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Judgment
Ramesh Ranganathan, CJ
This application is filed, under Section 11 (4) and (6) of the Arbitration and Conciliation Act, 1996 (for short the "1996 Act"), seeking appointment of an Arbitrator. The agreement entered into between the parties provides for settlement of disputes. Clause 8 of the said agreement reads thus:
"8. Settlement of Disputes
8.1 Amicable Settlement
The parties shall seek to resolve any dispute amicably by mutual consultation.
If either Party objects to any action or inaction of the other Party, the objecting Party may file a written Notice of Dispute to the other Party, providing in detail the basis of the dispute. The Party receiving the Notice of Dispute, will consider it and respond in writing within fourteen (14) days after receipt. If that Party fails to respond within fourteen (14) days, or the dispute cannot be amicably settled within fourteen (14) days following the response of that Party, Clause GCC 8.2 shall apply.
8.2 Dispute Resolution
Any dispute between the Parties, as to matters arising pursuant to this Contract, that cannot be settled amicably according to Clause GCC 8.1, shall be submitted by either Party for settlement proceedings, in accordance with the following provisions:
Arbitration
If the dispute of disagreement cannot be settled amicably pursuant to Clause GCC 8.1, or if, where the settlement proceedings under Clause GCC 8.2(a) are agreed, the dispute or disagreement has not been settled, such dispute or disagreement shall be finally settled under the rules of Arbitration, as applicable, by one or more arbitrators, appointed in accordance with the said Rules, and the proceedings shall be held in a neutral venue selected in accordance with these Rules of Arbitration. The award in any arbitration proceedings shall be final and binding upon the Parties and judgment thereon may be entered in any of competent jurisdiction on application of either party."
The existence of an arbitration clause in the agreement is not disputed by the respondents. The only contention, urged on their behalf by Mr. Pradeep Joshi, learned Standing Counsel, is that, since the entire agreement was terminated by proceedings dated 30.03.2016, the arbitration clause in the agreement would not survive after termination of the agreement in its entirety and, consequently, the applicant cannot invoke the jurisdiction of this Court under Section 11 of the Act seeking appointment of an Arbitrator.
It is well settled that unilateral termination of the agreement by one party would not obliterate the arbitration clause in the agreement. In Magma Leasing & Finance Ltd. Vs. Potluri Madhavilata :(2009) 10 SCC 103, the Supreme Court observed:
"The statement of law expounded by Viscount Simon, L.C. in Heyman : 1942 AC 356 as noticed above, in our view, equally applies to the situation where the contract is terminated by one party on account of the breach committed by the other particularly in a case where the clause is framed in wide and general terms.
Merely because the contract has come to an end by its termination due to breach, the arbitration clause does not get perished nor is rendered inoperative; rather it survives for resolution of disputes arising "in respect of" or "with regard to" or "under" the contract. This is in line with the earlier decisions of this Court, particularly as laid down in Kishorilal Gupta : AIR 1959 SC 1362."
(emphasis supplied)
Again in P. Manohar Reddy & Bros. Vs. Maharashtra Krishna Valley Development Corpn. : (2009) 2 SCC 494, the Supreme Court held that an arbitration clause was a part of the contract; it being a collateral term need not, in all situations, perish with the coming to an end of the contract; it may survive; and this concept of separability of the arbitration clause is now widely accepted.
This Court is satisfied, therefore, that unilateral termination of the agreement would not obliterate the arbitration clause which would, notwithstanding the unilateral termination, survive.
As an Arbitration agreement exists between the parties, both the learned counsel, appearing on behalf of the parties on either side, agree that Mr. Siddhartha Sah, Advocate of this Court, be appointed as an Arbitrator to resolve the disputes between the parties in this case.
The learned Arbitrator shall, in terms of Section 11(8) of the 1996 Act, furnish his disclosure in writing to this Court within 15 days from the date of receipt of a certified copy of this order. He shall, thereafter, fix his remuneration, and charges towards other expenses, in consultation with the parties to the dispute. He shall endeavour to complete the arbitral proceedings, and to pass an award with utmost expedition, preferably within six months from the date on which he enters upon a reference.
The Arbitration Application is, accordingly, disposed of.