Holding

The Court held that a valid arbitration agreement existed, a live dispute was present, and the pre‑condition of amicable settlement was exhausted, thereby permitting the appointment of an arbitrator.

Summary

Visa International Ltd. and Continental Resources (USA) Ltd. entered into a Memorandum of Understanding (14‑Feb‑2005) and a subsequent agreement (15‑Feb‑2005) to set up an integrated aluminium complex, containing Clause VI which provided that any dispute not settled amicably would be finally settled under the Arbitration and Conciliation Act, 1996. A dispute arose and the applicant invoked the arbitration clause, naming arbitrators, which the respondent rejected, claiming the clause was ineffective, the agreement inchoate, and that amicable settlement had not been exhausted. The Court examined whether a valid arbitration agreement existed under Section 7, whether a live dispute subsisted, and whether the pre‑condition of amicable settlement was satisfied. It held that Section 7 does not prescribe a particular form, the parties’ intention to arbitrate was clear from the clause and surrounding correspondence, a live issue existed and the requirement of exhausting amicable settlement was met. Consequently, the Court ordered the appointment of an arbitrator.

Issues considered

Whether a valid arbitration agreement exists between the parties under the Arbitration and Conciliation Act, 1996.
Whether a live dispute subsisting between the parties can be referred to arbitration.
Whether the pre‑condition of exhausting amicable settlement has been satisfied, rendering the application premature.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(5), s. 11(6), s. 11(9), s. 19, s. 20(1), s. 20(2), s. 2(1)(f), s. 23, s. 24, s. 25, s. 26, s. 27, s. 30, s. 61, s. 62, s. 67, s. 7, s. 73

Subjects

Arbitration agreementSection 11 of the Arbitration and Conciliation ActLive disputeAmicable settlementInternational commercial arbitrationInterpretation of arbitration clause

Judgment

[2008] 16 S.C.R. 1043

VISA INTERNATIONAL LTD. A
1 v.
CONTINENTAL RESOURCES (USA) LTD.
(Arbitration Petition No.16 of 2007)

DECEMBER 2, 2008
B
[B. SUDERSHAN REDDY, J.]

...... ~ Arbitration and Conciliation Act, 1996:

c
Ss.2(1 )(f), 7, 11 (5), (6) and (9) - 'International commercial
arbitration' - Arbitration clause in agreement - Existence of.
live claim - Held: s. 7 does not prescribe any particular form
of arbitration agreement- In the instant case, relevant clause
in the agreement indicates clear intention of parties to refer
the dispute to arbitration - There is a dispute and live issue D
between the parties -Claim is not barred by limitation - A clear
case is made out for appointment of arbitrator to decide the .
dispute between the parties - Arbitrator appointed.
~
..
A Memo of Understanding dated 14.2.1005 was
executed by and between the applicant and the E
respondent to incorporate a company for the purpose of
setting up an integrated Aluminium Complex. The said
MoU was followed by ~n agreement dated 15.2.2005
executed between the parties, Clause VI whereof stated:
"Any dispute arising out of this agreement and which F
cannot be settled amicably shall be finally settled in
/ -i
accordance with the Arbitration and Conciliation Act,
1996." Disputes having arisen between the parties, the
applicant invoked the arbitration clause duly informing
the respondent. The respondent by letter dated 3.4.2007 G
rejected the names suggested by the applicant to be
appointed as arbitrator for the reasons that (a) the
arbitration would not be cost effective and (b) the
arbitration was pre-mature. Therefore, the applicant filed
1043 H
1044 SUPREME COURT REPORTS [2008] 16 S.C.R.

A the application. ,._
The questions for consideration before the Court
were: "Whether there exists a valid arbitration agreement ~
between the parties?" and "Whether there exists a live
claim between the parties?"
B
Allowing the application, the Court
j
HELD: 1. It is now well settled that the power 'r 1-o•

exercised by the Chief Justice of India or the designated
c Judge under s.11 (6) of the Arbitration and Conciliation
Act, 1996 is not an administrative power. It is a judicial
power. The Chief Justice or the designated Judge, as the
case may be, is bound to decide whether he has
jurisdiction to entertain the request, in the sense, whether
D there is a valid arbitration agreement .in terms of s. 7 of the
Act and whether the person before him with a request is
a party to the arbitration agreement or whether there was
no dispute subsisting which was capable of being '!'
arbitrated upon. [Para 10] [1051-E-H; 1052-A] ..
E SBP & Co. vs. Patel Engineering Ltd. & Anr. (2005) 8
sec 618, relied on.
2.1. Section 7 of the Act does not µrescribe any
particular form and it is immaterial whether or not
expression 'arbitration' or 'arbitrator' or 'arbitrators' has
F
been used in the agreement. That an arbitration
agreement is not required to be in any particular form has ,.__ '
been reiterated in more than one decisions. What is
required to be decided in an application u/s 11 of the Act
is whether there is any arbitration agreement as defined
G in the Act. What is required to be gathered is the intention
of the parties from the surrounding circumstances
including the conduct of the parties and the evidence 1--
such as exchange of correspondence between them.
But, one cannot take into consideration the terms of any
H
VISA INTERNATIONAL LTD. v. CONTINENTAL 1045
RESOURCES (USA) LTD.

