PURUSHOTTAM S/O TULSIRAM BADWAIK versus ANIL & ORS.

[2018] 4 S.C.R. 347

PURUSHOTTAM S/O TULSIRAM BADWAIK

ANIL & ORS.

(Civil Appeal No. 4664 of 2018)

MAY 02, 2018

[ARUN MISHRA AND UDAY UMESH LALIT, JJ.]

Arbitration and Conciliation Act, 1996 – s.85(2)(a) –Partnership Agreement dtd. 9.11.2005 between the appellant andrespondents – Though, the said agreement was entered into afterthe 1996 Act had come into force, the relevant clause statedarbitration to be in accordance with the provisions of the 1940 Act– Respondents filed civil suit inter alia for injunction against theappellant – Appellant filed application u/s.8 of the 1996 Act to referthe dispute to arbitration – Trial Court as also High Court rejectedthe application – Issue as to applicability of the 1996 Act vis-a-vis1940 Act – On appeal, held: What is material for the purposes ofthe applicability of 1996 Act is the agreement between the partiesto refer the disputes to arbitration – In the instant case,basic requirements for an “arbitration agreement” are satisfied – Ifthere be such an arbitration agreement which satisfies therequirements of s.7 of 1996 Act, and if no arbitral proceeding hadcommenced before 1996 Act came into force, the matter would becompletely governed by the provisions of 1996 Act – Anyreference to 1940 Act in the arbitration agreement would be of noconsequence and the matter would be referred to arbitrationonly in terms of 1996 Act – In terms of s.85(2)(a) of the 1996Act, the governing provisions in respect of arbitral proceedingswhich had not commenced before the 1996 Act had come into forcewould be those of 1996 Act alone – An incorrect reference or recitalregarding applicability of 1940 Act would not render theentire arbitration agreement invalid – Judgment of High Court isset aside – Arbitration Act, 1940.

CDE

348SUPREME COURT REPORTS

AAllowing the appeal, the Court

HELD: 1.1 The basic requirements for an “arbitrationagreement” are– (a) an agreement between the parties to submitto arbitration all or certain disputes which have arisen or whichmay arise in future in respect of defined legal relationship; (b)Bsuch an arbitration agreement shall be in writing. The secondrequirement can be discernible from the documents or exchangeof communication as well. These requirements as stipulated inSection 7, Arbitration and Conciliation Act, 1996 are certainlysatisfied in the present matter. Sub-section (1) of Section 85 ofthe 1996 Act repealed three enactments including IndianCArbitration Act, 1940. Sub-section (2) stipulates inter alia thatnotwithstanding such repeal, the repealed enactment namely 1940Act would continue to apply in relation to arbitral proceedingswhich had commenced before 1996 Act came into force unlessthe parties were to agree otherwise. The second limb of firstDclause of said sub-section (2) further stipulates thatnotwithstanding such repeal the provisions of 1996 Act wouldapply in relation to arbitral proceedings which commenced on orafter 1996 Act came into force. [Paras 10, 11][354-B-C, G-H;355-A]

E1.2 Logically, even if in given case, reference to arbitrationin the agreement entered into before 1996 Act came into forcewas in terms of 1940 Act and if the arbitral proceedings had notcommenced before 1996 Act came into force, the provisions of1996 Act alone would govern the situation. The reference to“Indian Arbitration Act” or to “arbitration under 1940 Act” inFsuch cases would be of no consequence and the matter wouldstill be governed under 1996 Act. [Para 13][358-E]

1.3 The High Court had placed reliance on certainobservations in paragraph 35 of Thyssen case. However, theobservations were quoted and relied upon by the High CourtGcompletely out of context. What this Court considered inparagraph 35 of the said case was possibility that in terms ofSection 85(2)(a) of 1996 Act even when the proceedings hadcommenced under 1940 Act, the parties could still agree on theapplicability of the 1996 Act. What this Court thereafter stated

was the position in law that if the arbitral proceedings had notcommenced before 1996 Act came into force, the parties couldnot by their agreement agree on the applicability of 1940 Act.The idea was to emphasize that if the arbitral proceedings hadnot commenced as on the day when 1996 Act came into force,any subsequent commencement of arbitral proceedings had tobe in terms of 1996 Act. These observations do not in any waysuggest that, “if the arbitral proceedings had not commencedunder the Act of 1940 till the Act of 1996 came into force, thesame could not be commenced thereafter”. All that theseobservations indicate is that in such cases there cannot beapplicability of 1940 Act and not that there can be no arbitrationat all. [Para 15][359-E-H]

