M/S.AGRI GOLD EXIMS LTD. versus M/S. SRI LAKSHMI KNITS & WOVENS AND ORS.

Citation: [2007] 1 S.C.R. 1161 · Decided: 23-01-2007 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

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Judgment (excerpt)

i-
M/S.AGRI GOLD EXIMS LTD. 
v. 
MIS. SRI LAKSHMI KNITS & WOVENS AND ORS. 
JANUARY23, 2007 
[S.B. SINHAAND MARKANDEY KAT JU, JJ.] 
Arbitration and Conciliation Act, 1996-S.8-Held, is pre-emptory in 
nature-Where arbitration agreement exists, Court under obligation to 
refer parties to arbitration in terms of arbitration agreement-Jn such case 
A 
B 
civil suit would not be maintainable-Arbitration Act, 1940-Section 34. 
C 
The Appellant and the Respondents had entered into a Memorandum 
of Understanding (MOU) which contained an arbitration clause. Respondents 
issued five post-dated cheques in relation to the amount due to Appellant. 
However two cheques were dishonoured, pursuant to which Respondents 
made certain payments vide demand draft. Before receipt of the said 
payments, Appellant filed suit for money decree before the District Court. 
Respondents challenged maintainability of the suit and filed application 
praying for reference of the disputes to the arbitral tribunal in terms of 
the arbitration clause contained in the said MOU. The application was 
dismissed. On revision, however, the High Court held that the suit filed by 
the Appellant was not maintainable and accordingly directed the parties to 
take recourse to the provisions of the Arbitration and Conciliation Act, 
1996. Hence the present appeal. 
Dismissing the appeal, the Court 
HELD: 1. The 1996 Act was enacted in the light ofUNCITRAL Model 
Rules. Section 8 of the 1996 Act makes a radical departure from Section 
34 of the Arbitration Act, 1940. Difference between Section 34 of the 1940 
Act and Section 8 of the 1996 Act is distinct and apparent. 
D 
E 
F 
[Para 16] [1166-B-C] 
G 
Rashtriya /spat Nigam Limited v. Mis. Verma Transport Company 
(2006) 7 SCALE 565, referred to. 
2.1. Respondents had not filed any written statement in the suit. They 
had not disclosed their defence. They indisputably had raised a dispute in 
H 
1161 
1162 
SUPREME COURT REPORTS 
[2007] 1 S.C.R. 
A 
regard to the claim of the appellant. The arbitration agreement entered into 
by and between the parties is of wide amplitude. The arbitration agreement 
brings within its fold dispute of any nature whatsoever. It is in broadest 
term. The term 'dispute' must be given its general meaning under the 1996 
Act. [Paras 18 & 19) [1167-A-B, DJ 
B 
P. Ramanatha Aiyar's Advanced Law Lexicon, 3rd Edition, p.1431, 
referred to. 
2.2. Admittedly, the appellant's claim is not confined to the question 
regarding non-payment of the amount under the two dishonoured cheques. 
C 
Thus, there existed a dispute between the parties. [Para 21) [1167-F] 
3. Appellant evidently has taken before this Court an inconsistent 
stand. _If he was satisfied with the payment of the said demand drafts, he 
need not pursue the suit. It could have said so explicitly before the High 
D 
Court. It cannot, therefore, be permitted to approbate and reprobate. 
[Para 22) [1167-G) 
E 
4. Section 8 of the -1996 Actis pre-emptory in· nature. In a case where 
there·exists an_arbitration agreement, the Court is under obligation to 
refer the parties to arbitration in terms of the arbitration agreement. No 
issue, therefore, would ,remain to -.be decided in a suit. Existence of 
arbitration agreement is not disputed. The High Court; therefore, was right 
in referring the dispute between the parties·to arbitration. 
[Para 23) [1167-H, 1168-A-B] 
F 
Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums, 
G 
[2003] 6 SCC 503 and Rashtriya !spat Nigam Limited v. Mis. Verma 
Transport Company, [2006) 7 SCALE 565, relied on. 
CIVIL APPELLATE JURISDICTIDN : Civil Appeal No. 326 of2007. 
From the Final Judgment and Order dated 16.12.2005 of the High Court 
of Judicature, Andhra Pradesh at Hyderabad in C.R.P. No. 524112004. 
Annam D.N. Rao and D. Pawan Kumar for the Appellant. 
H 
Anupam Lal Das and Amit Sharma for the Respondents. 
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AGRI GOLD EXIMS LTD. v. SRI LAKSHMI KNITS & WOVENS [SINHA, J.] 
1163 
The Judgment of the Court was delivered by 
S.B. SINHA, J. : 1. Leave granted. 
2. An order of the Andhra Pradesh High Court dated 16th December, 
2005 passed in Civil Revision Petition No. 5241 of2004 directing the parties 
to take recourse to the provisions of the Arbitration and Conciliation Act, 
1996 (for short "the 1996 Act") opining that the suit filed by the appellant 
herein was not maintainable, is in question before us. 
3. Appellant and the predecessor-in-interest of the respondents ente

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