other contract especially when the contract is not A
between the same parties. [Para 18, 24 and 27] [1054-F-
H; 1056-H; 1057-A, O]
Rukmani Bai Gupta vs. Collector of Jabalpur, (1980) 4
SCC 556; M. Dayanand Reddy vs. A.P. Industrial
Infrastructure Corpn. Ltd. & Ors. (1993) 3 SCC 137; and Bihar B
State Mineral Development Corporation vs. Encon Building,
(2003) 7 sec 418, relied on.
Iron and Steel Company Ltd. vs. Tiwari Roadlines, (2007)
5 sec 703 held inapplicable. c
2.2. It is evident from the exchange of
correspondence between the parties that the respondent
while rejecting the names suggested by the applicant for
resolution of the disputes by arbitrator never disputed the
existence of the arbitration clause but, merely objected D
to the names inter alia contending that the suggested
arbitration would not be cost effective and the demand
for arbitration itself was a premature one. [Para 17 and
27] [1054-8; 1057-E]
3.1. It is evident from Clause VI of the agreement that E
the parties intended to settle the disputes amicably
among themselves and only in case of failure, the
disputes were required to be settled in accordance with
the provisions of the Act. The language employed in
Clause VI clearly shows that on failure to settle the F
disputes amicably the parties intended to invite a binding
verdict in accordance with the provisions of the Act. The
parties never intended to go through the conciliation
proceedings even after their failure to arrive at an
amicable settlement among themselves. It is pertinent to G
observe that the respondent never initiated any
conciliation by sending any written invitation to conciliate
under Part Ill of the Act. It was not the case of the
respondent that dispute, if any, between the parties, may
have to be resolved through conciliation and not by H
.-
1046 SUPREME COURT REPORTS [2008] 16 S.C.R.
I
}-
t
t
~
A arbitration. Such a plea evidently is an afterthought. [Para · I
I
7, 24 and 30] [1050-H; 1056-F; 1058-H; 1059-A-C]
E.J.R. Lovelock Ltd. vs. Export/es (1968) Vol.1 Lloyd's
Law Reports 163 and AIR Europe S.A. vs. QBE
B International Insurance Ltd. (2001) Vol.2 LLR 268, referred
to.
3.2. The parties have agreed for the resolution of the
disputes making all the provisions of the Arbitration and
Conciliation Act, 1996 applicable until the final termination
c of their disputes arising out of the agreement. The
absence of word 'Reference' may not clinch the issue
inasmuch as it is the whole clause providing for the
resolution/settlement of the· disputes arising out of the
agreement and not a word or two is required to be
interpreted in order to gather the intention of the parties.
0
Clear intention to refer the dispu~es to arbitration in
accordance with the provisions of Arbitration and ·
!'
Conciliation Act, 1996 is clearly evident from Article VI '
incorporated in the agreement. [Para 33] (1060-G-H; 1061-
E C-E]
3.3. Once the parties agree for resolution of dispute
in accordance with the Arbitration and Conciliation Act,
1996 the said Act will take care of the entire processes
and procedure. A close scrutiny of clause VI of the
F agreement reveals that essential et'ements stated in the
checklist have been addressed to. However, when the
specific intention of the parties is clearly evident from the
arbitration clause the same cannot be treated as vague
on the ground that it does not satisfy the suggested
G checklist of all matters to be considered while drafting an
arbitration agreement. [Para 34 and 35] (1062-B; 1063-A-
B] t
''Russel on Arbitration", referred to.

H 4.1. It cannot be said that the pre-conditibn for
VISA INTERNATIONAL LTD. v. CONTINENTAL 1047
~
RESOURCES (USA) LTD.
(

_) amicable settlement of the dispute between the parties A
having not been exhausted the application seeking
appointment of arbitrator is premature. From the
correspondence exchanged between the parties, it is
clear that there was no scope for amicable settlement, for
both the parties had taken rigid stand making allegations

-
B
against each other. The exchange of letters between the
parties undoubtedly discloses that attempts were made
A

"' for an amicable settlement but without any result leaving
no option but to invoke arbitration clause. [Para 36] [1063-
C-E; G-H] c
4.2. It is amply clear from the facts as pleaded as well
as from the exchange of correspondence between the
parties that there has not been any mutual satisfaction
arrived at between the parties as regards the dispute in
~and. The claims are obviously not barred by limitation. D
It is thus clear that there is a live issue subsisting
_J
} between the parties requiring its resolution. [Para 40]
• (1065-H; 1066.-A] -
5. A clear case is made out for appointment of an E
arbitrator to decide the disputes between the parties.
Arbitrator is, therefore, appointed. [Para 41] [1066-8-C]
Case Law Reference:
(2005) 8 sec 618 relied on para 10 F
• ~ (1980) 4 sec 556 relied on para 13
(1993) a sec 137 relied on para 16
(2003) 1 sec 418 relied on para 18
G
(2007) 5 sec 703 held inapplicable para 21
---f
(1968) Vol.1 Lloyd's referred to para 32
t Law Reports 163
(2001) Vol.2 LLR 268 referred to para 32 H
1048 SUPREME COURT REPORTS (2008) 16 S.C.R. ·~

.A CIVIL ORIGINAL JURISDICTION : Arbitration Petition No.
16 of 2007. ·

. DL ,c;.M.-Singhvi; Jaideep Gupta, K.K.Venugopal, Sanjeev
K1;1rr1ar, Vishal Gupta, KumarMihir (for M/s. Khaita.n & Co.) K.V.
Vishwanathan,, Promit K. Ray, Ra~f Rahim, Gopal, Ya,dunandan
8
Bansal ar.i9::S~oaib for the appearing parties ..

