(b) "To enforce the arbitration agreement, the terms of the agreement must be clear and certain." Explain.

Understanding the Arbitration Agreement under Indian Law

Section 7 of the Arbitration and Conciliation Act, 1996, defines an arbitration agreement as an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. It mandates that such an agreement shall be in writing. This written form can be a document signed by the parties, an exchange of letters, telex, telegrams, or other means of telecommunication which provide a record of the agreement, or even an exchange of statements of claim and defence where the existence of the agreement is alleged by one party and not denied by the other.

The Imperative of Clarity and Certainty

The dictum that an arbitration agreement must be clear and certain is rooted in the consensual nature of arbitration. Arbitration is a creature of contract, and its effectiveness hinges on the unambiguous expression of the parties' mutual intent to resolve their disputes through this specific mechanism. Any ambiguity can lead to protracted litigation regarding the existence or scope of the arbitration agreement itself, defeating the very purpose of ADR – efficient and expeditious dispute resolution.

Key Aspects Requiring Clarity and Certainty:

• Intention to Arbitrate (Consensus ad Idem): The agreement must unequivocally demonstrate the parties' intention to refer disputes to a private tribunal for resolution and to abide by its decisions. Mere contemplation or possibility of arbitration is insufficient. The language used should be mandatory, such as "shall be referred to arbitration," rather than permissive, like "may be referred to arbitration" (though recent judgments show a nuanced interpretation).
• Scope of Disputes: The agreement must clearly define which disputes are intended to be covered by arbitration. This can encompass "all disputes arising out of the contract" or be limited to specific types of disagreements. Uncertainty here can lead to jurisdictional challenges before the arbitral tribunal or courts.
• Identification of Parties: All parties to the arbitration agreement must be clearly and precisely identified, including their legal capacity to contract. Ambiguity in party identification can render the agreement unenforceable.
• Seat and Venue of Arbitration: While not always a fatal defect, clearly specifying the seat of arbitration is crucial as it determines the supervisory court and the governing law of the arbitration proceedings (lex arbitri). The venue, on the other hand, refers to the geographical place where hearings may physically take place.
• Number and Appointment of Arbitrators: The agreement should ideally specify the number of arbitrators (e.g., sole arbitrator or a three-member tribunal) and the procedure for their appointment. Vague clauses can lead to disputes and delays in constituting the tribunal.
• Governing Law: Parties should clearly state the substantive law governing the contract and, if different, the law governing the arbitration agreement. This prevents confusion regarding the interpretation of contractual terms and the arbitration clause itself.

Judicial Interpretation and Precedents

Indian courts have consistently emphasized the need for clarity and certainty in arbitration agreements. The judiciary adopts a pro-arbitration stance, seeking to uphold agreements where a clear intention to arbitrate can be discerned, even if the language is not perfectly formal.

Landmark Judgments:

• Jagdish Chander v. Ramesh Chander (2007): The Supreme Court of India highlighted that while no particular form is prescribed for an arbitration agreement, the language used must clearly indicate a commitment to arbitration, not merely a possibility. An agreement merely hinting at future arbitration is non-binding.
• Vidya Drolia v. Durga Trading Corporation (2021): This landmark judgment articulated a four-fold test to assess arbitrability of a dispute, underscoring that the subject matter must be capable of being resolved through arbitration, further reinforcing the need for clear scope.
• In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899 (7-Judge Bench, 2023): While primarily addressing the issue of unstamped agreements, this judgment reaffirmed the fundamental requirement of an 'agreement' and the need for clear intent. It clarified that insufficient stamping is a curable defect, not rendering the agreement void ab initio.
• Glencore International AG v. Shree Ganesh Metals (2025): The Supreme Court held that an unsigned arbitration agreement can be enforceable if parties are ad idem and have acted upon the contract terms, including arbitration clauses, inferred from their conduct and correspondence. This demonstrates that while clarity is paramount, the court focuses on the substance of consent over strict form.

Consequences of Lack of Clarity and Certainty

When an arbitration agreement lacks clarity or certainty, several issues can arise:

• Challenge to Validity: A party may challenge the very existence or validity of the arbitration agreement, leading to litigation under Section 8 or Section 11 of the Act.
• Jurisdictional Disputes: The arbitral tribunal's jurisdiction can be contested if the scope of arbitrable disputes is ambiguous, leading to delays and increased costs.
• Difficulty in Appointment of Arbitrators: If the procedure for appointing arbitrators is unclear, court intervention may be required, further prolonging the process.
• Unenforceability of Award: An arbitral award based on an ambiguous or invalid arbitration agreement may be challenged and set aside under Section 34 of the Act.

Therefore, drafting a clear and certain arbitration agreement is not merely a formality but a critical step in ensuring that the parties' intent to resolve disputes through arbitration is effectively realized, contributing to the efficiency and integrity of the entire arbitration process.