1.4 The correct approach, would be in promoting the objectof implementing the scheme of alternative dispute resolution. Itwould be farfetched to come to the conclusion that there couldbe no arbitration at all. What is material for the purposes of theapplicability of 1996 Act is the agreement between the parties torefer the disputes to arbitration. If there be such an arbitrationagreement which satisfies the requirements of Section 7 of 1996Act, and if no arbitral proceeding had commenced before 1996Act came into force, the matter would be completely governedby the provisions of 1996 Act. Any reference to 1940 Act in thearbitration agreement would be of no consequence and the matterwould be referred to arbitration only in terms of 1996 Actconsistent with the basic intent of the parties as discernible fromthe arbitration agreement to refer the disputes to arbitration.The High Court was not right in observing that there could be noarbitration at all in the present case. In situations where therelevant clause made reference to the applicability of “theprovisions of the Indian Arbitration Act and Rules madethereunder”, on the strength of Section 85(2)(a) the governingprovisions in respect of arbitral proceedings which had notcommenced before 1996 had come into force would be those of1996 Act alone. On the same reasoning even if an arbitrationagreement entered into after 1996 Act had come into force wereto make reference to the applicable provisions of those underIndian Arbitration Act or 1940 Act, such stipulation would be of

ABC

[2018] 4 S.C.R.

Ano consequence and the matter must be governed underprovisions of 1996 Act. An incorrect reference or recital regardingapplicability of 1940 Act would not render the entire arbitrationagreement invalid. Such stipulation will have to be read in thelight of Section 85 of 1996 Act and principles governing suchrelationship have to be under and in tune with 1996 Act. TheBrequirements of “arbitration agreement” as stipulated in Section7 of 1996 Act stand completely satisfied in the present matternor was there any suggestion that the agreement stood vitiatedon account of any circumstances in the realm of undue influence,fraud, coercion or misrepresentation. In the circumstances, theCattempt must be to sub-serve the intent of the parties to resolvethe disputes by alternative disputes resolution mechanism. TheHigh Court was, therefore, completely in error. The matter willhave to be dealt with by the trial court in terms of Section 8 of1996 Act. [Paras 16, 17 and 19][360-A-H; 361-C]

DThyssen Stahlunion GMBH v. Steel Authority of IndiaLtd. (1999) 9 SCC 334 : [1999] 3 Suppl. SCR 461 –distinguished.

M.M.T.C. Limited v. Sterlite Industries (India) Ltd.(1996) 6 SCC 716 : [1996] 8 Suppl. SCR 676 – reliedEon.Rajan Kumar Verma and Anr. v. Sachchidanand SinghAIR 2006 Patna 1 – not approved.

Kunhayammed and Others v. State of Kerala andAnother (2000) 6 SCC 359 : [2000] 1 Suppl. SCRF538 ; Indian Oil Corporation Ltd. v. State of Bihar &Ors. (1986) 4 SCC 146 : [1986] 3 SCR 553 – referredto.

Case Law Reference

[1999] 3 Suppl. SCR 461distinguished Para 5G

H[1986] 3 SCR 553

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4664of 2018.

From the Judgment and Order dated 10.12.2015 of the High Courtof Judicature at Bombay at Nagpur in Civil Revision Application No. 88of 2015.

Chirag M. Shroff, Ms. Neha Sangwan, Ms. Sanjana Nangia, Advsfor the Appellant.

Amol Nirmalkumar Suryawanshi, Adv for the Respondent.

The Judgment of the Court was delivered by

UDAY UMESH LALIT, J. 1. Leave granted.

2. Rejection of application preferred by the appellant under Section8 of the Arbitration and Conciliation Act, 1996 (“1996 Act” for short) asaffirmed by the High Court of Bombay at Nagpur by its judgment andorder dated 10.12.2015 in Civil Revision Application No.88 of 2015, isunder challenge in this appeal.

3. The appellant and the respondents had entered into PartnershipAgreement dated 09.11.2005. Clause 15 of said Partnership Agreementwas as under:

“15) That in case of any dispute between the partners as regardsinterpretation of this Deed or any other matter connected withthe partnership business, the same shall be referred to for arbitrationin accordance with the provisions of Indian Arbitration Act, 1940,and the decision of the Arbitrator shall be final and binding on allthe partners.”

4. The appellant had also executed registered Power of Attorneyon 28.12.2006 in favour of the partners. In April 2014 the respondentsfiled Special Civil Suit No.16 of 2014 in the Court of Civil Judge, SeniorDivision, Bhandara for declaration, damages, accounts and permanentinjunction against the appellant. Soon after receipt of the notice, theappellant preferred an application under Section 8 of 1996 Act to referthe dispute to arbitration in view of aforesaid clause 15 in the PartnershipAgreement. The matter was contested. The Trial Court rejected saidapplication by its order dated 05.01.2015. It was held that aforesaidclause 15 was vague, that there was no reference as to who should bethe arbitrator, that there was no mention about selection of the arbitratorand that the dispute did not form subject matter of agreement within themeaning of Section 8 of 1996 Act.

A5. The matter was carried further by the appellant by filing CivilRevision Application No.88 of 2015 in the High Court. The High Courttook the view that the relevant clause indicated agreement between theparties to refer the disputes to arbitration as per provisions of the IndianArbitration Act, 1940, (1940 Act, for short) although the PartnershipAgreement was entered into much after the enactment of 1996 Act.BRelying on portion of para 35 of the decision of this Court in ThyssenStahlunion GMBH v. Steel Authority of India Ltd.[1] and on the decisionof learned Single Judge of the Patna High Court in Rajan KumarVerma and anr. v. Sachchidanand Singh[2], the High Court observedin paragraphs 6 and 7 as under :-C“The Supreme Court in Thyssen Stahlunion GMBH (supra) hasobserved in paragraph 35 of its judgment as under:“35. Parties can agree to the applicability of the new Act evenbefore the new Act comes into force and when the old Act is stillholding the field. There is nothing in the language of SectionD85(2)(a) which bars the parties from so agreeing. There is,however, bar that they cannot agree to the applicability of theold Act after the new Act has come into force when arbitralproceedings under the old Act have not commenced though thearbitral agreement was under the old Act.”EFrom aforesaid observations of the Supreme Court, it can be seenthat if the arbitration proceedings had not been commenced underthe Act of 1940 till the Act of 1996 came into force, same couldnot be commenced thereafter. It has further been observed thatthere is bar to agree to the applicability of the Act of 1940 afterthe Act of 1996 has come into force.F

Similar view taken in Rajan Kumar Verma (supra) by learnedSingle Judge of the Patna High Court stands upheld in view ofrejection of the challenge thereto before the Supreme Court.”

The High Court thus rejected the challenge and dismissed saidGCivil Revision by its judgment under appeal.

6. In support of this appeal, Mr. Chirag M. Shroff, learned Advocatesubmitted :-

1 (1999) 9 SCC 3342 AIR 2006 Patna 1H

(a) The reference to the 1940 Act in the partnership deed dated09.11.2005 has to be necessarily referred to Arbitration process,as prevalent on the date of signing of the Agreement.

(b) The mention of 1940 Act will not defeat the intention of theparties to go for arbitration as dispute resolution mechanism.

7. On the other hand, Mr. Amol Nirmalkumar Suryawanshi, learnedAdvocate appearing for the respondent submitted that the question as towhether 1996 Act or 1940 Act would govern the relationship betweenthe parties was so fundamental that mistakes in that behalf wouldinvalidate the entire arbitration clause and as such the courts below werejustified in rejecting the submissions advanced by the appellant.

