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TMI Blog1993 (11) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... h the appellant to supply certain quantities of coal at certain price but as he failed to do so in accordance with the terms of the contract, the appellant repudiated the contract, imposed certain penalties in accordance with the terms of the contract which he later waived and ultimately paid certain sums to the respondent which were due to him for the supply of coal. It is the case of the appellant that these payments including the return of the deposit amount finally settled the claims of the respondent. No doubt the respondent was asked to submit his bill along with a receipt stating that he, received the payment in full and final settlement of all payment and that there was. no other claim. But the respondent while submitting his bill did not give the receipt as desired. The amount of the bill was, however, paid, after receipt of which tile respondent claimed further sums from the appellant including, damages for repudiation of the contract. When the, appellant did-not agree to comply with the demands the respondent served a notice of his intention to refer the matter to the arbitration under the arbitration clause contained in the contract. By that notice he intimated the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to refer the dispute to arbitration under the following clause of the agreement "........if at any time any question, dispute or difference whatsoever shall arise between the Corporation and the successful tenderer upon or in relation to, or in connection with the contract, either party may forthwith give to the other, notice in writing of the existence of such question, dispute or difference, and the same, shall be referred to the adjudication of two arbitrators, one to be nominated by the Corporation and the other to be nominated by the successful tenderer and the award of the arbitrators shall be final and binding on the parties and the provisions. of Indian Arbitration Act, 1940, and of the Rules thereunder and any statutory modification thereof shall be deemed to apply to and be incorporated in this contract It appears to us that the question whether there has been a full and &A settlement of a claim under the contract is itself a dispute arising 'upon' or 'in relation to' or 'in connection with' the contract. These words are wide enough to cover the dispute sought to be referred. The respondent's contention is that the contract has been repudiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revious contract and substitute in its place a new contract or alter the original contract in such a way that it cannot subsist. In all these cases, since the entire contract is put an end to, the arbitration clause, which is a part of it, also perishes along with it. Section 62 of the Contract Act incorporates this principle when it provides that if the parties to a contract agree to substitute a new contract or to rescind or alter it, the original contract need not be performed. Where, therefore, the dispute between the parties is that the contract itself does not subsist either as a result of it's being substituted by a now contract or by rescission or alteration that dispute cannot be referred to the arbitration as the arbitration ,clause itself would perish if the averment is found to be valid. As the very jurisdiction of the arbitrator is dependent upon the existence of the arbitration clause under which he is appointed, the parties have no right to invoke a clause which perishes with the contract. In certain circumstances, it may be that there has been a terminal tion of the contract unilaterally and as a consequence the parties may agree to rescind the contract. In suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct between the parties, such a dispute, cannot be covered by an arbitration clause in the challenged contract. If there has never been a contract at all, there has never been as part of it an agreement to, arbitrate. The greater includes the less. Further, a claim to set aside a contract on such grounds as fraud, duress or essential error cannot be the subject-matter of a reference under an arbitration clause in the contract sought to be set aside. Again, an admittedly binding contract containing a general arbitration clause may stipulate that in certain events the contract shall come to an end. If a question arises whether the con- tract has for any such reason come to an end I can see no reason why the arbitrator should not decide that question. It is clear, too, that the parties to a contract may agree to bring it to an end to all intents and purposes and to treat it as if it had never existed. In such a case, if there be an arbitration clause in the contract, it perishes with the contract. If the parties substitute a new contract for the contract which they have abrogated the arbitration clause in the abrogated contract cannot be invoked for the determination of questions under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not a conditional one and after its execution the parties should work out their rights only under its terms. Sarkar, J., however, held that the award was valid and could not be set aside as the third settlement neither expressly put an end to the arbitration clause. nor, considered as an accord and satisfaction, did it have that effect. He observed that an arbitration clause stands apart from the rest of the contract in which it is contained. it does not impose on the one party an obligation in favour of the other; it only embodies an agreement that if any dispute arises with regard to any obligation which one party has undertaken to the other, such dispute shall be settled by arbitration. An accord and satisfaction which is concerned with the obligations araising from the contract, does not affect an arbitration clause containaed in it. It will be observed that while the decision rested on the interpretation of the settlement clause as to whether the original contracts were put an end to and in their place, new contracts were substituted with the result that the arbitration clause did not survive, the principle of law that where the parties put an end to the contract as if it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case([1942]. A. C. 356.) and observed at P. 519 : "An arbitration agreement, of course, is the creature of an agreement and what is created by agreement may be destroyed by agreement." Again at p. 521 he- said : "It is well settled that such a clause (arbitration clause) in a contract stands apart from the rest of the contract." It was, however, pointed out by him that an accord and satisfaction which secures a release from an obligation arising under a contract, is really, based on the existence of the contract instead of treating it as non-existent. The contract is not annihilated but the obligations under it cease to be enforceable. Therefore it is that when an action is brought for the appropriate remedy for non-performance of these obligations that an accord and satisfaction furnishes a good defence. The defence is not that the contract has come to an end but that its breach has been satisfied by accord and satisfaction and, therefore, the plaintiff in the action is not entitled to the usual remedy for the breach. In the circumstances; he thought that the arbitration clause did survive to settle the dispute as to whether there was or was not an accord and satisfaction. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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