Summary
The Supreme Court held that an arbitration clause in a 2005 partnership deed was not invalid merely because it mistakenly referred to the repealed Arbitration Act, 1940. The written agreement satisfied section 7 of the 1996 Act and clearly expressed an intention to arbitrate. Since proceedings had not commenced before the 1996 Act took effect, that Act governed under section 85. The refusal of referral was set aside and the trial court directed to act under section 8 to effectuate the agreement.
Issues
- Whether an erroneous reference to the repealed 1940 Act invalidated an otherwise sufficient arbitration agreement.
- Which enactment governed proceedings not commenced before the 1996 Act came into force.
- Whether summary dismissal of a prior special leave petition affirmed the legal reasoning below.
Provisions considered
- Sections 7 and 85, Arbitration and Conciliation Act, 1996The written agreement met the statutory requirements of an arbitration agreement. Repeal and savings made the 1996 Act govern proceedings commencing after its entry into force; an incorrect recital invoking the 1940 Act did not defeat the parties’ basic intention to arbitrate. (¶¶ 9, 10, 11, 13, 15, 16, 17)
Held
- The partnership clause committed disputes concerning the deed or partnership business to final and binding arbitration. It satisfied section 7, and no fraud, coercion, undue influence or misrepresentation was alleged to vitiate the agreement. (¶¶ 3, 8, 9, 10, 17)
- Where no arbitral proceedings commenced before the 1996 Act took effect, the 1996 Act governs. That rule also applies when a later agreement mistakenly refers to the 1940 Act; the recital cannot revive the repealed procedure but does not destroy the agreement to arbitrate. (¶¶ 10, 11, 13, 16, 17)
- The High Court read Thyssen out of context. Its prohibition on choosing the repealed Act for later proceedings concerned the governing law, not a prohibition on arbitration altogether. MMTC supported enforcing the arbitration agreement under the applicable 1996 framework. (¶¶ 12, 13, 14, 15, 16)
- Summary dismissal of the special leave petition against Rajan Kumar Verma did not affirm that judgment’s statement of law. Its reasoning had to be understood in light of this decision and its omission to consider MMTC. (¶ 18)
- The trial court was to deal with the matter under section 8 and effectuate the agreement, with the parties directed to appear on 14 May 2018. The Supreme Court did not itself select an arbitrator. (¶¶ 19, 20)
Result
Appeal allowed without costs; High Court judgment set aside. Trial court to proceed under section 8 of the 1996 Act; parties directed to appear on 14 May 2018 to effectuate arbitration.