An arbitration agreement requires a bilateral right to submit to arbitration, as per Section 7 of the Arbitration and Conciliation Act, 1996.

S. K. PHAUJDAR, J.

( 1 ) THE matter was heard on March 3, 1997. A mortgage suit was filed by the State Bank of India before the Civil Judge, Meerut, which was registered as Suit No. 453 of 1995 for recovery of Rs. 94,00,000 (rupees ninety-four lakhs) odd. The defendants, including the present revisionist, appeared in the suit and an application was moved before the court below under Sections 8 and 9 of the Arbitration and Conciliation Act, 1996, praying therein that the court may refer the parties to arbitration and may stay further proceedings in the suit. The court below had considered the application, perused the agreement between the plaintiff and Rico Rubbers of which the revisionist is a partner, and rejected the prayer for reference to arbitration holding that the agreement in question was not an arbitration agreement and hence no reference to arbitration could be made.

( 2 ) THE relevant clause on which learned counsel for the revisionist as also learned counsel for the caveator bank drew my attention was Clause 4 in the agreement for cash credit between the State bank of India and Rico Rubbers. This clause may be quoted for the point in dispute as under :

"4. That on any default of the borrower in payment of any money hereby secured or the performance of any obligation to the bank or the occurrence of any circumstances in the opinion of the bank endangering this security the bank shall be entitled at the borrowers risk and expenses as attorney for and in the name of the borrower or otherwise to take possession and/or appoint receivers of any debts or assets under this security give notices and demands to debtors and third parties liable therefor sue for recovery receive and give receipts for the same and sell or realise by public auction or private contract or otherwise dispose of all or any part of such debts or assets and enforce settle compromise submit to arbitration or deal in any manner with any debts or claims under this security. . . . "

( 3 ) SECTION 7 of the Arbitration and Conciliation Act of 1996 says what is an arbitration agreement. Under this section, an arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a definite legal relationship whether contractual or not. Section 8 authorises a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement to refer the parties to arbitration on the application of either party provided the application is made not later than the date of submission of the first statement of that party on the substance of the dispute. Section 9 speaks of power of a court to take interim measures before, during or after the making of an arbitral award.

( 4 ) THE impugned order of the trial court was recorded on January 14, 1997. On perusal of the agreement in question, the court below interpreted that the right to submit a matter to arbitration deals with disputes between the borrower (Rico Rubbers) and a third party and not a dispute between the bank and the borrower. A reading of the aforesaid Clause 4 in the agreement indicates that the clause has rightly been interpreted by the court below.

( 5 ) THERE is yet another aspect of the interpretation of this Clause 4 in the light of Section 7 of the arbitration and Conciliation Act. An agreement becomes an arbitration agreement when the parties agree to submit to arbitration certain disputes which have arisen or which may arise between them in respect of a definite legal relationship. This suggests that the right to submit to arbitration must be a bilateral one to have been agreed upon by the parties. The agreement in question describes Rico Rubbers as the borrower and the State Bank of India as the bank. Clause 4 in the agreement speaks of three contingencies for action under this clause.

( 6 ) THERE could be,

(i) a default on the part of the borrower in repayment of any m

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