The main legal point established is that the original arbitral clause in a contract remains enforceable unless expressly modified or extinguished, and any limitation period that extinguishes rights under a contract is void under Section 28 of the Indian Contract Act, 1872.

ORDER :

1. Heard learned counsel for the rival parties.

2. The appellant-Grasim Industries Ltd. was engaged in the manufacture of rayon grade wood pulp, in the Kozhikode District, of the State of Kerala. The appellant company obtained certain grants from the Government of Kerala, for an exclusive right and licence to fell, cut and remove bamboos, from certain areas in the Nilambur valley, for the purpose of converting the same into rayon grade wood pulp and ancillary products. The first of such contractual agreements was executed on 03.05.1958. The same was followed by supplementary contractual agreements dated 06.08.1962, 10.07.1974, 16.11.1976 and 27.10.1988. In the first agreement dated 03.05.1958, clause 16 provided for settlement of disputes arising under the contract, through arbitration. The same read as under:

“If at any time hereafter either during the continuance or after the termination of the Agreement, any doubt, difference or dispute shall arise between the parties hereto touching or concerning their respective rights or privileges hereunder or otherwise arising out of these presents then the same shall be referred to the arbitration of three independent persons as arbitrators, one to be appointed by each party to the reference and the third, by both the parties thereto, and the unanimous decision of the said arbitrators or in the event of any difference of opinion amongst them the decision of the majority of them, shall be binding and conclusive on the parties to the reference and every such reference shall be deemed to be a reference to arbitration under the Indian Arbitration Act, 1940 and shall be regulated and conducted accordingly.”

3. The successor agreements, after the original agreement, postulated modifications in the terms of the contract. We are only concerned herein, with the supplementary agreement dated 27.10.1988, wherein clause 11 provided as under:

“11. Subject to the modifications mentioned above, the Principal Agreement and the First, Second and Third Supplemental Agreements shall remain in force and effect.”

4. The first question, that arises for consideration is, whether the arbitration clause incorporated in the original agreement, dated 03.05.1958, can be stated to be subsisting and enforceable between the parties, or whether the same stood extinguished? Having given our thoughtful consideration to the issue in hand, keeping in view clause 11 of the supplementary agreement dated 27.10.1988, we are satisfied, that the original arbitral clause, contained in the agreement dated 03.05.1958, subsisted and was never extinguished. We say so because, clause 11, extracted above, clearly expressed, that the supplementary agreements only altered the modifications provided for, and such of the terms and conditions, as were not modified “...shall remain in force and effect...” Since the arbitration clause 16, was admittedly never modified/altered, it would necessarily not be considered as having been extinguished. In the above view of the matter, we must also express our satisfaction, that the disputes between the parties, under their contractual obligations, were arbitrable.

5. In fact, we feel, that the State of Kerala was also aware of the rightful legal position, namely, the applicability of the arbitral clause provided for in the original contractual agreement, dated 03.05.1958. This conclusion of ours is based on the fact, that the State of Kerala, through its communication dated 24.11.2016, actually invoked clause 16 of the parent agreement, dated 03.05.1958, to appoint arbitrators in the matter arising between the same parties, under the same contractual obligation. A relevant extract of the aforesaid letter is reproduced hereunder:

“I am to invite your attention to the reference cited. As per Clause 16 of the Parent Agreement dated 03.05.1958, entered into between the Kerala Government and M/s. Grasim Industries Ltd. Government appointed Sri. Varghese IFS, Additional Principal Chief Conservator of For