8. In the present case though the Partnership Agreement wasentered into after 1996 Act had come into force, the relevant clausemade reference to “arbitration in accordance with the provisions of IndianArbitration Act, 1940”. It is not the case of the respondent that theagreement between the parties suffered from any infirmity on accountof fraud, coercion, undue influence or misrepresentation. What is howeverprojected is that the reference to arbitration in terms of 1940 Act wassuch fundamental mistake that it would invalidate the entire arbitrationclause and as such there could not be any reference to arbitration at all.

9. The term “Arbitration Agreement” has been defined in Section7 of 1996 Act as under :-

“7. Arbitration agreement. – (1) In this Part, “arbitrationagreement” means an agreement by the parties to submit toarbitration all or certain disputes which have arisen or which mayarise between them in respect of defined legal relationship,whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitrationclause in contract or in the form of separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in –

(a) document signed by the parties;

(b) an exchange of letters, telex telegrams or other means oftelecommunication (including communication through electronicmeans) which provide record of the agreement; or

A(c) an exchange of statements of claim and defence in which theexistence of the agreement is alleged by one party and not deniedby the other.

(5) The reference in contract to document containing anarbitration clause constitutes an arbitration agreement if theBcontract is in writing and the reference is such as to make thearbitration clause part of the contract.”

10. Thus the basic requirements for an “arbitration agreement”are – (a) an agreement between the parties to submit to arbitration all orcertain disputes which have arisen or which may arise in future in respectCof defined legal relationship; (b) such an arbitration agreement shall bein writing. The second requirement can be discernible from the documentsor exchange of communication as well. These requirements as stipulatedin Section 7 are certainly satisfied in the present matter. The questionhowever remains is whether reference to 1940 Act in the agreementwould have any bearing. At this stage, we may consider the provisionsDof Section 85 of 1996 Act which Section is to the following effect:

“85. Repeal and savings – (1) The Arbitration (Protocol andConvention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10of 1940) and the Foreign Awards (Recognition and Enforcement)Act, 1961 (45 of 1961) are hereby repealed.

(2) Notwithstanding such repeal, -

(a) the provisions of the said enactments shall apply in relation toarbitral proceedings which commenced before this Act came intoforce unless otherwise agreed by the parties but this Act shallapply in relation to arbitral proceedings which commenced on orFafter this Act comes into force;

(b) all rules made and notifications published, under the saidenactments shall, to the extend to which they are not repugnant tothis Act, be deemed respectively to have been made or issuedunder this Act.”

11. Sub-section (1) of Section 85 repealed three enactmentsincluding 1940 Act. Sub-section (2) stipulates inter alia thatnotwithstanding such repeal, the repealed enactment namely 1940 Actwould continue to apply in relation to arbitral proceedings which had

commenced before 1996 Act came into force unless the parties were toagree otherwise. The second limb of first clause of said sub-section (2)further stipulates that notwithstanding such repeal the provisions of 1996Act would apply in relation to arbitral proceedings which commencedon or after 1996 Act came into force.

12. In M.M.T.C. Limited v. Sterlite Industries (India) Ltd.[3],the arbitration agreement was of date prior to the commencement of1996 Act. The commencement of arbitral proceedings was howeverafter 1996 Act had come into force and as such it was held by this Courtin paragraph 11 that the provisions of 1996 Act would apply. Further, thearbitration clause contemplated appointment of two arbitrators and aquestion also arose whether the appointment of arbitrators had to be intune with the clause in question or in terms of the provisions of 1996Act. Paragraph Nos.1, 4, 5, 8, 10, 11, 12, and 13 of said decision arequoted hereunder for ready reference:

“1. The point involved for decision is, the effect of the Arbitrationand Conciliation Act, 1996 (for short “New Act”) in the presentcase on the arbitration agreement made prior to the commencementof the New Act. Clause VII of the agreement dated 14-12-1993between the parties is, as under:

