Arbitration clause drafting mistakes that make it unenforceable in India

The most common arbitration clause drafting mistakes in India are permissive “may” language, a missing or confused seat, one-sided appointment mechanisms, and over-broad scope that captures non-arbitrable disputes, and each one can make the clause unenforceable or stall it for months. Two Supreme Court rulings in 2023 and 2024 reset the ground: an unstamped agreement is now curable rather than void, and one party can no longer appoint the arbitrator unilaterally or force the other side to pick from a panel it curated. This article identifies the arbitration clause drafting mistakes that render a clause unenforceable, the cases that decided each point, and the fix for each. It closes with a model clause and a red-flag audit checklist you can run against a clause already sitting in a signed contract.

This article sets out the arbitration clause drafting mistakes that make a clause unenforceable in India, and the drafting fix for each.

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An arbitration clause is not a separate document. It is an arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996, living inside a commercial contract, so a defect in the clause is a defect in the parties’ only agreed route out of court. When the clause fails, the parties do not fall back to a neutral tribunal. They fall back to litigation, which is the outcome the clause existed to avoid.

The enforceability bar moved sharply in the last two years. A seven-judge bench changed the law on unstamped agreements in December 2023, and a five-judge bench struck down a whole category of appointment clauses in November 2024. Clauses copied from templates drafted before those rulings now carry live risk, and most of that risk sits in wording that once looked like boilerplate.

What makes an arbitration clause unenforceable in India

An arbitration clause becomes unenforceable when it fails the writing and intent requirement of Section 7, contradicts itself, or contains a mechanism that the courts will strike down. Those three failure modes cover most of what goes wrong. The clause either was never a valid arbitration agreement, or it says two incompatible things, or it hands one side a procedural advantage the law no longer tolerates.

Start with the statutory floor. Under Section 7 of the Act, an arbitration agreement must be in writing and must record the parties’ intention to submit their disputes to arbitration. A purely oral understanding does not qualify, though the writing requirement is satisfied by an exchange of letters, emails, or other communications that record the agreement. So a clause buried in a signed contract clears the writing hurdle easily. The harder question is whether it clears the intent hurdle, and that is where drafting choices start to matter.

A “pathological” arbitration clause is one that is defective enough to obstruct the smooth conduct of arbitration. The term covers clauses that name a non-existent institution, point to contradictory forums, leave the seat undefined, or set up an appointment method that cannot function. Some pathologies are fatal. Others merely invite a fight at the referral stage, which costs time and money even when the clause ultimately survives.

That distinction between void, unenforceable, and merely stalled is worth holding onto. A clause that fails Section 7 is void, and there is nothing to enforce. A clause with a struck-down appointment mechanism may survive with the offending part severed, so the arbitration proceeds under a court-appointed arbitrator instead. And a clause attached to an unstamped contract is now enforceable but temporarily inadmissible, which means it works once the stamp defect is cured. Can a badly drafted clause cost you real money even when it eventually holds? Yes, because every one of these detours runs through a court, and court time is the expense arbitration was supposed to save.

In practice, most disputes over clause validity are not about whether arbitration was intended. They are about the machinery: who appoints, where the seat sits, what disputes are covered. Experienced drafters treat the clause as a small system that has to run without the parties cooperating, because by the time it matters, they will not be cooperating. If you are still weighing whether to arbitrate at all, the trade-offs are covered in our comparison of arbitration versus litigation in India, and the wider family of options in this guide to alternative dispute resolution in India. This article assumes the choice is made and focuses on the wording.

A common question drafters raise is whether a short clause is riskier than a long one. It is not length that protects you. A three-line clause that fixes the seat, the number of arbitrators, a neutral appointment method, and the governing law is safer than a page of prose that leaves any of those open. The pitfall is treating the clause as a formality to be lifted from the last contract, because the last contract may predate the ruling that made its wording unsafe.

Permissive language: the “may refer to arbitration” trap

The single most common drafting mistake is optional wording. A clause that says the parties “may refer” disputes to arbitration, rather than “shall refer” them, lets a reluctant party argue that arbitration was never mandatory. That one modal verb decides whether the clause binds or merely invites.