···t~~. 'Judgment of the Court was _delivered b~
8. SUDERSHAN REDDY, J. 1. This application- 'under
c sub-section (5) and (9) of Section 11 of the Arbitration and
Conciliation Act, 1996 (for short "tile Act") has been filed with
a prayer to appoint an Arbitrator in terms of Clause VI of the
~greem~nt dated 15.2.2005 entered into by and between the
applicant an.d ~he respondent. ·

D · · 2. f~cts leading to filing of this application may briefly
The
be. noticed:· . .

3. The applicant is, inter alia, engaged in the business of
providing seryices in international trading of Minerals, M.etals
E and Ship 'Ctiartering. The respondent with an intention to make
substantial' investments to set· up an integrated aluminium
( ' -... ' l .. ~ ,. .. . . . .

complex in Orissa with an Alumina refinery to be catered by
the bauxite deposits of Gandh_amardan Mines entered into a
!,
Memorandum of Understanding (for short "MOU") with Orissa
F Mining Corporation Ltd. (for short "OMC")for mining of bauxite ti
deposi,ts from the Gandhamardan Mines situated in the State
of Orissa. In order to help set up integrated aluminium complex
I

in ·orissa, OMC had decided and agreed to enter into a Joint
t- -- '-

Venture Agreement with the respondent on certain terms and f-
G conditions. · I
~ . ; ,t

4 .. In terms'c>f'the proposed joint venture agreement, the
respondenCwas required to set up an -integrated alumina 1--·- .
complex in the vicinity of the Gandhamardc:m area and was .,...
further obliged to utilize the bauxite lifted from the said mines
'H as raw material in the proposed· aluminum complex. The
VISA INTERNATIONAL LTD. v. CONTINENTAL 1049
RESOURCES (USA) LTD. [8. SUDERSHAN REDDY, J.]

~ respondent proposed to the applicant to set up the said A
integrated aluminum complex in joint venture with the applicant
by duly incorporating a Special Purpose Vehicle (SPV) for the
purpose.

5. The applicant relying upon representations and B
assurances had accepted the proposal for setting up of the said
--1 aluminum complex in joint venture with the respondent. The
.....
parties mutually agreed to execute a MOU and an agreement
to clearly define their respective rights and obligations thereto.
Accordingly, a MOU dated 14.2.2005 was executed by and
between the applicant and the respondent whereby and
c
whereunder it was agreed that the applicant and the respondent
would fncorporate a company in the name and the style of
"VISA Aluminum Ltd" for the purpose of setting up an integrated
Aluminum Complex. The said MOU was followed by an
agreement dated 15.2.2005 executed between the parties. In D
terms of the said agreement it was agreed that the respondent
}'-
would enter into the joint venture agreement with OMC while
~
the applicant and the respondent would incorporate a company
in the name and style of "VISA Aluminum Limited" for setting
up an integrated Aluminum Complex. In terms of the said E'
agreement 26% of the issued and paid up equity shares ofthe
proposed company to be retained by the respondent and the
remaining 74% of the shareholding to be held by the applicant.
The applicant agreed to bear a sum of US$ 7,40,000 being
74% of US$ 10,00,000 to have been incurred by the respondent F
... _..,
on the pre-project activities. Day to day control was agreed to
be that of the applicant exclusively. The applicant also
undertook to pay a sum of US$ 22,50,000 to the respondent
for the future overseas costs in terms of the said agreement.
Article IV of the said agreement stipulated that the agreement G
to be effective upon signing by both the parties with immediate
-~ effect. The whole controversy centers around the interpretation
of Article VI in the said agreement which according to the
applicant contains the Arbitration Clause. .,
H
1050 SUPREME COURT .REPORTS {2008) 16 S.C.R.

A 6. It may not be necessary for the purpose of disposal of
this application to note further details ·as to what transpired
between the applicant and the respondent after.entering into
the agreement till 31st August, 2006. Suffice it to note that on
31st August, 2006 the respondentaddressed a letter to the
s applicant, inter alia,. alleging the agreement entered into·
between them 'is not 'appropriate and is obsolete' as it does
not address the changes in the OMC draft agreement itself. The
respondent proposed a new agreement to be prepared on the
lines suggested therein~This is the starting ·point leading to
c. unending and acrimonious correspondence between the.
·applicant and the respondent accusing each other of overreach.
The applicant asserted that the agreement dated 15.2.2005
entered into by and between the parties continued to be valid
and subsisting and whereas the responde!lt contended that the
0 agreement became unworkable. On 25.9.2006 the respondent
informed the applicant that MOU dated 14.2.2005 and
agreem·~nt d8'ted '15.2.2005' "stand discharged and CRL
stands"discharge" of its obligations under the said agreement.
MO'U dated 14:2.2005 and agreement dated 15.2'.2005. was· .
. E treated· as cancelled.The applicant vide letter·dated 6.3.2007 · ·
· informed the respondent that its action of unilateraliy terminating
the said. MOU' and also the.agreement was not acceptable fo
it. The applicant accordingly invoked/the arbitration clause duly ·
informing the respondent that disputes thus have arisen out of
the said MOU and the agreement which are required to be
F resolved by the ArbitratoL. The respondent in its turn vide letter
dated 3.4.2007-.rejected the· names· suggested by the applicant ·
to be appointed as Arbitrator for the reasons that (a) the
arbitratio'n will not be cost effectiv~; and (b) the arbitration is
pre-mature.
G
7. Be it noted th.at the respondent never disputed the
existence, of tt:i.e. arbitration clause, Nor was the C(lse of the ... . ,,_ _
respondentthat dispµte if any between the parties may have
to be resolved by way of concili(ltion and not by a·rbitration. It
H is under tho~e circumstances the present application has been
VISA INTERNATIONAL LTD. v. CONTINENTAL 1051
RESOURCES (USA) LTD. [B. SUDERSHAN REDDY, J.]

