Arbitration clause survives contract termination; foreign venue does not exclude Section 11 where the Indian Act governs procedure.

An arbitration clause is treated as a collateral and independent agreement on dispute resolution, so it ordinarily survives repudiation, frustration, breach, or mutual termination of the underlying contract and remains enforceable for disputes arising out of that contract. Where the clause directs arbitration in Hong Kong but also states that proceedings are to be conducted under the Arbitration and Conciliation Act, 1996, the foreign venue does not by itself displace the Indian statute. Section 11 therefore remains applicable, and the appointment process is not governed by Hong Kong law.

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Issues: (i) Whether an arbitration clause survives the abrogation or termination of the underlying contract; (ii) Whether Section 11 applies to an arbitration to be held outside India and whether the contractual stipulation required the arbitration to be governed by Hong Kong law rather than the Arbitration and Conciliation Act, 1996.

Issue (i): Whether an arbitration clause survives the abrogation or termination of the underlying contract.

Analysis: An arbitration clause is a collateral and independent term concerned with dispute resolution, not performance of the substantive contract. Even if the underlying contract comes to an end by repudiation, frustration, breach, or mutual termination, the arbitration agreement ordinarily survives for deciding disputes arising out of or in connection with that contract. This position is also reflected in Section 16(1) of the Arbitration and Conciliation Act, 1996, which treats the arbitration clause as independent of the other terms of the contract.

Conclusion: The arbitration clause survived and remained enforceable.

Issue (ii): Whether Section 11 applies to an arbitration to be held outside India and whether the contractual stipulation required the arbitration to be governed by Hong Kong law rather than the Arbitration and Conciliation Act, 1996.

Analysis: Section 2(2) of the Arbitration and Conciliation Act, 1996 does not exclude the operation of Part I in every case where the place of arbitration is outside India, and the prior decision in Bhatia International governed the field. The arbitration clause had to be read as a whole, and the words directing that disputes be referred to arbitration in Hong Kong did not neutralize the express stipulation that the arbitration was to proceed in accordance with the Arbitration and Conciliation Act, 1996. The venue could be Hong Kong, while the governing procedural law remained the Indian Act. Section 11 therefore remained applicable, and the appointment process was not governed by Hong Kong law.

Conclusion: Section 11 was applicable, and the arbitration was governed by the Arbitration and Conciliation Act, 1996.

Final Conclusion: The objections to appointment of an arbitrator were rejected, and the petition for appointment of an independent sole arbitrator was allowed.

Ratio Decidendi: An arbitration agreement survives termination of the substantive contract, and where the clause expressly adopts the Arbitration and Conciliation Act, 1996, the mere stipulation of a foreign venue does not displace the Act or exclude Section 11.

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