“VII. In the event of any question or dispute arising under orout of or relating to the construction, meaning and operation oreffect of this agreement or breach thereof, the matter in disputeshall be referred to arbitrator. Both the parties shall nominateone arbitrator each and the arbitrators shall appoint anumpire before proceeding with the reference. The decisionof arbitrators or in the event of their not agreeing the decisionof the umpire will be final and binding on the parties. Theprovisions of the Indian Arbitration Act and Rules madethereunder shall apply for proceedings. The arbitrators orthe umpire, as the case may be, shall be entitled with the consentof the parties to enlarge the time, from time to time, for makingthe award. The arbitrators/umpire shall give reasoned award.The venue of the arbitration shall be Bombay.”

(emphasis supplied)

4. The contention of the learned Attorney General on behalf ofthe appellant is that an arbitration agreement providing for theappointment of an even number of arbitrators is not validagreement because of Section 10(1) of the New Act; and,therefore, the only remedy in such case is by suit and not byarbitration. For this reason, he urged, that sub-section (2) of Section10 is not attracted since there is no failure to determine the numberof arbitrators according to sub-section (1). Another argument ofthe learned Attorney General was that Section 10 is departurefrom para 2 of the First Schedule of the Arbitration Act, 1940 (forshort the 1940 Act), which reads as under:

“2. If the reference is to an even number of arbitrators thearbitrators shall appoint an umpire not later than one monthfrom the latest date of their respective appointments.”

5. In reply Shri Dave, learned counsel for the respondent,contended that there is no such inconsistency between Section 10of the New Act and the corresponding provision in the 1940 Act,both being substantially the same. The learned counsel contendedthat the provisions of the New Act must be construed to promotethe object of implementing the scheme of alternative disputeresolution; and the New Act must be construed to enable theenforcement of the earlier arbitration agreements. It was urgedthat each of the parties having nominated its arbitrator, the thirdarbitrator was required to be appointed according to Section 11(3)and the failure to do so attracts the consequential results underthe New Act. The learned counsel contended that the provisionfor the number of arbitrators is machinery provision and doesnot affect the validity of the arbitration agreement which is to bedetermined according to Section 7 of the New Act.

8. Sub-section (3) of Section 7 requires an arbitration agreementto be in writing and sub-section (4) describes the kind of thatwriting. There is nothing in Section 7 to indicate the requirementof the number of arbitrators as part of the arbitration agreement.Thus the validity of an arbitration agreement does not depend onthe number of arbitrators specified therein. The number ofarbitrators is dealt with separately in Section 10 which is part ofmachinery provision for the working of the arbitration agreement.

It is, therefore, clear that an arbitration agreement specifying aneven number of arbitrators cannot be ground to render thearbitration agreement invalid under the New Act as contended bythe learned Attorney General.

10. The arbitration clause provides that each party shall nominateone arbitrator and the two arbitrators shall then appoint an umpirebefore proceeding with the reference. The arbitration agreementis valid as it satisfies the requirement of Section 7 of the NewAct. Section 11(3) requires the two arbitrators to appoint the thirdarbitrator or the umpire. There can be no doubt that the arbitrationagreement in the present case accords with the implied conditioncontained in para 2 of the First Schedule to the Arbitration Act,1940 requiring the two arbitrators, one each appointed by the twosides, to appoint an umpire not later than one month from thelatest date of their respective appointments.

11. The question is whether there is anything in the New Act tomake such an agreement unenforceable? We do not find any suchindication in the New Act. There is no dispute that the arbitralproceeding in the present case commenced after the New Actcame into force and, therefore, the New Act applies. In view ofthe term in the arbitration agreement that the two arbitrators wouldappoint the umpire or the third arbitrator before proceeding withthe reference, the requirement of sub-section (1) of Section 10 issatisfied and sub-section (2) thereof has no application. As earlierstated the agreement satisfies the requirement of Section 7 of theAct and, therefore, is valid arbitration agreement. Theappointment of arbitrators must, therefore, be governed by Section11 of the New Act.

12. In view of the fact that each of the two parties have appointedtheir own arbitrators, namely, Justice M.N. Chandurkar (Retd.),and Justice S.P. Sapra (Retd.), Section 11(3) was attracted andthe two appointed arbitrators were required to appoint thirdarbitrator to act as the presiding arbitrator, failing which the ChiefJustice of the High Court or any person or institution designatedby him would be required to appoint the third arbitrator as requiredby Section 11(4)(b) of the New Act. Since the procedureprescribed in Section 11(3) has not been followed the furtherconsequences provided in Section 11 must follow.

A13. Accordingly, we direct that the Chief Justice of the High Courtis to appoint the third arbitrator under Section 11(4)(b) of the NewAct in view of the failure of the two appointed arbitrators to appointthe third arbitrator within thirty days from the date of theirappointments. Direction given by the Chief Justice of the HighCourt is substituted to this effect.”B

13. The arbitration clause in MMTC Ltd. (supra) contemplatedan appointment process which was not strictly in tune with the provisionsof 1996 Act and the agreement was:- “the provisions of the IndianArbitration Act and Rules made thereunder shall apply for proceedings”.The reference was thus to the provisions of 1940 Act. The reading ofCthe decision shows that what was found crucial was date ofcommencement of the arbitral proceedings and if such commencementwas after 1996 Act had come into force, the provisions that would governthe situation were held to be that of 1996 Act. The appointment processwas also directed to be in tune with 1996 Act. What was found to beDfundamental was whether there was an arbitration agreement in writingin terms of Section 7 of 1996 Act. The acceptance of submission inparagraph 5 would further show that 1996 Act must be so construed toenable the enforcement of the earlier arbitration agreement.Logically, even if in given case, reference to arbitration in theEagreement entered into before 1996 Act came into force was in termsof 1940 Act and if the arbitral proceedings had not commenced before1996 Act came into force, the provisions of 1996 Act alone would governthe situation. The reference to “Indian Arbitration Act” or to “arbitrationunder 1940 Act” in such cases would be of no consequence and thematter would still be governed under 1996 Act. Would it then make anyFdifference if in an agreement entered into after 1996 Act, the referencemade by the parties in the agreement was to arbitration in terms of 1940Act.

14. In Thyssen (supra) three appeals were considered together.In the first of those three appeals, the arbitral proceedings hadGcommenced on 14.09.1995 under 1940 Act and the award was given bythe sole arbitrator on 24.09.1997. petition was filed under Sections 14and 17 of 1940 Act on 13.10.1997 for making the award rule of theCourt. In these proceedings an application was moved submitting that1996 Act having come into force on 25.01.1996, it would be applicable in

respect of enforcement of the award. In the context of these facts, thequestion which arose for consideration was whether the award wouldbe governed by 1996 Act for its enforcement or whether provisions ofthe 1940 Act would apply. In the second matter, the arbitral proceedingswere held in the United Kingdom prior to the enforcement of 1996 Actand the award was made on 25.02.1996 in London and the questionwhich arose was whether the award was governed by the provisions of1996 Act for its enforcement or by the Foreign Awards Act. In the thirdmatter the reference to the sole arbitrator was on 04.12.1993 and theaward was given by the arbitrator on 23.02.1996 i.e. after 1996 Act hadcome into force. The question that was framed in the third matter was,when Clause (a) of Section 85(2) of 1996 Act used the expression “unlessotherwise agreed by the parties” could the parties agree for theapplicability of 1996 Act even before 1996 Act had come into force.Thus the fact situation in all three matters was clear that thecommencement of arbitral proceedings was much before 1996 Act cameinto force. Therefore, on the strength of Section 85(2)(a) of 1996 Act, itwas held that the provisions of the repealed enactments including 1940Act would continue to apply in relation to such arbitral proceedings.The conclusions are clear from paragraphs 29 and 42 of said decision.

