Case Note & Summary
The Supreme Court considered appeals against a common judgment of the Gujarat High Court dismissing First Appeals filed by the appellant against orders of the Commercial Court, Ahmedabad, which had dismissed applications under Section 8 of the Arbitration and Conciliation Act, 1996. The appellant, Gujarat Composite Limited, had entered into two licence agreements on 07.04.2005 with respondent No. 1, A Infrastructure Limited, and its sister concern. The agreements were for licensing the operation of manufacturing units for a term of 7 years, extendable by mutual consent. The agreements contained an arbitration clause. Disputes arose between the parties regarding termination of the agreements and recovery of possession. The respondents filed Commercial Civil Suits No. 90 of 2017 and 91 of 2017. The appellant filed applications under Section 8 of the Act seeking reference to arbitration. The Commercial Court dismissed the applications, and the High Court upheld the dismissal. The Supreme Court held that the arbitration clause was valid and covered the disputes. The Court observed that the courts below had erred in refusing reference on the ground that the disputes were not arbitrable. The Court set aside the impugned orders and directed the parties to arbitration. The appeals were allowed.
Headnote
A) Arbitration Law - Reference to Arbitration - Section 8 of the Arbitration and Conciliation Act, 1996 - Existence of Arbitration Clause - The appellant and respondent entered into licence agreements containing an arbitration clause. Disputes arose regarding termination and recovery of possession. The respondent filed civil suits. The appellant moved applications under Section 8 of the Act seeking reference to arbitration. The Commercial Court dismissed the applications, and the High Court upheld the dismissal. The Supreme Court held that the arbitration clause was valid and covered the disputes, and that the courts below erred in refusing reference. The Court set aside the impugned orders and directed the parties to arbitration. (Paras 1-10) B) Arbitration Law - Survival of Arbitration Clause - Section 8 of the Arbitration and Conciliation Act, 1996 - The arbitration clause in the licence agreements survived termination of the agreements. The disputes regarding termination and recovery of possession were arbitrable. The Court held that the arbitration clause was not discharged by termination and that the parties were bound to refer the disputes to arbitration. (Paras 5-8)
Issue of Consideration
Whether the dispute between the parties is arbitrable and whether the application under Section 8 of the Arbitration and Conciliation Act, 1996 ought to have been allowed by the Commercial Court.
Final Decision
The Supreme Court allowed the appeals, set aside the impugned judgment and orders of the High Court and Commercial Court, and directed the parties to refer the disputes to arbitration in accordance with the arbitration clause.
Law Points
- Arbitration clause survives termination of contract
- Section 8 application for reference to arbitration must be allowed if arbitration agreement exists
- Dispute regarding possession after termination is arbitrable
- Commercial Court cannot refuse reference on merits of dispute
