IMPORTANT POINTS
in case there is an arbitration agreement in terms of section 7 and the proceedings started after coming into force of Act 1996; the proceedings would be governed by Act 1996 notwithstanding any reference to Act 1940.
Summary disposal of SLP does not mean affirmation of High Court view.

JUDGMENT :

Uday Umesh Lalit, J.

Leave granted.

2. Rejection of application preferred by the appellant under Section 8 of the Arbitration and Conciliation Act, 1996 (“1996 Act” for short) as affirmed by the High Court of Bombay at Nagpur by its judgment and order dated 10.12.2015 in Civil Revision Application No.88 of 2015, is under challenge in this appeal.

3. The appellant and the respondents had entered into a Partnership Agreement dated 09.11.2005. Clause 15 of 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.”

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 the disputes to arbitration as per provisions of the Indian Arbitration Act, 1940, (1940 Act, for short) although the Partnership Agreement was entered into much after the enactment of 1996 Act. Relying on portion of para 35 of the decision of this Court in Thyssen Stahlunion GMBH v. Steel Authority of India Ltd., (1999) 9 SCC 334 and on the decision of a learned Single Judge of the Patna High Court in Rajan Kumar Verma and anr. v. Sachchidanand Singh, AIR 2006 Patna 1, the High Court observed in paragraphs 6 and 7 as under :-

“The Supreme Court in Thyssen Stahlunion GMBH (supra) has observed in paragraph 35 of its judgment as under:

“35. Parties can agree to the applicability of the new Act even before the new Act comes into force and when the old Act is still holding the field. There is nothing in the language of Section 85(2)(a) which bars the parties from so agreeing. There is, however, a bar that they cannot agree to the applicability of the old Act after the new Act has come into force when arbitral proceedings under the old Act have not commenced though the arbitral agreement was under the old Act.”

From aforesaid observations of the Supreme Court, it can be seen that if the arbitration proceedings had not been commenced under the Act of 1940 till the Act of 1996 came into force, same could not be commenced thereafter. It has further been observed that there is a bar to agree to the applicability of the Act of 1940 after the Act of 1996 has come into force.

Similar view taken in Rajan Kumar Verma (supra) by learned Single Judge of the Patna High Court stands upheld in view of rejection of the challenge thereto before the Supreme Court.”

The High Court thus rejected the challenge and dismissed said Civil Revision by its judgment under appeal.

6. In support of this appeal, Mr. Chirag M. Shroff, learned Advocate submitted :-

(a) The reference to the 1940 Act in the partnership deed dated 09.11.2005 has to be necessarily referred to Arbitration process, as prevalent on the date of signing of the Agre