K.K. Modi v. K.N. Modi and Ors. MANU/SC/0092/1998 : (1998) 3 SCC 573

The Court laid down the essential attributes of an arbitration agreement in following terms:

Among the attributes which must be present for an agreement to be considered as an arbitration agreement are:

👉 The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement.

👉 That the jurisdiction of the tribunal to decide the rights of parties must derive either from the consent of the parties 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.

👉 The agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal.

👉 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.

👉 That the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly.

👉 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.

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.:

The essential elements of an arbitration agreement are as follows:

👉 There must be a present or a future difference in connection with some contemplated affair.

👉 There must be the intention of the parties to settle such difference by a private tribunal.

👉 The parties must agree in writing to be bound by the decision of such tribunal.

👉 The parties must be ad idem.

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