Section 7 of the Arbitration and Conciliation Act, 1996 (“ACA”) deals with formal validity of the arbitration agreement. Section 7(3) prescribes that the arbitration agreement “shall be in writing.” Did parties have a written arbitration agreement? This was the question in the case in an interesting fact situation.
The arbitrator had been appointed by the court, with consent of the parties, while hearing a company petition. He resigned mid-way of the arbitral proceedings. When Inspira, the claimant in the arbitration, filed an application for his substitution, Tata used the opportunity to argue that there was no (written) arbitration agreement within the meaning of Section 7 ACA.
By this time, as the court noted: –
The court concluded that Tata’s argument was “not well founded” and it had “wholeheartedly accepted reference of the disputes to arbitration.” It then held the requirement that arbitration agreement be written was fulfilled because:–
Kerala State Electricity Board v. Kurien E. Kalathil, 2018 4 SCC 793, cited by Tata, was distinguished because that was a case of counsel giving consent but the parties objecting later, unlike here where the parties participated in the arbitration.
Tata’s alternative argument that it no longer continued to give the consent was rejected as “wholly misconceived.” The court ruled that once the arbitrator was appointed recognising the arbitration agreement, the substitute arbitrator would be required to be appointed in the same fashion (citing Shailesh Dhairyawan v. Mohan Balkrishna Lulla, (2016) 3 SCC 619).