JUDGMENT

R.V. Raveendran, J.

1. Leave granted.

2. These appeals by special leave are by the State of Orissa aggrieved by the orders of the Chief Justice of Orissa High Court allowing the applications filed under Section 11 of the Arbitration and Conciliation Act 1996 ('Act' for short) filed by contractors and appointing arbitrators to decide the disputes raised by them against the State Government. The learned Chief Justice held that the last sentence of the proviso to Clause 10 of the conditions of contract (forming part of the agreements between the state and the contractors) is an arbitration agreement. The Appellants challenge the said orders on the ground that there is No. arbitration agreement and therefore the applications under Section 11 of the Act filed by the contractors ought to have been dismissed. Therefore the short question that arises for our consideration in these appeals is whether the said clause is an arbitration agreement.

The essentials of an arbitration agreement

3. In K.K. Modi v. K.N. Modi 1998 (3) SCC 573 this Court enumerated the following attributes of a valid arbitration agreement:

(1) The arbitration agreement must contemplate that the decision of the Tribunal will be binding on the parties to the agreement, (2) that the jurisdiction of the Tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the Court or from a statute, the terms of which make it clear that the process is to be an arbitration, (3) the agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal, (4) that the tribunal will determine the rights of the parties in an impartial and judicial manner, with the tribunal owing an equal obligation of fairness towards both sides, (5) that the agreement of the parties to refer their disputes to the decision of the Tribunal must be intended to be enforceable in law, and lastly, (6) the agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the Tribunal.

Following K.K. Modi and other cases, Bihar State Mineral Development Corporation v. Encon Builders (IP) Ltd. 2003 (7) SCC 418, this Court listed the following as the essential element's of an arbitration agreement:

(i) There must be a present or a future difference in connection with some contemplated affair;

(ii) There must be the intention of the parties to settle such difference by a private tribunal;

(iii) The parties must agree in writing to be bound by the decision of such tribunal; and

(iv) The parties must be ad idem.

4. In Jagdish Chander v. Ram Chandra 2007 (5) SCC 719, this Court, after referring to the cases on the issue, set out the following principles in regard to what constitutes an arbitration agreement:

(i) The intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement. If the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private tribunal for adjudication and an willingness to be bound by the decision of such tribunal on such disputes, it is arbitration agreement. While there is No. specific form of an arbitration agreement, the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the possibility of going for arbitration. Where there is merely a possibility of the parties agreeing to arbitration in future, as contrasted from an obligation to refer disputes to arbitration, there is No. valid and binding arbitration agreement.

(ii) Even if the words 'arbitration' and 'arbitral tribunal (or arbitrator)' are not used with reference to the process of settlement or with reference to the private tribunal which has to adjudicate upon the disputes, in a clause relating to settlement of disputes, it does not detract from the clause being an arbitration agreement if