Arbitration / Contract : Mutuality / Unilateral agreement to refer to arbitration

Jindal Exports v. Fuerst Day Lawson Ltd. (Delhi HC)

Manu/DE/3204/2009

Issue: Whether agreement to settle disputes by arbitration entitling only one party to refer the matter to arbitration is a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996?

The Clause in Dispute: The Buyer shall shall be entitled to nominate any of the above options at any time after the dispute or difference has arised, the Seller hereby acknowledging that they are familiar with the Arbitration Rules of the Association thereby nominated and agree to be bound by the decision of such arbitrators or of any appeal therefrom.

Held:

"I [the court] can see no reason, why, if an agreement between two persons confers on one of them alone the righht to refer the matter to arbitration, the reference should not constitute an arbitration. There is fully bilateral agreement which constitutes a contractt to refer. The fact that the option is exercisable by only one of the parties seems to me to be irrelevant. The arrangement suits both parties. "

"The words in Section 7 means an agreement by the parties to submit to arbitration, in my opinion, postulates an agreement which necessarily or rather mandatorily requires the appointment of an arbitrator(s). Section 7 does not cover a case where the parties agree that they may go to a suit or they may also go to arbitration"

There should not be an agreement to further obtain consent or to agree to settle disputes by arbitration.

See http://www.lw.com/upload/pubContent/_pdf/pub1762_1.pdf for position in other countries.