What did the Supreme Court decide in Jagdish Chander v. Ramesh Chander?

The Court held that a clause saying disputes shall be referred to arbitration if parties so determine is not a binding arbitration agreement. It requires fresh consent later.

Why was clause 16 not a valid arbitration agreement?

Because it kept arbitration optional. The words show only a possibility of agreeing later, not a present obligation to arbitrate.

Does using words like ‘arbitration’ or ‘arbitrator’ automatically create an arbitration agreement?

No. Mere use of those words does not help if the clause still needs fresh consent before reference to arbitration.

What should a valid arbitration clause contain?

Clear words showing current determination and a binding obligation to refer disputes to arbitration, without needing new consent.

Which area of law does the case relate to?

Arbitration law and contract drafting, especially how to frame enforceable dispute resolution clauses.

Jagdish Chander v. Ramesh Chander

Supreme Court of India 2007 (2007) 5 SCC 719 Arbitration Law 6 min read

AUTHOR_NAME: Gulzar Hashmi • LOCATION: India • PUBLISH_DATE: 02 Nov 2025

PRIMARY_KEYWORDS: arbitration agreement, consent, partnership deed SECONDARY_KEYWORDS: clause validity, SCC 2007, Supreme Court

Quick Summary

This case explains a simple point: an arbitration clause must show a present decision to arbitrate. If a clause says “we will arbitrate if we later decide,” it is not binding. In the partnership deed here, Clause 16 allowed arbitration only if the partners chose it later. The Supreme Court said this is not a valid arbitration agreement.

Issues

Whether Clause 16 of the partnership deed is a valid “arbitration agreement”.

Rules

The agreement must show a clear decision to refer disputes to arbitration and a binding obligation to do so.
If the clause only keeps the option open for future consent, it is not a valid arbitration agreement.
Mere use of the words “arbitration” or “arbitrator” is not enough if fresh consent is still needed later.

Facts (Timeline)

The parties formed a partnership, “Empire Art Industries”.

Deed contained Clause 16 on dispute resolution.

Clause 16 said disputes shall be “mutually decided” or “referred for arbitration if the parties so determine”.

Arbitration was conditional on a later decision.

Respondent sought appointment of an arbitrator for dissolution and accounts.

Appellant objected: no binding arbitration agreement existed.

Delhi High Court appointed an arbitrator, treating Clause 16 as an arbitration agreement.

Appellant appealed to the Supreme Court.

Timeline visual for events in Jagdish Chander v. Ramesh Chander

Arguments

Appellant

Clause 16 is optional; it needs fresh consent later.
No present obligation to arbitrate; hence, no valid arbitration agreement.

Respondent

Parties intended arbitration as a dispute route.
Delhi High Court correctly treated Clause 16 as an arbitration clause.

Judgment

The Supreme Court set aside the High Court’s order. It held that Clause 16 is not a valid arbitration agreement. The crucial words—“shall be referred for arbitration if the parties so determine”—show that the parties must take a new decision later. That means no present commitment to arbitrate.

Ratio

An arbitration clause must show a present, binding agreement to arbitrate.
Clauses that require further consent are only “agreements to agree” and are unenforceable as arbitration agreements.
Language like “may refer,” “if parties so desire,” or “if parties so determine” is insufficient.

Why It Matters

Drafting matters. A single soft word can collapse your arbitration plan. This case is a drafting checklist for lawyers: use firm language that creates a binding duty to arbitrate without fresh approvals.

Key Takeaways

Say “shall be referred to arbitration”—not “may be referred if the parties decide”.
Avoid language that needs future consent.
Mere mention of “arbitration” does not create an arbitration agreement.
Vague dispute clauses risk court litigation instead of arbitration.

Mnemonic + 3-Step Hook

Mnemonic: NOW, NOT LATER — “Arbitrate now (present obligation), not later (fresh consent).”

Check Words: Does the clause say “shall be referred” (good) or “if parties determine/may” (bad)?
Check Timing: Is the commitment present, without any extra approval?
Check Effect: If fresh consent is needed, it’s not an arbitration agreement.

IRAC Outline

Issue: Is Clause 16 a valid arbitration agreement?

Rule: A valid arbitration clause must show a present decision and binding duty to arbitrate; optional or future-consent clauses fail.

Application: Clause 16 says arbitration will happen only “if the parties so determine”—this keeps it optional and needs fresh consent.

Conclusion: Clause 16 is not a valid arbitration agreement; appointment of arbitrator by the High Court was incorrect.

Glossary

Arbitration Agreement: A contract clause where parties agree, now, to send disputes to arbitration.
Agreement to Agree: A promise to decide later—usually unenforceable for arbitration.
Fresh Consent: New approval needed after a dispute arises; this defeats a binding arbitration clause.