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CS Professional · Arbitration, Mediation and Conciliation · Arbitration under Investors' Grievances Redressal Mechanism of Stock Exchanges

Meridian Securities Pvt Ltd, a trading member, and its client Ravi Menon signed a client agreement. A clause in it says that any dispute about trades will be referred to arbitration under the stock exchange bye-laws. Ravi later says that no arbitration agreement exists because the clause sits inside a larger contract and not in a separate document. Under the Arbitration and Conciliation Act, 1996, what is the position?

The clause is a valid arbitration agreement. The Act allows an arbitration agreement to take the form of a clause within a contract or a separate agreement, so long as it is in writing. A signed client agreement meets the writing requirement, so Ravi's objection fails.

  1. AThe agreement is invalid because an arbitration agreement must always be a separate document
  2. BThe agreement is valid because it may be an arbitration clause in a contract, provided it is in writingCorrect
  3. CThe agreement is valid only if it is registered with the stock exchange
  4. DThe agreement is valid only if it was made after the dispute arose

Explanation

Section 7(2) says an arbitration agreement may be an arbitration clause in a contract or a separate agreement. Section 7(3) requires it to be in writing. A signed client agreement satisfies this. The option demanding a separate document contradicts section 7(2).

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