A

Project report
On
Arbitration Agreement

By
Gagandeep kaur (BA-LLB IXth sem)
Roll no.- 16001114

Under the guidance

Of
Mr.Mukesh Ghosh

SCHOOL OF LAW
GURU GHASIDAS UNVIERSITY
 ACKNOWLEDGEMENT

Primarily, it would be my pleasure to express my sincere thanks to Mr.Mukesh Ghosh

for his helping hand. His guidance and constant supervision for project are responsible for
attaining its present form. I am grateful to him for extension of her helping hand towards
me.

Then, I would like to express my gratitude to my seniors and my fellow classmates for
their whole hearted cooperation and support.

I would also thank my parents for their constant motivation and shall remain indebted to
them.

Lastly, I am thankful to each and every person who has contributed towards this project.

Name- Gagandeep Kaur Faculty signature:

Roll no. - 16001114
BA-LLB IXth sem
 DECLARATION

I hereby declare that this project entitled “Arbitration Agreement” is completed under the
supervision of Mr.Mukesh Ghosh and is the original piece of work of undersigned.

All information provided here are to the best of my knowledge.

All information in this document has been obtained and presented in accordance with
academic rules and conduct. It is not submitted to any other organization for any other
purpose.

I am indebted to the authors of the books I referred for the project and the writers of the
articles of websites I relied upon.

Name- Gagandeep Kaur Faculty signature:

Roll no. - 16001114
BA-LLB IXth sem
 CERTIFICATE

I am glad to submit this project as a part of my academic assignment. It is to certify that,

the original and genuine research work is carried out to investigate about the subject
matter and the related data collection.

I have taken proper care and shown utmost sincereness in this project.

Hereby I hope the project proves satisfactory to authorities and informative to readers.

Further, hoping that it up to the expectation of people in concern and is according to the
prescribed guidelines.

Name- Gagandeep Kaur Faculty signature:

Roll no. - 16001114
BA-LLB IXth sem

TABLE OF CONTENTS
1) Introduction
2) Arbitration agreements
 Meaning
 Essential elements
 Attributes of Arbitration Agreement
 Points to remember while drafting Arbitration Agreement
3) Important provisions in the Arbitration Agreement
4) Sample of Arbitration Agreement1
5) Significance
6) Conclusion
7) Bibliography
 ARBITRATION AGREEMENT

Introduction:
In today's competitive marketplace, most companies either cannot afford or do not wish to
incur the time, expense and adverse business consequences of traditional litigation.
Unfortunately, in every business relationship there is the potential for conflict over
contractual agreements or business operations. When such conflicts arise, there is no need to
incur the onerous expense and delays involved in traditional litigation. There are readily
available alternative dispute resolution procedures that will enable you to resolve your
disputes relatively quickly, fairly and cost-effectively.

The term arbitration in very lucid terms means the disputes of the parties with one another,
gets referred to a neutral party where this neutral party solves the disputes. Arbitration is a
form of alternative dispute resolution, where the settlement of the dispute takes place outside
the Courtrooms. This third party who solves the dispute is known as an arbitrator. His
decisions regarding the dispute are always binding upon the parties. It is an adequate way to
save time and resources. This method of settlement outside the court is governed by an Act
called, “The Arbitration and Conciliation Act, 1966”. This Act saves the parties from the
hassle of spending years in the Courts and saves them a lot of time and money, which
otherwise would have been a lot to invest. Arbitration is a quasi-judicial process and the
parties are referred to a domestic tribunal. 

Arbitration agreement:

Meaning

The formation of an arbitration agreement takes place when two parties, enter into a contract
and in which, the contract states that any dispute arising between the parties have to be solved
without going to the courts with the assistance of a person, who would be a neutral person, a
third party, appointed by both of the parties, known as the Arbitrator, who would act as a
judge. The arbitrator so appointed should have been previously mentioned in the contract that
they made. They should also state who should select the arbitrator, regarding the kind of
dispute the arbitrator should give decisions on, the place where the arbitration would take
place. Furthermore, they should also state the other kinds of procedures mentioned or that has
to be required during an arbitration agreement. 

Essential elements

The existence of a dispute is an essential condition for arbitration. Where parties have
effectively settled their disputes, they cannot refute the settlement and invoke an arbitration
clause.

 Written Agreement

An arbitration agreement must be in writing. As per Section 7 (4) of the Act, arbitration
agreement is considered to be in writing, if it is contained in:

1. A document signed by the parties;

2. An exchange of letters, telex, telegrams or other means of telecommunication which
provide a record of the agreement; or
3. An exchange of statements of claim and defence in which the existence of the
agreement is alleged by one party and not defined by another.

 Intention

Intention of the parties is of prime importance. No form has been prescribed for an arbitration
agreement and nowhere has it been mentioned that terms like arbitration, arbitrator are
essential prerequisites in an arbitration agreement. According to a leading case law in this
subject, the intention of the parties to refer their dispute to arbitration should be clearly
discernible from the arbitration agreement.

 Signature

An arbitration agreement needs to be signed by the parties. The agreement may be in the
form of a signed document by both the parties containing all the terms or it may also be a
signed document by one party which contains the terms and an acceptance signed by the
other party. It will suffice if one party puts his signature in the written submission and the
other party accepts it.

Attributes of an Arbitration Agreement

In the landmark case of K.K. Modi v. K.N. Modi and Ors. (1998) 3 SCC 573, it was held by
the Hon’ble Supreme Court that the following attributes must be present in an arbitration
agreement:

1. The agreement must state that the decision of the tribunal will be binding upon by
both the parties.
2. That the jurisdiction of the tribunal on the rights of the parties should be decided
by both the parties consensually or from an order obtained by the Court which
states that the proceeding shall be made through arbitration. 
3. The tribunal has the right to determine the rights of the parties by being fair and
just.
4. The agreement that the parties will refer to the tribunal must be enforceable by
law.
5. The agreement must state that any decision made by the tribunal on the dispute
must be formulated prior to the time when the reference is made.

Points to remember while drafting Arbitration Agreement

1. Seat of Arbitration – This clause specifies the seat or place of arbitration. The seat of
arbitration determines the procedural laws that govern the arbitration procedure. It
need not be the same as the place of hearings. Seat of arbitration is considered to be a
place where arbitrations are held even if the place of hearings differ. Place of hearings
don’t by any means affect the chosen seat of arbitration.
2. Procedure for Appointing Arbitrators – Section 11 of the Arbitration and
Conciliation Act talks about the appointment of arbitrators. It provides that a person
of any nationality may be appointed as an arbitrator, unless otherwise agreed by the
parties. The parties are free to agree on a procedure for appointing the arbitrator(s). If
the parties fail to reach an agreement, in an arbitration with 3 arbitrators, each party
shall appoint one arbitrator, and the two arbitrators shall thereafter appoint a third
arbitrator, who shall be the presiding arbitrator. The appointment of parties may be by
 the parties themselves, or by the designated authority or by the arbitral institutions. In
places where the dispute involves international commercial transaction, then the
arbitrator to be appointed shall not be of the same nationality as the parties to the
dispute.
3. Language of Arbitration – It is important to mention the language of arbitration in
the agreement itself. Especially, in a country like ours, where Hindi and English aren’t
the only two languages spoken, it would get very difficult to decide and settle the
disputes. Choosing the language of arbitration is also very cost effective, because it
would save you from paying exorbitant fees to the translators.
4. Number and Qualifications of Arbitrators – According to Section 10 of the
Arbitration and Conciliation Act of 1996, parties can determine the number of
arbitrators, provided that the number is an odd number. Failing to determine the no. of
arbitrators, the arbitral tribunal shall consist of a sole arbitrator.
5. Type of Arbitration – Parties can choose between Institutional or Ad hoc
arbitrations. If the parties choose the former, then they have to be bound by the rules
of the arbitration institutions. All these institutions have their own set of rules for
arbitration and these rules would be applicable to arbitral proceedings conducted by
them. Whereas, in case of Ad-hoc arbitrations, arbitrations are both agreed to and
arranged by the parties themselves. No help is sought from the arbitral institutions in
Ad-hoc arbitrations.
6. Governing Law – This is the law that governs the main point of contention between
the parties to a dispute. It is even known as the substantive law. The parties should
mention the law they want to be governed by, failing which may give way to disputes
in the future.
7. Name and Address of the Arbitration Institution – If the parties to the dispute are
referring their disputes to an arbitration centre, then it is pertinent that they mention
the name and address of the arbitration facility in clear and unambiguous words. Such
inadvertent mistakes can lead to the nullification of the arbitration clause.

Important provisions in the Arbitration Agreement:

There are a few important provisions under an arbitration agreement, and these are mentioned
below:
 1. Written Agreement- As stated as an essential condition, there must be a written
agreement. Section 7(4) of the Act, states that every agreement made must be in
the form of a written document or even in the form of any kind of communication
whether or not those communications take place through telegrams, telex or even
other telecommunication devices provided that there must be a record of the
communication. 
2. Appointment of the Arbitrators- Section 11 states that the arbitrator can be
appointed at the liberty of the parties to the contract. In case, where the parties fail
to decide the appointment of the arbitrator, the Chief Justice of the High Court, in
case of the domestic arbitration and the Chief Justice of the Supreme Court, in case
of International Commercial Arbitration is approached. 
3. Interim Relief- Section 9 and Section 17 of the Act provide for the Interim relief
orders with respect to the arbitration. The relief petition is maintainable under
section 9 if there is prima facie evidence that there is an agreement for the
arbitration proceeding. The parties, if they want, can move to the Court before the
arbitration proceeding actually starts or even after making the arbitral award but
before its enforcement as per section 36 of the Act. Section 17 states that, at the
parties’ request, the tribunal may order the party to take interim measures, the way
it deems fit and necessary in respect to the subject matter of the dispute. 
4. Finality of an Award by Arbitration- Section 34 states that the award given by the
arbitrator is final and is binding upon the parties who have signed the contract.
Once the decree is granted by the court, it shall be enforceable with respect to
section 34 of the Act. 
5. Appeal- Section 37 states that if the parties are not satisfied with the decision of
the arbitrators, an appeal lies against the order granting or refusing to grant any
measure under section 9 and also against refusing to set aside or setting aside an
award. An appeal can also lie against the order of the tribunal accepting the plea
referred to in section 16 or granting or refusing to grant an interim measure under
section 17. However, there is no provision for an appeal against the appointment of
an arbitrator as given under section 11. 