15. However, the High Court has placed reliance on certainobservations in paragraph 35 of Thyssen (supra). In our view theobservations have been quoted and relied upon by the High Courtcompletely out of context. What this Court considered in paragraph 35was possibility that in terms of Section 85(2)(a) of 1996 Act evenwhen the proceedings had commenced under 1940 Act, the parties couldstill agree on the applicability of the 1996 Act. What this Court thereafterstated was the position in law that if the arbitral proceedings had notcommenced before 1996 Act came into force, the parties could not bytheir agreement agree on the applicability of 1940 Act. The idea was toemphasize that if the arbitral proceedings had not commenced as on theday when 1996 Act came into force, any subsequent commencement ofarbitral proceedings had to be in terms of 1996 Act. These observationsdo not in any way suggest that, “if the arbitral proceedings had notcommenced under the Act of 1940 till the Act of 1996 came into force,the same could not be commenced thereafter”. All that these observationsindicate is that in such cases there cannot be applicability of 1940 Actand not, and we repeat, that there can be no arbitration at all.

16. The correct approach, according to us, would be in promotingthe object of implementing the scheme of alternative dispute resolutionas was rightly submitted in MMTC Ltd. (Supra). It would be farfetchedto come to the conclusion that there could be no arbitration at all. As isclear from MMTC Ltd. (Supra) what is material for the purposes of theapplicability of 1996 Act is the agreement between the parties to referBthe disputes to arbitration. If there be such an arbitration agreementwhich satisfies the requirements of Section 7 of 1996 Act, and if noarbitral proceeding had commenced before 1996 Act came into force,the matter would be completely governed by the provisions of 1996 Act.Any reference to 1940 Act in the arbitration agreement would be of noCconsequence and the matter would be referred to arbitration only interms of 1996 Act consistent with the basic intent of the parties asdiscernible from the arbitration agreement to refer the disputes toarbitration.

17. Viewed thus, the High Court was not right in observing thatDthere could be no arbitration at all in the present case. In situationswhere the relevant clause made reference to the applicability of “theprovisions of the Indian Arbitration Act and Rules made thereunder” aswas the case in MMTC Ltd. (Supra), on the strength of Section 85(2)(a)the governing provisions in respect of arbitral proceedings which hadnot commenced before 1996 had came into force would be those ofE1996 Act alone. On the same reasoning even if an arbitration agreemententered into after 1996 Act had come into force were to make areference to the applicable provisions of those under Indian ArbitrationAct or 1940 Act, such stipulation would be of no consequence and thematter must be governed under provisions of 1996 Act. An incorrectFreference or recital regarding applicability of 1940 Act would not renderthe entire arbitration agreement invalid. Such stipulation will have to beread in the light of Section 85 of 1996 Act and in our view, principlesgoverning such relationship have to be under and in tune with 1996 Act.As observed earlier, the requirements of “arbitration agreement” as

stipulated in Section 7 of 1996 Act stand completely satisfied in the presentGmatter nor has there been any suggestion that the agreement stood vitiatedon account of any circumstances in the realm of undue influence, fraud,coercion or misrepresentation. In the circumstances, the attempt mustbe to sub-serve the intent of the parties to resolve the disputes byalternative disputes resolution mechanism. The High Court was,Htherefore, completely in error.

18. We must also hold that the view taken by the learned SingleAJudge of the Patna High Court in Rajan Kumar Verma (Supra) is requiredto be seen in the light of the present decision. Said judgment of thelearned Single Judge had not noted the decision of this Court in MMTCLtd. (Supra). Summary dismissal of SLP(C) No.25036 of 2005 videorder dated 14.12.2005 by this Court would not mean affirmation of theBview taken by the learned Single Judge insofar as declaration of law isconcerned[4.]

19. We therefore set aside the judgment and order passed by theHigh Court and accept the appeal preferred by the appellant. The matterwill have to be dealt with by the trial court in terms of Section 8 of 1996Act. The parties shall appear before the trial court on 14[th] May, 2018for effectuating the arbitration agreement.

20. The appeal stands allowed in aforesaid terms. No costs.

Divya Pandey

Appeal allowed.

4 See Kunhayammed and others v. State of Kerala and another (2000) 6 SCC 359para 27 Indian Oil Corporation Ltd. v. State of Bihar & Ors. (1986) 4 SCC 146 paras6 to 10