R.N. KUMAR versus R.K. SORAL

Citation: [1988] 3 S.C.R. 527 · Decided: 13-04-1988 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed

Judgment (excerpt)

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R.N. KUMAR 
A 
v. 
R.K. SORAL 
APRIL 13, 1988 
[SABYASACHI MUKHARJI ANDS. RANGANATHAN, JJ.J 
B 
Arbitration Act, i940. Section 20---Arbitration agreement-Duty 
bf Court to direct filing of-Whether obligatory. 
Indian Contract Act, 1872. Section JO-Contract-Whether there 
is complete novation of a contract in a particular case-Held, it depends 
on facts and circumstances of the case. 
An agreement for distribution of the film "Savere Wali Gadi" 
was entered into on 19th March, 1983 between the petitioner as the 
distributor and the respondent as the producer. The agreement con-
tained an arbitration clause. A sum of Rs.3.40 lakhs paid to the respon-
dent and acknowledged by him earlier to the agreement was deemed to 
have been adjusted against the first instalment. In or about J 984 about 
Rs. 3 lakhs were further advanced to the respondent. As per the agree-
ment the respondent was to hand over the prints of the film by JOth 
August, 1983, but it was not done. 
On JJth March, 1985 a further agreement was entered into bet-
ween the parties whereby the respondent agreed to pay a total sum of 
Rs.6.50 lakhs to the petitioner for giving up his distribution rights in the 
first agreement. The first agreement was accordingly irrevocably 
cancelled and superseded by the subsequent agreement. 
The respondent took up the matter with Motion Pictures Associa-
tion to de-register the film in the name of the petitioner. The Motion 
Picture Association stated that de-registration would be allowed only 
when the respondent pays Rs.6.50 lakhs to the petitioner or deposits the 
amount with the Association. The petitioner's claim before the Associa-
tion was that the respondent committed 'breach of the subsequent 
agreement. 
A civil suit was filed in the High Court for recovery of Rs.6.50 
lakhs with interest, by the petitioner ag~inst the respondent. Later, an 
application under section 20 of the Arbitration Act was made. The 
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Single Judge' held that the first agreement had revived and directed the 
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527 
A 
528 
SUPREME COURT REPORTS 
I 1988] 3 S.C.R. 
filing of the agreement. On appeal, the Division Bench confirmed the 
order. This special leave petition is against the order of the Division 
Bench of the High Court. 
Dismissing the special leave petition, this Court, 
B 
HELD: I. I Whether in any particular case there was a complete 
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novation of a contract in the sense that the new contract replaced or 
substituted the old contract, could depend upon the facts and circumst-
ances of the case. [53IB-C] 
1.2 When the agreement of 1985 was entered into, it was the 
intention of the parties that the earlier agreement would be superseded 
and a new arrangement was sought to be brought about whereby the 
rights of the petitioner under the earlier agreement were to be yielded 
for a sum of Rs.6.50 lakhs. This amouut of Rs.6.50 lakhs was never 
paid by the respondent, and it was the case of the petitioner that the 
earlier agreement stood cancelled. The petitioner who claimed rights 
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under the earlier agreement, sought the continuation of his registration 
of distributorship. This registration could continue only by virtue of the 
earlier agreement which had revived. [530G-H; 53IB) 
E 
Babula/ Marwari and others v. Tulsi Singh and others, A.I.R. 1940 
Patna 121, referred to. 
2.1 Sub-section (I) of Section 20 of the Arbitration Act gives an 
option to the parties by the use of the expression 'may', but the other 
sub-sections, if the conditions are fultilled, make it obligatory for the 
Court to direct filing of an arbitration agreement. [532G I 
F 
2.2 Indubitably, there was an arbitration clause in the agree-
ment. The parties have applied for reference. The Division Bench has 
reiterated that the original agreement dated 19th March, 1983 which 
ceased to have effect and came to an end by the agreement dated l lth 
March, 1985 stood revived by virtue of the two letters dated 15th July, 
1985 and !Ith September, 1985 by the appellant. It is clear that the 
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petitioner in the above letters fell back on the original contract of 19th 
March, 1983. This was accepted by the respondent. Hence there was at 
all relevant times a valid and binding contract between the parties. That 
contract contained an arhitrati~n clause. There was nothing to disenti-
tle the parties to have their rights adjudicated in terms of an arbitration 
clause. The civil suit filed does not by itself preclude filing of proper 
H arbit

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