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2025 Supreme(Online)(TEL) 1926
HIGH COURT OF TELANGANA
T. VINOD KUMAR, PULLA KARTHIK, JJ
M/s. Cemcon Track Industries – Appellant
Versus
Union of India – Respondent
CMA/632/2024
The arbitration clause survives termination of a contract, and disputes arising from the contract must be referred to arbitration.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 8 - Interlocutory application dismissed by the lower court - Appellant contended that the respondents failed to place a purchase order within the stipulated time, leading to cancellation of the offer - The appellant argued that disputes should be referred to arbitration as per the Indian Railway Standard Conditions of Contract - The court found that the suit filed by the respondents was based on the contract terms and thus, the arbitration clause was applicable - The lower court erred in dismissing the application to refer the dispute to arbitration. (Paras 1, 4, 6, 17)
(B) Arbitration Agreement - The court emphasized that even if a contract is terminated, the arbitration clause survives, allowing for disputes to be resolved through arbitration. (Paras 15, 16)
Facts of the case:
The appellant is the defendant in a suit for recovery of Rs.88,55,711/- due to failure to supply goods as per an e-tender. The appellant claimed that the respondents did not place a purchase order within the required timeframe, leading to cancellation of the offer. (Paras 3, 4)
Findings of Court:
The court held that the dispute regarding recovery of the suit amount is arbitral and should be referred to arbitration as per the contract terms. (Paras 17, 18)
Issues: The main issues were whether the suit could proceed in civil court despite the arbitration clause and the applicability of the arbitration agreement post-termination of the contract. (Paras 6, 17)
Ratio Decidendi: The court ruled that the respondents' claim for recovery was based on the contract terms, making it subject to arbitration, and that the lower court erred in dismissing the application to refer the dispute to arbitration. (Paras 17, 18)
Result: Appeal allowed; the lower court's order set aside.
| Table of Content |
|---|
| 1. independent disputes (Para 4 , 5 , 6 , 7 , 8 , 9) |
| 2. recovery of amount due (Para 10 , 11 , 12) |
| 3. contract terms and arbitration (Para 13) |
| 4. arbitration clause survival (Para 14 , 15 , 16) |
| 5. dispute referred to arbitration (Para 17) |
| 6. impugned order set aside (Para 18 , 19) |
JUDGMENT:(per Hon’ble Sri Justice T.Vinod Kumar)
This Civil Miscellaneous Appeal is directed against the order dt.29.10.2024 in I.A.No.827 of 2022 in O.S.No.78 of 2021 on the file of the XII Additional Chief Judge, City Civil Court, Secunderabad, whereby the underlying interlocutory application filed by the appellant herein as the defendant in the suit filed by the respondents herein under Section 8 of the Arbitration and Conciliation Act, 1996 (for short, ‘the Act’) has been dismissed.
2. Heard learned counsel for the appellant and Sri M.Rama Krishna, learned counsel representing Sri Gadi Praveen Kumar, learned Deputy Solicitor General of India appearing for the respondents, and perused the record.
3. The appellant herein is the petitioner in the underlying interlocutory application and defendant in the suit filed by the respondents herein as plaintiffs for recovery of a sum of Rs.88,55,711/- being the increase in cost and the consequential loss on account of the failure of the appellant herein in making supplies, pursuant to e-tender issued by the respondents herein.
4. Appellant further contends that as the respondents have failed to place purchase order within 120 days from the date of validity of the offer made by it, the offer made by the appellant pursuant to the e-tender issued by the respondents stood cancelled and as such, the respondents cannot seek to enforce the covenants of contract or standard terms of contract forming part of e-tender.
5. It is the further case of the appellant that notwithstanding the termination/cancellation of the purchase order issued by the respondents, the respondents have now sought to recover the suit amount from the appellant herein on the ground that the appellant failed to make supplies in pursuance of the purchase order placed on it.
6. It is also the contention of the appellant that since the relationship between the parties is governed by the Indian Railway Standard Conditions of Contract, forming part of the e-tender issued by the respondents, the respondents cannot maintain the suit before the Civil Court for recovery of the aforesaid sum and ought to have referred the dispute for its resolution by arbitration as provided in Clause 2900 of the Indian Railway Standard Conditions of Contract, providing for resolution of disputes by arbitration.
7. Appellant further contends that on the respondents filing the aforesaid suit, it had filed the underlying interlocutory application before the Court below praying for dismissal of the suit and to refer the partiesto arbitration in the light of the arbitration agreement contained in Clause
8. It is the contention of the appellant that the suit filed by the respondents herein is in relation to recovery of increased cost and consequential loss suffered by it, on account of the purchases made by it, by invoking risk purchase clause of agreement and reference to arbitration at an earlier point of time was in relation to the penalty imposed and thus, both disputes are independent of one another and the Court below had erred in dismissing the underlying interlocutory application filed under Section 8 of the Act.
9. In support of his contentions, appellant placed reliance on various decisions of the Hon’ble Supreme Court in Hindustan Petroleum Corporation Limited v/s. Pinkcity Midway Petroleums , [(2003) 6 SCC 503] ; Branch Manager, Magma Leasing and
