survival of arbitration agreement on termination of contract

Supreme Court of India CIVIL APPEAL NO.6399 of 2009

Judge(s): Tarun Chatterjee,R. M. Lodha

Date of Judgment: 18 September, 2009

THE B. MANAGER,M/S. MAGMA LEASING &FIN. LTD. & ANR Versus POTLURI MADHAVILATA & ANR.

The core question that falls to be determined in this appeal by special leave is : does the arbitration agreement survive for the purpose of resolution of disputes arising under or in connection with the contract even if its performance has come to an end on account of termination due to breach ?

The hire purchase agreement having been admittedly entered into between the parties and the disputes and differences have since arisen between them, we hold, as it must be, that the arbitration clause 22 survives for the purpose of their resolution although the contract has come to an end on account of its termination.

The next question, an incidental one, that arises for consideration is whether the trial court must refer the parties to arbitration under Section 8 of the Act, 1996.

Section 8 is in the form of legislative command to the court and once the pre-requisite conditions as aforestated are satisfied, the court must refer the parties to arbitration. As a matter of fact, on fulfillment of conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration.