APPLICABILITY OF ARBITRATION AND CONCILIATION ACT 1940 AND ARBITRATION AND CONCILIATION ACT 1996.

In a peculiar case, where the parties under the agreement have agreed for the applicability of Arbitration and Conciliation Act, 1940, while the agreement was done after the Arbitration and conciliation Act 1996 had come in force.

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.4664 OF 2018

(Arising out of SLP (Civil) No.14589 of 2016)

Purushottam s/o Tulsiram Badwaik ……Appellant

VERSUS

Anil & Ors. ..…. Respondents

The SLP was filed as regards the issue under which provisions of the Arbitration act, the dispute has to be decided and which Act shall be applicable, when the parties in their agreement have agreed to refer to the Arbitration and Conciliation act 1940, while the agreement was done very well after the Arbitration and Conciliation act 1996 was in force.

HELD- In view of the Arbitration and Conciliation act 1996 and repeal provisions at Sec 85 – The provisions- The correct approach, according to us, would be in promoting the object of implementing the scheme of alternative dispute resolution as was rightly submitted in MMTC Ltd. (Supra). It would be farfetched to come to the conclusion that there could be no arbitration at all. As is clear from MMTC Ltd. (Supra) what is material for the purposes of the applicability of 1996 Act is the agreement between the parties to refer the disputes to arbitration. If there be such an arbitration agreement which satisfies the requirements of Section 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 consistent with the basic intent of the parties as discernible from the arbitration agreement to refer the disputes to arbitration.

Viewed thus, the High Court was not right in observing that there could be no arbitration at all in the present case. In situations where the relevant clause made reference to the applicability of “the provisions of the Indian Arbitration Act and Rules made thereunder” as was the case in MMTC Ltd. (Supra), on the strength of Section 85(2)(a) the governing provisions in respect of arbitral proceedings which had not commenced before 1996 had came into force would be those of 1996 Act alone. On the same reasoning even if an arbitration agreement entered into after 1996 Act had come into force were to make a reference to the applicable provisions of those under Indian Arbitration Act or 1940 Act, such stipulation would be of no consequence and the matter must be governed under provisions of 1996 Act. An incorrect reference or recital regarding applicability of 1940 Act would not render the entire arbitration agreement invalid. Such stipulation will have to be read in the light of Section 85 of 1996 Act and in our view, principles governing such relationship have to be under and in tune with 1996 Act. As observed earlier, the requirements of “arbitration agreement” as stipulated in Section 7 of 1996 Act stand completely satisfied in the present matter nor has there been any suggestion that the agreement stood vitiated on account of any circumstances in the realm of undue influence, fraud, coercion or misrepresentation. In the circumstances, the attempt must be to sub-serve the intent of the parties to resolve the disputes by alternative disputes resolution mechanism. The High Court was, therefore, completely in error.

We therefore set aside the judgment and order passed by the High Court and accept the appeal preferred by the appellant. The matter will have to be dealt with by the trial court in terms of Section 8 of 1996 Act. The parties shall appear before the trial court on 14th May, 2018 for effectuating the arbitration agreement.

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