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Clauses To Prevent Disputes And To Ensure Smooth Implementation Of Agreement Will Not Be An Arbitration Agreement

The Supreme Court in Shyam Sunder Agarwal vs. P Narotham Rao has held that clauses inserted in the agreements to prevent disputes from occurring and to ensure smooth implementation of the agreement will not be an arbitration agreement.

The court found that the clause in the MOU referred to by the appellant while referring to two persons as Mediators/Arbitrators but the same persons have also been appointed as escrow agents for smooth and successful completion of the transaction. Referring to the the decision of the Supreme Court in Bihar State Mineral Development Corporation vs. Encon Builders (I) (P) Limited wherein it was decided that a clause which is inserted in an Agreement for the purpose of prevention of a dispute will not be an arbitration agreement, the court said that in this MOU it is clear that the wording of the Agreement, as has been held by us above, is clearly inconsistent with the view that the Agreement intended that disputes be decided by arbitration.

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