[Landmark Judgement] Meenakshi Solar Power v. Abhyudaya Green Economic Zones 2022

Landmark Judgment Law Insider (1)

Published on: 13 December 2022 at 16:18 IST

Court: Supreme Court of India

Citation: Meenakshi Solar Power v. Abhyudaya Green Economic Zones 2022

Honourable Supreme Court of India has held that even if the performance of the contract has come to an end, the contract can still be in existence for certain purposes in respect of disputes arising under it or in connection with it.

Hence, such matters are to be referred to the Arbitrator for proper adjudication.

18. It would be also useful to refer to another decision of this Court in Damodar Valley Corporation v. K.K. Kar wherein it has been observed as under:

(1) an arbitration clause is a collateral term of a contract as distinguished from its substantive terms; but nonetheless it is an integral part of it;

(2) however comprehensive the terms of an arbitration clause may be, the existence of the contract is a necessary condition for its operation; it perishes with the contract;

(3) the contract may be non est in the sense that it never came legally into existence or it was void ab initio;

(4) though the contract was validly executed, the parties may put an end to it as if it had never existed and substitute a new contract for it solely governing their rights and liabilities thereunder;

(5) in the former case, if the original contract has no legal existence, the arbitration clause also cannot operate, for along with the original contract, it is also void; in the latter case, as the original contract is extinguished by the substituted one, the arbitration clause of the original contract perishes with it; and

(6) between the two falls many categories “of disputes in connection with a contract, such as the question of repudiation, frustration, breach, etc. In those cases, it is the performance of the contract that has come to an end, but the contract is still 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.

Drafted By Abhijit Mishra

Key Words: contract, Arbitrator and adjudication

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