Section 40 of ACA : Section 40: Arbitration Agreement Not To Be Discharged By Death Of Party Thereto

Explanation using Example

Imagine Sarah and Mike entered into a business contract which included an arbitration agreement to resolve any future disputes. Unfortunately, Sarah passes away before a dispute arises. Despite Sarah's death, under Section 40(1) of The Arbitration and Conciliation Act, 1996, the arbitration agreement remains valid. Thus, if a dispute arises, Mike can still enforce the arbitration agreement against Sarah's estate, represented by her legal heirs or executors.

Similarly, if an arbitrator was appointed by Sarah before her passing, Section 40(2) ensures that the arbitrator's mandate continues. Sarah's death does not terminate the arbitrator's role in resolving the dispute between Mike and Sarah's estate.

However, Section 40(3) clarifies that if the specific dispute is of such a nature that Sarah's death extinguishes the right to pursue it (say, a personal claim that cannot be transferred to her heirs), then the arbitration agreement cannot be used to pursue that claim posthumously.