IMPORTANT POINT
Merely because the contract has come to an end by its termination due to breach, arbitration clause does not get perished nor rendered inoperative; rather it survives for resolution of disputes arising “in respect of” or “with regard to” or “under” the contract.

Headnote:Arbitration and Conciliation Act,1996 –- Arbitration agreement -– Whether survives for the purpose of resolution of disputes arising under or in connection with the contract even if its performance has come to an end on account of termination due to breach -– Held . Merely because the contract has come to an end by its termination due to breach, arbitration clause does not get perished nor rendered inoperative; rather it survives for resolution of disputes arising “in respect of” or “with regard to” or “under” the contract –- Instantly, clause 22 of the hire purchase agreement that provided for arbitration had been couched in widest possible terms as could well be imagined -– It embraces all disputes, differences, claims and questions between parties arising out of the said agreement or in any way relating thereto -– The hire purchase agreement having been admittedly entered into between the parties and the disputes and differences had since arisen between them, held that the arbitration clause 22 survived for the purpose of their resolution although the contract had come to an end on account of its termination -–Appeal allowed (Paras18,19).
       Facts of the Case :
        Issue in consideration in present case was whether the arbitration agreement survive for the purpose of resolution of disputes arising under or in connection with the contract even if its performance has come to an end on account of termination due to breach ?
       Findings of the Court :
        Merely because the contract has come to an end by its termination due to breach, arbitration clause does not get perished nor rendered inoperative; rather it survives for resolution of disputes arising “in respect of” or “with regard to” or “under” the contract – Instantly, clause 22 of the hire purchase agreement that provided for arbitration had been couched in widest possible terms as could well be imagined- It embraces all disputes, differences, claims and questions between theparties arising out of the said agreement or in any way relating thereto – The hire purchase agreement having been admittedly entered into between the parties and the disputes and differences had since arisen between them, held that the arbitration clause 22 survived for the purpose of their resolution although the contract had come to an end on account of its termination.
       Result : Appeal allowed

Judgement Key Points

Certainly. Here are the key points from the provided legal document:

The arbitration clause in a contract remains effective and does not perish when the contract is terminated due to breach. It continues to be operative for resolving disputes "in respect of," "with regard to," or "under" the contract (!) .
The scope of an arbitration clause is broad, covering disputes related to the validity, breach, or termination of the contract, provided the clause is drafted in wide terms (!) (!) .
Even if the contract is repudiated, frustrated, or terminated, the arbitration clause can still be invoked for disputes arising out of or in connection with the contract, especially if the clause is expressed in wide and general terms (!) (!) .
The arbitration clause is considered collateral and procedural, distinct from the substantive obligations of the contract, and can survive the termination or rescission of the main contract (!) (!) .
The survivability of the arbitration clause is supported by the principle that disputes concerning breaches or damages can be arbitrated even after the contract's performance has ended (!) (!) .
The arbitration agreement is separable from the main contract, and its validity is not necessarily dependent on the continued validity of the main contract (!) (!) .
When a dispute arises regarding the existence, validity, or breach of the contract, and the arbitration clause is broad, the dispute is typically within the scope of arbitration, regardless of the contract's termination (!) .
The Court is mandated to refer the parties to arbitration if the conditions under the applicable law are satisfied, including the existence of an arbitration agreement and compliance with procedural requirements (!) (!) .
The arbitration clause's broad language and legal principles support its continued applicability for resolving disputes even after the underlying contract has been terminated due to breach or other reasons (!) (!) .

Please let me know if you need further analysis or assistance.

JUDGEMENT

R.M. Lodha, J.—

1. Leave granted.

2. The core question that falls to be determined in this appeal by special leave is : does the arbitration agreement survive for the purpose of resolution of disputes arising under or in connection with the contract even if its performance has come to an end on account of termination due to breach ?

