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CS Professional · Arbitration, Mediation and Conciliation · Arbitration: Introduction, Agreements and its Institutions

A suit is filed in a Mumbai court on a contract between an Indian company, Bharat Steels Ltd, and a foreign supplier, which contains an agreement of the kind referred to in Section 44. Bharat Steels requests reference to arbitration under Section 45. The court sees only a doubtful, arguable claim that the agreement is inoperative, and the defect is not apparent on a prima facie view. How should the court act?

The court should refer the parties to arbitration. Under Section 45, on the request of one party it must refer unless it prima facie finds the agreement null and void, inoperative or incapable of being performed. A mere arguable doubt is not such a finding.

  1. ARefuse reference, because any doubt about the agreement defeats it
  2. BRefer the parties to arbitration, since it can decline only where it prima facie finds the agreement null and void, inoperative or incapable of being performedCorrect
  3. CHold a full trial on the validity of the agreement before deciding
  4. DRefer only if the foreign supplier also requests reference

Explanation

Section 45 says the authority shall, at the request of one of the parties, refer them to arbitration unless it prima facie finds the agreement null and void, inoperative or incapable of being performed. Since no such prima facie finding arises, reference follows. A full trial conflicts with the prima facie standard, and one party's request suffices, not both.

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