Arbitration agreement analysis

A Contemporary Analysis of Arbitration Agreements and Arbitration Clauses in India (2024–2025 Judicial Trends)

Abstract

Arbitration has emerged as the preferred mode of dispute resolution in commercial transactions in India. The Arbitration and Conciliation Act, 1996 (as amended) seeks to minimise judicial intervention and uphold party autonomy. However, disputes frequently arise regarding the existence, validity, scope, and survival of arbitration clauses. Recent judicial pronouncements (2024–2025) have clarified crucial aspects such as what constitutes an arbitration agreement, who decides arbitrability, the effect of deletion or frustration of contracts, and limits on court interference under Sections 8 and 11. This paper critically analyses these developments and their implications on arbitration jurisprudence in India.

1. Introduction

An arbitration agreement is the foundation of arbitral jurisdiction. Courts have repeatedly emphasised that arbitration is a creature of consent, not coercion. Despite legislative intent to promote arbitration, Indian courts continue to be approached at the threshold stage, especially regarding the interpretation of arbitration clauses.

Recent judgments from the Supreme Court and High Courts during 2024–2025 indicate a clear shift towards:

Strengthening kompetenz–kompetenz

Restricting pre-arbitral judicial scrutiny

Preserving arbitration clauses even when the main contract is questioned

2. Arbitration Clause – What Is

An arbitration clause is an agreement whereby parties undertake to submit disputes to arbitration instead of courts.

Essential Elements (Judicially Recognised):

Intention to arbitrate

Binding decision

Neutral adjudicator

Finality of award

2025 Supreme Court Position

In Alchemist Hospitals Ltd. v. ICT Health Technology Services India Pvt. Ltd. (2025), the Supreme Court held that:

Mere use of the word “arbitration” does not create an arbitration agreement unless there is a clear and binding intention to submit disputes to arbitration.

🔹 Significance:

Clauses providing only for negotiation, mediation, or future consensus do not qualify as arbitration agreements.

3. Arbitration Clause – What Is Not

An arbitration clause does not exist where:

Parties agree only to negotiate

Decision is advisory or non-binding

Authority acts as an expert, not arbitrator

Judicial Clarification

Courts in 2024–2025 consistently ruled that expert determination or certification clauses cannot be equated with arbitration unless adjudicatory power exists.

4. Arbitrator Appointed by Designation

Clauses naming a specific authority or office (e.g., CMD, Managing Director) often raise neutrality concerns.

2024–25 Trend

Courts have upheld such clauses only if they comply with:

Section 12(5) neutrality requirements

Independence and impartiality standards

If the designated authority is ineligible, courts appoint a neutral arbitrator, preserving the clause rather than invalidating it.

5. Payment of Fees as Pre-Condition for Invoking Arbitration

Certain contracts mandate payment of fees before arbitration invocation.

Legal Position

High Courts in 2024 clarified that:

Such clauses are procedural, not jurisdictional

Non-payment cannot defeat the existence of arbitration agreement

Arbitrator may decide consequences of non-payment

🔹 This aligns with the principle of minimal court intervention.

6. Expert Determination vs Arbitration – Distinction

Aspect

Expert Determination

Arbitration

Role

Technical opinion

Judicial adjudication

Procedure

Informal

Quasi-judicial

Binding nature

Limited

Final & enforceable

Challenge

Contractual

Under Section 34

Courts in 2024 reiterated that labels are irrelevant; substance matters.

7. Arbitration Agreement by Exchange of Letters

Section 7 recognises arbitration agreements formed through:

Emails

Letters

Electronic communication

Recent Judicial View

Courts have upheld arbitration agreements inferred from correspondence if mutual consent is evident, even without a signed contract.

8. Incorporation of Arbitration Clause by Reference

An arbitration clause in another document becomes binding when:

Reference is specific

Parties had knowledge

Intention to incorporate exists

2025 Position

Courts clarified that general reference is insufficient unless the arbitration clause is clearly incorporated.

9. Arbitration Clause in Subsequent or Substituted Agreement

If a later agreement supersedes the original contract:

Arbitration clause survives unless expressly excluded

Key Principle

Arbitration clause is independent and separable from the main contract.

10. Arbitration Agreement During Pending Proceedings

Courts have upheld post-dispute arbitration agreements, reinforcing party autonomy.

11. Survival of Arbitration Clause Despite Frustration

Doctrine of Separability

Even if:

Contract is terminated

Performance becomes impossible

The arbitration clause survives.

2024–25 Judicial Consensus

Arbitration agreement does not perish with the contract.

12. Effect of Deletion of Arbitration Clause

If parties expressly delete the arbitration clause:

Arbitration cannot be invoked

Courts strictly enforce party intention

13. Matters Barred from Arbitration

Non-arbitrable disputes include:

Criminal offences

Matrimonial disputes

Insolvency

Guardianship

Testamentary matters

2025 Emphasis

Courts reiterated that arbitrability is primarily for the arbitrator, except where barred on the face of the record.

14. Number of Arbitrations Under One Contract

Multiple disputes under one contract may lead to:

Single or multiple arbitrations

Depends on clause wording

15. When Arbitration Clause Extinguishes

Arbitration clause extinguishes only when:

Parties mutually rescind it

Statutorily barred

Settlement expressly excludes arbitration

16. Role of Courts under Section 11 (2024–25 Trend)

Courts now examine only prima facie existence of arbitration agreement.

Delhi High Court (2025)

Held that applicability and scope of the clause must be decided by the arbitral tribunal, not the court.

17. Conclusion

Recent judgments demonstrate India’s steady move towards becoming an arbitration-friendly jurisdiction. Courts have:

Strengthened arbitral autonomy

Limited judicial gatekeeping

Preserved arbitration clauses wherever possible

However, clarity in drafting arbitration clauses remains critical. Ambiguous or poorly drafted clauses continue to be the primary source of litigation.