Arbitration clause did not survive novation; dispute under a fresh exit arrangement could not be referred under Section 8.

An arbitration clause does not survive where the original contract is novated and replaced by a fresh exit arrangement executed by mutual consent without any arbitration clause. The principle that an arbitration clause may continue after termination of a contract did not apply because the dispute arose from the later arrangement, not from unilateral breach of a subsisting contract. The doctrine of accord and satisfaction was also inapposite on these facts. Accordingly, reference to arbitration under Section 8 was not required and the application was correctly rejected.

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Issues: Whether the arbitration clause in the earlier agreements survived after the parties executed a fresh exit arrangement by mutual consent, so as to require reference of the dispute to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996.

Analysis: The earlier agreements containing the arbitration clause had been superseded by a later exit paper executed mutually by the parties. The dispute was not one of unilateral termination or a mere claim of breach under the subsisting contract, but one arising after a fresh contractual arrangement that did not contain any arbitration clause. The legal principle that an arbitration clause may survive termination of a contract did not assist the appellant because that principle does not apply where the original contract is novated and replaced by a new agreement. The reference to the doctrine of accord and satisfaction was also inapposite, since the case involved novation by mutual agreement rather than settlement of disputes under the old contract.

Conclusion: The arbitration clause did not survive the novation, and the application under Section 8 was rightly rejected.

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