Sample of Arbitration Agreement:

Specimen of Arbitration Agreement to Refer the Dispute to two Arbitrators-

This agreement made and entered into between Mr…………..….…………. and
Mr…………..….…………. on this…………..….…………. day of (month) and (year)
witnessed as follows: WHEREAS differences and disputes have arisen between the parties
above-mentioned regarding the matter of…………..….…………. and the parties could not
mutually settle the matter. Now the parties agree that the matter as under be referred to
arbitration to obtain an award:

1. For the purpose of final determination of the dispute, the matter will be referred to
Mr…………..….…………...….…………. nominated by one party and Mr…………..
………..….………….……. nominated by the other party as arbitrators and their award
shall be final and binding on both the parties.

2. If differences should arise between the said two arbitrators on the questions referred to
them, the said arbitrators shall select an umpire and the award to be given by the umpire
shall be final and both the parties hereby agree that the award so given by the umpire or
arbitrators shall be binding on both the parties.

3. A reasonable time-limit may be fixed after consulting the arbitrators for the grant of the
award by them and umpire if appointed and the said time may be extended in
consultation with the arbitrators or umpire if need be.

4. The provisions of the Arbitration and Conciliation Act, 1996 so far as applicable and as
are not inconsistent or repugnant to the purposes of this reference shall apply to this
reference to arbitration.

5. Both the parties agree that they would co-operate and lead evidence etc. with the
arbitrators so appointed as expeditiously as possible and it is an express condition of
this agreement, that if any of the parties non-co-operates or is absent at the reference,
the arbitrators would be at liberty to proceed with the reference ex parte.

6. The parties hereto agree that this reference to arbitration would not be revoked either by
death of either party or any other cause.

7. If the arbitrators or anyone of them as chosen under this agreement become

incapacitated either by death or sickness or other disability, the parties retain the right
of nominating substitutes and no fresh agreement therefor would be necessary.
 8. It is an express stipulation that any award passed by the said arbitrators shall be binding
on the parties, their heirs, executors and legal representatives.

Having agreed to the above by both the parties, the said parties affix their signatures to this
agreement this…………..….…………. day of (month and year) at (place).

Signature I Signature II

Significance:

The growth of arbitration signifies that there is a fundamental change that is present in our
way of legislating. Another significance is in deciding the matters in a significantly lesser
amount of time and the different or the separate clauses mentioned in the commercial
contract. These are paving the way for the most effective and the most suitable remedy
without having to go through the recourse of the courtrooms. Arbitration is generally the
most efficient form of remedy for settlement of disputes amongst the parties, which actually
does not require any long procedures of the Court for the decisions to be made. It is cost-
efficient, it is time-saving, and it also permits one to choose their own arbitrators. Through
this, the decisions are given swiftly, and according to the nature of the case, they are also,
most of the time satisfactory. The severability, separability, and the autonomy principle of the
Arbitral agreement prevent the validity of one agreement from being overlapped by the other.
Nonetheless, the two agreements may co-exist. Having such a principle does not negate the
value of the other principles mentioned in the contract, but mostly adds on to those principles.
Thus it plays an important role when the contractual clauses arise when dealing with the
disputes. 

Conclusion:

Therefore, we can state that an arbitration agreement is not only beneficial to the parties
whilst saving the resources, but also in means of the time and efforts put in by each of the
parties. Despite a few people stating that it is not a complete procedural aspect of dealing
with the cases, one state that it does help both the parties who have faced the dispute.
However, most importantly, it is important that there are certain things that have to be kept in
one’s mind before actually drafting or while drafting a contract for the arbitration agreement.
In practice though, almost all arbitration agreements are concluded with arbitration clauses. 
 BIBLIOGRAPHY

Referred statue:

The Arbitration and Conciliation Act, 1996

Referred book:

Law relating to Arbitration and Conciliation in India by Dr.N.V.Paranjape

Referred sites:

 http://letspedia.com/importance-arbitration-clauses/
 http://www.helplinelaw.com/business-law/SIGOAAC/significance-of-an-arbitration-
clause-in-an-agreement.html
 https://unctad.org/en/Docs/edmmisc232add39_en.pdf
 http://www.icaindia.co.in/icanet/rules/commercialarbitration/arbitration&conciliation/
chapter1b.htm
 http://lawtimesjournal.in/arbitration-agreement/