PURUSHOTTAM S/O TULSIRAM BADWAIK versus ANIL & ORS.

Citation: [2018] 4 S.C.R. 347 · Decided: 02-05-2018 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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PURUSHOTTAM S/O TULSIRAM BADWAIK
v.
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 and
respondents – Though, the said agreement was entered into after
the 1996 Act had come into force, the relevant clause stated
arbitration to be in accordance with the provisions of the 1940 Act
– Respondents filed civil suit inter alia for injunction against the
appellant – Appellant filed application u/s.8 of the 1996 Act to refer
the dispute to arbitration – Trial Court as also High Court rejected
the application – Issue as to applicability of the 1996 Act vis-a-vis
1940 Act  – On appeal, held: What is material for the purposes of
the applicability of 1996 Act is the agreement between the parties
to refer the disputes to arbitration – In the instant case,
basic requirements for an “arbitration agreement” are satisfied – If
there be such an arbitration agreement which satisfies the
requirements of s.7 of 1996 Act, and if no arbitral 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 no
consequence and the matter would be referred to arbitration
only in terms of 1996 Act – In terms of s.85(2)(a) of the 1996
Act,  the governing provisions in respect of arbitral proceedings
which had not commenced before the 1996 Act had come into force
would be those of 1996 Act alone – An incorrect reference or recital
regarding applicability of 1940 Act would not render the
entire arbitration agreement invalid – Judgment of High Court is
set aside – Arbitration Act, 1940.
  [2018] 4 S.C.R. 347
   347
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SUPREME COURT REPORTS
[2018] 4 S.C.R.
Allowing the appeal, the Court
HELD: 1.1 The basic requirements for an “arbitration
agreement” are– (a) an agreement between the parties to submit
to arbitration all or certain disputes which have arisen or which
may arise in future in respect of a defined legal relationship; (b)
such an arbitration agreement shall be in writing. The second
requirement can be discernible from the documents or exchange
of communication as well. These requirements as stipulated in
Section 7, Arbitration and Conciliation Act, 1996 are certainly
satisfied in the present matter. Sub-section (1) of Section 85 of
the 1996 Act repealed three enactments including Indian
Arbitration Act, 1940.  Sub-section (2) stipulates inter alia that
notwithstanding such repeal, the repealed enactment namely 1940
Act would continue to apply in relation to arbitral proceedings
which had commenced before 1996 Act came into force unless
the parties were to agree otherwise.  The second limb of first
clause of said sub-section (2) further stipulates that
notwithstanding such repeal the provisions of 1996 Act would
apply in relation to arbitral proceedings which commenced on or
after 1996 Act came into force. [Paras 10, 11][354-B-C, G-H;
355-A]
1.2  Logically, even if in a given case, reference to arbitration
in the agreement entered into before 1996 Act came into force
was in terms of 1940 Act and if the arbitral proceedings had not
commenced before 1996 Act came into force, the provisions of
1996 Act alone would govern the situation. The reference to
“Indian Arbitration Act” or to “arbitration under 1940 Act” in
such cases would be of no consequence and the matter would
still be governed under 1996 Act.  [Para 13][358-E]
1.3 The High Court had placed reliance on certain
observations in paragraph 35 of Thyssen case. However, the
observations were quoted and relied upon by the High Court
completely out of context. What this Court considered in
paragraph 35 of the said case was a possibility that in terms of
Section 85(2)(a) of 1996 Act even when the proceedings had
commenced under 1940 Act, the parties could still agree on the
applicability of the 1996 Act. What this Court thereafter stated
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was the position in law that if the arbitral proceedings had not
commenced before 1996 Act came into force, the parties could
not by their agreement agree on the applicability of 1940 Act.
The idea was to emphasize that if the arbitral proceedings had
not commenced as on the day when 1996 Act came into force,
any subsequent commencement of arbitral proceedings had to
be in terms of 1996 Act. These observations d

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