Judgement

SUBBA RAO, J. : This appeal by special leave raises the question of survival of an arbitration clause in a contract after the said contract is superseded by a fresh one. The respondent-firm, styled as "Kishorilal Gupta and Brothers", entered into the following three contracts with the Governor-General-in-Council through the Director General of Industries and Supplies, hereinafter called the Government: (i) contract dated April 2, 1943, for the supply of 43,000 "Ladles Cook"; (ii) contract dated September 15, 1944; for the supply of 15,500 "Bath Ovals"; and (iii) contract dated September 22, 1944, for the supply of 1,00,000 "Kettles Camp" Each of the said contracts contained an arbitration clause, the material part of which was as follows :

"In the event of any question of dispute arising under these conditions or any special conditions of contract or in connection with this contract (except as to any matters the decision of which is specially provided for by these conditions) the same shall be referred to the award of an arbitrator to be nominated by the purchaser and an arbitrator to be nominated by the contractor ............."

Under the terms of the said three contracts, the Government supplied certain raw-materials to the respondents and the latter also delivered some of the goods to the former. On May 21, 1945, the contract dated April 2, 1943, hereinafter called the first contract, was cancelled by the Government. The Government also demanded certain sums towards the price of the materials supplied by them to the respondents. On the same day, the Government cancelled the contract dated September 15, 1944, hereinafter called the second contract, and made a claim on the respondents for the price of the raw-materials supplied to them. The respondents made a counter-claim against the Government for compensation for breach of the contract. On March 9, 1946, the Government cancelled the contract dated September 22, 1944, hereinafter called the third contract. Under that contract there were mutual claims - by the Government for the raw-material supplied to the contractors and by the latter for compensation for breach of contract. The disputes under the three contracts were amicably settled. The outstanding disputes under the first and the second contracts were settled on September 6, 1948, and two separate documents were executed to evidence the said settlement. As the decision, to some extent, turns upon the comparative study of the recitals in the said documents of settlement, it will be convenient to read the material part of the recitals contained therein. The settlement in respect of the first contract contained the following recitals :

"(1) The contractor expressly agrees to pay the Government the sum of Rs. 3, 164-8 as.only on this contract.

(2) The contract or payment of the amount mentioned in clause (1) shall stand finally determined."

The recitals in the settlement of the second contract are as follows:

"(1) The contractor expressly agrees to pay to the Government the sum of Rs. 36,276. If D. G. I and S has recovered any amount under the contract out of the sum due credit will be given to the contractor.

(2) The contract stands finally determined and no party will have any further claim against the other."

One prominent difference in the phraseology used in the two settlements may be noticed at this stage. While under the settlement of the first contract, the contract should stand finally determined only on payment of the amount agreed to be paid to the Government by the contractor, under the settlement of the second contract, the contract stood finally determined on the date of the settlement itself. The third contract was settled on February 22, 1949, and the material part of the recitals therein is as follows:

"1. The firm will pay a sum of Rs. 45,000 in full and final settlement of the amount due to the Government in respect of raw materials received against the contract and their claims for compensation for canc