Indian courts read arbitration clauses for a clear and unqualified intention to arbitrate. Words like “may,” “can,” or “at the option of either party” muddy that intention, because they suggest arbitration is one route among several rather than the agreed route. When a party then files a civil suit, the other side has to persuade the court that “may” actually meant “shall,” and the outcome turns on the rest of the clause and the surrounding contract. That is an argument you never want to have, and it is entirely avoidable.

The fix is a single decisive verb. “All disputes arising out of or in connection with this Agreement shall be finally resolved by arbitration” leaves no room for the optional reading. The word “finally” does additional work, signalling that arbitration is the endpoint, not a preliminary step before litigation.

Ambiguity has a second, more dangerous form: the internally contradictory clause. A contract that sends disputes to arbitration in one sentence and grants the courts of a named city “exclusive jurisdiction” to try disputes in the next has set up a direct conflict. In a widely discussed decision, a High Court had to untangle a clause that pointed to arbitration and to a civil court at the same time, and precision, not volume, was what the clause lacked. The reader lesson is blunt. Do not paste an arbitration clause into a contract that already contains a general dispute-resolution or jurisdiction clause without reconciling the two.

In practice, the exclusive-jurisdiction line is not always a contradiction. Properly drafted, it identifies which court supervises the arbitration, which is useful. The mistake is leaving it as a litigation-forum clause that competes with the arbitration clause, because then each side reads the contract to suit its position. What experienced practitioners do is make the jurisdiction clause serve the arbitration, naming the court that will hear Section 9 interim applications and Section 34 challenges, not a court that will try the dispute itself.

Is “the parties may refer disputes to arbitration” ever enforceable? Sometimes, if the rest of the contract shows arbitration was intended to be binding, but you are betting the clause on a judge’s reading of context. Why take that bet when one word removes it? Draft “shall,” reconcile any jurisdiction clause, and the trap closes.

Seat and venue drafting mistakes

Confusing the seat of arbitration with the venue, or omitting the seat entirely, is the mistake that most often triggers satellite litigation over which court controls the arbitration. The seat is not a geographic detail. It fixes the supervisory court and, in effect, the procedural law of the arbitration, so getting it wrong reroutes every future application to the wrong forum.

The seat and the venue are different things. The seat is the legal home of the arbitration: it decides which country’s or state’s courts have supervisory jurisdiction over the proceedings and the award. The venue is merely the physical location where hearings happen, which can shift for convenience without changing the seat. A tribunal seated in New Delhi can hold a week of hearings in Mumbai, and the Delhi courts still supervise. Our explainer on arbitration versus litigation in India sets out why that supervisory link matters so much in practice.

The Supreme Court settled the jurisdictional weight of the seat in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552, which held that the seat determines which courts exercise supervisory control and that Part I of the Act does not apply to arbitrations seated outside India. It went further in Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd., (2017) 7 SCC 678, where it held that fixing the seat operates like an exclusive-jurisdiction clause: naming Mumbai as the seat gives the Mumbai courts exclusive supervisory jurisdiction, even if no part of the cause of action arose there. So if your clause names Delhi as the seat but the goods were delivered and the breach occurred in Chennai, the Delhi courts, not the Chennai courts, supervise the arbitration. That is a deliberate consequence of the seat, and it should be a deliberate choice, not an accident.

Here is where loose drafting turns costly. Many clauses name only a “venue” and say nothing about a “seat,” on the assumption that the two words are interchangeable. In BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234, the Supreme Court held that when a clause designates a “venue” of arbitration and there is no significant contrary indicator, that named venue is treated as the seat. So writing “the venue of arbitration shall be Kolkata” can silently fix Kolkata as the seat, handing the Calcutta High Court supervisory jurisdiction you may not have intended. The word you thought was casual carried the whole jurisdictional load.

The trap has a sharper edge that most drafting guides miss. The BGS Soma rule applies only when there is no significant “contrary indicia,” and an exclusive-jurisdiction clause pointing to a different city’s courts can be exactly that contrary indicator. When a clause names Mumbai as the venue but gives the Delhi courts exclusive jurisdiction, courts have split on which one wins, and the resulting uncertainty is litigated at the very start of the dispute. In practice, High Courts have not spoken with one voice on this combination, so a clause that mixes a venue in one city with exclusive jurisdiction in another is an invitation to a preliminary fight. The clean fix is to remove the ambiguity at the drafting stage rather than argue about it later.

What a careful drafter writes is explicit. State that “the seat of arbitration shall be New Delhi,” then separately provide that “the courts at New Delhi shall have exclusive supervisory jurisdiction,” and, if hearings may move, add that “hearings may be held at any other location for convenience without altering the seat.” Should you write “seat” or “place”? The Act uses “place” in Section 20 of the Arbitration and Conciliation Act, 1996, and courts read “place” as “seat” when the context points that way, but writing “seat” expressly removes the interpretive step. Name the seat, name the supervisory court, decouple the venue, and this entire category of dispute disappears from your contract.

One-sided appointment of the arbitrator

An appointment mechanism that lets one party choose the arbitrator, or choose from a panel it controls, is now the fastest route to an unenforceable appointment clause. After a Constitution Bench ruling in November 2024, the clauses that PSUs and large contracting parties relied on for years are exposed, and private contracts that copied them are exposed with them.

The principle built up over several rulings. In TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377, the Supreme Court held that a person who is himself ineligible to act as arbitrator, such as a party’s Managing Director, is equally ineligible to nominate the arbitrator, which killed the familiar “the MD or his nominee shall be the sole arbitrator” formula. Two years later, in Perkins Eastman Architects DPC v. HSCC (India) Ltd., 2019 SCC OnLine SC 1517, the Court extended the logic: a party interested in the outcome of the dispute cannot have the unilateral power to appoint a sole arbitrator, because the appointer’s interest taints the appointment. The engine behind both rulings is Section 12 of the Arbitration and Conciliation Act, 1996, read with the Fifth and Seventh Schedules, which list the relationships that make an arbitrator ineligible.

Then came the decisive turn. In Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), 2024 INSC 857, a five-judge Constitution Bench held that a clause requiring one party to select its arbitrator from a panel curated by the other party violates the principle of equal treatment, and that unilateral appointment of a sole arbitrator in public-private contracts is impermissible. This is the mechanism countless government, railway, and infrastructure contracts used to survive the earlier rulings: not “we appoint the arbitrator,” but “you must choose from our list of five.” The Court closed that escape route. A curated-panel clause is now a live enforceability risk, whether the contract is with a PSU or between private parties who borrowed the PSU template.

Consider how this lands in a real contract. A construction company signs an infrastructure agreement whose arbitration clause lets the government body pick the arbitrator from its own panel of retired officers. Under the current position, that mechanism is vulnerable to challenge, and if the company objects, the appointment can be set aside and the arbitrator appointed afresh under Section 11 of the Arbitration and Conciliation Act, 1996, the provision that lets a court or designated institution step in when the agreed method fails. The clause survives, but the one-sided machinery inside it does not.

In practice, the safest appointment method is one that no party controls alone. For a three-member tribunal, each party appoints one arbitrator and the two party-appointed arbitrators appoint the presiding arbitrator, which is the default the Act itself contemplates. For a sole arbitrator, the parties either agree jointly or let a neutral institution appoint. Can you still specify qualifications, such as a retired judge or a chartered engineer? Yes, Section 11 preserves party autonomy over qualifications, so long as the choice of the individual does not sit with one side alone.

A question that comes up constantly is whether unilateral clauses in older PSU contracts are simply void now. They are not automatically wiped from the contract, but they are unenforceable as written, and a party facing one can ask the court to appoint a neutral arbitrator instead. If your clause is silent on appointment altogether, the fallback is the same Section 11 machinery, so silence is safer than a one-sided method, though a well-drafted neutral method is safer still. The drafting fix is to state the balanced mechanism expressly and add one sentence: no party shall have the unilateral right to appoint the sole or presiding arbitrator, nor to require the other to select from a panel it has curated.

Number of arbitrators and Section 10

Specifying an even number of arbitrators, or leaving the number unstated, creates a defect that is usually curable but entirely avoidable. The number of arbitrators is a small drafting decision that occasionally becomes a preliminary dispute, and there is no reason to invite one.

The rule sits in Section 10 of the Arbitration and Conciliation Act, 1996. The parties are free to determine the number of arbitrators, provided that the number is not even. The statute then supplies a default: failing any agreement, the tribunal consists of a sole arbitrator. So a clause that says “three arbitrators” or “a sole arbitrator” is safe, while a clause that says “two arbitrators” runs into the odd-number requirement.

The nuance that most articles get wrong is what happens when a clause does name an even number. The blunt statement that an even-number clause is “void” overstates the position. The Supreme Court has treated the even-number stipulation as a defect that a party can waive by not objecting in time, so an arbitration that proceeds before two arbitrators without objection is not automatically a nullity. The point for a drafter is not to rely on that cure. Waiver saves an arbitration after the fact; clean drafting avoids the argument before it starts.

Choosing between a sole arbitrator and a three-member tribunal is a practical trade-off, not a legal one. A sole arbitrator is cheaper and faster, which suits contracts of modest value or where speed matters most. A three-member tribunal costs three sets of fees and moves more slowly, but it spreads the decision across three minds, which parties often prefer for high-value or technically complex disputes. Our note on the advantages and disadvantages of arbitration works through where each structure earns its keep.

In practice, a sensible clause ties the number to the stakes. Many commercial contracts provide for a sole arbitrator below a value threshold and a three-member tribunal above it, which matches the cost of the tribunal to the size of the dispute. What you should not do is leave the number to be worked out later, because “later” means after the dispute has started and cooperation has ended. State an odd number, match it to the contract’s value, and move on.

Over-broad or non-arbitrable scope

Drafting “all disputes” without regard to what Indian law actually permits you to arbitrate can pull the clause into subject matter the courts will refuse to send to arbitration. Scope is not just about catching everything. It is about catching everything that is arbitrable, and knowing where that line falls.

Some categories of dispute cannot be resolved by a private tribunal at all. The Supreme Court laid down the framework in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, which set out a fourfold test for when a dispute is non-arbitrable, broadly covering rights in rem, disputes affecting third-party rights, matters reserved for public fora, and subjects a statute expressly withdraws from arbitration. The Court built on the earlier categories in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532, which held that actions in rem, such as the enforcement of a mortgage, are not arbitrable because they determine rights against the world, not just between the parties.

What that means for scope drafting is concrete. Allegations of serious fraud that go to the validity of the contract itself, tenancy governed by rent-control statutes, insolvency, testamentary matters, and matrimonial disputes generally fall outside arbitration, so a clause cannot drag them in merely by saying “all disputes.” Can you arbitrate an intellectual property dispute? A licensing royalty claim between two parties can be arbitrable, while a challenge to the validity of a registered patent, which affects the public register, is not. The clause does not decide arbitrability; the subject matter does.

The fix is not to narrow the scope defensively. A broad connective phrase remains the right default: “all disputes, differences or claims arising out of or in connection with this Agreement, including any question regarding its existence, validity, breach or termination.” That wording is deliberately wide, because “in connection with” reaches disputes that merely relate to the contract, not only those arising strictly under it. The arbitrability limits then operate as a matter of law on top of the scope, carving out what cannot be arbitrated without you having to list every exclusion.

In practice, experienced drafters keep the scope broad and add a short carve-out only where the contract sits close to a non-arbitrable field. A contract touching real property under rent control, or one where fraud allegations are foreseeable, benefits from a line acknowledging that disputes a court must decide will go to court. A common misconception is that a wider scope clause is always stronger. It is stronger only up to the arbitrability line, and beyond that line the extra words buy nothing, because no clause can confer arbitrability on a subject the law reserves for the courts.

Non-signatories, survival and the stamping trap

Three drafting-adjacent mistakes decide whether the clause reaches the right parties, survives the contract, and can be enforced without delay. None of them is about the words “arbitration” or “shall.” Each is about the clause’s relationship with the people and the paper around it.

The first is the reach of the clause beyond its signatories. In Cox & Kings Ltd. v. SAP India Pvt. Ltd., 2023 INSC 1051, a five-judge Constitution Bench confirmed that the group of companies doctrine survives in Indian law, so a non-signatory within a corporate group can be bound by an arbitration clause where the parties’ mutual intention and conduct show that the non-signatory was meant to be part of the bargain. That cuts both ways for a drafter. If you want affiliates bound, name them or describe them; if you do not, be careful that their conduct during performance does not later imply consent. Over-correcting by dragging every affiliate into the clause by name can create its own problems, because you may bind entities that never intended to arbitrate.

The second is survival. A well-drafted clause has to outlive the contract it sits in, because disputes usually erupt when the contract is being terminated or is claimed to be void. Section 16 of the Arbitration and Conciliation Act, 1996 supplies the answer through the separability principle: the arbitration clause is treated as an agreement independent of the main contract, so the termination, breach, or even invalidity of the main contract does not by itself end the arbitration clause. Does the clause survive novation, where a new contract replaces the old? The safer course is not to rely on the doctrine alone but to say so, adding that the arbitration agreement is severable and survives the termination, expiry, or invalidity of the contract.

The third is stamping, and this is where the law changed most recently. For a period, an unstamped or insufficiently stamped arbitration agreement was treated as unenforceable, which meant a stamping defect could stall a Section 11 petition at the threshold. That position was overruled. In In Re Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899, 2023 INSC 1066, a seven-judge bench held that non-stamping or insufficient stamping does not render the agreement void or unenforceable, but only inadmissible in evidence, and the defect is curable by paying the duty and any penalty. So an unstamped agreement is enforceable, but you still cannot rely on it until the stamp is cured, and the cure takes time and money.

The practical lesson survives the change in the law. Will an unstamped clause delay your arbitration? It can, because the instrument has to be impounded and stamped before it is admitted, and that detour runs through the collector or the court. The duty itself is a State subject under the Indian Stamp Act, 1899, so the rate varies from State to State, and the safest practice is to stamp the contract correctly at execution rather than argue about admissibility later. Draft the survival clause, name the parties you intend to bind, and stamp the paper, and none of these three mistakes gets a chance to bite.

A model arbitration clause and a red-flag audit checklist

A clause that avoids every mistake above reads cleanly, and any clause already in a signed contract can be checked against a short red-flag list. This section gives you both: a model clause to adapt, and a diagnostic to run on the clauses you already have.

Here is a model clause for an ad hoc, India-seated arbitration, annotated so you can see which mistake each line closes:

All disputes, differences or claims arising out of or in connection with this Agreement, including any question regarding its existence, validity, breach or termination, shall be finally resolved by arbitration under the Arbitration and Conciliation Act, 1996 (as amended). The seat of arbitration shall be New Delhi, India, and the courts at New Delhi shall have exclusive supervisory jurisdiction. Hearings may be held at any other location for convenience without altering the seat. The tribunal shall consist of a sole arbitrator, or where the dispute exceeds [value], three arbitrators, of whom each party shall appoint one and the two so appointed shall appoint the presiding arbitrator. No party shall have the unilateral right to appoint the sole or presiding arbitrator, nor to require the other party to select from a panel it has curated. The language of the arbitration shall be English. The governing law of this Agreement, and of this arbitration agreement, shall be the substantive law of India. This arbitration agreement is severable and shall survive the termination, expiry or invalidity of this Agreement.

Each line maps to a section above: the mandatory “shall” answers the permissive-language trap; the express seat, supervisory court, and venue decoupling answer the seat and venue mistakes; the balanced appointment and the anti-unilateral sentence answer the appointment ruling; the odd number answers Section 10; the separate governing law of the arbitration agreement and the express survival answer the separability and enforcement points. For the clause-by-clause anatomy behind each of these choices, our companion guide on drafting an arbitration agreement in India works through the essential clauses in full. A practitioner walkthrough of the same drafting decisions is available in this guide to drafting an arbitration clause in India, and drafters handling cross-border contracts will find the wider skill set in this note on contract drafting for foreign clients.

Should you copy an institution’s model clause or write your own? For an institutional arbitration, copy the institution’s recommended wording and adapt only the blanks, because institutional rules are drafted to interlock with their model clause. The Mumbai Centre for International Arbitration, for instance, publishes a model clause that incorporates its rules by reference, and similar wording is offered by the Delhi International Arbitration Centre and by international institutions such as the ICC and SIAC. Pull the current text directly from the institution’s own site rather than paraphrasing it, because a paraphrase can break the incorporation of the rules. For a comparison of institutional and ad hoc arbitration, our overview of what arbitration is and how it works sets out the difference.

Multi-tier clauses deserve a word of caution. A clause that requires the parties to negotiate, then mediate, and only then arbitrate can be useful, because it filters out disputes that settle. But it becomes a trap when the pre-arbitration steps are drafted as mandatory conditions precedent without a clear endpoint, because the other side can argue that arbitration cannot be invoked until the negotiation or mediation is exhausted. If you use a tiered clause, set firm time limits on each step so that arbitration becomes invocable on a fixed date, not on a vague finding that talks have failed.

Run this red-flag audit on any arbitration clause already in your contracts:

1. Does the clause say “shall,” not “may”?
2. Does it name a seat, and separately a supervisory court, rather than only a “venue”?
3. Does any exclusive-jurisdiction clause elsewhere in the contract contradict the seat?
4. Is the appointment method free of any one-sided or curated-panel mechanism?
5. Is the number of arbitrators odd, and matched to the value of likely disputes?
6. Is the scope broad (“in connection with”) while respecting arbitrability limits?
7. Does the clause survive termination, expiry, and invalidity in express words?
8. Is the underlying contract properly stamped for the relevant State?

The reform pipeline is likely to keep moving. The Draft Arbitration and Conciliation (Amendment) Bill, 2024 proposes giving arbitral institutions, not only courts, the power to extend timelines and to appoint substitute arbitrators, and it contemplates statutory emergency arbitrators. Early signals suggest that clauses naming a competent institution will gain an edge in speed if those changes become law, so drafters increasingly reach for an institution even in domestic contracts. The Bill is still a draft and not yet in force, so draft to the law as it stands, and revisit your template when it changes.

Frequently asked questions

What makes an arbitration clause unenforceable in India?
A clause is unenforceable when it fails the writing and intent requirement of Section 7 of the Arbitration and Conciliation Act, 1996, contradicts itself, or contains a struck-down mechanism such as one-sided appointment. Over-broad scope reaching non-arbitrable subject matter and a missing seat are the other frequent causes. Most defects are avoidable with a few decisive words.

Is “the parties may refer disputes to arbitration” a valid arbitration clause?
It is risky, because “may” suggests arbitration is optional, and a reluctant party can argue it was never mandatory. Whether it holds depends on a court reading the rest of the contract for intention. Draft “shall be finally resolved by arbitration” and the ambiguity disappears.

Does an arbitration clause have to say “shall”?
The clause does not need that exact word, but it needs unqualified language showing arbitration is mandatory. “Shall be finally resolved by arbitration” is the clearest form. Optional words like “may,” “can,” or “at the option of a party” invite a challenge.

What is the difference between the seat and the venue of arbitration?
The seat is the legal home of the arbitration and fixes which courts supervise it and the award. The venue is only the physical place where hearings are held, and it can change for convenience without altering the seat. Confusing the two is a leading cause of jurisdictional disputes.

What happens if my arbitration clause does not mention a seat?
The seat may then be inferred from a named venue or from other indicators, which produces uncertainty and litigation at the outset. A named “venue” can itself be read as the seat when there is no contrary indicator. The safe course is to state the seat expressly.

Can one party appoint the sole arbitrator?
No. Following Perkins Eastman and the 2024 Constitution Bench ruling in Central Organisation for Railway Electrification, a party interested in the dispute cannot unilaterally appoint the sole arbitrator. It also cannot force the other side to choose from a panel it has curated.

Is unilateral appointment of an arbitrator still valid in India?
It is not. The current position bars both unilateral appointment of a sole arbitrator and the curated-panel device in public-private contracts, and the reasoning extends to private contracts that copied the same mechanism. A neutral, balanced appointment method is the fix.

Can a party pick its arbitrator from a panel curated by the other party?
No. A five-judge Constitution Bench held in 2024 that requiring one party to select from a panel unilaterally curated by the other violates the equal-treatment principle of the Act. Clauses of this kind, common in PSU contracts, are now open to challenge.

How many arbitrators should an arbitration clause specify?
An odd number, because Section 10 of the Arbitration and Conciliation Act, 1996 bars an even number. A sole arbitrator suits smaller or faster disputes, while three arbitrators suit high-value or complex ones. Many clauses tie the number to a value threshold.

Is an arbitration clause specifying two arbitrators invalid?
The even-number stipulation is a defect, but the Supreme Court has treated it as curable where a party does not object in time, so an arbitration is not automatically a nullity. Do not rely on the cure. Specify an odd number and avoid the argument.

Is an unstamped arbitration agreement enforceable in India?
Yes. A seven-judge bench held in In Re Interplay (2023) that non-stamping or insufficient stamping makes the agreement inadmissible in evidence but not void, and the defect is curable by paying the duty and penalty. You still cannot rely on the agreement until the stamp is cured.

Can I cure an unstamped arbitration agreement later?
Yes. The instrument can be impounded and stamped, with any penalty paid, after which it becomes admissible. The cure takes time and money, so stamping the contract correctly at execution is the better practice.

Which disputes cannot be referred to arbitration in India?
Broadly, rights in rem, serious fraud going to the contract’s validity, insolvency, testamentary matters, matrimonial disputes, and tenancy governed by rent-control statutes. The Supreme Court’s fourfold test in Vidya Drolia is the reference point. A clause cannot arbitrate these merely by saying “all disputes.”

Can a non-signatory be bound by an arbitration clause?
Yes, in limited circumstances. The 2023 Constitution Bench ruling in Cox & Kings confirmed the group of companies doctrine, so a non-signatory within a corporate group can be bound where mutual intention and conduct show it was meant to be part of the bargain. Drafting should name the parties you intend to bind.

Institutional or ad hoc arbitration: which should my clause choose?
Ad hoc arbitration gives the parties full control but relies on the courts to fill gaps. Institutional arbitration incorporates a set of rules and administrative support, which speeds up appointment and case management. If you choose an institution, copy its model clause rather than paraphrasing it.

What governing law should the arbitration clause state?
State the substantive law of the contract, and separately state the law governing the arbitration agreement itself, because the two can differ. For an India-seated arbitration between Indian parties, both are usually Indian law. Naming the law of the arbitration agreement expressly avoids a later dispute over which law tests the clause’s validity.

References

Case Law

1. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 (Supreme Court, 5-judge Constitution Bench)
2. BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234 (Supreme Court, 3-judge)
3. Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., (2011) 5 SCC 532 (Supreme Court, 2-judge)
4. Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV), 2024 INSC 857 (Supreme Court, 5-judge Constitution Bench, 8 November 2024)
5. Cox & Kings Ltd. v. SAP India Pvt. Ltd., 2023 INSC 1051, (2024) 4 SCC 1 (Supreme Court, 5-judge Constitution Bench, 6 December 2023)
6. In Re Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899, 2023 INSC 1066 (Supreme Court, 7-judge Constitution Bench)
7. Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd., (2017) 7 SCC 678 (Supreme Court, 2-judge)
8. Perkins Eastman Architects DPC v. HSCC (India) Ltd., 2019 SCC OnLine SC 1517 (Supreme Court, 2-judge)
9. TRF Ltd. v. Energo Engineering Projects Ltd., (2017) 8 SCC 377 (Supreme Court, 3-judge)
10. Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1 (Supreme Court, 3-judge)

Statutes

1. Arbitration and Conciliation Act, 1996 (sections cited: 7, 10, 11, 12, 16, 20)
2. Indian Stamp Act, 1899 (stamping of instruments; State-specific rates apply)

This article is for informational purposes only and does not constitute legal advice. For specific legal guidance, consult a qualified legal professional.