Clauses To Prevent Disputes And To Ensure Smooth Implementation Of Agreement Will Not Be An Arbitration Agreement: SC [Read Judgment]

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 agreement in question states about handing over nine cheques favouring one Narotham Rao to two persons Sudhakar Rao and Gone Prakash Rao. 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 bench, referring to clauses, observed: “What emerges on a conspectus of reading of these clauses is that Mr. Sudhakar Rao and Mr. Gone Prakash Rao, though styled as Mediators/Arbitrators, are without doubt escrow agents who have been appointed to keep certain vital documents in escrow, and to ensure a successful completion of the transaction contained in the MOU. Clause 11 further makes it clear that these two gentlemen are escrow agents but shall not handover certain documents till the total transaction is satisfactorily completed.” The court further observed that the two escrow agents are not persons who have to decide disputes that may arise between the parties, whether before or after the transaction is completed, after hearing the parties and observing the principles of natural justice, in order to arrive at their decision.