Section 11 Arbitration Act - The Legal Chamber

No Arbitration Without Clear Agreement: When Does a Dispute Clause Become Binding? Supreme Court’s Latest Verdict Explained

14Aug

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Supreme Court

No Arbitration Without Clear Agreement: When Does a Dispute Clause Become Binding? Supreme Court’s Latest Verdict Explained

The Supreme Court held that Clause 13 of the contract, which stated disputes "may be sought through arbitration," did not constitute a binding arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996. The use of "may" indicated no mandatory intent to arbitrate, requiring further mutual consent. The Court emphasized that an arbitration agreement must reflect a clear, unequivocal commitment to resolve disputes through arbitration, excluding domestic courts. Mere enabling language without obligation is insufficient. The High Court’s dismissal of the arbitration application was upheld. Facts Of The Case: The dispute arose between BGM & M-RPL-JMCT (JV) (Appellant) and Eastern Coalfields Limited (Respondent) over a contract for transportation/handling of goods. T...

Supreme Court Rules: Insured Can Challenge ‘Full Settlement’ Under Arbitration Clause

The Supreme Court held that signing a full and final discharge voucher under financial duress does not extinguish arbitration rights if the validity of the settlement is challenged. Following Boghara Polyfab and SBI General Insurance, it ruled that arbitral tribunals must examine coercion claims, and courts under Section 11(6) of the Arbitration Act need only confirm the existence of an arbitration agreement. The judgment reaffirms that "accord and satisfaction" does not automatically nullify arbitration clauses unless expressly agreed, emphasizing minimal judicial interference at the referral stage. Economic duress and arbitrability are left for the tribunal’s determination. Facts Of The Case: The appellant, Arabian Exports Private Limited, engaged in meat exports, suffered ...

Supreme Court Clarifies Power of Arbitral Tribunals to Join Non-Signatories: Key Ruling on Arbitration and Corporate Group Doctrine

The Supreme Court held that an arbitral tribunal has the authority to implead non-signatories to an arbitration agreement under the Group of Companies doctrine. It affirmed that such power is not confined to referral courts under Section 11 of the Arbitration and Conciliation Act, 1996, upholding the tribunal's jurisdiction. Facts Of The Case: The case arises from a dispute involving Shapoorji Pallonji and Company Private Limited (SPCPL), which entered into a Works Contract dated 21.11.2016 with ASF Insignia SEZ Pvt. Ltd. (AISPL), part of the ASF Group. The contract was later novated to Black Canyon SEZ Pvt. Ltd. (BCSPL), another ASF Group entity, through a Novation Agreement dated 17.04.2018. A Settlement Agreement was executed in 2020 due to performance issues. BCSPL initiated arbitrat...