Even if the Performance of contract Comes to an End, Contract can Still be in Existence for Certain Purposes in Respect of Disputes Arising under it: Supreme Court

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The Supreme Court ruled that even if the performance of a contract comes to an end, the contract can still be in existence for certain purposes in respect of disputes arising under it.

Background 

The Civil Appeal has been filed by assailing the judgment and order passed by the High Court of Judicature for the State of Telangana at Hyderabad in Arbitration Application whereby the High Court dismissed the application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 filed by the appellant.

Arguments 

Senior Advocate Meenakshi Arora, appearing for the appellant, submitted that the High Court erred in giving a finding of implied/deemed novation while adjudicating on an application under Section 11 of the Act of 1996 and failed to comprehend the nature of limited judicial intervention under the said provision. 

She contended that the High Court has failed to examine the ingredients for novation and has given an erroneous finding in that regard by superficially dealing with the said issue.

Advocate D. Narendra Naik, appearing for the respondent, contended that the appellant failed miserably in making complete payment of the purchase of shares from respondent and in fulfilling its obligation before the expiry of the Share Purchase Agreement when the Share Purchase Agreement lapsed and stood terminated by operation of Clause 8 of the Share Purchase Agreement.

Decision 

The division bench of Justice B.R. Gavai and Justice B.V. Nagarathna observed that issues relating to contract formation, existence, validity and non­ arbitrability would be connected and intertwined with the issues underlying the merits of the respective disputes/claims. They would be factual and disputed and for the Arbitral Tribunal to decide.

It was found that the High Court was not right in dismissing the petition under Section 11(6) of the Act of 1996 filed by the appellant by giving a finding on novation of the Share Purchase Agreement between the parties as the said aspect would have a bearing on the merits of the controversy between the parties. 

The court said that it must be left to the Arbitrator to decide on the said issue also. 

Case title: M/s. Meenakshi Solar Power Pvt. Ltd. v/s M/s. Abhyudaya Green EconomicZones Pvt. Ltd. and Ors.

Citation: Civil appeal no. 8818 of 2022

Date: 23.11.2022

Click here to read the Order/Judgment 

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