Arbitration Clause Has To Be Given Effect Even If It Does Not Expressly State That Decision Of Arbitrator Is Final & Binding On Parties: Supreme Court

Arbitration Clause Has To Be Given Effect Even If It Does Not Expressly State That Decision Of Arbitrator Is Final & Binding On Parties

Case: Babanrao Rajaram Pund vs Samarth Builders & Developers

Coram: Justices Surya Kant and Abhay S. Oka

Case No.: SLP(C) 15989 OF 2021

Court Observation: “Firstly, apart from the fact that Clause 18 of the Development Agreement uses the terms “Arbitration” and “Arbitrator(s)”, it has clearly enunciated the mandatory nature of reference to arbitration by using the term “shall be referred to arbitration of a Sole Arbitrator mutually appointed, failing which, two Arbitrators, one to be appointed by each party to dispute or difference”. Secondly, the method of appointing the third arbitrator has also been clearly mentioned wherein the two selected Arbitrators are to appoint a third arbitrator. Finally, even the governing law was chosen by the parties to be “the Arbitration and Conciliation Act, 1996 or any re­enactment thereof.” These three recitals, strongly point towards an unambiguous intention of the Page 12 of 16 parties at the time of formation of the contract to refer their dispute(s) to arbitration”

“It can be gleaned from other parts of the arbitration agreement that the intention of the parties was surely to refer the disputes to arbitration. In the absence of specific exclusion of any of the attributes of an arbitration agreement, the Respondents’ plea of non­ existence of a valid arbitration clause, is seemingly an afterthought.. Even if we were to assume that the subject­clause lacks certain essential characteristics of arbitration like “final and binding” nature of the award, the parties have evinced clear intention to refer the dispute to arbitration and abide by the decision of the tribunal. The party autonomy to this effect, therefore, deserves to be protected. 25. The deficiency of words in agreement which otherwise fortifies the intention of the parties to arbitrate their disputes, cannot legitimise the annulment of arbitration clause.

..It is thus imperative upon the courts to give greater emphasis to the substance of the clause, predicated upon the evident intent and objectives of the parties to choose a specific form of dispute resolution to manage conflicts between them. The intention of the parties that flows from the substance of the Agreement to resolve their dispute by arbitration are to be given due weightage. It is crystal clear to us that Clause 18, in this case, contemplates a binding reference to arbitration between the parties and it ought to have been given full effect by the High Court.”

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Decision Of Arbitrator, Decision Of Arbitrator Is Final & Binding On Parties