As per the Contract Act, 1872, it is clearly stated that for an agreement to become a contract, the parties must be competent to contract, wherein age of majority is a condition for competency. A deed of mortgage is a contract and it cannot be held that a mortgage in the name of a minor is valid, simply because it in the interest of the minor unless he/she is represented by her natural guardian or guardian appointed by the Court. The law cannot be read differently for a minor who is a mortgagor and a minor who is a mortgagee as there are rights and liabilities in respect of the immovable property would flow out of such a contract on both of them. Mathai Mathai v. Joseph Mary, (2015) 5 SCC 622.
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The concept of separability of the arbitration clause/agreement from the underlying contract is a necessity to ensure that the intention of the parties to resolve the disputes by arbitration does not evaporate into thin air with every challenge to the legality, validity, finality or breach of the underlying contract. The Indian Arbitration Act, 1996 under Section 16 accepts the concept that the main contract and the arbitration agreement form two independent contracts. Commercial rights and obligations are contained in the underlying, substantive or the main contract. It is followed by a second contract, which expresses the agreement and the intention of the parties to resolve the disputes relating to the underlying contract through arbitration. A remedy is elected by parties outside the normal civil court remedy. It is true that support of the national courts would be required to ensure the success of arbitration, but this would not detract from the legitimacy or independence of the collateral arbitration agreement, even if it is contained in a contract, which is claimed to be void or voidable or unconcluded by one of the parties.
The scope and ambit of the provision contained in Section 16 of the Indian Arbitration Act has been clearly explained in Reva Electric Car Company (P) Ltd. V. Green Mobil, (2012) 2 SCC 93, wherein it was inter alia observed as follows:
“Under Section 16(1), the Legislature makes it clear that while considering any objection with respect to the existence or validity of the arbitration agreement, the arbitration clause which formed part of the contract, has to be treated as an agreement independent of the other terms of the contract. To ensure that there is no misunderstanding, Section 16(1)(b) further provides that even if the Arbitral Tribunal concludes that the contract is null and void, it should not result, as a matter of law, in an automatic invalidation of the arbitration clause. Section 16(1)(a) presumes the existence of a valid arbitration clause and mandates the same to be treated as an agreement independent of the other terms of the contract. By virtue of Section 16(1)(b), it continues to be enforceable notwithstanding a declaration of the contract being null and void.
In Today Homes and Infrastructure (P) Ltd. V. Ludhiana Improvement Trust, (2014) 5 SCC 68, it was held as under:
“The Legislature makes it clear that while considering any objection with regard to the existence or validity of the arbitration agreement, the arbitration clause which formed part of the contract, had to be treated as an agreement independent of the other terms of the contract. Enercon (India) Ltd. V. Enercon GMBH and others, (2014) 5 SCC 1.