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THE VALIDITY OF THE UNILATERAL ARBITRATION CLAUSES IN INDIA

Author: Sonal Gupta, IV year of BA LLB (Prog) from Symbiosis Law School, Hyderabad (Symbiosis International University, Pune)


Introduction

A striking component in various understandings executed in India, where one of the party is either a loan specialist or an open part embraced, are statements which vest as it were one party with the privilege to summon discretion or a specific method of debate goals. At the point when the legitimacy and enforceability of such provisos have been tried previously by the different High Courts in India, the high courts have adopted various strategies in arriving at their decisions. The one-sided nature i.e. the unilateral agreements, of which a statement surfaces from the language of the condition and along these lines provisos which are understood as ‘one-sided’ come in various structures and structures. In this part, we have evaluated a few statements which give a one-sided right of references like one-sided intervention statements for example provisions which vest just one party with the privilege to summon intervention and one-sided contest goals provision for example statements which vest just one party with the privilege to select for the method of contest goals once the question emerges.


The word ‘unilateral’ is a self-defining word which means one party or one-sided. The Clause provisos vest the privilege to settle on assertion with just one party to the understanding. Thusly, toward one side of the range, the enforceability of such provisions is opposed since the establishment of a legitimate assertion understanding, if in any case, the differentiating perspective is that party self-rule crystalizes at the time of going into the agreement as parties have in actuality assented to such provisions according to business sensibilities.


Meaning –Unilateral Arbitration Clauses

“A unilateral option clause is a dispute resolution clause which confers an exclusive right to elect a specific dispute resolution method, i.e. it provides the option of resorting to arbitration or litigation; however, this option is conferred upon only one party. Courts have had to consider whether they should uphold such clauses in the interest of party autonomy or intervene due to public policy considerations”.[1]


A unilateral arbitration clause is an exclusive and single party clause where one party only exercises the power in arbitration. Henceforth, the one part clause gives rise to a dilemma as to the substance of the agreement and equality, and violations of the rights of other parties. A one-sided clause can take numerous structures. It might concede its recipient to select the appropriate and to pick among prosecution and intervention when a question emerges, or to contest before a particular ward while compelling the non-recipient to a particular discussion or a particular method of debate settlement. Subsequently, unilateral agreements are without a doubt solely favourable to one side or party and they are much of the time utilized in explicit businesses.


Status in Indian Scenario

The validity of the unilateral clauses is opined by the Supreme Court and various other high courts, questioning upon the disintegrated terms which impart and portrays the incoherence of one-sided clause. As stated in the case of Castrol India Ltd. v. Apex Tooling Solution[2]that it did not question the general rule that arbitration provisions need not have commonality. Nonetheless, on the realities, the court held that the parties looking to summon discretion through its sole alternative couldn’t do as such, having neglected the item, and having even taken an interest during the fundamental phases of the suit. Moreover, in another case[3], the Calcutta High court opined that the way that the understanding gives a choice to either the buyer or the seller to allude the issue to assertion does not influence the legitimacy of the arbitration agreement further, presumed that the other party has consented to submit to that choice, and once the choice is practised and the decision is made, the two parties will be bound by such race to parley. Hence the courts have a varied opinion in deciding the validity of the one-sided clause which is an arbitrary action clause of one party.


Conclusion

The author from the above decision of the various courts concludes that according to the court’s opinion which appeared to be slanted to maintain intervention statements where the alternative is given to one party to look for arbitration. Nonetheless, it stays to be seen whether the Supreme Court will distinguish that the one-sided ideal to refer to assertion in discretion proviso streams from the development assent at the hour of going into the agreement, or regardless of whether it will hold generally. Till at that point, when the issue of the legitimacy of one-sided assertion statements and one-sided contest goals provisions individually emerges for further thought previously various courts in India, it might make way for further perplexity in perspective on the differed line of thought pursued by the distinctive High Courts. Regardless of the assortment of contentions, none comprises satisfactory grounds to refute unilateral agreements. Withal the contention for maintaining their legitimacy is settled. Neither arbitral councils nor courts settling on the legitimacy of one party clause should control or contain party independence missing sufficient grounds to do as such.


[1]Examining the Validity of Unilateral Option Clauses in India: A Brief Overview, Kluwer Arbitration Blog (2017), http://arbitrationblog.kluwerarbitration.com/2017/10/20/examining-validity-unilateral-option-clauses-india-brief-overview/

[2]Castol India Ltd. v. Apex Tooling Solution, (2015) 1 LW 961 DB

[3]KedarnathAtmaram v. Kesoram Cotton Mills Ltd., ILR (1950) 1 Calcutta 550 (13)