A brief analysis of Section 7 of the Arbitration Act, 1996
Section 7 of the Arbitration and Conciliation Act, 1996 talks about arbitration agreement and its ingredients. It also makes it mandatory to have the agreement in writing. It has to be signed by both the parties. Arbitration agreement is basically an agreement entered into by the parties to get their disputes resolved through arbitration. The agreement can be entered into even at the time when parties enter into contract for the resolution of future disputes by the process of arbitration. One of the reasons for this is the parties give a lot of importance to their reputation which might get affected by the process of courtroom litigation.
Arbitration agreement is a kind of agreement and it must be concluded under the provisions of the Indian Contract Act. For the existence of any agreement there shall be ‘consensus ad idem’ which means that the parties to the agreement must be agreeing upon the same thing and further, they should be agreeing in the same sense. Similarly the parties must have the intention and will to take the dispute for resolution to arbitration which shall be reflected in the terms mentioned in the agreement. There are essential ingredients of section 7 , some of them are:
The parties must have a mutual consent
Both the parties must have clear intention of to settle the dispute by a private tribunal
The parties must agree to refer to arbitration for resolution of disputes in ‘writing’.
The 2015 amendment to section 7 of the 1996 Arbitration Act
Due to the growing technology enhancements and its adoption in different sectors the amendment of 2015 now provides that when two parties enter into an arbitration agreement through electronic means of communication it would be a valid agreement.
By this amendment the Indian law is now at par with the UNCITRAL model on law of International commercial arbitration by adding the provision which now allows the conclusion of arbitration agreement by use of electronic means of communication.
Electronic means of communication involves generating data messages, sending them and receiving the same. Some examples are: Telegram, e mail etc.
Effect of 2015 Amendment
The amendment made to section 7 is of a progressive nature and it now considers agreement concluded through electronic means as the same as a written agreement.
By this amendment it has made the conclusion of the agreement more convenient and the parties to the agreement are not required to be physically present for the agreement. The intention must be mutual and the same shall be communicated through such electronic means.