Arbitrator Cannot Go Beyond the Agreement: Supreme Court

The Supreme Court of India has recently ruled that an arbitrator has no authority to go beyond the terms of the agreement between the parties in dispute. In other words, the arbitrator cannot make decisions that are not mandated by the agreement between the parties.

This ruling is significant because it clarifies the role of the arbitrator in the dispute resolution process. An arbitrator is appointed by the parties in dispute to resolve their differences in a fair and impartial manner. The arbitrator`s decision is binding on the parties, and it is meant to be final.

However, the arbitrator`s authority is limited to the terms of the agreement between the parties. The arbitrator cannot exceed the scope of the agreement or make decisions that are not supported by the terms of the agreement.

The Supreme Court`s ruling arises from a dispute between two construction companies. The parties had entered into an agreement that contained an arbitration clause. The arbitration clause stated that any disputes arising from the agreement would be resolved by arbitration.

The arbitrator appointed by the parties made a decision that was not supported by the terms of the agreement. One of the parties appealed the decision, arguing that the arbitrator had exceeded his authority.

The Supreme Court agreed with the appellant and ruled that the arbitrator had no authority to make a decision that was not mandated by the agreement between the parties. The Court stated that the arbitrator`s authority is derived from the agreement, and the arbitrator cannot go beyond the scope of the agreement.

This ruling has important implications for businesses that use arbitration as a means of resolving disputes. It underscores the importance of clear and concise language in arbitration agreements. Parties should be careful to draft agreements that clearly outline the scope of the arbitrator`s authority and provide specific guidance on how disputes should be resolved.

Overall, the Supreme Court`s ruling provides clarity on the role of the arbitrator in the dispute resolution process. The arbitrator`s authority is limited to the terms of the agreement, and the arbitrator cannot go beyond the scope of the agreement. This underscores the importance of carefully drafting arbitration agreements that clearly outline the scope of the arbitrator`s authority and provide specific guidance on how disputes should be resolved.