Arbitration clause survives contract termination where disputes arise under the agreement; jurisdiction and limitation depend on territorial facts.

An arbitration clause was treated as a collateral term that survives termination where the contract has not been rescinded, substituted, or otherwise extinguished, and where the dispute concerns interpretation, breach, or matters arising under the agreement. Territorial jurisdiction under section 33 could not rest merely on the petitioner's business at Coimbatore or on a reply sent from there; jurisdiction depends on the defendant's residence or business, or on part of the cause of action arising within the territory. A claim based on defective work and short filling was also held not to be manifestly time-barred, because the cause of action accrued in 1985 and the reference made in 1988 was still within time on the stated facts.

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Issues: (i) Whether the arbitration clause survived termination of the contract and remained operative for disputes arising under the agreement; (ii) whether the Court of Sub-ordinate Judge, Coimbatore had jurisdiction to entertain the application under section 33 of the Arbitration Act; (iii) whether the reference to arbitration was barred by limitation.

Issue (i): Whether the arbitration clause survived termination of the contract and remained operative for disputes arising under the agreement.

Analysis: An arbitration clause is a collateral term of the contract, but it remains part of the contract and operates so long as the contract subsists for the relevant purpose. Where the dispute concerns breach or matters arising under the agreement, termination of performance does not necessarily extinguish the arbitration agreement. The clause in question covered disputes regarding interpretation or application of the agreement and differences about the quality of material, and the contract had not been substituted, rescinded, or altered so as to destroy the arbitration clause.

Conclusion: The arbitration clause survived the termination of the agreement and continued to be operative.

Issue (ii): Whether the Court of Sub-ordinate Judge, Coimbatore had jurisdiction to entertain the application under section 33 of the Arbitration Act.

Analysis: Jurisdiction could not be founded on the petitioner's business at Coimbatore, because territorial jurisdiction under civil procedure depends on the defendant's residence or business or on a part of the cause of action arising within the territory. A mere reply to a notice from Coimbatore did not constitute part of the cause of action for purposes of jurisdiction.

Conclusion: The Court of Sub-ordinate Judge, Coimbatore had no jurisdiction.

Issue (iii): Whether the reference to arbitration was barred by limitation.

Analysis: The complaint of short filling and defective work was brought to the appellant's notice in early 1985, followed by testing in July 1985 and a demand in November 1987. On that footing, the cause of action to claim damages accrued in 1985, and the arbitration reference made in 1988 could not be said to be manifestly time-barred.

Conclusion: The reference to arbitration was not barred by limitation.

Final Conclusion: The objection to the arbitration reference failed, the appointment of the arbitrator was upheld, and the dispute was directed to proceed in accordance with law.

Ratio Decidendi: An arbitration clause, though collateral to the main contract, survives termination where the contract continues to subsist for purposes of disputes arising under it and has not been rescinded, substituted, or otherwise extinguished.

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