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A.

It Is The Duty Of The Court To Make An Unworkable Agreement Workable Within The
Permissible Limits Of Law.
In the instance of an arbitration clause being unworkable in the given framework of the law, a
duty is cast upon the Courts to ensure that the same is made workable within the permissible
limits of the law.1 The permissible limits of law in such a situation denote that the Court must
construe the unworkable arbitration clause within the scope of the applicable law under the
Arbitration & Conciliation Act, 1996.2
It is settled law that an arbitration agreement is formed if it is indicated from the terms of the
agreement that the parties to such an agreement intended to refer the dispute for arbitration and
they are willing to be bound by the decision on such dispute. 3 Thus, it falls under the duty of the
Court to render the arbitration agreement workable if there is an intention of the parties to refer
the dispute to arbitration. In construing an intention to form an arbitration agreement, it is
necessary for the court to employ a common sense approach, and not to apply the legal mindset.4
Court cannot invalidate the arbitration clause on the ground of unworkability present in such
clause.5 The Arbitration & Conciliation Act, 1996 further provides for the minimized intervention
of the judicial authorities except as provided. 6 If the entire arbitration agreement is invalidated, it
would inevitably result in the resolution of the dispute through litigation, which goes against the
objects and purposes of the Arbitatration and Concilliation Act, 1996. 7 Thus, the Court shall
1 Enercon (India) Ltd v Enercon GMBH AIR 2014 SC 3152.
2 ibid.
3 Jagdish Chander v Ramesh Chander (2007) 5 SCC 719.
4 Enercon (n 1).
5 ibid.
6 Arbitration and Conciliation Act 1996, s 5.
7 Konkan Railway Corporation Ltd v Rani Construction Pvt Ltd AIR 2002 SC 778.

consider the arbitration agreement to be valid in the instance of existence of intention to


arbitrate.8
The Court is within its duty to severe the objectionable or unworkable parts in the arbitration
agreement in order to give effect to the intention of the parties.9 By upholding the validity of the
arbitration agreement through severing the unworkable clauses, the Court cannot be considered
to be re-writing the agreement, but only doing what is contemplated by the parties through a
clearly explicit intention to arbitrate. 10 The agreement would be valid to that extent as is intended
by the parties to refer the dispute to arbitration.

B. Substance of the Arbitration Agreement Is Severable From the Invalid Part under the
Blue Pencil Doctrine
The Blue Pencil doctrine has been made applicable in India in deciding the severability of the
illegal or void parts of the contract.11 The Doctrine is a judicial standard for deciding upon the
validity of an agreement if it contacting offending words. 12 Under this doctrine, in an agreement
containing offending words, only such words are to be invalidated by deletion, rather than by
addition or alternation to the contract.13 The doctrine also casts a duty on the courts to enforce
the remainder of the agreement if it is possible to validate it by severing the offensive parts.14

8 Jagdish (n 3).
9 Shin Satellite v Jain Studios AIR 2006 SC 963
10 ibid.
11 Beed District Central Co-operative Bank Ltd v State of Maharashtra (2006) 8 SCC 514.
12 P. Ramanatha Aiyar, Advanced Law Lexicon, vol 1 (3rd edn Lexis-Nexis 2005) 553-54.
13 ibid.
14 ibid; See also EPI of Cleveland Inc v Basler 12 Ohio App2d 16.

The Doctrine has been likewise recognized in arbitration in the context of Indian law. It has been
held that a sub clause in the arbitration agreement does not, in any way, affect the right of the
parties to refer a dispute to arbitration.15 Hence referring to arbitration would still be an effective
recourse available to the parties, notwithstanding the invalidity of any sub-clause.16
The blue pencil doctrine only allows for severing of clauses when the enforceable part of the
agreement is clearly severable from the invalid part. 17 However, the substance of the agreement
has to be maintained, and cannot be overlooked by such severance. 18 The substance of arbitration
agreement is to taken to be the intention of the parties to refer the dispute to arbitration. 19 Hence,
the blue pencil doctrine is applicable to an arbitration agreement as the substance of the
agreement i.e. intention to arbitrate would not be overlooked through such severance.
The severability under the blue pencil doctrine is based on substantial severability' rather than
'textual divisibility.20 Hence, the Court is under the duty to sever the invalid part and give effect
to the substance of the arbitration agreement, which is the intention of the parties to refer the
dispute to arbitration.21 The intention of the parties to refer a dispute to arbitration is clearly
expressed in Clause 15 of the Tri-partite agreement 22 and hence, the substance of the agreement
can be severed from the invalid part and be given effect by the Court.

15 Union Construction v Chief Engineer AIR 1960 All 72.


16 ibid.
17 Attwood v. Lamont (1920) 2 KB 146.
18 ibid.
19 Jagdish (n 3).
20 Shin (n 9).
21 ibid.
22 Factsheet at 7.

C. Failure of Machinery Provision Cannot Affect the Validity of the Arbitration Agreement
The validity of an arbitration agreement is considered to be based on the substance of the
arbitration agreement which is the intention of the parties to arbitrate. 23 However, the invalidity
stemming from a machinery provision cannot by itself invalidate the arbitration agreement. 24 The
machinery provisions are provided in the Arbitration and Conciliation Act, 1996 for the parties to
proceed for the arbitration if the clear intention regarding the same has been expressed. 25 The
machinery provisions thus provide for the working of the arbitration agreement as agreed upon
by the parties.26
The principle of severability allows for severing of the invalid parts of an agreement, provided
the substance of the agreement is retained.27 A machinery provision is not part of the substance of
the agreement as it only deals with the working of the arbitration agreement as intended by the
parties and does nor form part of the intention.28 Thus, it follows from this reasoning that the
machinery provision can be severed from the arbitration agreement if considered to be invalid,
while giving effect to the intention of the parties to arbitrate.
The invalidity regarding the arbitration agreement is arising under Section 45 of the Act, due to
the foreign designation of seat being against the public policy of India. 29 It has been held that
Section 45 of the Act is a machinery provision to ensure that the parties proceed for the

23 Shin (n 9).
24 MMTC Limited v Sterlite Industries (India) Ltd (1996) 6 SCC 716.
25 Enercon (n 1).
26 Vasudeo Wadiraj Rao v Hotel Padma 2000 (102(2)) BOMLR 138.
27 Attwood (n 17).
28 Vasudeo (n 26).
29 Factsheet at 4.

arbitration if they have intended to it.30 The intention of the parties to refer a dispute to arbitration
can be construed from Clause 15 of the Tri-partite agreement. 31Hence, failure of Section 45 will
not invalidate the arbitration agreement as it is a machinery provision and does not affect the
clear and express intention of the parties to refer the dispute for arbitration.

30 Enercon (n 1).
31 Factsheet at 7.