THE BRANCH MANAGER, M/S. MAGMA LEASING AND FINANCE LIMITED AND ANR. versus POTLURI MADHAVILATA AND ANR.

Citation: [2009] 14 S.C.R. 815 · Decided: 18-09-2009 · Supreme Court of India · Bench: TARUN CHATTERJEE · Disposal: Appeal(s) allowed

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Judgment (excerpt)

[2009] 14 (ADDL.) S.C.R. 815 
THE BRANCH MANAGER, M/S. MAGMA LEASING AND 
A 
FINANCE LIMITED AND ANR. 
v. 
POTLURI MADHAVILATA AND ANR. 
(Civil Appeal No. 6399 of 2009) 
SEPTEMBER 18, 2009 
B 
[TARUN CHATTERJEE AND R.M. LODHA, JJ.] 
-4 
Arbitration and Conciliation Act, 1996 - s. 8 - Hire 
purchase agreement entered into by respondent-hirer with c 
appellant-finance company in respect of motor vehicle -
Agreement containing atbitration clause - Default in payment 
of installments by respondent - Termination of agreement by 
appellant - Vehicle seized from respondent - Respondent 
"t 
filed suit for recovery of possession of the vehicle - Appellant D 
filed application u/s.8 of the Act read with s.151 CPC for 
referring the dispute raised in the suit, to an arbitrator -
Application dismissed - Propriety of - Held: Not proper -
Merely because the agreement came to an end by its 
termination due to breach, the atbitration clause did not get E 
perished nor was it rendered inoperative; rather it survived for 
resolution of disputes arising "in respect of' or "with regard to" 
or "under" the agreement - On fulfillment of conditions of s.8, 
t 
as in the present case, no option is left to the Court and the 
Court has to refer the parties to atbitration. 
F 
Respondent no.1 entered into a Hire purchase 
agreement with appellant finance company in respect of 
a motor vehicle. The agreement contained an arbitration 
clause. Respondent no.1 committed default in payment 
of installments. Appellant terminated the agreement and 
G 
... 
seized the vehicle from respondent no.1. Respondent 
no.1 filed suit for recovery of possession of the said 
vehicle and for restraining the appellant from transferring 
the vehicle. Meanwhile, appellant filed application before 
815 
H 
816 
SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R. 
A the trial court under Section 8 of the Arbitration and 
Conciliation Act, 1996 read with Section 151, CPC for 
referring the dispute raised in the suit, to an arbitrator. The 
application was dismissed. The order was upheld by the 
High Court on the ground that the arbitration clause did 
B not survive upon termination of the hire purchase 
agreement. Hence the present appeal. 
Allowing the appeal, the Court 
HELD: 1.1. Merely because the contract has come to 
c an end by its termination due to breach, the arbitration 
clause does not get perished nor rendered inoperative; 
rather it survives for resolution of disputes arising "in 
respect of' or "with regard to" or "under" the contract. 
[Para 18] [833-E-F] 
J?, 
1.2. In the instant case, clause 22 of the hire 
'1' 
purchase agreement that provides for arbitration has 
.,, 
been couched in widest possible terms as can well be 
imagined. It embraces .all disputes, differences, claims 
E and questions between the parties arising out of the said 
agreement or in any way relating thereto. The hire 
purchase agreement having been admittedly entered into 
between the parties and the disputes and differences 
have since arisen between them, the arbitration clause 22 
1 
survives for the purpose of their resolution although the 
L 
t 
F contract has come to an end on account of its 
termination. [Para 19] [833-G-H; 834-A-B] 
Union of India v. Kishorilal Gupta and Bros. (1960) 1 SCR 
493; National Agricultural Coop. Marketing Federation India 
G Ltd. v. Gains Trading Ltd. (2007) 5 SCC 692 and P. Manohar 
Reddy & Bros. v. Maharashtra Krishna Valley Development 
Corporation And Ors. (2009) 2 SCC 494, relied on. 
Heyman and Another v. Darwins Ltd. (1942) 1 ALL ER 
H 
BRANCH MANAGER, MIS. MAGMA LEASING AND FINANCE 817 
LTD. v. POTLURI MADHAVILATA 
" 
337, referred to. 
A 
2.1. An analysis of Section 8 of the Arbitration and 
Conciliation Act, 1996 would show that for its 
applicability, the following conditions must be satisfied: 
(a) that there exists an arbitration agreement; (b) that 8 
action has been brought to the court by one party to the 
arbitration agreement against the other party; (c) that the 
subject matter of the suit is same as the subject matter 
of the arbitration agreement; (d) that the other party 
before he submits his first statement of the substance of C 
the dispute, moves the court for referring the parties to 
arbitration; and (e) that along with the application the 
other party tenders the original arbitration agreement or 
duly certified copy thereof. The said Section 8 is in the 
form of legislative command to the court and once the 
\ 
pre-re

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