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TMI Blog2018 (5) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the decision of the Arbitrator shall be final and binding on all the partners." 4. The appellant had also executed a registered Power of Attorney on 28.12.2006 in favour of the partners. In April 2014 the respondents filed Special Civil Suit No.16 of 2014 in the Court of Civil Judge, Senior Division, Bhandara for declaration, damages, accounts and permanent injunction against the appellant. Soon after receipt of the notice, the appellant preferred an application under Section 8 of 1996 Act to refer the dispute to arbitration in view of aforesaid clause 15 in the Partnership Agreement. The matter was contested. The Trial Court rejected said application by its order dated 05.01.2015. It was held that aforesaid clause 15 was vague, that there was no reference as to who should be the arbitrator, that there was no mention about selection of the arbitrator and that the dispute did not form subject matter of agreement within the meaning of Section 8 of 1996 Act. 5. The matter was carried further by the appellant by filing Civil Revision Application No.88 of 2015 in the High Court. The High Court took the view that the relevant clause indicated agreement between the parties to refer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was so fundamental that mistakes in that behalf would invalidate the entire arbitration clause and as such the courts below were justified in rejecting the submissions advanced by the appellant. 8. In the present case though the Partnership Agreement was entered into after 1996 Act had come into force, the relevant clause made reference to "arbitration in accordance with the provisions of Indian Arbitration Act, 1940". It is not the case of the respondent that the agreement between the parties suffered from any infirmity on account of fraud, coercion, undue influence or misrepresentation. What is however projected is that the reference to arbitration in terms of 1940 Act was such a fundamental mistake that it would invalidate the entire arbitration clause and as such there could not be any reference to arbitration at all. 9. The term "Arbitration Agreement" has been defined in Section 7 of 1996 Act as under :- "7. Arbitration agreement. - (1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding 1940 Act. Sub-section (2) stipulates inter alia that notwithstanding such repeal, the repealed enactment namely 1940 Act would continue to apply in relation to arbitral proceedings which had commenced before 1996 Act came into force unless the parties were to agree otherwise. The second limb of first clause of said sub-section (2) further 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. 12. In M.M.T.C. Limited v. Sterlite Industries (India) Ltd. (1996) 6 SCC 716, the arbitration agreement was of a date prior to the commencement of 1996 Act. The commencement of arbitral proceedings was however after 1996 Act had come into force and as such it was held by this Court in paragraph 11 that the provisions of 1996 Act would apply. Further, the arbitration clause contemplated appointment of two arbitrators and a question also arose whether the appointment of arbitrators had to be in tune with the clause in question or in terms of the provisions of 1996 Act. Paragraph Nos.1, 4, 5, 8, 10, 11, 12, and 13 of said decision are quoted hereunder for ready referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the scheme of alternative dispute resolution; and the New Act must be construed to enable the enforcement of the earlier arbitration agreements. It was urged that each of the parties having nominated its arbitrator, the third arbitrator was required to be appointed according to Section 11(3) and the failure to do so attracts the consequential results under the New Act. The learned counsel contended that the provision for the number of arbitrators is a machinery provision and does not affect the validity of the arbitration agreement which is to be determined according to Section 7 of the New Act. 8. Sub-section (3) of Section 7 requires an arbitration agreement to be in writing and sub-section (4) describes the kind of that writing. There is nothing in Section 7 to indicate the requirement of the number of arbitrators as a part of the arbitration agreement. Thus the validity of an arbitration agreement does not depend on the number of arbitrators specified therein. The number of arbitrators is dealt with separately in Section 10 which is a part of machinery provision for the working of the arbitration agreement. It is, therefore, clear that an arbitration agreement specifying a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor under Section 11(4)(b) of the New Act in view of the failure of the two appointed arbitrators to appoint the third arbitrator within thirty days from the date of their appointments. Direction given by the Chief Justice of the High Court is substituted to this effect." 13. The arbitration clause in MMTC Ltd. (supra) contemplated an appointment process which was not strictly in tune with the provisions of 1996 Act and the agreement was:- "the provisions of the Indian Arbitration Act and Rules made thereunder shall apply for proceedings". The reference was thus to the provisions of 1940 Act. The reading of the decision shows that what was found crucial was date of commencement of the arbitral proceedings and if such commencement was after 1996 Act had come into force, the provisions that would govern the situation were held to be that of 1996 Act. The appointment process was also directed to be in tune with 1996 Act. What was found to be fundamental was whether there was an arbitration agreement in writing in terms of Section 7 of 1996 Act. The acceptance of submission in paragraph 5 would further show that 1996 Act must be so construed to enable the enforcement of the earlier a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continue to apply in relation to such arbitral proceedings. The conclusions are clear from paragraphs 29 and 42 of said decision. 15. However, the High Court has placed reliance on certain observations in paragraph 35 of Thyssen (supra). In our view the observations have been quoted and relied upon by the High Court completely out of context. What this Court considered in paragraph 35 was a possibility that in terms of Section 85(2)(a) of 1996 Act even when the proceedings had commenced under 1940 Act, the parties could still agree on the applicability of the 1996 Act. What this Court thereafter stated was the position in law that if the arbitral proceedings had not commenced before 1996 Act came into force, the parties could not by their agreement agree on the applicability of 1940 Act. The idea was to emphasize that if the arbitral proceedings had not commenced as on the day when 1996 Act came into force, any subsequent commencement of arbitral proceedings had to be in terms of 1996 Act. These observations do not in any way suggest that, "if the arbitral proceedings had not commenced under the Act of 1940 till the Act of 1996 came into force, the same could not be commenced th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pletely 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. 18. We must also hold that the view taken by the learned Single Judge of the Patna High Court in Rajan Kumar Verma (Supra) is required to be seen in the light of the present decision. Said judgment of the learned Single Judge had not noted the decision of this Court in MMTC Ltd. (Supra). Summary dismissal of SLP(C) No.25036 of 2005 vide order dated 14.12.2005 by this Court would not mean affirmation of the view taken by the learned Single Judge insofar as declaration of law is concerned (See Kunhayammed and others v. State of Kerala and another (2000) 6 SCC 359 para 27 Indian Oil Corporation Ltd. v. State of Bihar & Ors. (1986) 4 SCC 146 paras 6 to 10). 19. We therefore set aside the judgment and order passed by the High Court and accept the appeal preferred by the appella ..... 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