-~
filed by the applicant under Section 11 (5) & (9) of the,Arbitration A
and Conciliation Act, 1996.

8. The respondent admits the execution of the said MOU
as well as the agreement dated 15.2.2005 but contends that
the agreement is an inchoate document, a contingent matter, 8,
not capable of being enforced as an arbitration agreement. The
exchange of letters by and between the parties is not in dispute.
;;, ·-! It is also the case of the respondent that the applicant failed to
identify the dispute that could not be resolved amicably and as
such there is no question of referring the matter to arbitration
by appointing an arbitrator.
c
9. Having regard to the pleadings and coritentions the
following .questions arise for-consideration:

1. Whether there exists a valid arbitration agreement D
between the parties?
): 2. Whether there exists a live claim between the
;.
parties?

10. It is now well settled that the power exercised.by the E
Chief Justice of India or the Designated Jud_ge under Section
11 (6) of the Arbitration and Conciliation Act, 1996 is not an
administrative power. It is a judicial power. In SBP & Co. Vs.
Patel Engineering Ltd. & Anr. [ (2005) 8 SCC 618] this Court
in its ~uthoritative pronouncement held that while exercising the . F
power or performing the duty under Section 11 (6) of the Act,
the Chief Justice or the designated Judge has to consider
whether the conditions laid down by the Section for the
exercise of that power or the performance of that duty, exist.
The Chief Justice or the designated Judge as the case may G
be, is bound to decide whether he has jurisdiction to entertain
the request, in the sense, whether there is a valid arbitration
-~
agreement in terms of Section 7 of the Act and whether the
person before him with a request is a party to the arbitration
agreement or whethf3r there was no dispute subsistihg which
H
1052 SUPREME COURT REPORTS . [2008] 16 S.C.R..

A was capa91e of being arbitrated upon. These principles ought ;..
to be borne in mind while deciding the application under
Section 11 (6) of the Act.

Whether there exists a valid arbitration agreement
between the parties?
B
11. The disputed arbitration clause in the present case
reads as under: )- .._,,,_
~
"Any dispute arising out of this agreement and whicl1
c canrwt be settled amicably shall be finally settled in
accordance with the Arbitration and Conciliation Act,
1996."

12. Arbitration agreement is defined under Section 7 of
the Act. It does not prescribe any particular form as such. In
D terms of the said provision arbitration agreement means:

(1) 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,
E 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.
F (3) An arbitration agreement shall be in writing.
;Jr
(4) An arbitration agreement is in writing if it is contained
in-

(a) a document signed by the parties;
G
(b) ......................
~-
(c) ......................
(5) ...................
H
1054 SUPREME COURT .REPORTS [2008] 16 S.C.R.

A 17. The Court is required to decide whether.the existence ...
of an agreement to refer the dispute to arbitration can be. clearly
ascertained in the facts and circumstances of the case. This,
in turn, may c;iepend upon the intention of the parties to be
gathered from the correspondence exchanged between the
B ·parties and the surrounding circumstances. In the instant case,
the respondent while rejecting the names suggested by 1he
. applicant for resolution of the disputes by the arbitrator never )-- /
~

disputed the existence of the arbitration clause. The applicant \

vide letter dated 20.9.2006 in response to the respondent's
c letters dated 7,8, 13 and 15.9.2006 and duly placing relian9e
upon MOU dated 14.2.2005 and agreement dated 15.2.2005
asserted that agreement entered into between the parties
provided for resolution of all disputes by arbitration. The
applicant accordingly expressed its willingness to refer the
D matter to arbitration. The respondent in its reply dated
25.9.2006 stated that referring the matter for arbitration "is
irrelevant and inappropriate" in absence of any valid
agreement, in as much as the MOU dated 14.2.2005 was itself 'f ;
'-...
conditional and not effective, The respondent did not dispute
the existence of a valid arbitration clause in the agreement. The
E
plea was that agreement entered into between the parties on
15.2.2005. itself was not a valid one.

18. That an arbitration agreement. is not required to b~ i11
any particular form has been reiterated in more than f)ne
F decision. [see: Bihar Stat~ Mineral Development Corporation
Vs. Encon Building (2003) 7 SCC 418]. What is required is 't-
to gather the intention of the parties as to :whether they have
agreed for resolution of the disputes through arbitration. What
is required to be decided in an application under Section 11
G of the Act is whether there is any arbitration agreement as
defined in the Act? It needs no reiteration that Section iof the
Act does not prescribe any particular form anp it is imfnaterial )....-
whether or not expression 'arbitration' or 'arbitrator' or
'arbitrators' has been used in the agreement.
H
VISA 1NTERNATIONAL LTD. v. CONTINENTAL 1055
RESOURCES (USA) LTD. [B. SUDERSHAN REDDY, J.]

