Say the ratio out loud before you open Reasoning — recalling it unprompted is exactly what the exam pays for.
Why it matters
Section 7 requires an arbitration agreement in writing, but writing is not the same as a signed formal document. This is the short authority for the proposition that a Government contract containing an arbitration clause may be spelt out of correspondence.
Facts
There was no executed formal contract. The relationship between the party and the Government rested on an exchange of letters, and the question was whether an arbitration agreement could be found in it.
Held
It is possible to spell out an arbitration agreement in a contract by correspondence with the Government.
Reasoning
Step one — writing, not formality, is the statutory requirement. What must be recorded is the parties' agreement to refer existing or future disputes to arbitration. Correspondence can record that as well as a deed can.
Step two — read the exchange as a whole. The agreement is spelt out of the correspondence taken together, not extracted from a single sentence in one letter.
Step three — the constitutional limit is separate. Finding an agreement in the correspondence answers the question of form. It does not answer the question of authority, which is where State of Punjab v. Om Prakash takes over.
Exam use
It opens: What are the requirements of a valid arbitration agreement? — as the illustration that the writing requirement is satisfied liberally.
Always cite it with State of Punjab v. Om Prakash, which holds that a contract by correspondence with the Government must be entered into by an officer duly authorised under Art. 299, and that a contract made by a person not so authorised is void. The two together are one proposition: correspondence can make the agreement, but only if the person corresponding could bind the Government.
Pair it also with K.K. Modi v. K.N. Modi, which supplies the substantive attributes an agreement must have before it counts as an arbitration agreement at all. P.B. Ray is about form; K.K. Modi is about content.
It does not decide what happens where the correspondence is inconsistent, or whether an agreement can be spelt out of correspondence between private parties — though the reasoning about the writing requirement is not peculiar to Government contracts.