K.K. Modi v. K.N. Modi (1998)

Everything in Part I depends on one prior question: is this clause an arbitration agreement at all? If it is not, there is no tribunal to constitute under s. 11, no award to enforce under s. 36 and nothing to set aside under s. 34; the parties are simply bound by a contractual valuation or expert decision. Commercial documents constantly name a third party to resolve difficulties — a valuer, an engineer, a chairman — and the parties often call the process arbitration in their correspondence.

K.K. Modi is the decision that supplies the test, and it supplies it as a list of attributes rather than a slogan, which is exactly what an examiner wants to see applied clause by clause.

Two groups of a family signed a memorandum of understanding for dividing assets. Under it, a named body would value the assets, another would frame the scheme of division, and any difficulty in implementation would be decided by the Chairman of a financial corporation. The correspondence between the parties described this arrangement as arbitration.

The clause contemplated no judicial determination and no recording of evidence. Those two absences decide the case.

The arrangement was expert determination, not arbitration. The decision-maker was to resolve difficulties by the application of his own expertise, not to adjudicate a formulated dispute after hearing both sides on evidence, so the clause was not an arbitration agreement within the Act.

The label the parties used was treated as persuasive but not conclusive.

The Court drew from this and related cases the attributes of an arbitration agreement, and they are the method to reproduce in an answer:

• the decision of the tribunal is intended to bind the parties;
• the tribunal's jurisdiction comes from consent, from a court order, or from a statute that makes clear the process is arbitration;
• the tribunal is to determine substantive rights;
• it is to act impartially and judicially, with an equal duty of fairness to both sides;
• the agreement is intended to be enforceable in law;
• the decision is on a dispute already formulated when the reference is made, not an arrangement designed to prevent future disputes from arising; and
• the tribunal is to receive evidence and contentions from both sides, or at least to give the opportunity.

Apply the list to the family arrangement and it fails at the crucial points: the Chairman was to settle difficulties of implementation as they arose rather than decide a formulated dispute, and nothing in the clause required him to take evidence or to act judicially.

It opens the threshold question in any arbitration problem: run the attributes against the clause before you discuss anything else. It is also the authority for the point that nomenclature is not decisive — neither the presence of the word arbitration nor its absence settles the matter, because s. 7(1) asks only whether the parties agreed to submit disputes arising out of a defined legal relationship to arbitration.

It disposes of the argument that calling a process arbitration in correspondence makes it one, and equally of the argument that a binding third-party decision is necessarily an award.

It does not decide the form requirements — s. 7(3) and (4) govern whether the agreement is in writing, contained in an exchange of letters or in pleadings not denied — and it does not deal with the separability of a clause once it is an arbitration clause; that is Olympus Superstructures under s. 16(1). A complete answer runs the attributes first, then the form, then separability.