19. Shri KK. Venugop~I. !earned seni9r counsel appearing A
on behalf of the respond~nt submitted that MOU dated
14.2.2005 does not contain any arbitration clause and further
the agreement dated 15.2.2005 itself is a cpntingent agreement
incapable of being enforced.
B
20. Dr. Singhvi, learned senior counsel for the applicant
in response to the said contention submitted that MOU dated
14.2.2005 culminated in the agreement dated 15.2.2005 which
contained a valid arbitration clause and there is no legal
hindrance to appoint an arbitrator for resolving the disputes.
c
21. The crucial ,questiqn ce.nters around the interpretation
of Clause VI of the agreement dated 15.2.2005. Shri
Venugopal, in response to a pointed query from the court
submitted that the intention vf the respondent was to agree for
settlement of the disputes through conciliation in accordance. D
with the provisions of the Act in case of failure to settle disputes
amicably between the parties. The submission was in a case
)-
of arbitration, there is no settlement; the award of an arbitrator
who has to be independent and impartial from the parties is ·
binding by and between the parties not because both the E
parties finally have settled the matter but because of legal
sanctity. There has been no attempt whatsoever to amicably
settle the matter-which is a pre-condition to invoke the latter limb
of Article VI and therefore, the application under Section 11 is
liable to be rejected. The learned counsel in this regard placed F
reliance on the decision in Iron and Steel Company Ltd. Vs.
Tiwari Roadlines reported in [2007) 5 SCC 703]. In the said
case the parties have agreed for resolution of disputes by
arbitration in accordance with the Rules of Arbitration of the
Indian Council of Arbitration. No efforts were made to have the
G
disputes settled by arbitration in accordance with the Rules of
; ,J.
Arbitration of the Indian Council of Arbitration. On the contrary,
one of the parties moved an application under Section 11 of
the Act It is under those circumstances this Court held:

"Since the parties tiere had agreed on a· procedure for H
1056 SUPREME COURT REPORTS · [2008) 16 S.C.R.

A appointing an arbitrator for settling the dispute by ~
arbitration as contemplated by Section 11 (2) and there
is no allegation_ that any one or the contingencies
enumerated in Section 11 (6) clause (a) or (b) or (c) had
occurred, the application moved by the respondent was
B clearly not maintainable and the court had no jurisdiction
to entertain such an application and pass any order."
(emphasis supplied)
'r .......
22. The case has no application to the fact situation in.
hand. It was a case where one of the parties invoked Section
c 11 (6) of the Act without there being no allegation that any one
of the contingencies enumerated in Section 11 (6) Clause (a)
or (b) or (c) had occurred.

23. In the present case the parties did not agree upon any
D particular procedure for the appointment of the arbitrator.
Clause VI provides that disputes arising out of the agreement
which could not be settled amicably shall be finally settled in
i
accordance with the provisions of the Act.
"'
The question is whether the par(ies have agreed to
E
resolve their disputes by arbitratiqn or through
conciliation?
...
· 24. Be it noted that at no stage the respondent took any
plea that the dispute was required to be settled through
F conciliation in accordance i.,yith the Arbitration and Conciliation "°".

Act, 1999. It. is evidently an afterthought. Shri Venugopal y.
submitted that.on a·comparison with di$pute resolution clause
in the MOU entered into between the OMC an_d CRL with the
settlement clause in the agreement dated i=ebru·ary 15, 2005,
G it is apparent that there was no specific intenti_on ofth~ parties
to refer the disputes to arbitration. It is true that the dispute
resolution clause in MOU entered into between OMC and CRL . >..._ -

is more specific in its terms but the said clause would not throw
any light in construing clause VI in the agreement dated 1Stti
H Februa,.Y, 2005. One cannot take into consideration terms of
VISA INTERNATIONAL LTD. v. CONTINENTAL 1057
RESOURCES (USA) LTD. [B. SUDERSHAN REDDY, J.]

other contracts especially when the contract is not between the A
-~
same parties.

25. Shri Venugopal, relied on that clause and submitted
that in the absence of a similar clause in the present agreement
the parties have made their intention expressly clear to resolve B
their disputes through conciliation in case of failure to settle the
disputes amicably among themselves.

26. The submission is unsustainable for more than one
reason. No party can be allowed to take advantage of inartistic
drafting of arbitration clause in any agreement as long as clear c
intention of parties to go for arbitration in case of any future
disputes is evident from the agreement and material on record
including surrounding circumstances.

27. What is required to be gathered is the intention of the D
parties ffom the surrounding circumstances including the
conduct of the parties and the evidence such as exchange of
~ correspondence between the parties. lhe respondent in none
of its letters addressed to the applicant suggested that the
dispute between the parties is required to be settled through
E
conciliation and not by arbitration. In response to the applicant's
letter invoking the arbitration clause the respondent merely ·
objected to the names inter-alia contending the suggested
arbitration would not be cost effective and the demand for
arbitration itself was a premature one.
F
Is there any material available on record suggesting that·
the parties intended to resolve their disputes through
conciliation on failure to settle the disputes amicably
among themselves?
G
28. Part Ill of the Act deals with conciliation. Section 61 '

provides: "save as otherwise provided by any law and unless
-~
have otherwise agreed, Rart Ill shall apply to conciliation of
disputes arising out of legal relationship, whether contractual
or not and to all proceedings relating thereto. Section 62
H
1058 SUPREME COURT REPORTS [2008] 16 S.C.R.

