Tag: #Section7

Case Law Analysis: P. Anand Gajapathi Raju & Ors. v. P.V.G Raju

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Case Number

Civil Appeal No. 5251 of 1993

Equivalent Citations

(2000) 4 SCC 539

Bench

D.P. Wadhwa, Ruma Pal

Date of Judgment

March 28, 2000

Relevant Act/ Sections

Section 7 of Arbitration and Conciliation Act 1996

Section 2(e) of Arbitration and Conciliation Act 1996

Section 8(1) & 8(2) of Arbitration and Conciliation Act 1996

Section 2(e) of Arbitration Act, 1940

Facts of the Case:

During the pendency of this appeal, all the parties have entered into an arbitration agreement. The arbitration agreement covers all the disputes between the parties in the proceedings before the court and even more than that. They have agreed to refer their disputes in this appeal and others to Justice S. Ranganathan, a retired Judge of this Court as sole Arbitrator. The arbitration agreement is in the form of an application and has been signed by all the parties, The agreement meets the requirements of Section 7 of the Arbitration and Conciliation Act, 1996 (new Act).

Relevant Legal Provision:

Section 8 of the New Act lays down the conditions which are required to be satisfied for referring a suit to arbitration. The relevant parts of the law are reproduced below: – 

“8(1). A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement, shall if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

(1) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

(2) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, and arbitration may be commenced or continued and an arbitral award made.”

Issues before the Court:

  1. Whether this Court in appeal can refer the parties to arbitration under the Arbitration and Conciliation Act, 1996.
  2. Whether the Court is, in circumstances where the entire subject matter of the suit is considered in the arbitration agreement, obliged to refer the parties to arbitration and if so with what effect.

Ratio of the Case

  •  Section 5, which is contained in Part I of the new Act, defines the extent of judicial intervention in arbitration proceedings. It says that notwithstanding anything contained in any other law for the time being in force, in matters governed by Part I, no judicial authority shall intervene except where so provided in that Part. 
  • Section 5 brings out clearly the object of the new Act, namely, that of encouraging resolution of disputes expeditiously and less expensively and when there is an arbitration agreement, the Courts intervention should be minimal.
  • The conditions which are required to be satisfied under sub-section (1) and (2) of Section 8 before the Court can exercise its powers are: 
    • (1) there is an arbitration agreement; 
    • (2) a party to the agreement brings an action in the Court against the other party; 
    • (3) subject matter of the action is the same as the subject matter of the arbitration agreement; 
    • (4) the other party moves the Court for referring the parties to arbitration before it submits its first statement on the substance of the dispute.
  • The last provision (4) creates a right in the person bringing the action to have the dispute adjudicated by the Court, once the other party has submitted his first statement of defense. But if the party, who wants the matter to be referred to arbitration applies to the Court after submission of his statement and the party who has brought the action does not object, as is the case before us, there is no bar on the Court referring the parties to the arbitration.
  • In the matter before us, the arbitration agreement covers all the disputes between the parties in the proceedings before us and even more than that.
  • The arbitration agreement satisfies the requirements of Section 7 of the new Act. The language of Section 8 is peremptory. It is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement.
  • There is no question of stay of the proceedings till the arbitration proceedings conclude and the Award becomes final in terms of the provisions of the new Act.
  • All the rights, obligations, and remedies of the parties would now be governed by the new Act including the right to challenge the Award.
  • An application before a Court under Section 8 merely brings to the Courts notice that the subject matter of the action before it is the subject matter of an arbitration agreement.

Final Decision:

The Court allows the application and would refer the parties to the arbitration. No further orders are required in this appeal and it stands disposed of accordingly.

This case analysis is done by Prateek Chandgothia, a first-year BA LLB (Hons.) students at Rajiv Gandhi National University of Law, Punjab.

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