INTRODUCTION
The Ar Arbit bitrat ration ion and Con Concil ciliat iation ion Ac Act, t, 199 19966 (h (here ereina inafte fterr the "19 "1996 96 Ac Act") t") sup suppla plants nts the Arbitration Act, 1940. In the 1996 Act, interention b! Courts as li#ited so that the ob$ect behind speed! $ustice $ustice could be ell achieed. achieed. To To further further the aforesaid aforesaid ob$ectie, the 1996 Act harbours #an! proisions. %ection & of the 1996 Act denotes one such proision hich proides for li#ited $udicial interention and furthers the ob$ectie b! directin' the parties to 'et inoled in arbitration on the basis of the arbitration a'ree#ent. In do#estic arbitrations , the uses of %ection & applications in the Courts hae spiraled oer the !ears. This piece proides an indepth anal!sis of %ection & of the 1996 Act b! focusin' on the $udicial precedents. FACTS
The ashtri!a Ispat i'a# is a *ublic %ector +ndertain'. It is en'a'ed, inter alia, in the business of #anufacturin' and #aretin' of iron and steel products. The espondent is a partnership fir#. It is en'a'ed in the business of consi'n#ent a'ents. It has its office at -alandhar. A contract as entered into b! and beteen the parties hereto in re'ard to the handlin' and stora'e of iron and steel #aterials of the Appellant at udhiana. The Appellants Appellants contend that one %hri Anil /er#a, *artner of the espondentir# had constituted arious fir#s and co#panies and obtained seeral consi'n#ent a'enc! contracts fro# the Appellant pertainin' to 2elhi, aridabad, Chandi'arh and udhiana etc. ho conspired ith certain officials of the Appellants and obtained pa!#ents 3 s.140 per 5.T. in place of s.6 per 5.T. on a false plea that the Transport Transport +nion at 7ahadur'arh 7ahadur'arh did not per#it transportation of 'oods ithout le! of a fee of s.100 per 5.T. on transportation of such 'oods. An inesti'ation as conducted b! the Central 7ureau of Inesti'ation and a cri#inal case as initiated a'ainst %hri Anil /er#a and the concerned officials of the Appellants. Alle'edl!, ith the ob$ect of presentin' a clean i#a'e to the Appellants and ith a ie to aoid ter#ination of all the contracts b! the#, a plea as put forth that %hri Anil /er#a had resi'ned fro# the partnership fir# as also fro# his other fir#sco#panies. Accordin' to the Appellants, the said %hri Anil /er#a as replaced b! his fa#il! #e#bers as a partner of the said fir# but he continued to be in co#plete control oer the fir#sco#panies. The contract of the espondent as ter#inated b! the Appellants on 8.0.8008. :n the sa#e da!, a sho cause notice as also issued to %hri Anil /e /er#a as to h! he and his fir#sco#panies fir#sco#panies should not be blac listed.
SECTIONS INVOLVED INVOLVED
%ection &; The
%ection & of the Arbitration and Conciliation Act, 1996 is pere#ptor! in nature. It proides that a $udicial authorit! shall, on the basis of the arbitration a'ree#ent beteen the parties, direct the parties to 'o for arbitration. It also enlists conditions precedent, hich need fulfill#ent before a reference can be #ade as per the ter#s of the 1996 Act. 1 In *. Anand
:rs. . *./.<. a$u (2ied) > :rs 8., hile iteratin' the peripher! of %ection & of the 1996 Act, the %upre#e Court said that "The conditions hich are re?uired to be satisfied under %ubsections (1) and (8) of %ection & before the Court can e@ercise its poers are (1) there is an arbitration a'ree#ent (8) a part! to the a'ree#ent brin's an action in the Court a'ainst the other part! () sub$ect #atter of the action is the sa#e as the sub$ect #atter of the arbitration a'ree#ent (4) the other part! #oes the Court for referrin' the parties to arbitration before it sub#its his first state#ent on the substance of the dispute. .... The lan'ua'e of %ection & is pere#ptor!." The folloin' factors are to be considered before entertainin' an application under %ection & of the 1996 Act; •