A speaks of commencement of conciliation proceedings. It says
the party initiating conciliation shall send to the other party a
written invitation to conciliate under Part Ill, briefly identifying the
subject of the dispute and the conciliation proceedings shall
commence when the other party accepts in writing the invitation
B of conciliation. If the other party rejects the invitation, there will
be no conciliation proceedings. Part Ill of the Act does not
envisage any agreement for co.nciliation of future disputes. It
only provides for an agreement to refer the disputes to
conciliation after the disputes had arisen. Whereas Section 7
c of the Act which speaks of arbitration agreement provid.es f~r:
an agreement between the parties to submit to the arbitration
all or certain disputes which have arisen or which may arise
between them in respect of a defined legal relatjonsh!p 1
whether contractual or not. ·
D 29. Clause VI i.n the present C(ls@ obviouf?IY provides for
resolution of the, disputes between the parties which may arise
out of the agre13mentafter its execution, There was no dispute
between the pE:Jrties even as on the date of the agreement. That
apart the conciliator only assists the parties in an independent
E and impartial manner in their attempt to reach an amicable
. settlement of their disputes. The conciliator provides guidance
as provided for under Section 67 of the Act. Under Section 73
of the Act the Conciliator formulates the terms of a possible
settlement when it appears to him that there exist elements of
F a settlement which is acceptable to the· parties. Ultimately it is .
the parties who are 'required to reach an agreement on a
settlement of dispute. The conciliator merely authenticates the
settlement agreement. The s~ttlernent agreement shall have the
same effect as the arbitral qward on agreed terms on the
G ·substance of the dispute rendered by the arbitral tribunal under
Section 30.
· 30. In the present case as is evjdent from Clause VI of the .l--
agreement .the parties intended to settle the disputes amicably
among themselves and only in case of failure the disputes were
H required to be settled in accordance with the provisions of the
VISA INTERNATIONAL LTD. v. CONTINENIAL 1059
RESOURCES (USA) LTD. [B. SUDERSHAN REDDY, J.]
_. At:X It is clearly evietent from the language employed in Clause · A
VI that on failure to settle the disputes amicably the parties
Intended to lnviM a binding verdict in accordance with the
provisions of the Act. The parties never intended to go through
the conciliation proceedings even after their failure to arrive at
an· amicable settlement among themselves. It is pertinent to B
observe that the respondent never initiated any conciliation by
... 1 sending any written invitation to conciliate under Part Ill of the
Act. In the circumstances, it is impossible to accede to the
submission that the parties intended to settle their future
disputes arising out of the agreement through conciliation. c
31. Shri Venugopal submitted that the agreement dated
15th February, 2005 is of inchoate nature and is a contingent
agreement, therefore, even if any dispute had arisen the same
cannot be referred to any Ai'bitral Tribunal to resolve it.
0
32. The decision reported in E.J.R. Lovelock Ltd. Vs.
'r Export/es [1968] Vol.1 Lloyd's Law Reports 163 and AIG
"' Europe S.A. vs. QBE International Insurance Ltd. reported in
[2001] Vol.2 LLR 268 upon which reliance was placed are not
applicable to the facts of the case and render any assistance E
to resolve the issue. In E.J.R. Lovelock Ltd.(supra) the
arbitration clause was divided into two parts. The first part
(which was lifted bodily from a standard form and contract)
provided for arbitration before English ~rbitrators. The second
· part provided for arbitration in Russia in accordance with F
·'( Russian Chamber of Commerce Arbitration Rules. Lord
Denning having interpreted the arbitration clause contained in
the agreement in that case observed that the clause was so
uncertain that the court cannot give effect to it. "The .clause is
divided into two parts which are inconsistent with one another: G,
and it is impossible to .reconcile. them. The first part of this
--,A arbitration clause would send "any dispute and/or claim to
arbitration in England. The second part of the clause would
send ''any other dispute" to arbitration in Russia. It is beyond
the wit of man or at any rate beyond my wit - to say which
H
1060 SUPREME COURT REPORTS [2008) 16 S.C.R.

A dispute comes within which part of the clause ... :... the whole · ~
clause is meaningless. It must be rejected. The court cannot
give ·effect to It. Ttle dispute cannot be sent to arbitration." In
AIG Europe S.A.; Queen's Bench Division while construing a
contract of rei~surance which inter-alia provided:
B
"All terms clauses and conditions as original in all
respects including settlements: ·
. .
The underlying policy contained among its general
conditions the following cla.uses:
c
(L) Arbitral Procedure

In case of dispute between the insured and the insurers
the parties will apply to Tribunal de Commerce in Paris
who wili appoint an arbitrator.....
D
(M) Law and Jurisdiction.

