IMPORTANT POINT
Clause 19 of the agreement could be invoked to refer the matter to arbitration where contract is terminated by notice.

JUDGMENT

Hansaria, J.-Special leave granted.

2. The appellant entered into an agreement with respondent No. 2 (which was subsequently amalgamated with the first respondent and became one of its division) on 13.8.1982 whereunder the respondent was to undertake filling of vials with medicines. The agreement was for the period from 1.4.1982 to 31.3.1984, subject to renewal by mutual agreement thereafter. It was also subject to termination by either party by giving three months notice to the other. Such a notice was given by the appellant on 28.12.1983 stating that the agreement would stand terminated with effect from 1.4.1984. During the subsistence of the agreement, the respondent undertook some work which, according to the appellant, was not in terms of the agreement. After the defect came to thhe notice of the appellant, which was sometime in the second half of 1985, it called upon the respondent, by its letter of 10.11.1987, to reimburse the loss which was stated to be a sum of Rs. 161.82 lacs. The respondent disputed the claim by its letter 27.11.1987, whereupon by invoking clause 19 of the agreement, the appellant referred the dispute to respondent No. 3 who had been appointed by the Chairman and Managing Director of the appellant in exercise of power conferred by clause 19. The appointment was challenged by respondent No. 2 by filing an application under Section 33 of the Arbitration Act, 1940, read with certain provisions of the Code of Civil Procedure, before the Court of Sub-ordinate Judge, Coimbatore, stating, inter alia, that clause 19 of the agreement could not be invoked to refer the matter to arbitration. In any case clause 19 did not permit resolution of the dispute of the type raised by the appellant. The Sub-ordinate Judge decided main issues in favour of the respondent, which order was challenged by the appellant in the High Court of Judicature at Madras. The High Court upheld the order of Sub-ordinate Judge. Hence this appeal under Article 136 of the Constitution.

3. The following questions arise for determination on the basis of the pleadings of the parties :

(i) Whether the arbitration clause remained in existence by 1988 when the arbitrator was appointed on the face of termination of the agreement by the appellant with effect from 1.4.1984 ?

(ii) Whether the arbitration clause, if held to be operative, could be invoked for the purpose at hand ?

(iii) Whethher the Court of Sub-ordinate Judge at Coimbatore had jurisdiction to entertain the application under Section 33 of the Arbitration Act ?

Apart from the above, the first two respondents have raised the question of limitation also in these proceedings.

4. We propose to express our views on the four questions in the order noted by us.

5. Whether the arbitration clause remained in existence by 1988 when the arbitrator was appointed on the face of  termination of the agreement by the appellant with effect from 1.4.1984 ?

This is the real bone of the contention between the parties. Shri Desai, duly assisted by Ms. Indu Malhotra, strenuously urged that as the appellant itself had terminated the agreement with effect from 1.4.1984, the arbitration clause, which is a part of the agreement, had ceased to be operative after 1.4.1984. This contention is seriously disputed by the learned Attorney General appearing for the appellant.

6. To decide this dispute between the parties, it would be enough to note clauses 17 and 19 of the agreement which read as below:

"17. The agreement will be for the period from 1.4.1982 to 31.3.1984 subject to renewal by mutual agreement thereafter. The agreement is subject to termination by either party by giving three months notice to other party.

19. Any dispute regarding the interpretation or application of this agreement and any difference about the quality of the material shall be referred to an arbitrator appointed by the Chairman and Managing Director of IDPL, whose decision