3. MAGMA Leasing Limited Public United Company (for short, ‘MAGMA’) is a financial institution engaged in the business of providing funds for purchase of plant and machinery and other assets by way of hire purchase. Smt. Potluri Madhavilata-respondent no. 1 (hereinafter referred to as ‘hirer) entered into an agreement of hire purchase with MAGMA for purchase of a motor vehicle (Bolero Camper-AP 16 TV 1263) on January 31, 2005. As per the terms of hire purchase agreement, the hirer was required to pay hire purchase price in 46 installments. It appears that the hirer committed default in payment of few installments and as a result thereof, MAGMA seized the said vehicle from the hirer on August 6, 2005. MEGMA also sent a notice to the hirer intimating her that hire purchase agreement has been terminated. Thereafter some correspondence seems to have ensued between the parties.

4. The hirer then filed a suit against MAGMA in the Court of Senior Civil Judge, Vijayawada seeking recovery of possession of the aforesaid vehicle and for restraining MAGMA from transferring the said vehicle.

5. MAGMA, upon receipt of notice of the aforesaid proceedings, made an application (I.A. No. 490 of 2006) before the trial court under Section 8 of the Arbitration and Conciliation Act, 1996 (for short , ‘Act, 1996’) read with Section 151 of the Code of Civil Procedure praying therein that the dispute raised in the suit be referred to an arbitrator and the proceedings in the suit be stayed.

6. The hirer contested the aforesaid application on the ground that the hire purchase agreement having been terminated, the arbitration agreement does not survive and the matter need not be referred to the arbitration.

7. The First Additional Senior Civil Judge, Vijayawada vide order dated December 4, 2006 dismissed the application made by MAGMA under Section 8 of the Act, 1996.

8. Not satisfied with the order of the trial court, MAGMA filed a civil revision petition before the High Court of Andhra Pradesh.

9. The Division Bench dismissed the revision petition on April 30, 2007 holding that upon termination of the hire purchase agreement, the arbitration agreement does not survive. The present appeal by special leave arises from this order.

10. Despite service, hirer has not chosen to appear before this court.

11. The hire purchase agreement contains the following clause for arbitration :

“22. Arbitration : All disputes, differences, claims and questions whatsoever arising out of this agreement between magma and/or its representatives and/or its assigns on the one hand and the Hirer/s and the Guarantor/s on the other hand touching and concerning these presents or anything herein contained or in any way relating to or arising from these presents shall be referred to a sole arbitrator to be appointed by Magma Leasing Limited. The Arbitrator so appointed shall formulate his own procedure and shall be entitled to dispense with filing of pleadings or taking of any evidence and shall be entitled to dispose off the proceedings in a summary manner. The Arbitrator shall have summary powers. The award of such arbitrator so appointed shall be final and binding on all the parties to this agreement. Such arbitration proceedings will be at Kolkata. The sole arbitrator shall pronounce the award as expeditiously as possible after entering on the reference or within such time as he may deem expedient. The pronouncement of the award by the arbitrator in a meeting of the parties fixed after the conclusion of the arbitration proceedings shall be deemed to be the publication of the award and shall be construed as the date of receipt of the award by

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2009 Supreme(SC) 1607

2009(6) Supreme 746SUPREME COURT OF INDIATarun Chatterjee and R. M. Lodha,JJ.The Branch Manager, M/s. Magma Leasing &Finance Limited & Anr. — AppellantsversusPotluri Madhavilata & Anr. — Respondents Civil Appeal No. 6399 of 2009(Arising out of SLP(C) No. 21323 of 2007)Decided on : 18-09-2009

IMPORTANT POINT Merely because the contract has come to an end by its termination due to breach, arbitration clause does not get perished nor rendered inoperative; rather it survives for resolution of disputes arising “in respect of” or “with regard to” or “under” the contract.

Cases Referred (3)

IMPORTANT POINT
Merely because the contract has come to an end by its termination due to breach, arbitration clause does not get perished nor rendered inoperative; rather it survives for resolution of disputes arising “in respect of” or “with regard to” or “under” the contract.