IMPORTANT POINTS
Article 13(3)(a) has no relevance in deciding whether an agreement is void and is not enforceable in law.
An instruction is not law in terms of section 23, Contract Act.

JUDGMENT

A. K. Patnaik, J.-This is an appeal by way of special leave under Article 136 of the Constitution against the judgment dated 27.04.2006 of the Division Bench of the Andhra Pradesh High Court in Civil Miscellaneous Appeal No.322 of 2005 (for short `the impugned judgment').

2. The facts in brief are that in August, 1999, the appellant invited tenders for supply of fresh fruits for its troops for the period from 01.10.1999 to 30.09.2000 and respondent No.2 amongst others submitted tenders and the tender of respondent No.2 was accepted. The respondent No.2 started supply of fresh fruits on 01.10.1999 and stopped the supply on 06.06.2000. On 13.06.2000, the appellant issued a notice to respondent No.2 to show-cause why action should not be initiated for such non-supply of fresh fruits. The respondent No.2 submitted its reply dated 20.06.2000 saying that the prices of all variety of fruits had increased and that it was impossible on its part to perform the contract and that the appeals made by the respondent No.2 were not considered by the authorities. The appellant then rescinded the contract with respondent No.2 by letter dated 29.06.2000 and informed the respondent No.2 that its security deposit has been forfeited and that the appellant will recover the expenditures made by the appellant for purchase of fruits during the contract period.

3. As the contract provided for an arbitration clause, the dispute between the parties was referred to the arbitrator. The respondent No.2 made a claim of Rs.12,23,732/-before the arbitrator and the appellant made a claim of Rs.5,89,130.72 for purchase of fruits during the period 07.06.2000 to 30.09.2000 before the arbitrator. The arbitrator (respondent No.1) framed 4 Issues and answered the 4 Issues in his Award dated 06.06.2001 and awarded a sum of Rs.38,173/-towards prices of fresh fruits supplied by respondent No.2 to the appellant with interest at the rate of 18% per annum till payment and also directed the appellant to hand over the Fixed Deposit Certificates retained as security deposit to respondent No.2. The appellant filed O.P. No.1457 of 2001 under Section 34 of the Arbitration and Conciliation Act, 1996 (for short `the Act') for setting aside the Award dated 06.06.2001 in the City Civil Court, Hyderabad. The Third Additional Chief Judge, City Civil Court, Hyderabad, by his order dated 05.11.2004 did not find any patent illegality in the Award and dismissed the application of the appellant under Section 34 of the Act. Aggrieved, the appellant filed Civil Misc. Appeal No.322 of 2005 under Section 37 of the Act against the order dated 05.11.2004 of the Third Additional Chief Judge, City Civil Court, Hyderabad, but by the impugned judgment, the Division Bench of the High Court has dismissed the appeal.

4. Learned counsel for the appellant challenged the findings of the arbitrator on Issue No.4. He submitted that Issue No.4 framed by the arbitrator was whether the contract between the appellant and the respondent No.2 was legally enforceable and the arbitrator has held in the Award that the contract was void ab initio and was not enforceable. He referred to the reasons given by the arbitrator in the Award to show that this finding of the arbitrator on issue No.4 was contrary to law. Learned counsel for the appellant alternatively submitted that if it is held that the contract was void ab initio, then the arbitration clause which is part of the contract cannot be invoked. He cited the decision in National Insurance Company Limited v. Boghara Polyfab Private Limited [(2009) 1 SCC 267] in which this Court has held that where a contract is void ab initio and has no legal existence, the arbitration clause also cannot operate, for along with the original contract, it is also void. He submitted that on these two grounds the Award of the arbitrator should have been set aside and the application of the appellant under Section 34 of the Act should have been allowed.

5. Learned counsel for t