An Arbitration clause, even without the words “final and binding”, valid, if the intention of the parties to abide by the arbitrator’s decision, is clear: Supreme Court
Case Name: Babanrao Rajaram Pund v. Samarth Builders & Developers.
Case Citation: 2022 SCC OnLine SC 1165.
Case Facts: The owner of the land (“Appellant”) and a developer (“Respondent”) who is engaged in the business of construction of residential & commercial buildings entered into a development agreement for the development of land into an apartment building name ‘Amay Apartment’ (“Agreement”) and GPA in favour of Respondent.
As per the Agreement, Respondent was supposed to complete the development works within 15 months, however, Respondent failed to meet the timeline. As a result, the Appellant issued a legal notice to terminate the said Agreement and the GPA, this notice was contested by the Respondent. The Appellant then invoked the arbitration clause in the Agreement and issued notice for appointing Mr. Rajale as the sole arbitrator to resolve the dispute. However, the Respondent did not reply to the said notice. Consequentially, the Appellant filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 (“Act”) before the Hon’ble High Court.
Respondent contested the said application on the ground that since the Agreement 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 writing to be bound by the decision of an arbitral tribunal”, was highlighted by Respondent to contend that Clause 18 of the Agreement was not enforceable. The Respondent argued that the Appellant’s application under Section 11 was not maintainable because it lacked a proper arbitration provision. The High Court concurred with the Respondent and reached the same conclusion.
Case Decision: A bench consisting of Surya Kant and Abhay S. Oka, JJ, came to the conclusion that there need not be an express mention of the words “final and binding” for a valid arbitration clause to be present when an arbitration agreement luminously discloses the intention and obligation of the parties to be bound by the decision of the tribunal.
After reviewing the other provisions of the arbitration agreement, the apex court found that the parties’ primary objective was unquestionably to have any issues resolved via the process of
arbitration. As a result, the Respondents’ claim of non-existence of a legal arbitration clause appears to be an afterthought in the lack of specified exclusion of any of the characteristics of
an arbitration agreement.
The Supreme Court stated:
“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.”

The apex court stressed on the fact that UNCITRAL Model Law on International Commercial Arbitration, 1985 from which the Act 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.
It was, hence, observed that it is 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.