THE STATE GOVERNMENT OF TAMIL NADU & ORS.versusM/S. SAMARTH BUILDERS & DEVELOPERS & ANR.

                        [2022] 16 S.C.R. 151                              151


                 BABANRAO RAJARAM PUND                                    A
                                  v.
     M/S. SAMARTH BUILDERS & DEVELOPERS & ANR.
                   (Civil Appeal No. 6272 of 2022)
                       SEPTEMBER 07, 2022                                 B
        [SURYA KANT AND AND ABHAY S. OKA, JJ.]
       Arbitration and Conciliation Act, 1996: s.11 – Arbitration
Clause in agreement – Respondent No.1 is a developer engaged in
the business of construction and development of buildings –
                                                                          C
Appellant and respondent No. 1 entered into a ‘Development
Agreement’ and pursuant thereto appellant also executed a General
Power of Attorney (GPA), in favour of Respondent No. 1 – Failure
on part of respondent No. 1 to complete the development works
within the stipulated time – Appellant served respondents with legal
notice communicating his desire to terminate the Development              D
Agreement and cancel the GPA as the stipulated period had already
lapsed – This gave rise to disputes and differences between the
parties – Appellant invoked arbitration clause in the ‘Development
Agreement’ and issued a notice to the respondents regarding referral
of the dispute to the sole arbitrator – Respondents failed to respond
                                                                          E
to it – Appellant filed application u/s.11 of the Act before the High
Court – Respondents claimed that the contract lacked the express
wording necessary for it to be considered a valid and binding
agreement to refer the disputes to arbitration – High Court accepted
the contention of respondents and dismissed application as not
maintainable – Hence instant appeal – Held: High Court fell in            F
error in holding that application u/s.11 was not maintainable for
want of a valid arbitration clause – Clause 18 luminously disclosed
the intention and obligation of the parties to be bound by the decision
of the tribunal, even though the words “final and binding” were
not expressly incorporated therein – The parties evinced clear
                                                                          G
intention to refer the dispute to arbitration and abide by the decision
of the tribunal, therefore the party autonomy deserves to be protected
– 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 – Clause 18,
contemplates a binding reference to arbitration between the parties       H
                                   151
152            SUPREME COURT REPORTS                      [2022] 16 S.C.R.


A     and it ought to have been given full effect by the High Court –
      Maharashtra Apartment Ownership Act, 1970 – s.2.
            Allowing the appeal, the Court
            HELD: 1. It is a settled proposition of law that the existence
      of a valid arbitration agreement under Section 7 of the Act is sine
B     qua non for a court to exercise its powers to appoint an arbitrator/
      arbitral tribunal under Section 11 of the Act. [Para 13][157-D]
            2. Clause 18 luminously discloses the intention and
      obligation of the parties to be bound by the decision of the tribunal,
      even though the words “final and binding” are not expressly
C     incorporated therein. 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,
D     is seemingly an afterthought. [Para 23][162-A-C]
            3. Even if this Court were to assume that the subject-clause
      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
E     decision of the tribunal. The party autonomy to this effect,
      therefore, deserves to be protected. 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. [Paras 24 & 25][162-C-D]

F            4. 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
G     due weightage. It is crystal clear to this Court 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. Clause 18 of the Development Agreement is held to be a

H
BABANRAO RAJARAM PUND v. M/S. SAMARTH BUILDERS                            153
             & DEVELOPERS & ANR.

valid arbitration clause. A former Judge of the Bombay High Court         A
is appointed as the Sole Arbitrator to resolve all disputes/
differences between the parties.[Paras 28-30][163-D-H]
      Enercon (India) Ltd. and Ors. v. Enercon Gmbh and
      Anr. (2014) 5 SCC 1 : [2014] 2 SCR 855 – followed.
      Bihar State Mineral Development Corporation and Anr.                B
      v. Encon Builders (I) (P) Ltd. (2003) 7 SCC 418 : [2003]
      2 Suppl. SCR 812; Jagdish Chander v. Ramesh Chander
      & Ors. (2007) 5 SCC 719 : [2007] 5 SCR 720; K. K.
      Modi v. K. N. Modi and Ors. (1998) 3 SCC 573 : [1998]
      1 SCR 601 – distinguished.                                          C
      Rukmanibai Gupta v. Collector, Jabalpur and Ors.
      (1980) 4 SCC 556 – relied on.
      Karnataka Power Transmission Corporation Ltd. and
      Anr. v. Deepak Cables (India) Ltd. (2014) 11 SCC 148
      : [2014] 4 SCR 771 – referred to.                                   D
                       Case Law Reference
[2003] 2 Suppl. SCR 812            distinguished         Para 8
[2014] 4 SCR 771                   referred to           Para 8
[2007] 5 SCR 720                   distinguished         Para 11          E

(1980) 4 SCC 556                   relied on             Para 15
[1998] 1 SCR 601                   distinguished         Para 16
[2014] 2 SCR 855                   followed              Para 25
                                                                          F
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6272
of 2022.
       From the Judgment and Order dated 07.07.2021 of the High Court
of Judicature of Bombay, Bench at Aurangabad in Arbitration Application
No. 10 of 2018.
                                                                          G
       Sudhanshu S Choudhari, Mahesh Shinde, Vatsalya Vigya, Advs.
for the Appellant.



                                                                          H
154            SUPREME COURT REPORTS                         [2022] 16 S.C.R.


A           The Judgment of the Court was delivered by
            SURYA KANT, J.
            1. Leave granted.
             2. The bone of contention in the instant proceedings is whether
B     Clause 18 of the Development Agreement dated 29.05.2014 possesses
      the necessary ingredients to constitute a legal and valid arbitration
      agreement? The genesis of the dispute lies in the aforesaid agreement
      executed between the parties for construction of an apartment complex
      called “Amay Apartments”. The construction was to be carried out by
      Respondent No.1 partnership firm on the land owned by the Appellant.
C     Respondent No. 2 is the partner of Respondent No. 1 partnership firm.
            Factual Background:
             3. The Appellant owns and possesses the land bearing Plot Nos.
      13 & 14, measuring 4000 sq. ft situated in Village Deolai, District
D     Aurangabad, Maharashtra. Appellant harbored a desire to develop the
      said property through the construction of residential and commercial
      complexes. Respondent No.1 is a developer engaged in the business of
      construction and development of residential and commercial buildings.
      When it came to know that the Appellant wished to develop his property,
      the First Respondent approached the Appellant and offered to develop
E     the site. The Appellant and Respondent No. 1, thus, entered into a
      ‘Development Agreement’ and pursuant thereto the Appellant also
      executed a General Power of Attorney (GPA), in favour of Respondent
      No. 1.
             4. The Agreement stipulated that the First Respondent shall
F     construct “Amay Apartments” within a period of 15 months which was
      extendable, incumbent on payment of a penalty amount. Respondent
      No. 1 agreed to hand over the constructed area to the extent of 45% to
      the Appellant on or before the completion of the period of 15 months,
      and to retain the remaining 55% of the developed portion. The Parties
G     also entered into a Deed of Declaration under Section 2 of the
      Maharashtra Apartment Ownership Act,1970 which was registered on
      20.10.2015 for the purposes of retaining the facilities, amenities, common
      spaces, and to specify the portions of the developed property. Respondent
      No. 1, however, failed to complete the development works within the
      stipulated time of 15 months. The Appellant served Respondents with a
H     Legal Notice on 11.07.2016, communicating his desire to terminate the
BABANRAO RAJARAM PUND v. M/S. SAMARTH BUILDERS                                 155
      & DEVELOPERS & ANR. [SURYA KANT, J.]

