Arbitration clause cannot revive after compromise supersedes earlier contract; fraud-based disputes remain for civil adjudication.

Section 8 referral to arbitration was unavailable because the later compromise superseded the earlier agreement and did not preserve any arbitration clause. The dispute in the money suit arose from post-compromise conduct, including alleged failure to appoint the claimant as stockist and claimed loss of goodwill, so it was outside the scope of the earlier arbitration clause. Allegations that the compromise decree was vitiated by fraud also required evidence and civil adjudication. The arbitral reference was therefore set aside and the money suit restored for trial in accordance with law.

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Issues: (i) Whether the parties could be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 on the basis of the arbitration clause in the earlier agreement dated 01.05.1997. (ii) Whether the disputes raised in Money Suit No.73 of 2003 were covered by that arbitration clause in view of the subsequent compromise decree and the allegations of fraud.

Issue (i): Whether the parties could be referred to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 on the basis of the arbitration clause in the earlier agreement dated 01.05.1997.

Analysis: Section 8 applies only when there is an arbitration agreement and the subject matter of the judicial proceeding is the same as the subject matter of that agreement. The earlier arrangement appointing the appellant as clearing and forwarding agent stood superseded by the compromise, under which the appellant was appointed only as stockist at Guwahati and Agartala. The compromise created a new arrangement and did not contain any arbitration clause. In such circumstances, the arbitration clause in the earlier agreement could not be invoked for the later dispute.

Conclusion: The reference of the dispute to arbitration on the basis of the earlier agreement was not justified.

Issue (ii): Whether the disputes raised in Money Suit No.73 of 2003 were covered by that arbitration clause in view of the subsequent compromise decree and the allegations of fraud.

Analysis: The claims in the money suit arose substantially from events after the compromise, including the alleged failure to appoint the appellant as stockist, loss of goodwill and reputation, and losses said to have flowed from subsequent conduct. These claims did not fall within the arbitration clause in the earlier agreement. Further, the respondent's plea that the compromise decree was vitiated by fraud raised issues that required adjudication on evidence by the civil court, especially where serious allegations of fraud were pleaded.

Conclusion: The disputes in the money suit were not arbitrable and were fit to be tried by the civil court.

Final Conclusion: The order referring the parties to arbitration was set aside and the money suit was restored to the trial court for decision in accordance with law.

Ratio Decidendi: A reference under Section 8 can be made only when the suit dispute falls within the arbitration agreement, and where a later compromise supersedes the earlier contract or serious allegations of fraud require civil adjudication, the civil court may retain jurisdiction.

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