Chapter 2 of the arbitration and conciliation act, 1996 deals with arbitration agreement. According to Section 7 of the arbitration and conciliation act, 1996 ‘arbitration agreement’ means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. The act also specifies that the arbitration agreement can either be an arbitration clause in the contract or a separate agreement it is also necessary for the agreement to be in a written form which includes a document signed by the parties, proof of communication (such as letters, telex, telegram or any form of telecommunication) and a proof of exchange of statements of claim and defence.
The Supreme Court in the case of Enercon (India) Ltd V Enercon Gmbh and Anr (2014) held that the Arbitration condition shaping piece of an agreement will be treated as an understanding free of such an agreement. The idea of distinctness of the assertion condition/understanding from the hidden agreement is a need to guarantee that the aim of the gatherings to determine the questions by mediation doesn't vanish immediately and inexplicably with each challenge to the lawfulness, legitimacy, conclusion or break of the fundamental agreement.
The Act then again has not made qualification on the type of the Arbitration understanding or the way in which the Arbitration statement will be drafted to frame a piece of agreement. The discretion understanding will reveal the ethical basic demonstration of the gatherings to go for question settlement through the methods for mediation. The statement or understanding will not simply be a purpose of plausibility to go for intervention however ought to mirror the desire of the gatherings to pick Arbitration as a method for contest settlement component.
The Supreme Court in the case Jagdish Chander V Ramesh Chander and Ors (2007) held that there is no specific procedure or format of an arbitration agreement. The parties should make sure that the words used should disclose a determination to go to arbitration and not just speak about the possibility of going for arbitration.
Hence the arbitration agreement facilitates the parties to settle their disputes in a flexible manner and not a cumbersome dispute settlement mechanism.
In K.K. Modi V K.N. Modi and others (1998) the Supreme court held that the authorities seem to agree that one can follow a set of guidelines in deciding whether the agreement is to talk about an issue to an expert or the parties have agreed to resolve disputes through arbitration.
Section 8 of the arbitration and conciliation act mandates any judicial authority to introduce the parties to arbitration in respect of an action brought before it, which is the theme of arbitration agreement.