In the event of dispute. between the insured and the
insurer..... the ..... parties should address themselves to the
E · French Courts which have sole jurisdiction; foreign
companies which have accepted part of the risk are also
subject to the jurisdiction of the French Courts... "

observed that clause (L) on its face merely provided for a
pr~liminary procedure involving appointment of persons
F described a~ arbitrators; but it was clear that it was at best a
procedure for consideration which might or might not result in
a compromise of a dispute; it was clearly not an arbitration
agreement in the sense in which that expression was normally
used, nor did it deprive the courts of jurisdiction; as between
G the insured and insurer.

33. In the present case the parties have agreed that the
disputes arising out of the agreement which cannot be settled
amicably to be finally settled in accordance with the provisions
H of Arbitration and Conciliation Act, 1996. The Act not only
VISA INTERNATIONAL LTD. v. CONTINENTAL 1061
RESOURCES (USA) LTD. [B. SUDERSHAN REDDY, J.J

provides for the pror;edure involving appointment of arbitrator A
1
but also comprehensively provides as to jurisdiction of Arbitral
Tribunal and conduct of arbitral proceedings such as
determination of rules of procedure; place of arbitration etc.
and for making arbitral award and termination of proceedings.
The arbitral award shall be final and binding on the parties and B
persons claiming under them respectively. The award is
.JI 1 enforceable under the Code of Civil Procedure in the same
manner as if it was a decree of the court. The parties have thus
agreed for the resolution of the disputes making all the
provisions of the Arbitration and Conciliation Act, 1996 c
applicable until the final termination of their disputes arising out
of the agreement. The absence of word 'Reference' may not
clinch the issue inasmuch as it is the whole clause providing
for the resolution/settlement of the disputes arising out of the
agreement and not a word or two is required to be interpreted D
in order to gather the intention of the parties. In my considered
opinion clear intention to refer the disputes to arbitration in
r accordance with the provisions of Arbitration and Conciliation
" Act, 1996 is clearly evident from Article VI incorporated in the
agreement. It is also required to notice that clause VI contains
E
expression "shall be finally settled ..... " which is of some
significance. The Qward passed by the Arbitral Tribunal is final
and binding on the parties and the persons claiming under them
respectively of course subject to the provisions contained in
Chapter Ill o{the Act. A plane reading of the arbitration clause
reveals that parties intended to settle disputes finally in F
\ accordance with the provisions of the Act in case of failure to
arrive at amicable settlement.

34. Further the respondent has placed reliance and
referred to the checklist of matters to be considered/suggested G,
by Russel in his treatise, Russe_I on Arbitration. The contention
.. ,), was that the disputed clause does not satisfy the checklist of
matters to be considered. Russ.el in his. treatise suggests that
while drafting an arbitration agreement care needs to be taken
to ensure whettier they need to be addressed in the particular H
•

1062 SUPREME COURT REPORTS [2008] 16 S.C.R.
r
A circumstances of ttie case. The following is the checklist of the >-- 1.--
matterswhich according to Russel need to be consideredwhen ,._
drafting ari arb,itration (3greement But it may not be necessary
to include any provision for all of them. But thought should be
given as to whether they need to be addressed in .the particular .
B circumstances ohHe case. Aclose scrutiny of clause VI of the· I
agreement which ptovieies for the applicability of the provisions
of Arbitration and Conciliation Act reveals that essential ~
r ~

elements stated in the ctrecklist have been addressed to
namely:
c 1. The parties have been properly identified; J
2. ·There is a clear. reference to arbitration in
· accordance with the provisions of Arbitration and
Conciliation Act, 1996;
D
3. . The disputes that had arisen between the parties
which could not be amicably settled are 'to be
-{
referred to arbitration;

4. .The seat of the ~rbitration is' to be i~. tern1s, of
E Sectioh 20(1) and 20(2). The arbitral tribunal in the
absence of any agreement betvyeen the parties is
entitled to determine the place of arbitration;
~
5. The substance of the dispute is to be determined
F in accordance with the provisions of Sections
19,23,24,25,26,27 and· other provisions of the i •-..
Arbitration and Conciliation Act, 1996. i
35. The arbitration clause states that the disputes arising .
i
out of the agreement which cannot be settled amicably to be
G finally settled in :ccordance with the Arbitration and Conciliation
Act, 1~96. Ther fore, the provisions of the said Act will govern .
A. ....
the appointmenf of Arbitrafor, the reference of disputes and the
entire pro.cess tcnd procedure of arbitration from the stage of
appointment ofi arbitration till the award is made and executed/
H given effect to/' The provisions of the said Act would meet the
VISA INTERNATIONAL LTD. v. CONTINENTAL 1063
RESOURCES (USA) LTD. [B. SUDERSHAN REDDY, J.]

requirement of checklist of the matters enumerated in the A
-..\, treatise. Once the parties agree for resolution of dispute in
accofdance with the Arbitration and Conciliation Act, 1996 the
said Act will take care of the entire processes and procedure.
Be that as it may when the specific intention of the parties is
clearly evident from the arbitration clause the same cannot be B
treated as vague on the ground that it does not satisfy the

... i
suggested checklist of all matters to be considered while
drafting an arbitration agreement.
Whether invocation of Article VJ providing for arbitration
is premature? c
36. It was contended that the pre-condition for amicable
settlement of the dispute between the parties has not been
exhausted and therefore the application seeking appointment
of arbitrator is premature. From the correspondence
D
exchanged between the parties at pages 54-77 of the Paper-

