Jagdish Chander v. Ramesh Chander

Facts

Disputes arose between partners regarding dissolution and accounts of a partnership firm. The partnership deed contained a clause stating that if disputes arose, the same 'shall be referred for arbitration if the parties so determine'. One partner sought appointment of an arbitrator under Section 11. The respondent contended that the clause did not constitute a binding arbitration agreement.

Issues

• What are the essential attributes that constitute a valid arbitration agreement under Section 7?
• Whether a clause requiring further/fresh consent of the parties before reference amounts to a binding arbitration agreement enabling appointment under Section 11.

Arguments

The appellant argued the clause evidenced an intention to arbitrate and the court should appoint an arbitrator under Section 11. The respondent argued the words 'if the parties so determine' made arbitration contingent on a fresh future agreement, so no binding arbitration agreement existed.

Held

The Court laid down the well-settled essentials of an arbitration agreement: a written agreement; agreement to refer present/future disputes to a private tribunal; that tribunal to adjudicate impartially after due hearing; and the parties' agreement that the decision will be binding. It held that where a clause requires or contemplates a further or fresh consent before reference (e.g. 'shall be referred to arbitration if the parties so determine'), it is merely an agreement to enter into an arbitration agreement in future and is not itself an arbitration agreement. As the clause needed further mutual determination, there was no existing arbitration agreement, and the Section 11 petition could not be entertained.

Ratio decidendi

An agreement is an arbitration agreement only if it discloses a clear and binding intention to refer disputes to a private tribunal whose decision is final; a clause contemplating a further/fresh consensus before reference is not an arbitration agreement under Section 7.

Significance

The leading authority restating the attributes of an arbitration agreement under Section 7; routinely cited for the distinction between a binding arbitration clause and a mere agreement to agree to arbitrate.

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