Revival of Earlier Contract and Arbitration Clause After Failed Superseding Arrangement Under Section 20

A later arrangement intended to supersede an earlier distribution agreement did not take effect because the agreed payment was not made. The parties then acted on the basis of the original contract, and correspondence showed that both sides accepted that position. On those facts, the earlier agreement was treated as subsisting, so its arbitration clause remained available. Applying Section 20 of the Arbitration Act, 1940, the court found no reason to interfere with the direction to file the arbitration agreement and proceed to reference.

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Issues: Whether the original distribution agreement and its arbitration clause survived or revived after the subsequent agreement failed, so as to justify an order directing filing of the arbitration agreement under Section 20 of the Arbitration Act, 1940.

Analysis: The subsequent arrangement of 11 March 1985 was intended to supersede the earlier agreement of 19 March 1983, but it did not take effect as contemplated because the agreed amount was not paid. The parties thereafter acted on the footing of the earlier agreement, and the correspondence showed that the petitioner fell back on the original contract and the respondent accepted that position. On those facts, the earlier agreement was treated as subsisting at the relevant time and the arbitration clause in that agreement remained available. Since Section 20 of the Arbitration Act, 1940 required the court to direct filing of the arbitration agreement where the statutory conditions were satisfied, there was no reason to interfere with the High Court's order.

Conclusion: The arbitration agreement was held to be subsisting, and the direction to file the agreement and proceed to reference was upheld against the appellant.

Ratio Decidendi: Where a later arrangement intended to supersede an earlier contract fails and the parties subsequently conduct themselves on the basis of the earlier contract, the earlier contract and its arbitration clause may be treated as revived or continuing for the purpose of Section 20 of the Arbitration Act, 1940.

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