Development Agreement and cancel the GPA as the period of 15 months            A
along with the extendable period of 3 months had already lapsed. In
addition to this, the Appellant issued a publication in the newspaper dated
11.07.2016 informing the general public that he had terminated the
Agreement as well as the GPA. Respondents in their reply to the Legal
Notice controverted the contents of the Notice. This gave rise to disputes
                                                                               B
and differences between the parties.
       5. It is pertinent to mention at this juncture that Clause 18 of the
Development Agreement, purported to be an ‘arbitration clause’, reads
as follows:
      “18. All the disputes or differences arising between the parties         C
      hereto as to the interpretation of this Agreement or any
      covenants or conditions thereof or as to the rights, duties, or
      liabilities of any part hereunder or as to any act, matter, or
      thing arising out of or relating to or under this Agreement
      (even though the Agreement may have been terminated), the
      same shall be referred to arbitration of a Sole Arbitrator               D
      mutually appointed, failing which, two Arbitrators, one to be
      appointed by each party to dispute or difference and these
      two Arbitrators will appoint a third Arbitrator and the
      Arbitration shall be governed by the Arbitration and
      Conciliation Act, 1996 or any re-enactment thereof.”                     E
      6. The Appellant in the interregnum, sought an injunction under
section 9 of the Arbitration and Conciliation Act, 1996 (the Act) in
M.A..R.J.I No. 285 of 2016 and the District Court at Aurangabad vide
order dated 30.09.2016, restrained Respondent No. 1 from selling any
tenements on the developed property till further orders.                       F
        7. Thereafter, the Appellant invoked the arbitration clause in the
Development Agreement on 07.11.2016 and issued a notice to this effect
to the Respondents regarding referral of the dispute to Mr. Shyam Rajale
as the sole arbitrator. Though the notice was duly served, the Respondents
failed to respond to it. This led the Appellant to file an application under   G
section 11 of the Act before the High Court.
       8. It was contended on behalf of the Respondents before the High
Court that the contract lacked the express wording necessary for it to
be considered a valid and binding agreement to refer the disputes to
arbitration. Specifically, the absence of the term, “the parties agreeing in
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156                SUPREME COURT REPORTS                       [2022] 16 S.C.R.


A     writing to be bound by the decision of an arbitral tribunal”, was highlighted
      by Respondent No. 1 to contend that Clause 18 of the Development
      Agreement was not enforceable. To buttress this plea, reliance was
      placed on the decisions of this Court in Bihar State Mineral
      Development Corporation and Anr. v. Encon Builders (I) (P) Ltd. 1,
      and Karnataka Power Transmission Corporation Ltd. and Anr. v.
B
      Deepak Cables (India) Ltd.2, wherein it was held that in case of
      exclusion of attributes of an arbitration agreement from a dispute
      resolution clause, it would not amount to a valid arbitration agreement.
      Respondents further urged that it was crucial that “the parties should
      have agreed that the decision of the private tribunal in respect of the
C     disputes will be binding on them.”
              9. Although the High Court vide the impugned judgment dated
      07.07.2021, acknowledged the existence of Clause 18 in the Agreement
      that provides for disputes to be referred to arbitration, it accepted the
      contentions of Respondents and came to the conclusion that Clause 18
D     indeed lacks certain essential ingredients of a valid arbitration agreement,
      as it does not mandate that the decision of the arbitrator will be final and
      binding on the parties. Consequently, the High Court dismissed the
      application as not maintainable. The aggrieved Appellant is now before
      this Court.
E            10. Notice was issued to the Respondents on 20.10.2021 and as
      per the office report dated 18.08.2022, they have been duly served but
      have not entered appearance. We accordingly proceeded to hear the
      matter ex parte on 22.08.2022.
               Submissions:
F            11. Learned counsel for the Appellant vehemently urged that Clause
      18 crystallises the intention of the parties to refer disputes between them
      to arbitration and to be bound by the decision of the arbitrator. The High
      Court failed to read into the intention of the parties and erroneously
      drew an inference contrary to the spirit and object of Clause 18.
G     According to him, the clause clearly mentions that “all the disputes or
      differences arising between the parties” are to be referred to arbitration
      of a Sole Arbitrator mutually appointed, failing which the dispute shall be
      referred to a tribunal consisting of three arbitrators. Moreover, there is

      1
          (2003) 7 SCC 418.
H     2
          (2014) 11 SCC 148.
BABANRAO RAJARAM PUND v. M/S. SAMARTH BUILDERS                                  157
      & DEVELOPERS & ANR. [SURYA KANT, J.]

