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“28. According to Section 19 of the Contract Act when consent to an agreement is caused by misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. The latter may, if he thinks fit, insist that the contract shall be (2003) 12 SCC 91 performed and that he shall be put in the position in which he would have been if the representations made had been true. According to Section 2 clause (i), an agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.

70.)” Section 19A deals with there being no free consent on account of the consent of a party being obtained by undue influence. The said vitiating factor also, does not result in a void agreement but a voidable contract. Section 14, defining ‘free consent’, provides that consent is said to be free, when it is not caused by mistake, subject to the provisions of Sections 20, 21 and 22, after referring to the other four aspects, which detract from free consent. We notice what Section 20 provides. Section 20 declares that where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. We may observe that this again is a case of an agreement, which is declared void within the meaning of Section 10, apart from Sections 24 to 30. Section 21 provides that a mistake as to any law in force in India, would not make the contract voidable. Thus, while Section 10 sets out the core element for an agreement to become a contract, the effect of non- conformity varies. Therefore, the lack of competency and absence of sound mind completely detract from the formation of a ‘contract’. The absence of free consent arising from coercion, undue influence, misrepresentation and even fraud will, however, result in an agreement which is a ‘contract’ though voidable (see Sections 19 and 19A of the Contract Act). The effect of mistake, is again spelt out in Section 22, insofar as it provides that a contract is not voidable merely because one of the parties consented to the contract, labouring under a mistake as to a matter of fact. Section 37 comes under Chapter IV which deals with performance of contracts and of contracts which must be performed. Section 37 reads:

“64. Consequences of rescission of a voidable contract. -When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is the promisor. The party rescinding a voidable contract shall, if he had received any benefit thereunder from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received.”
59. As to what would happen, if an agreement is discovered to be void or becomes void, is provided in Section 65. It declares that when such an eventuality takes place, any person, who has, under such agreement or contract, received any advantage, is bound to restore it to the person from whom he has received it or make compensation for the same. In the context of Section 65, we may notice the nexus with Section 2(j) of the Contract Act. Section 2(j), as we have noticed, provides that, when the contract ceases to be enforceable, it becomes void. Thus, what may be an agreement and which fulfils the requirement that it is enforceable and, therefore, becomes a contract, can upon it ceasing to be enforceable, become void.

71. What Section 11(6A) contemplates is a contract and it is not an agreement which cannot be treated as a contract. This is despite the use of the words ‘arbitration agreement’ in Section 11(6A). In other words, contract must conform to Section 7 of the Act. It must also, needless to say, fulfil the requirements of the Contract Act.

72. A voidable contract within the meaning of Section 19 and 19A, undoubtedly stands in stark contrast to void contracts. However, even in the categories of void contracts as for instance, Section 20 of the Contract Act provides that if on a material point, the parties were mistaken, the contract would be void. If in a given case where this is the contention raised by a party in a proceeding under Section 11 when the agreement otherwise satisfies the requirement of a contract to make it exist as an Arbitration Agreement, then, the Court would be justified in treating the agreement as one which exists and leave it open to the Arbitrator to go into the question, which can be done after the pleadings are laid and evidence is unfolded before him. When an Arbitration Agreement is sought to be brought under the cloud on the basis that it is a voidable contract which has been avoided, again it may be a matter where the principle of Kompetenz-Kompetenz may be apposite and again the court under Section 11 would be justified in proceeding on the basis that an arbitration agreement exists. The question must undoubtedly be approached from the standpoint of advancing the sublime cause of speedy commencement, progress and conclusion of arbitration. When Parliament intervened by amending the Act, while in Section 8, it has employed the words prima facie, it has used the word ‘examine’ to ascertain about the existence of an arbitration agreement in Section 11 (6A). Likewise, in Section 8 the law giver has used the word ‘valid’ which is missing in Section 11(6A). Can it be said that an invalid agreement can be said to exist in law for the purpose of Section 11(6A)?