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Case Comment

Submitted towards the partial fulfilment of grading for the 7thth semester of
B.A.LL.B. (Hons.) course for the subject

Alternative Dispute Resolution

Submitted To:

Submitted by:

Asst. Prof. Miss Shruti Soni

Varun Kumar

School of Law,

13GSOL102010

Galgotias University

7th Semester

PETITIONER:
P. ANAND GAJAPATHI RAJU & ORS.

Vs.

RESPONDENT:
P.V.G.

RAJU (DIED ) & ORS.

AIR 2000 SC 1886


DATE OF JUDGMENT:

28/03/2000

Judges: Bench: Ruma Pal, D.P.Wadhwa


The parties entered into an arbitration agreement during the pendency of the appeal in the court and
agreed to refer their disputes to an arbitrator. The conditions which are to be satisfied under sub-sections
(1) and (2) of Section 8 of the Act of 1996 before the court can exercise its powers are:
1)
2)
3)
4)

there is an arbitration agreement ;


a party to the agreement brings an action in the court against the other party ;
subject-matter of the action is the same as the subject-matter of the arbitration agreement ;
the other party moves the court for referring the parties to arbitration before it submits his first
statement on the substance of the dispute.
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 it is in the present case, there is no
bar on the court referring the parties to arbitration.

Whether court in appeal can refer the parties to arbitration under Section 8 of the Act of 1996
even where arbitration agreement is entered into during pendency of the appeal?

Facts:

Pendency of the appeal led to arbitration agreement


They agreed to refer their disputes in this appeal and others to Justice S. Ranganathan, a retired
Judge of this Court as sole Arbitrator.
After which only the question was that whether the court can refer to arbitration or not?

Statutes involved:

Section 8 in The Arbitration Act, 1940


Section 5 in The Arbitration Act, 1940
Section 2 in The Arbitration Act, 1940

Section 7 in The Arbitration Act, 1940


Section 42 in The Arbitration Act, 1940
Section 21 in The Arbitration Act, 1940
Section 25 in The Arbitration Act, 1940
ISSUES INVOLVED:
The arbitration agreement is in the form of an application and has been signed by all the parties and
meets the requirements of Section 7 of the Arbitration and Conciliation Act, 1996 (new Act). The question
that arises for consideration is whether this Court in appeal can refer the parties to arbitration under the
new Act. The Arbitration Act, 1940 expressly provided for the parties to a suit to apply for an order of
reference of the subject matter of the suit (see Sections 21 to 25, Chapter IV relating to arbitration in
suits).
PRINCIPLE LAID DOWN:
It is, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement.
Nothing remains to be decided in the original action or the appeal arising therefrom. 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.
CRITICAL COMMENT:
It was only after this case, Section 8 of the Arbitration and Conciliation Act, 1966 comes
into play when there is an agreement between the parties to refer the disputes or
differences arising out of the agreement to arbitration, and either party, ignoring
the terms of the agreement, approaches the civil court, the other party can, under
the said Section, move the court for referring the parties to arbitration before the
first statement on the substance of the dispute is filed. Sundaram Finance Ltd. v. T.
Thankam, 2015 SCC OnLine SC 147, decided on 20.02.2015

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