no alternative provided in the agreement other than the arbitration for         A
the purpose of resolution of the disputes. Even the governing law of the
arbitration had been agreed upon by the parties as the Arbitration and
Conciliation Act, 1996, manifesting their animus to be bound by the
decision of the arbitrator. There are also no specific exclusions of any
attributes of an arbitration agreement in Clause 18 as envisaged by this
                                                                                B
Court in Deepak Cables which, in turn, relied upon Jagdish Chander
v. Ramesh Chander & Ors.3.
       12. Finally, it was submitted that this Court has time and again
held that an arbitration clause need not be penned down in any specific
form. The High Court was thus not justified in holding that Clause 18 of
the Development Agreement did not meet the essential criteria of a              C
valid arbitration clause.
         Analysis
       13. It is a settled proposition of law that the existence of a valid
arbitration agreement under Section 7 of the Act is sine-qua-non for a          D
court to exercise its powers to appoint an arbitrator/arbitral tribunal under
Section 11 of the Act. The short question that falls for our consideration
is whether Clause 18 constitutes a valid arbitration clause for the purpose
of invoking powers under Section 11 of the Act?
       14. Section 2 (1)(b) of the Act, defines “arbitration agreement” to      E
mean an agreement referred to in section 7, which inter-alia lays down
the following characteristics of an Arbitration Agreement:
         “7. Arbitration agreement—
         (1) In this Part, “arbitration agreement” means an agreement
         by the parties to submit to arbitration all or certain disputes        F
         which have arisen or which may arise between them in respect
         of a defined legal relationship, whether contractual or not.
         (2) An arbitration agreement may be in the form of an
         arbitration clause in a contract or in the form of a separate
         agreement.                                                             G
         (3) An arbitration agreement shall be in writing.
         (4) An arbitration agreement is in writing if it is contained
         in—
3
    (2007) 5 SCC 719.                                                           H
158                SUPREME COURT REPORTS                      [2022] 16 S.C.R.


A                  (a) a document signed by the parties;
                   (b) an exchange of letters, telex, telegrams, or other means
                   of telecommunication [including communication through
                   electronic means] which provide a record of the agreement;
                   or
B                  (c) an exchange of statements of claim and defence in which
                   the existence of the agreement is alleged by one party and
                   not denied by the other.
               (5) The reference in a contract to a document containing an
               arbitration clause constitutes an arbitration agreement if the
C              contract is in writing and the reference is such as to make
               that arbitration clause part of the contract.”
             15. It may be seen that section 7 of the Act does not mandate any
      particular form for the arbitration clause. This proposition was settled by
      this Court way back in Rukmanibai Gupta v. Collector, Jabalpur and
D     Ors.4, while viewing erstwhile section 2(a) of the Arbitration Act, 1940
      which contained the definition of “arbitration agreement”. It was held
      that:
               “6. ……Arbitration agreement is not required to be in any
               particular form. What is required to be ascertained is whether
E              the parties have agreed that if disputes arise between them in
               respect of the subject- matter of contract such dispute shall
               be referred to arbitration, then such an arrangement would
               spell out an arbitration agreement. A passage from RUSSELL ON
               A RB IT RAT IO N , 19th Edn., p. 59, may be referred to with
F              advantage:
                   If it appears from the terms of the agreement by which a
                   matter is submitted to a person’s decision that the intention
                   of the parties was that he should hold an inquiry in the
                   nature of a judicial inquiry and hear the respective cases
                   of the parties and decide upon evidence laid before him,
G
                   then the case is one of an arbitration.”
           16. This very principle was reiterated in K.K.Modi v. K.N.Modi
      and Ors.5 which also dealt with section 2(a) of the 1940 Act. While
      4
          (1980) 4 SCC 556.
      5
H         (1998) 3 SCC 573.
BABANRAO RAJARAM PUND v. M/S. SAMARTH BUILDERS                              159
      & DEVELOPERS & ANR. [SURYA KANT, J.]

attempting to decide whether the arbitration clause embodied in a           A
Memorandum of Understanding was a valid arbitration clause or not,
this Court laid down the essential attributes of an arbitration agreement
in following terms:
      “17. Among the attributes which must be present for an
      agreement to be considered as an arbitration agreement are:           B
         (1) The arbitration agreement must contemplate that the
         decision of the tribunal will be binding on the parties to
         the agreement,
         (2) that the jurisdiction of the tribunal to decide the rights
         of parties must derive either from the consent of the parties      C
         or from an order of the court or from a statute, the terms of
         which make it clear that the process is to be an arbitration,
         (3) the agreement must contemplate that substantive rights
         of parties will be determined by the agreed tribunal,
                                                                            D
         (4) that the tribunal will determine the rights of the parties
         in an impartial and judicial manner with the tribunal owing
         an equal obligation of fairness towards both sides,
         (5) that the agreement of the parties to refer their disputes
         to the decision of the tribunal must be intended to be
                                                                            E
         enforceable in law and lastly,
         (6) the agreement must contemplate that the tribunal will
         make a decision upon a dispute which is already
         formulated at the time when a reference is made to the
         tribunal.
                                                                            F
      18. The other factors which are relevant include, whether the
      agreement contemplates that the tribunal will receive evidence
      from both sides and hear their contentions or at least give the
      parties an opportunity to put them forward; whether the
      wording of the agreement is consistent or inconsistent with
      the view that the process was intended to be an arbitration,          G
      and whether the agreement requires the tribunal to decide
      the dispute according to law.”
                                                   [Emphasis applied]

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160             SUPREME COURT REPORTS                          [2022] 16 S.C.R.


A            17. In the afore-cited case, the dispute resolution clause stipulated
      that the disputes were to be referred to the Chairman, IFCI or his
      nominee. This Court came to the conclusion that the clause in dispute
      did not constitute a valid arbitration covenant as it could not be said with
      clarity that the parties contemplated the disputes to be arbitrated.
B            18. Encon Builders (supra) placed reliance on K.K. Modi’s case
      and further condensed the essential features of an arbitration agreement
      into four elements i.e.:
            “13. The essential elements of an arbitration agreement are
            as follows:
C           (1) There must be a present or a future difference in
            connection with some contemplated affair.
            (2) There must be the intention of the parties to settle such
            difference by a private tribunal.

D           (3) The parties must agree in writing to be bound by the
            decision of such tribunal.
            (4) The parties must be ad idem.”
            19. It is important to appreciate the nature of the arbitration clause
      in Encon Builders’ case, which was to the following effect:
E           “In case of any dispute arising out of the agreement, the matter
            shall be referred to the Managing Director, Bihar State Mineral
            Development Corporation Limited, Ranchi, whose decision
            shall be final and binding.”
             20. The above-reproduced clause was held to be invalid primarily
F     due to the fact that the Managing Director, who was chosen to be the
      adjudicator-cum-arbitrator of the dispute(s) arising between the parties,
      was likely to be biased as he had an interest in the outcome of the case.
      The principle that one cannot be a judge of his own cause was thus aptly
      applied to invalidate the subject clause. It was evidently not a case of an
G     arbitral clause lacking essential ingredients of an arbitration agreement.
      In our opinion, this case renders no assistance to the Respondents.
             21. In Jagdish Chander (supra), again a two-Judge bench of
      this Court dealt with a peculiar arbitration clause, stipulating that:

H
BABANRAO RAJARAM PUND v. M/S. SAMARTH BUILDERS                                 161
      & DEVELOPERS & ANR. [SURYA KANT, J.]

      “(16) If during the continuance of the partnership or at any             A
      time afterwards any dispute touching the partnership arises
      between the partners, the same shall be mutually decided by
      the partners or shall be referred for arbitration if the parties
      so determine.”
                                                     [Emphasis applied]        B
       Reference to the arbitration under the above reproduced clause
was contingent on the determination by the parties, as their explicit
intention to arbitrate was conspicuously missing. This Court, therefore,
held that the arbitration clause was invalid as the parties had shown
mere desire or hope to have the disputes settled by arbitration. While         C
interpreting Section 7 of the 1996 Act and placing reliance on K.K.Modi
(supra) as well as Encon Builders (supra), it was further held that:-
      “8.(i)….Where there is merely a possibility of the parties
      agreeing to arbitration in future, as contrasted from an
      obligation to refer disputes to arbitration, there is no valid           D
      and binding arbitration agreement…….
      (iii) Where the clause provides that in the event of disputes
      arising between the parties, the disputes shall be referred to
      arbitration, it is an arbitration agreement.”
       22. Adverting to the case in hand, it may be seen that the contents     E
and the nature of Clause 18 are substantially different from the dispute
resolution pacts in K.K.Modi, Jagdish Chander, or Encon Builders
(supra). We say so for three reasons. 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         F
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       G
be “the Arbitration and Conciliation Act, 1996 or any re-enactment
thereof.” These three recitals, strongly point towards an unambiguous
intention of the parties at the time of formation of the contract to refer
their dispute(s) to arbitration.
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162                SUPREME COURT REPORTS                      [2022] 16 S.C.R.