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irst ?uestion to be anal!Bed is hether it can be #ade applicable to a ciil dispute. The %upre#e Court hile anserin' the aforesaid ?uestion in . %rinias *ai and Anr. . ./. *ai (2) thr. .s. and :rs. , said that "The Act applies to do#estic arbitrations, international co##ercial arbitrations and conciliations. The applicabilit! of the Act does not depend upon the dispute bein' a co##ercial dispute. eference to arbitration and arbitabilit! depends upon the e@istence of an arbitration a'ree#ent, and not upon the ?uestion hether it is a ciil dispute or co##ercial dispute. There can be arbitration a'ree#ents in nonco##ercial ciil disputes also." The presence of arbitration a'ree#ent is another prere?uisite for seein' a reference under %ection &.4%ection D of the 1996 Act proides the dia#eter of the ter# "arbitration a'ree#ent". The i#portance of arbitration a'ree#ent, for seein' a reference under %ection &, as e#phasiBed b! the %upre#e Court in %#t. Ealpana Eothari . %#t. %udha Fada and ors. herein the Court said that "As lon' as the Arbitration clause e@ists, hain' recourse to Ciil Court for ad$udication of disputes enisa'ed to be resoled throu'h arbitral process or 'ettin' an! orders of the nature fro# Ciil Court for appoint#ent of eceier or prohibitor! orders ithout eincin' an! intention to hae recourse to arbitration in ter#s of the a'ree#ent #a! not arise." In the step ise anal!sis of %ection & is hether the alidit! of the arbitration clause can be disputed before the Court, in front of hich an application for reference is #ade. The anser to the ?uestion as laid in the ne'atie b! the %upre#e Court in industan *etroleu# Corpn. td. . *incit! 5ida! *etroleu#s 6. The Court in this case held that if the e@istence of the arbitration clause is ad#itted, in ie of the #andator! lan'ua'e of %ection & of the Act, the courts ou'ht to refer the dispute to arbitration. The %upre#e Court, hile raisin' a presu#ption for the alidit! of an arbitration clause in an a'ree#ent, in India ousehold and ealthcare td. . <
ousehold and ealthcare td. D, said that the Courts ould construe the a'ree#ent in such a #anner so as to uphold the arbitration a'ree#ent. •
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%ection & further #andates that the sub$ect #atter of the dispute is the sa#e as the sub$ect #atter of the arbitration a'ree#ent. Ghile articulatin' on this prere?uisite, the %upre#e Court in %uan!a oldin's *t. td. . -a!esh . *and!a and Anr. &, said that "The releant lan'ua'e used in %ection & is"in a #atter hich is the sub$ect #atter of an arbitration a'ree#ent". Court is re?uired to refer the parties to arbitration. Therefore, the suit should be in respect of Ha #atterH hich the parties hae a'reed to refer and hich co#es ithin the a#bit of arbitration a'ree#ent." An application under %ection &(1) cannot be entertained unless acco#panied b! ori'inal arbitration a'ree#ent or a certified cop! thereof. a!in' e#phasis on section &(8) for the 'rant of reference, the %upre#e Court in The 7ranch 5ana'er, 5a'#a easin' and inance i#ited and Anr. . *otluri 5adhailata and Anr. 9 said that "An anal!sis of %ection & ould sho that for its applicabilit!, the folloin' conditions #ust be satisfied; (e) that alon' ith the application the other part! tenders the ori'inal arbitration a'ree#ent or dul! certified cop! thereof."
B. Implied Inclusion under Section 8
Thou'h not i#plicit in the readin' of %ection & of the Act, the Court in the case of ar!ana Teleco# td. . %terlite Industries (India) td. 10 brou'ht in the co#petence of the arbitral tribunal as one of the 'rounds for the 'rant of reference. The proposition that %ection &, despite proidin' the e@plicit 'rounds on hich reference can be #ade, also la!s don the i#plicit 'round of co#petence of the Arbitral Tribunal, as also read in the affir#atie b! the Court in the case of 7ooB Allen > a#ilton Inc. . %7I o#e inance td. 11 herein it as held that here the causedispute is inarbitrable, the court here a suit is pendin', ill refuse to refer the parties to arbitration, under %ection & of the Act. Eect o t!e Ar"itr#tion #nd Concili#tion $Amendment% Ordin#nce& '()* ;
:n 8rd :ctober, 801, the *resident pro#ul'ated the Arbitration and Conciliation (A#end#ent) :rdinance, 801. The said :rdinance a#ended %ection & b! stipulatin' that $oinder of nonsi'natories to an arbitration a'ree#ent as not per#issible. urther a#end#ent to %ection & re?uires that the $udicial authorit! co#pulsoril! refer parties to arbitration irrespectie of an! decision b! the %upre#e Court or an! other court, if the $udicial authorit! finds that a alid arbitration clause pri#afacie e@ists. The a#end#ent essentiall! nullifies the $ud'#ent of the %upre#e Court in 7ooB Allen a#ilton . %7I o#e finance18, here it had ruled that serious alle'ations of fraud are not arbitrable.
ISSUES RAISED B+ BOT, -ARTIES
5r. .. ari#an, the learned %enior Counsel appearin' on behalf of the Appellants, inter alia, sub#itted that ; (1) %ection & of the 1996 Act cannot be e?uated ith %ection 4 of the Arbitration Act, 1940, (for short, Hthe 1940 Act) hain' been #ade in ter#s of +CITA 5odel ules and hain' under'one a thorou'h chan'e. (8) ilin' an opposition to the interi# in$unction ould not preclude a defendant fro# filin' an application under %ection & of the 1996 Act. () The i'h Court co##itted a serious error in entertainin' the plea raised b! the espondent for the first ti#e before it in holdin' that the application filed b! the Appellants as not acco#panied b! a certified cop! of the arbitration a'ree#ent. (4) 2espite the fact that attention of the i'h Court as specificall! dran that the said findin' as factuall! incorrect in the reie application, the i'h Court did not address itself on the said ?uestion. 5r. a'endra ai, the learned %enior Counsel appearin' on behalf of the espondent, on the other hand, sub#itted that ; (1) The pre#ise on hich the contract as ter#inated bein' de Hhors the conditions of the contract, the sa#e ould not be arbitrable. (8) The suit hain' been filed ?uestionin' both blaclistin' as also ter#ination of contract bein' outside the purie of arbitration, the application under %ection & of the 1996 Act as not #aintainable. () The Appellants in their re$oinder hain' disclosed the substance of the dispute ere not entitled to file the said application. (4) An application for ti#e hain' been filed to file ritten state#ent, the i#pu'ned orders do not suffer fro# an! infir#it!.
UD/E0ENT
The eidence recorded b! the Trial Court discloses that there as no dispute beteen the Co#pan! and the +nion arisin' under the contract on hich the suit as filed. The +nion accepted liabilit! to pa! the a#ount clai#ed b! the Co#pan! in the suit. The +nion still declined to pa! the a#ount assertin' that an a#ount as due fro# the Co#pan! to the +nion under a distinct contract. This a#ount as not sou'ht to be setoff under an! ter# of the contract under hich the Co#pan! #ade the clai#. The dispute raised b! the +nion as therefore not in respect of the liabilit! under the ter#s of the contract hich included the arbitration clause, but in respect of an alle'ed liabilit! of the Co#pan! under another contract hich it #a! be noted had alread! been referred to arbitration. The +nion had no defence to the action filed b! the Co#pan! ; it as not contended that the a#ount of s. 10,68 as not due to the Co#pan! under the contract relied upon b! the Co#pan!. or enforce#ent of the arbitration clause there #ust e@ist a dispute ; in the absence of a dispute beteen the parties to the arbitration a'ree#ent, there can be no reference." %uch as not the case here. or the fore'oin' reasons, e are of the opinion that the application filed b! the Appellants under %ection & of the 1996 Act as #aintainable. 7efore partin' ith the case, e #a! notice a disturbin' state of affairs. 5r. ari#an #ade a state#ent before us that in ie of the order of status ?uo passed b! the learned Ciil -ud'e, the espondents hae not onl! been orin' for the full ter# of fie !ears conte#plated under the a'ree#ent but also for the e@tended the period of ten !ears, to hich the! ere not entitled. The order of in$unction passed b! the learned Trial -ud'e is not before us. The contention raised b! 5r. ari#an if correct, e are sure that correctie #easures shall i##ediatel! be taen b! the court concerned. or the reasons afore#entioned, the i#pu'ned $ud'#ents cannot be sustained hich are set aside. The appeals are alloed ith costs. Counsel fee is ?uantified at s.1,000.
