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SYED JAFAR IMAM, A.K.SARKAR, K.SUBBA RAO
Union Of India – Appellant
Versus
Kishorilal Gupta And Brothers – Respondent
The court held that a breach of a substituted contract does not necessarily mean the original contract remains in effect. When a new, legally enforceable contract is substituted for an earlier one, the original contract is extinguished along with its arbitration clause. The breach of the original contract does not revive the rights or obligations under it, nor does it imply that the original arbitration clause remains operative. The court emphasized that the substituted contract becomes the sole governing agreement, and disputes arising from breaches are to be resolved under its terms. The arbitration clause in the original contract perishes with the contract itself, and the existence of a new contract signifies the termination of the old obligations, including any associated arbitration provisions (!) (!) (!) .
Judgement
SUBBA RAO, J. : This appeal by special leave raises the question of survival of an arbitration clause in a contract after the said contract is superseded by a fresh one. The respondent-firm, styled as "Kishorilal Gupta and Brothers", entered into the following three contracts with the Governor-General-in-Council through the Director General of Industries and Supplies, hereinafter called the Government: (i) contract dated April 2, 1943, for the supply of 43,000 "Ladles Cook"; (ii) contract dated September 15, 1944; for the supply of 15,500 "Bath Ovals"; and (iii) contract dated September 22, 1944, for the supply of 1,00,000 "Kettles Camp" Each of the said contracts contained an arbitration clause, the material part of which was as follows :
"In the event of any question of dispute arising under these conditions or any special conditions of contract or in connection with this contract (except as to any matters the decision of which is specially provided for by these conditions) the same shall be referred to the award of an arbitrator to be nominated by the purchaser and an arbitrator to be nominated by the contractor ............."
Under the terms of the said three contracts,
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