Arbitration clause incorporated in the agreement subsists even after termination of agreement.

This revision is filed against the order of dismissal of the application under Section 8 read with Section 5 of the Arbitration and Conciliation Act, 1996, filed by the petitioner herein.

2. The petitioner and the respondent entered into a loan agreement No. 21602081 dated 30-09-2001 thereby the respondent availed financial assistance from the petitioner to the extent of Rs.4,93,000/- for purchase of Ford icon car. The respondent herein agreed to pay the said sum in 36 monthly instalments commencing from 03-11-2001 to 03-10-2004. Clause 29 of the said agreement contemplates arbitration clause. The petitioner herein has issued loan recall notice on 12-01-2004 invoking clause 14 of the agreement as the respondent committed default in repaying the monthly instalments and as on 29-02-2004, the respondent was liable to pay a sum of Rs.2,68,062/-. The petitioner has also issued a telegram on 14-01-2004 to the respondent terminating the said loan agreement. The respondent has filed the suit O.S. No. 854 of 2004 before VIII Assistant City Civil Court, Madras for permanent injunction restraining the petitioner from in any manner re-possessing the vehicle. In the said suit, the petitioner has filed I.A. No. 3259 of 2004 for injunction, and order of status-quo was granted on 26-02-2004.

3. The petitioner herein has filed I.A. No. 3762 of 2004 in the said suit under Section 8A read with Section 5 of the Arbitration and Conciliation Act, 1996. The said application was dismissed on the ground that clause 29 of the agreement contemplates that disputes and differences to be settled by the Arbitrators nominated by the petitioner and the proceedings to be held at Mumbai; whereas clause 30 of the agreement confers jurisdiction of the Courts at Chennai; that the loan agreement was terminated, hence the arbitration clause contain in the arbitration no longer exists and the Civil Court is vested with the jurisdiction to entertain the suit and that the respondent has paid 26 instalments, only 10 instalments remains to be paid.

4. The learned counsel for the revision petitioner submits that when agreement contains arbitration clause, it is mandatory on the part of the civil court to refer the matter to arbitrator; that the findings of the court below that clause 29 is contradictory to clause 30 is unsustainable; clause 29 stipulates the venue of arbitration at Mumbai, whereas clause 30 confers jurisdiction on the Courts at chennai to decide the dispute arising out of the agreement, hence they are not contradictory; that the court below erred in holding that once agreement is rescinded, the arbitration clause also no longer exists; that the arbitration clause in an agreement is an agreement by itself and the same shall not be deemed to have been terminated by reason of termination of agreement, when an agreement containing arbitration clause is terminated, the parties to the agreement have to work out their remedy only by way of arbitration under the terms of the agreement and not otherwise and prayed for setting aside the order passed by the court below.

5. In support of his contentions, the learned counsel for the petitioner relied on the below mentioned decisions:-

i) (Chairman and Managing Director, N.T.P.C. Ltd vs. M/s. Reshmi Constructions, Builders & Contractors) 2004 (1) C.T.C. 445 wherein the Honourable Supreme Court held in Paragraph No. 27, 28, 29 and 36 as follows:-

"27. Even when rights and obligations of the parties are worked out the contract does not come to an end inter alia for the purpose of determination of the disputes arising thereunder, and, thus, the arbitration agreement can be invoked. Although it may not be strictly in place but we cannot shut our eyes to the ground reality that in the cases where a contractor has made huge investment, he cannot afford not to take from the employment the amount under the bills, for various reasons which may include discharge of his liability towards the banks, financial institutions an