A settlement agreement that explicitly supersedes an original contract and lacks an arbitration clause is not subject to arbitration, reinforcing the principle of separability.

ORDER. :-

1. This Interim Application has been filed by the Defendant seeking to refer the suit to Arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 and accordingly dispose of Commercial Summary Suit No. 3 of 2025.

2. The background facts leading to the filing of this application has been stated in the Application as under:

2.1 The Applicant is a private limited company and statedly is operator/concessionaire of Mumbai Metro Line – 1 project, operating between Versova, Andheri and Ghatkopar in Mumbai. The Respondent is a company operating inter alia in the infrastructure and construction sector.

2.2 The Applicant appointed the Respondent as a contractor to execute various works in respect of the Mumbai Metro Line - 1 project (between Versova – Andheri - Ghatkopar). Thereafter parties entered into a contract agreement dated 16^th August 2010 (the “Contract”) which set out the terms and conditions between the parties. The Clause 19.7 of the said contract provided for reference to arbitration. The said clause is reproduced as under:

19. CLAIMS, DISPUTES, CONCILIATION AND ARBITRATION

19.1 … ……

19.7 If the efforts to resolve all or any of the disputes, differences or controversy through negotiation fail, then such disputes or differences, whatsoever arising between the Parties, arising out of or relating to construction, measuring, operation or effect of the Contract or the breach thereof shall be referred to arbitration in accordance with the following provisions:

(a) Matters to be arbitrated upon shall be referred to a sole arbitrator if the total value of the claim is upto Rupees ten (10) million and to a panel of three (3) arbitrators if total value of claims is more than Rs.10 million. The sole arbitrator shall be appointed mutually by the Parties and in case the Parties fail to agree on the sole arbitrator, then the sole arbitrator shall be appointed in accordance with the provisions of the Arbitration and Conciliation Act, 1996 . In the arbitration panel each Party shall nominate one (1) arbitrator each and the third arbitrator shall be chosen by the two (2) arbitrators nominated by the Parties. The arbitrator(s) shall be appointed within a period of thirty (30) days from the date of receipt of written notice/demand of appointment of arbitrator from either Party.

(b) The arbitration proceedings shall be held in Mumbai. The language of proceedings, documents and communication shall be English.

(c) The award of the sole arbitrator or the award by majority of three arbitrators as the case may be shall be binding on all Parties.”

2.3 It is submitted that during the course of the works, disputes arose regarding certain performance bank guarantees furnished by the Respondent under the Contract. In view of the aforesaid arbitration clause, the Respondent preferred an application under Section 9 of the Arbitration and Conciliation Act, 1996 (the “Arbitration Act”) whereby inter alia release of performance bank guarantees was sought.

2.4 During the pendency of the said application the parties entered into a Settlement Agreement dated 28^th March 2024 ( the “Settlement Agreement”) whereby the Applicant agreed to return the performance bank guarantees furnished by the Respondent and pay a sum of Rs.9,00,00,000 (Rupees Nine Crores Only) to the Respondent towards full and final settlement of the disputes between the parties.

2.5 It is submitted that the Applicant returned the performance bank guarantees to the Respondent as well as issued the final taking-over certificates. The Application under Section 9 of the Act was dispose