IMPORTANT POINT
An arbitration clause in an agreement cannot survive if the agreement containing arbitration clause has been superseded/novated by a later agreement.

Judgment :-

K.S. Radhakrishnan, J.

Leave granted.

2. IMS Learning Resources Private Limited, the respondent herein, filed CS (OS) No.2316 of 2011 in the High Court of Delhi at New Delhi for a permanent injunction restraining infringement of a registered trademark, infringement of copyright, passing off of damages, rendition of accounts of profits and also for other consequential reliefs against the appellant herein. Appellant preferred IA No.18 of 2012 under Section 8, read with Section 5 -of the Arbitration and Conciliation Act, 1996 for rejecting the plaint and referring the dispute to arbitration and also for other consequential reliefs. Respondent-plaintiff raised objection to the said application stating that the suit is perfectly maintainable. The High Court rejected the application vide its order dated 16.04.2012 holding that that earlier agreements dated 01.04.2007 and 01.04.2010, which contained arbitration clause stood superseded by a new contract dated 01.02.2011 arrived at between the parties by mutual consent. Defendant aggrieved by the said order filed FAO (OS) No.290 of 2012 before the Division Bench of the Delhi High Court, which confirmed the order of the learned Single Judge and dismissed the appeal against which this appeal has been preferred by special leave.

3. Mr. Manu T. Ramachandran, learned counsel appearing for the appellant raised the following question of law:

“a) Whether an arbitration clause is a collateral term in the contract, which relates to resolution of disputes, and not performance and even if the performance of the contract comes to an end on account of repudiation, frustration of breach of contract, the arbitration agreement would survive for the purpose of resolution of disputes arising under or in connection with the contract?

b) Whether the impugned judgment is contrary to the law settled by this Hon’ble Court in Branch - Manager, /s Magma Leasing & Finance Limited and another v. Potluri Madhavilata and another (2009) 10 SCC 103 and National Agricultural Cooperative Marketing Federation India Ltd. V. Gains Trading Ltd. (2007) 5 SCC 692?

c) Whether the Hon’ble High Court is correct in holding that the law settled by this Hon’ble Court in The Branch Manager, M/s Magma Leasing & Finance Limited and another v. Potluri Madhavilata and another (2009) 10 SCC 103 and National Agricultural Cooperative Marketing Federation India Ltd. V. Gains Trading Ltd. (2007) 5 SCC 692 is applicable in case of unilateral termination of agreement by one of the parties and not in mutual termination for accord and satisfaction of the earlier contract?”

4. Learned counsel also submitted that arbitration clause is a collateral term in the contract, which relates to resolution of disputes and not performance and even if the performance of the contract comes to an end on account of repudiation, frustration of breach of contract, the arbitration agreement would survive for the purpose of resolution of disputes arising under or in connection with the contract. Learned counsel also submitted that the court has erroneously held that the case of the appellant is not a case involving the assertion by the respondent of accord and satisfaction in respect of earlier contracts, especially when the sole purpose of the Exit paper dated 01.02.2011 was to put an end to the contractual relationship between them under the -aforesaid earlier contracts. Apart from the decisions referred hereinbefore, reliance was also placed on the judgment of the U.S. Court in Nolde Bros., Inc. v. Bakery Workers 430 US 243.

5. Mr. Sai Krishna Rajgopal, learned counsel appearing for the respondent placing reliance on the detailed counter affidavit filed on behalf of the respondent submitted that the arbitration clause in the agreements dated 01.04.2007 and 01.04.2010 cannot be invoked since both the above-mentioned agreements were superseded and abrogated by the new agreement dated 01.02.2011. Learned counsel also submitted that in the new agreement it was mu