Termination of agreement does not automatically terminate the arbitration clause contained in such agreement

Karnataka High Court: A Single judge bench comprising of Dinesh Maheshwari, J. while hearing a civil writ petition for appointment of arbitrator noted that even after termination of an agreement entered into between the parties, the arbitration agreement survives.

Brief background of the case was that the respondent had entered into a MoU with one Sandip Foundation. After a certain period of time, Sandip Foundation passed a resolution under which all its activities under the said MoU were transferred to the petitioner institution which specialized in developments and distribution of course material for various technical and non-technical courses. Respondent – University issued a notification withdrawing certain courses from the academic collaborative institutions and despite assuring that the students already admitted would not be affected and could continue their courses, it failed to conduct examinations. This led to the petitioner issuing a notice calling upon the respondent to commence arbitration proceedings in terms of the MoU. The respondent replied by terminating the MoU and did not respond to petitioner’s multiple requests and notices for arbitrating their dispute. The sole contention raised on behalf of the respondent was that since the MoU had been terminated, the arbitration clause contained therein did not survive. Hence, the petitioner was constrained to file the instant petition for appointment of a sole arbitrator to adjudicate their disputes.

The sole question posed before the court was as to whether there was an arbitration agreement between the parties. The court went through clauses of the MoU entered into between the parties and noted that clause 14 of the MoU clearly stipulated that disputes between parties be referred to arbitration. It was observed that despite issuing a notice to the respondent, it did not take steps for appointment of an arbitrator. Further, the court rejected the argument that the termination of MoU had the effect of terminating arbitration clause as well.

On the aforesaid holding and observations, the writ petition was disposed of by giving directions for appointment of an arbitrator. [SCOPE v Karnataka State Open University,2018 SCC OnLine Kar 1568, decided on 03-10-2018]

Join the discussion

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.