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

Meridian Securities Pvt Ltd and its client Ravi Menon signed a single agreement that contains a clause: 'All disputes arising out of this account shall be referred to arbitration.' Ravi later argues that no separate arbitration agreement was signed, so there is no arbitration agreement. Under the Arbitration and Conciliation Act, 1996, what is the position?

The clause is a valid arbitration agreement. Section 7(2) allows an arbitration agreement to take the form of a clause inside a contract or of a separate agreement, and section 7(1) covers disputes that may arise in future, so no separate document is required.

  1. AThe clause is valid, because an arbitration agreement may be an arbitration clause in a contract or a separate agreementCorrect
  2. BThe clause is invalid, because an arbitration agreement must always be a separate stand-alone document
  3. CThe clause is valid only if it is registered with the stock exchange
  4. DThe clause is valid only if the dispute has already arisen on the date of signing

Explanation

Section 7(2) says an arbitration agreement may be in the form of an arbitration clause in a contract or a separate agreement. Section 7(1) covers disputes that have arisen or may arise. Hence the option demanding a separate document or an already-arisen dispute is wrong.

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