Arbitration agreement required for Section 8 referral; mere reference to an unsigned proposal does not incorporate an arbitration clause.

An arbitration referral under Section 8 of the Arbitration and Conciliation Act, 1996 requires an existing arbitration agreement between the parties. A clause contained only in a proposal signed by one side was not enough where the letter of intent executed by both parties merely referred to the proposal and set out work terms without adopting the arbitration clause. The later purchase order also referred to earlier correspondence but did not itself contain an arbitration clause. Mere reference to prior documents does not incorporate an arbitration clause unless the executed document expressly adopts it and shows consensus ad idem.

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Issues: Whether the suit could be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 in the absence of an arbitration agreement contained in a document executed by both parties.

Analysis: Existence of an arbitration agreement is a prerequisite for invoking Section 8. The proposal relied upon by the respondents contained an arbitration clause, but it was signed only by the respondents. The letter of intent signed by both parties referred to the proposal, but it did not incorporate any arbitration clause and instead recorded the terms for execution of the work. The subsequent purchase order also referred to earlier correspondence but, though signed only by the petitioners, did not contain any arbitration clause. Mere reference to an earlier proposal does not amount to incorporation of its arbitration clause unless the clause is expressly adopted in the executed document showing consensus ad idem.

Conclusion: The referral to arbitration under Section 8 was unsustainable because no arbitration agreement existed between the parties in the executed documents.

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