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TMI Blog1966 (4) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... lied under the previous contracts. The suit is for the recovery of damages for breach of the contract dated 26-9-1957. The contention of the defendant is that on 28-5-1957 the parties had entered into two contracts under which the defendant agreed to supply cloth to the plaintiff. Both the contracts contained an arbitration Clause (clause 21) to the following effect:-- All disputes and questions whatsoever which shall arise between the parties hereto out of or in connection with this agreement or as to the construction or application thereof or the respective rights and obligations of the parties hereunder or as to any clause or things herein contained, or any amount or valuation to be made hereunder or as to any other matter in any way relating to these presents, shall be referred to arbitration in accordance with the rules of the Millowners' Association, Bombay, for the time being in force regulating arbitration with respect to piece goods.' The defendant denies that the said contracts were replaced by a new contract. He has explained that all that took place was to alter the time and mode of delivery leaving the original contracts intact in all other respects. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It follows, therefore, that fundamental to the remand order made by the Division Bench was the finding that the two original contracts containing the arbitration clause were valid. It was on this basis that the remand order directing the lower Court to decide the question of substitution of the old contracts by a new one was made. The decision that the two contracts were valid being thus implied in the remand order, it is not now open to the plaintiff on the principle of res judicata to raise any question as to the validity of the original contracts containing the arbitration clause. The trial Court in its order dated 30-1-1964 found that it could not be held that the plaintiff ever agreed to the arbitration clause printed in small type on the back of the earlier contracts and that there was a clear understanding between the parties that the printed terms on the back of this contract shall be ignored. It, therefore, held that in the previous contracts also there was no arbitration clause for dealing with the disputes which arose between the parties. It further found that on 26-9-1957 the old contracts were substituted completely by a new contract, that the previous contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in default in satisfaction of the existing cause of action and it was so done in this case. He very strongly relied on the last term of the contract dated 26-9-1957 which reads as follows: Further, it is absolutely agreed that you will fulfil this agreement as stated above and shall have no claim or any other objection whatsoever with regard to the outstanding contracts till date. In our opinion, the learned trial Judge went beyond the scope of enquiry and was in error in holding that the earlier contracts did not contain any arbitration clause. In doing so, the Additional District Judge completely disregarded the order made by the learned Chief Justice in civil revision No. 422 of 1962 where it was clearly pointed out that the previous decision of the Division Bench dated 14-12-1960 implied that the two earlier contracts were valid and it was not open to the plaintiff on the principle of res judicata to raise any question as to the validity of the original contracts containing the arbitration clause. The learned counsel for the respondent very fairly argued the case before us on the basis that the earlier contracts contained a valid arbitration clause. The only point, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in existence for certain purposes in respect of disputes arising under it or in connection with it. As the contract subsists for certain purposes the arbitration clause operates in respect of these purposes. It cannot be disputed that the arbitration clause is distinct from the other substantive clauses in the contract. Total breach of the substantive stipulations, even when it is accepted by the other party, does not abrogate the arbitration clause, and even the party in default may invoke that clause, but the parties are not bound to have recourse to arbitration. They may settle the disputes directly and agree not to invoke the arbitration clause for that purpose. The arbitration clause ceases to exist with reference to the disputes which are thus settled. They may also enter into a substituted agreement in complete supersession of the original contract and thereby abrogate the contract and the arbitration clause contained in it (see AIR 1953 Cal. 642 and Heyman v. Darwins Ltd., 1942 AC 356 at P. 377). This is also well settled that mere alterations or modifications of the terms of a contract do not amount to its rescission. The modifications are read into and become part an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving rise to new rights and obligations independently of the old contract. It was held that the disputes under the subsequent arrangement could not be dealt with under the arbitration clause of the first contract. In the subsequent arrangement there was no arbitration clause. It was also held in that case that the arbitration clause in the first contract was not broad enough to cover the disputes which arose under the subsequent arrangement. The question of the suit being stayed or not will have to be judged on the aforesaid principles. The terms of the contract made between the parties on 26-9-1957 have been reduced to writing. Under Section 92 of the Evidence Act, no evidence of any oral agreement or statement can be admitted as between the parties to the contract for the purpose of contradicting, varying, adding to, or subtracting from its terms. The parties are clearly bound by the recorded terms. The rate specified for 28 bales of grey coarse patka cloth in the contract dated 26-5-1957 is different from the rate specified for the supply of the bales of this cloth according to the subsequent contract. In the earlier contracts the rate was ₹ 1/12/6 besides excise d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier contracts and consequently it should be held that those contracts were not abrogated. For considering this argument, it would be necessary to refer to the provisions of sections 62 and 63 of the Contract Act. These provisions are as follows: Section 62: If the parties to a contract agree to substitute a new contract for them or to rescind or to alter it the original contract need not be performed. Section 63: Every promisee may dispense with or remit whole or any part of the performance of the promise made to him or may extend the time for such performance or may accept, instead of it, any satisfaction which he thinks fit. Section 62 requires an agreement for rescission. The necessity of an agreement necessarily implies that there should be consideration. Under Section 63, for dispensing with or remitting whole or any part of the performance of the promise made to a promisee, it is not necessary that consideration should be there. The promisee may before breach gratuitously release the promisor from the obligation to perform the promise (see Jitendra Chandra v. S.N. Banerjee, AIR 1943 Cal. 181 and AIR 1953 Cal. 642). It is a question of construction in each case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be worked out on the basis of the substituted agreement and not on the original contract. The previous disputes about the earlier contracts were settled by the parties on 26-9-1957 by entering into a new contract. We have already held that the words used in the document dated 26-9-1957 are wide enough to indicate that the parties intended to wipe out the pre-existing claims once for all in exchange of the mutual promises made by the parties when they made the subsequent contract. There is nothing in the subsequent contract which can be read so as to revive the old rights and obligations between the parties. In our opinion, there was accord and satisfaction by substituted agreement between the parties and this discharged and extinguished the original contracts between them including the arbitration clause contained in the original contracts. The disputed claims which could have been enforced by law formed good consideration to sustain the agreement made between the parties on 26-9-1957. Forbearance to sue is a good consideration according to the definition of that term in Clause 2(d) of the Contract Act. Shri Sen vehemently contended that the arbitration clause in agreement is d ..... 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