Sections 40 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
An arbitration agreement does not come to an end because one party dies, and an insolvent's arbitration term is dealt with in section 41. Section 40 keeps the agreement alive against or for the legal representative and keeps the arbitrator's mandate intact; section 41 deals with the receiver of an insolvent. This article reads both as per the India Code consolidated text consulted; if a live dispute is affected, a short legal consultation can sort out who now stands in the party's place.
Under section 40, an arbitration agreement is not discharged by the death of any party, as regards the deceased or any other party, and can be enforced by or against the legal representative. The mandate of an arbitrator is not ended by the death of the party who appointed him. Under section 41, an arbitration term in a contract with an insolvent is enforceable by or against the receiver if the receiver adopts the contract; otherwise the other party or the receiver may apply to the judicial authority in the insolvency proceedings for an order sending the matter to arbitration.
Section 40: death of a party
Sub-section (1): the agreement continues
"An arbitration agreement shall not be discharged by the death of any party thereto either as respects the deceased or as respects any other party, but shall in such event been forceable by or against the legal representative of the deceased." The printed words "been forceable" read like "be enforceable"; the text consulted prints them as they stand, and the sense is plainly that the agreement is enforceable by or against the legal representative.
Who is the "legal representative"? Section 2(1)(g) defines the term for Part I: a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased, and, where a party acts in a representative character, the person on whom the estate devolves on the death of the party so acting. For the other definitions in Part I, see our article on section 2.
Sub-section (2): the arbitrator's mandate
"The mandate of an arbitrator shall not be terminated by the death of any party by whom he was appointed." The tribunal continues. The death of a party is therefore not, by itself, a ground for the arbitrator to step down or for the proceedings to stop.
Sub-section (3): rights that die with a person
"Nothing in this section shall affect the operation of any law by virtue of which any right of action is extinguished by the death of a person." Section 40 keeps the arbitration agreement alive, but it does not revive a claim that some other law says ends with the person. The text consulted names no such law; this article names none either.
Section 40(1) and statutory arbitrations
Section 2(4) says that Part I, "except sub-section (1) of section 40, sections 41 and 43", applies to every arbitration under any other enactment as if the arbitration were pursuant to an arbitration agreement. So section 40(1) and section 41 are kept out of statutory arbitrations by that sub-section; sub-sections (2) and (3) of section 40 are not named in the exception. For the MSME route, see our posts on section 18 of the MSMED Act, 2006.
Section 41: insolvency
Sub-section (1): the receiver adopts the contract
Where a contract to which an insolvent is a party provides that "any dispute arising there out or in connection therewith shall be submitted to arbitration", the term shall, "if the receiver adopts the contract, be enforceable by or against him so far as it relates to any such dispute". The printed words "arising there out" are as in the text consulted. The condition is the receiver's adoption of the contract. The section does not say how a receiver adopts a contract; the text consulted is silent on that and this article takes nothing from outside it.
Sub-section (2): where sub-section (1) does not apply
Sub-section (2) covers a person adjudged an insolvent who, before the commencement of the insolvency proceedings, had become a party to an arbitration agreement, and where "any matter to which the agreement applies is required to be determined in connection with, or for the purposes of, the insolvency proceedings". If the case is one to which sub-section (1) does not apply, "any other party or the receiver may apply to the judicial authority having jurisdiction in the insolvency proceedings" for an order directing that the matter be submitted to arbitration in accordance with the arbitration agreement. The judicial authority "may, if it is of opinion that, having regard to all the circumstances of the case, the matter ought to be determined by arbitration, make an order accordingly".
Sub-section (3): who is a "receiver"
"The expression 'receiver' includes an Official Assignee." The section does not define "insolvent" or the insolvency proceedings; the text consulted does not carry that law, and this article states no insolvency law from outside the Act.
Side by side
| Question | Section 40 (death) | Section 41 (insolvency) |
|---|---|---|
| Does the arbitration agreement survive? | Yes, it is not discharged by the death | Yes, if the receiver adopts the contract (sub-section (1)) |
| Who enforces or is bound? | The legal representative of the deceased | The receiver, "so far as it relates to any such dispute" |
| Where the agreement is not adopted | Not applicable; the agreement continues as stated | Other party or receiver may apply to the judicial authority in the insolvency proceedings (sub-section (2)) |
| Effect on the arbitrator | Mandate not ended by the death of the appointing party | The section is silent |
| Kept out of statutory arbitrations by s.2(4)? | Sub-section (1) only | Whole section |
An example
Meridian Fabrics Pvt Ltd has a supply contract with a sole proprietor, Mr Rao, with an arbitration clause. A dispute over unpaid invoices has been referred to a sole arbitrator when Mr Rao dies. Under section 40(1), the agreement is not discharged; Meridian's claim can proceed against Mr Rao's legal representative, as defined in section 2(1)(g). Under section 40(2), the arbitrator's mandate is not terminated. Section 40(3) is the caution: if some other law says a particular right of action is extinguished by death, section 40 does not save it.
In a different dispute, a distributor of Meridian is adjudged an insolvent, and its supply contract has an arbitration term. If the receiver adopts the contract, section 41(1) makes the term enforceable by or against the receiver for disputes under it. If it is a case to which sub-section (1) does not apply, Meridian or the receiver may apply under section 41(2) to the judicial authority in the insolvency proceedings.
Practical points
- Name the right person. After a death, check who is the legal representative under section 2(1)(g) before filing or serving anything.
- Keep the arbitration agreement in the file. Both sections work off the agreement; our guide on arbitration clause drafting shows what a clean clause looks like.
- Do not assume other law. Section 40(3) preserves other laws on the extinction of rights; section 41 says nothing about time, notice or any insolvency procedure.
Need help when a party has died or become insolvent?
When a counterparty dies or is adjudged an insolvent mid-dispute, the practical questions are who now stands in the party's shoes and whether the arbitration can go on. Our legal consultation service can review the agreement and the record with you.
Key takeaways
- Death of a party does not discharge the arbitration agreement; it is enforceable by or against the legal representative.
- The arbitrator's mandate is not terminated by the death of the party who appointed him.
- Section 40 does not revive a right of action that another law extinguishes on death.
- An insolvent's arbitration term is enforceable by or against the receiver if the receiver adopts the contract.
- Otherwise the other party or the receiver may apply to the judicial authority in the insolvency proceedings; "receiver" includes an Official Assignee.
Read next
- Section 42: jurisdiction of the Court over later applications
- Sections 38–39: deposits and lien on the award
- Section 43: the Limitation Act applies to arbitrations
- Section 2: definitions and scope of Part I
Disclaimer: Based on the India Code consolidated text of the Arbitration and Conciliation Act, 1996, whose footnotes show amendments up to Act 3 of 2021 and a latest date of 12 October 2023, as consulted on 2 October 2026. Rules, regulations and notifications under the Act, later amendments and the commencement of the Mediation Act, 2023 should be checked. This article is general information, not legal advice; check the official text before acting.