'
1
'
. r-
book, it is clear that there was no scope for amicable
settlement, for both the parties have taken rigid stand making
aUegations against each other. In this regard a reference may
be made to the letter dated 15th September, 2006 from the
respondent herein in which it is inter-alia stated "...... since E
February, 2005 after the execution of the agreements, various
meetings/discussions have taken place between both the
parties for furtherance of the objective and purpose with which
the agreement and MOU was signed between parties. Several
correspondences have been made by CRL to VISA to help and F
<'
support its endeavour for achieving the goal for which the above
"" mentioned agreements were executed." In the same letter it is
alleged that in spite of repeated requests the petitioner has not
provided any Funding Schedules for their portion of equity along
with supporting documents to help in convincing OMC of G
financial capapilities of the parties and ultimately to obtain
·-)..
financial closure of the project. The exchange of letters between
the parties undoubtedly discloses that attempts were made for
an amicable settlement but without any result leaving· no option
but to invoke arbitration clause. H
{
1064 SUPREME COURT REPORTS [2008] 16 S.C.R.

A Whether there is any live issue between the parties ?

37. The next question that falls for consideration is as to
whether- there is a live issue between the parties? The
application for arbitration can be made only when a dispute
arises between the parties to the arbitration agreement and
8
such dispute gives rise to a live issue. As to what is the meaning
and nature of dispute has been summed up by Mustill and Boyd
in their treatise on Arbitration law titled Law and Practice of r- . .
Commercial Arbitration, 1982 ..... .

c "A dispute means that there may be a difference of
opinion as to the future performance of a contract. For
example, ope party may be denying that any further
performance is due, on the ground that the contract has
been discharg~d by repudiation or frustration; or it may be
D a common ground that the contract is subsisting, but the
parties may be in a dispute abo.ut whether ~ particular act
would .con~titute a valid performance, or whether one party
is entitled to give a particul_ar order, or exercise an option
in a particular way. If the parties stand their ground in such
E a situation, a time will come when it is too late for the right
view to prevail; one party will irremedia~ly in the wrong;
.and serious financial loss is likely to ensue. All this can be
prevented if the partie~ can mount arbitration with sufficient
speed to enable them to know the true position under the ·
_ _contract before the time for performance has finally
F
expir~d."

38. In the present case, in this sense there is a dispute
and live issue between bottl the parties. It is not a stale claim
-or a claim barred by any limitation. However, it is required to
G note that this finding as to the existence of dispute is confined
only for the purpose of finding out whether the arbitral procedure
has 'to be. started for resolving the live is-sue in between the ""_.,
parties.

H 39. In SBP & Co. vs. Paff!! Engineering Ltd. & Anr. [(2005)
VISA INTERNATIONAL LTD. v. CONTINENTAL 1065
RESOURCES (USA) LTD. [B. SUDERSHAN REDDY, J.]

~ 8 sec 618] it is observed: A

"39. It is necessary to define what exactly the Chief Justice,
approached with an application under Section 11 of the
Act, is to decide at that stage. Obviously, he has to decide
his own jurisdiction in the sense whether the party making 8
the motion has approached the right High Court. He has

-- 1
to decide whether there is an arbitration agreement, as
defined in the Act and whether the person who has made
the request before him, is a party to such an agreement. It
is necessary to indicate that he can also decide the
question whether the claim was a dead one; or a long-
c
barred claim that was sought to be resurrected and
whether the parties have concluded the transaction by
recording satisfaction of their mutual rights and obligations
or by receiving the final payment without objection. It may
not be possible at that stage, to decide whether a live claim D

~ . 'y
made, is one which comes within the purview of the
arbitration clause. It will be appropriate to leave that
question to be decided by the Arbitral Tribunal on taking
evidence, along with the merits of the claims involved in
the arbitration. The Chief Justice has to decide whether E
the applicant has satisfied the conditions for appointing an
arbitrator under Section 11 (6) of the Act. For the purpose
of taking a decision on these aspects, the Chief Justice
can either proceed on the basis of affidavits and the
documents produced or take such evidence or get such F
;
-l.; evidence recorded, as may be necessary. We think that
adoption of this procedure in the context of the Act would
best serve the purpose sought to be achieved by the Act
of expediting the process of arbitration, without too many
approaches to the court at various stages of the G
• proceedings before the Arbitral Tribunal."
~ )-.
40. It is amply clear from the facts as pleaded and as well
as from the exchange of correspondence between the parties
that there has not been any satisfaction recorded by the parties
H
1066 SUPREME COURT REPORTS [2008] 16 S.C.R.

)__

A with respect to their claims. There has been no· mutual ~
satisfaction arrived at between the parties as regards the
dispute in hand. The claims are obviously not barred by any
limitation. It is thus clear that there is a live issue subsisting
<. • •• -- -

between the parties
' . requiring its resolution.
'

B
41. In the light of foregoing discussion I am of the clear
opinioh that a clear case is made out for appointment of an
arbitrator to decide the disputes. between the parties. r- ...
4:2; Hon'ble Shri Justice Dr. AS. Anand, former Chief
c Justice of India is appointed as the sole Arbitrator with a
request to him to decide the disputes between the parties
arising out of the agreement referred to in this order. The sole
Arbitrator shall be at liberty to fix his fee in the matter.

D 43. The application is accordingly allowed.

.
RP. Application allowed.
-{
"

: