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Jul 29, 2025

SC Lays Down Necessary Ingredients of an Enforceable Arbitration Agreement

The SC in South Delhi Municipal Corporation v. SMS Ltd.[1], held that a valid and enforceable arbitration agreement must:

i.    reflect the parties’ intent to refer their disputes to arbitration that is binding in nature; and

ii.   comply with basic arbitral norms, such as party autonomy, subject to statutory safeguards.

The SC cautioned against the use of ambiguous dispute resolution clauses in contracts, emphasising that such ambiguity leads to unnecessary and prolonged litigation. The SC further observed that Courts may invoke their suo moto powers in appropriate cases where arbitration clauses have been deliberately drafted in an ambiguous manner to mislead and misguide.

[1] South Delhi Municipal Corporation v. SMS Ltd., 2025 SCC OnLine SC 1138.

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These are the views and opinions of the author(s) and do not necessarily reflect the views of the Firm. This article is intended for general information only and does not constitute legal or other advice and you acknowledge that there is no relationship (implied, legal or fiduciary) between you and the author/AZB. AZB does not claim that the article's content or information is accurate, correct or complete, and disclaims all liability for any loss or damage caused through error or omission.

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