A            23. We are, therefore, of the firm opinion that the High Court fell
      in error in holding that the Appellant’s application under section 11 was
      not maintainable for want of a valid arbitration clause. We find that
      Clause 18 luminously discloses the intention and obligation of the parties
      to be bound by the decision of the tribunal, even though the words “final
      and binding” are not expressly incorporated therein. It can be gleaned
B
      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.
C            24. Even if we were to assume that the subject-clause 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.
D            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. A three-Judge Bench of this Court
      in Enercon (India) Ltd. and Ors. v. Enercon Gmbh and Anr.6 dealt
      with an arbitration clause that did not provide for a method of electing
E     the third arbitrator. The court held that “the omission is so obvious
      that the court can legitimately supply the missing line.” The line
      “the two arbitrators appointed by the parties shall appoint the third
      arbitrator” was read into the clause so as to give effect to it. It was
      further held that:

F               “88. In our opinion, the courts have to adopt a pragmatic
                approach and not a pedantic or technical approach while
                interpreting or construing an arbitration agreement or
                arbitration clause. Therefore, when faced with a seemingly
                unworkable arbitration clause, it would be the duty of the
                court to make the same workable within the permissible limits
G               of the law, without stretching it beyond the boundaries of
                recognition. In other words, a common sense approach has
                to be adopted to give effect to the intention of the parties to
                arbitrate. In such a case, the court ought to adopt the attitude
                of a reasonable business person, having business common
H     6
          (2014) 5 SCC 1.
BABANRAO RAJARAM PUND v. M/S. SAMARTH BUILDERS                                  163
      & DEVELOPERS & ANR. [SURYA KANT, J.]

      sense as well as being equipped with the knowledge that may               A
      be peculiar to the business venture. The arbitration clause
      cannot be construed with a purely legalistic mindset, as if
      one is construing a provision in a statute….”
       26. The UNCITRAL Model Law on International Commercial
Arbitration, 1985 from which the Arbitration and Conciliation Act, 1996         B
originated, envisages minimal supervisory role by courts. When section
7 or any other provisions of the Act do not stipulate any particular form
or requirements, it would not be appropriate for a court to gratuitously
add impediments and desist from upholding the validity of an arbitration
agreement.
                                                                                C
       27. There is no gainsaying that it is the bounden duty of the parties
to abide by the terms of the contract as they are sacrosanct in nature, in
addition to, the agreement itself being a statement of commitment made
by them at the time of signing the contract. The parties entered into the
contract after knowing the full import of the arbitration clause and they
cannot be permitted to deviate therefrom.                                       D

       28. 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     E
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.
      Conclusion:
                                                                                F
       29. In light of the above discussion, the Civil Appeal stands allowed.
Clause 18 of the Development Agreement is held to be a valid arbitration
clause. Consequently, the impugned judgment and order dated 07.07.2021
passed by the High Court of Judicature of Bombay at Aurangabad is set
aside.
                                                                                G
      30. Since the Appellant has already invoked the arbitration clause,
without any further ado, this Court appoints Mr. Justice P.V. Hardas
(Contact number: +91-9834933135), former Judge of the Bombay High
Court, as the Sole Arbitrator to resolve all disputes/differences between
the parties. The learned Arbitrator shall be entitled to a fee as per the
                                                                                H
164              SUPREME COURT REPORTS                      [2022] 16 S.C.R.


A     Fourth Schedule of the Act, as amended from time to time. The Registry
      is directed to send a copy of this order to the learned Sole Arbitrator.
             31. The issues on merits that may be raised by the parties are
      kept open and shall be determined by the learned Arbitrator in accordance
      with law.
B
      Devika Gujral                                              Appeal allowed.
      (Assisted by : Shubhanshu Das, LCRA)




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