India: Supreme Court Says That Mere Reference To The 1940 Arbitration Act Will Not Render The Entire Arbitration Agreement Invalid

Last Updated: 24 August 2018
Article by S.S. Rana & Co. Advocates

Brief Facts:

  • Purrushottam s/o Tulsiram Badwaik (herein after referred to as the "Appellant") and Anil (herein after referred to as the Respondent) entered into a partnership agreement dated November 9, 2005. Clause 15 of the said partnership agreement was as under- "15) That in case of any dispute between the partners as regards interpretation of this Deed or any other matter connected with the partnership business, the same shall be referred to for arbitration in accordance with the provisions of Indian Arbitration Act, 1940, and the decision of the Arbitrator shall be final and binding on all the partners."
  • In April 2014, the Respondents filed a civil suit for declaration, damages, accounts and permanent injunction against the Appellant.
  • After receipt of the notice, the Appellant preferred an application under Section 8 of the Arbitration Act, 1996 (hereinafter referred to as the "1996 Act") to refer the dispute to arbitration in the view of the aforementioned clause 15 of the partnership agreement.
  • The Trial Court rejected the application and held that the aforesaid Clause 15 was vague, since there was no reference as to who the arbitrator should be, and how should the arbitrators be selected further. The dispute did not form subject matter of agreement within the meaning of Section 8 of 1996 Act.
  • The Appellant then filed a civil revision application in the High Court. The High Court rejected the challenge and the dismissed the application relying on a portion of the decision of Supreme Court in Thyssen Stahlunion GMBH v. Steel Authority of India Ltd. The High Court took the view that the relevant Clause 15 indicated an agreement between the parties to refer the disputes to arbitration as per provisions of the Indian Arbitration Act, 1940, (hereinafter referred to as the "1940 Act") although the Partnership Agreement was entered into much after the enactment of 1996 Act.
  • The Appellant challenged the order of the High Court before the Supreme Court in this appeal.

Contentions of Appellant:

  • It was contended by the Learned Counsel for the Appellant that the reference to the 1940 Act in the partnership deed dated November 09, 2005, has to be necessarily referred to the Arbitration process, as prevalent on the date of signing of the Agreement.
  • It was further submitted that the mention of 1940 Act will not defeat the intention of the parties to go for arbitration as a dispute resolution mechanism.

Contentions of Respondent:

  • Mr. Amol Nirmalkumar Suryawanshi, the advocate appearing on behalf of the Respondents submitted, that the question as to whether the relationship between the parties would be governed by the 1940 Act or the 1996 Act was so fundamental, that any mistakes in that behalf would invalidate the entire arbitration clause and as such there could not be any reference to arbitration at all. Therefore, the Courts were justified in rejecting the submissions advanced by the Appellant.

Court's View

  • The Court held that all the requirements of an arbitration agreement as mentioned in Section 7 of the 1996 Act were satisfied in the present matter.
  • While deciding the question as to whether the reference made to the 1940 Act will have any bearing, the Court considered Section 85 of the 1996 Act, wherein sub section (2) 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."
  • Relying on the M.M.T.C. Limited v. Sterlite Industries (India) Ltd decision, the Court inferred that the date of commencement of the arbitral proceedings was crucial and if such commencement was after 1996 Act had come into force, the provisions of the 1996 Act would govern the situation.
  • The Court opined that the correct approach would be in promoting the object of implementing the scheme of alternate dispute resolution, as submitted in MMTC Ltd. case. "It would be farfetched to come to the conclusion that there could be no arbitration at all" the Court further held.
  • The Court took a view that for the purposes of the applicability of 1996 Act it is material that there is an agreement between the parties to refer the disputes to arbitration. If there is 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 to refer the disputes to arbitration.
  • The Supreme Court thus set aside the order and judgement passed by the High Court and accepted the appeal preferred by the Appellant.
  • It ordered that the matter will be dealt by the trial court in accordance with Section 8 of the 1996 Act for effectuating the arbitration agreement. It further directed the Chief Justice of the High Court to appoint a third arbitrator under Section 11(4)(b) of the 1996 Act due to the failure of the two appointed arbitrators (by the parties) to appoint the third arbitrator within thirty days from the date of their appointments.

For further information please contact at S.S Rana & Co. email: or call at (+91- 11 4012 3000). Our website can be accessed at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions