The arbitration agreement survives termination of the underlying contract, and the court must refer parties to arbitration if a valid agreement exists.

JUDGMENT :

SOMASEKHAR SUNDARESAN, J.

Context and Factual Background:

1. This is an Appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (“the Act”), challenging an order dated October 21, 2024 (“Impugned Order”) that rejected an Application of the Appellant filed under Section 8 of the Act before Learned Civil Judge, Senior Division, Kalyan.

2. The Respondent, M/s. Vijay Enterprises (“Vijay”) entered into a Development Agreement dated April 30, 2004 (“Development Agreement”) with the ‘Dhone Family’ to develop the suit property belonging to the latter. The Appellant, M/s. Sab Developers (“Sab”) entered into an agreement dated August 23, 2005 with Vijay, to develop that property (“Subject Agreement”).

3. It is common ground that the Subject Agreement has an arbitration agreement at Clause 23 (page 45). Accordingly, the parties have agreed that all disputes and differences between them in respect of any of the terms and conditions of the Subject Agreement or in respect of interpretation of any provision in that agreement or in respect of any other matter, cause or thing even if not contained therein or otherwise not provided for or relating to that agreement shall be resolved by reference to arbitration.

4. Vijay filed Special Civil Suit No. 188 of 2018 (“Suit 188”) before the Learned Civil Judge on June 20, 2018 in relation to disputes and differences with Sab. An Application under Section 8 was filed by Sab, on October 23, 2018. At the time Suit 188 was instituted, the plaint entailed the Kalyan Dombivli Municipal Corporation (“KDMC”) as Defendant No.2. However, a plain reading of the reliefs sought originally in Suit 188 would indicate that they were primarily for rescission and cancellation of the Subject Agreement and to handover vacant and physical possession of the suit land to Vijay.

5. The documentation executed between the parties, including the Subject Agreement and power of attorney, both dated August 23, 2005, were sought to be declared as illegal and void, and various other connected and consequential reliefs were sought. Purely as an interlocutory measure, in prayer clauses (i) and (j), relief was sought against KDMC seeking that they be restrained permanently from taking any action against the suit property during the subsistence of the disputes between the parties.

6. The plaint in Suit 188 came to be amended much later on August 12, 2024 to seek additional prayers against KDMC. The Section 8 Application had not been adjudicated until then.

Impugned Order:

7. Eventually, when the Section 8 Application was heard and dealt with by the Learned Civil Judge it was ruled in the Impugned Order that that Sab could not postpone the payment of remaining consideration for an indefinite period. Vijay was held to be entitled to terminate the Subject Agreement unilaterally in view of Section 27 of the SPECIFIC RELIEF ACT , 1963. Therefore, since the Subject Agreement was held to be validly and finally rescinded, no arbitration agreement would subsist for referral of disputes under the Subject Agreement to arbitration.

8. The Impugned Order also holds that the reliefs sought against KDMC would not have been amenable to arbitration. Such reliefs being in rem, would be beyond the scope of arbitration, and therefore it was held that arbitration could not be the avenue to restrain KDMC from taking action against the suit property on account of non- payment and other violations as alleged by KDMC. With the aforesaid observations, the Learned Civil Judge was pleased to reject the Application filed under Section 8 of the Act and