All India Bar Examination (AIBE) 6-VI Previous Year Question Papers with Answers

The correct option is C: an arbitration clause in a contract or in the form of a separate agreement.

The reason is that Section 7 of the Arbitration and Conciliation Act, 1996 defines an arbitration agreement as an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. Section 7(2) further provides that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. An arbitration clause is a provision in a contract that specifies that any dispute arising out of the contract will be resolved by arbitration. A separate agreement is an independent document that contains the terms and conditions of arbitration mutually agreed by the parties.

The other options are incorrect because they are not the forms of an arbitration agreement recognized by the Act. An arbitration agreement cannot be based on commercial custom alone, as it has to be in writing and express the clear intention of the parties to arbitrate their disputes. The Act does not limit the arbitration agreement to either a clause in a contract or a separate agreement only, but allows both forms as valid and enforceable.