Arbitration is an adjudicatory dispute resolution process by a neutral third
party, governed by the provisions of The Arbitration and Conciliation Act, 1996
Arbitrations, largely, arise out of contractual relationship between the
parties, although it extends to other legal relationships as well.
The Act clarifies that there can be a submission of dispute to Arbitration only
when there is an ‘arbitration agreement’ between the parties. An arbitration
agreement, simply put, is an agreement whereby parties agree to submit the
disputes between them to arbitration, rather than approaching the courts of law.
An arbitration agreement may be concluded as a clause within a contract or as a
separate agreement; former being the widely practiced form.
It is pertinent to note that although arbitration clause is a part of the
contract, the Separability, Severability or Autonomy of the arbitration
clause makes it distinct and independent from the underlying contract. In the
event of any dispute, the arbitrator so appointed is competent to separate the
arbitration clause from the underlying contract, and decide the issue.
Principally, the separability of the arbitration clause ensures that arbitral
proceedings are continued, even though the contract is found to be null and
Party autonomy is the golden thread that runs across the whole institution of
arbitration, whereby parties are free to include any term, agree to the law
which would govern their agreement, agree to the kind of disputes which they
would submit to arbitration and appoint an arbitrator of their choice who has a
particular expertise or better serves the nature of the case.
Significantly, the intention of the parties to resolve disputes by way of
arbitration and the manner in which it is to be conducted must be manifest in
the agreement. In conspectus of the above, a carefully drafted arbitration
clause is an effective and efficient departure from courtroom litigation which
saves one time and cost and at the same time ensures that the dispute in
question is resolved by professionals and experts.