Survival of arbitration clause after amendment: a supplemental agreement did not novate the original contract, so arbitration was mandatory.

A supplemental agreement that referred back to the principal agreement and dealt only with selected terms was treated as an amendment, not a novation. The principal agreement therefore remained in force, and its arbitration clause survived. Because the dispute fell within that arbitration agreement and no ground such as nullity, inoperability, or incapability of performance was shown, the judicial forum was required to refer the matter to arbitration under Section 45 of the Arbitration and Conciliation Act, 1996. The statutory nature of the oppression and mismanagement petition did not displace that mandatory referral.

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Issues: (i) Whether the supplemental agreement novated the principal agreement or merely amended it, and whether the arbitration clause in the principal agreement survived. (ii) Whether, in view of the arbitration agreement, the matter in the petition was required to be referred to arbitration under Section 45 of the Arbitration and Conciliation Act, 1996.

Issue (i): Whether the supplemental agreement novated the principal agreement or merely amended it, and whether the arbitration clause in the principal agreement survived.

Analysis: The principal agreement expressly contemplated future amendments. The supplemental agreement repeatedly referred back to the principal agreement and stated that it was altering the principal agreement to reflect the parties' understanding. The supplemental agreement dealt only with selected aspects such as shareholding and management and could not stand independently without reference to the principal agreement. On its terms, therefore, it was an amendment and not a substitution. Since the principal agreement was not rescinded, the arbitration clause contained in it continued to govern the relationship between the parties.

Conclusion: The supplemental agreement did not novate the principal agreement. The principal agreement survived and its arbitration clause remained operative.

Issue (ii): Whether, in view of the arbitration agreement, the matter in the petition was required to be referred to arbitration under Section 45 of the Arbitration and Conciliation Act, 1996.

Analysis: The dispute in the petition was found to arise principally out of and in connection with the supplemental agreement, and the supplemental agreement was held to be part of the principal agreement. The parties had agreed to foreign arbitration under the London Court of International Arbitration rules. The Court held that Section 45 is mandatory where a judicial authority is seized of a matter covered by an arbitration agreement, unless the agreement is shown to be null and void, inoperative, or incapable of being performed. No such defect was established. The contention that the statutory nature of the oppression and mismanagement petition or the width of the CLB's powers displaced the statutory command of Section 45 was rejected.

Conclusion: The parties were bound to be referred to arbitration under Section 45, and the CLB had no discretion to retain the matter.

Final Conclusion: The dispute was held to be referable to arbitration, and the statutory forum declined to proceed with the merits of the petition.

Ratio Decidendi: Where a subsequent agreement merely amends an earlier agreement instead of rescinding it, the arbitration clause in the original agreement survives and, if the dispute falls within its scope and the arbitration agreement is not null, void, inoperative, or incapable of performance, a judicial authority must refer the parties to arbitration under Section 45 of the Arbitration and Conciliation Act, 1996.

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