Understanding Section 7: The Importance and Role of an Arbitration Agreement in Conflict Resolution

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Title: Understanding Section 7: The Importance and Role of an Arbitration Agreement in Conflict Resolution

The world of business is fraught with conflicts, be they between companies or within. While court battles can usually resolve such disputes, a more efficient and less acrimonious alternative exists in the form of arbitration. Central to this process is the arbitration agreement, the importance of which cannot be overstated.

As legal experts with years of experience at SimranLaw, our objective here is to dissect the complexities of arbitration agreements, specifically relating to Section 7 of the Arbitration and Conciliation Act, 1996 (Act). Our aim is to deepen our reader’s understanding of the intricacies of this crucial legal framework and its implications in conflict resolution.

Understanding Section 7

Section 7 pertains to the very existence of an arbitration agreement – a written agreement by the parties involved to submit their disputes to arbitration, rather than take them to court. This written document is crucial as it forms the foundation for arbitration proceedings. Without it, the entire process falls apart.

The courts and arbitral tribunals often examine this section closely when determining whether there is an arbitration agreement between the disputing parties or not. As per Section 7 of the Arbitration and Conciliation Act, 1996, an arbitration agreement needs to be in writing and signed by all parties involved.

Significant Judgments

Some landmark judgments shed light on the interpretation and implementation of Section 7.

1. K.K. Modi v K N Modi (1998): This case set the precedent that an arbitration contract must denote a clear intention to arbitrate disputes in case they arise.

2. Jagdish Chander v Ramesh Chander (2007): The Supreme Court ruled that oral arbitration agreements are not valid under Section 7 which necessitates that an arbitration agreement must be in writing.

3. Shyam Sunder Agarwal & Co. v Union of India (2015): The court held that while an arbitration agreement must be in writing, it is not necessary for it to be signed by both parties in all instances.

Role of an Arbitration Agreement

An arbitration agreement serves several functions:

1. Clarity: The agreement provides clarity about the parties’ consent to resolve disputes through arbitration rather than traditional litigations.

2. Saves Time and Resources: Instead of protracted litigation, parties can seek expeditious resolution through the more streamlined process of arbitration.

3. Confidentiality: Unlike court proceedings that are public, arbitration allows for confidential dispute resolution.

4. Control: Parties have more control over the process: they can choose the arbitrators, the location and the language of the arbitration.

Importance of Section 7

Section 7 provides a legal framework for arbitral proceedings, defining what constitutes a valid arbitration agreement. It safeguards parties’ rights and interests by stipulating that the agreement must be in writing and signed by the involved parties.


The critical role that Section 7 and the arbitration agreement play in conflict resolution within the commercial world cannot be overstated. They provide a robust, efficient, and private mechanism for dispute resolution that can save businesses time, money and often damaging public exposure. As experienced legal experts at SimranLaw, we can’t stress enough how essential it is to fully understand these dynamics in order to effectively navigate business disputes.

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