M/S YOUNG ACHIEVERSversusIMS LEARNING RESOURCES PVT. LTD.

                        [2013] 2 S.C.R. 252


A                    MIS YOUNG ACHIEVERS
                                  v.
             IMS LEARNING RESOURCES PVT. LTD.
                 (Civil Appeal No. 6997 of 2013)
                         AUGUST 22, 2013
8
         [K.S. RADHAKRISHNAN AND A.K. SIKRI, JJ.]

      Arbitration - Contract containing arbitration clause,
  superseded by another contract not containing any arbitration
C clause - Effect of, on arbitration clause contained in the earlier
  contract - Held: Arbitration clause contained in the earlier
  contract did not survive once such contract was superseded I
  novated by the later contract - Arbitration and Conciliation Act,
  1996 - s.8, rlw s.5.
D
       The respondent filed suit in the High Court for a
  permanent injunction restraining infringement of a
  registered trademark, infringement of copyright, passing
  off of damages, rendition of accounts of profits and also
E for other consequential reliefs against the appellant.
  Appellant preferred IA under Section 8, read with Section
  5 of the Arbitration and Conciliation Act, 1996 for rejecting
  the plaint and referring the dispute to arbitration and also
  for other consequential reliefs. Respondent-plaintiff
F raised objection to the said application stating that the
  suit was perfectly maintainable.

       The High Court rejected the application holding that
  the earlier agreements dated 01.04.2007 and 01.04.2010
  between the parties which contained arbitration clause
G stood superseded by a new contract dated 01.02.2011
  arrived at between the parties by mutual consent, and
  therefore the present appeal.

        Dismissing the appeal, the Court
H                                252
YOUNG ACHIEVERS v. IMS LEARNING RESOURCES 253
                PVT. LTD.
    HELD: 1.1. Survival of the arbitration clause, as          A
sought by the appellant in the agreements dated
01.04.2007 and 01.04.2010 has to be seen in the light of
the terms and conditions of the new agreement dated
01.02.2011. An arbitration clause in an agreement cannot
survive if the agreement containing arbitration clause has     B
been superseded/novated by a later agreement. [Para 6]
(257-D-E]

     1.2. It is the common case of the parties that the
subsequent agreement titled "Exit paper/agreement"             C
dated 01.02.2011 entered into between the parties does
not contain any arbitration clause. The Exit paper would
clearly indicate that it is a mutually agreed document
containing comprehensive terms and conditions which
admittedly does not contain an arbitration clause. The
High Court is right in taking the view that the case on        D
hand, is not a case involving assertion by the respondent
of according a satisfaction in respect of the earlier
contracts dated 01.04.2007 and 01.04.2010. If that be so,
it could have referred to arbitrator in terms of those two
agreements going by the dictum in the case Kishorilal          E
Gupta. This Court in Kishorilal Gupta's case laid down the
principle that if the contract is superseded by another, the
arbitration clause, being a component part of the earlier
contract, falls with it. But where the dispute is whether
such contract is void ab intio, the arbitration clause         F
cannot operate on those disputes, for its operative force
depends upon the existence of the contract and its
validity. [Paras 7, 8] [258-A-B; 259-H; 260-A-D]

    1.3. So far as the present case is concerned, parties      G
have entered into a fresh contract contained in the Exit
paper which does not even indicate any disputes arising
under the original contract or about the settlement
thereof, it is nothing but a pure and simple novation of
the original contract by mutual consent. Above being the       H
    254       SUPREME COURT REPORTS             [2013] 8 S.C.R.


A factual and legal position, no error is found in the view
  taken by the High Court. [Para 9] [260-F-H]

         Union of India v. Kishorilal Gupta and Bros. AIR 1959 SC
    1362: 1960 SCR 493; Branch Manager, Is Magma Leasing
    & Finance Limited and another v. Potluri Madhavilata and
8
    another (2009) 10 SCC 103; National Agricultural
    Cooperative Marketing Federation India Ltd. V. Gains Trading
    Ltd. (2007) 5 sec 692 - referred to.

      Nolde Bros., Inc. v. Bakery Workers 430 US 243 and
C Heyman v. Darwins Limited 1942 (1) All. E.R 337 - referred
  to.

                         Case Law Reference:
          (2009) 10 sec 103       referred to          Para 3
D
          c2001) s sec 692        referred to          Para 3
          430 us 243              referred to          Para 4
          1960 SCR 493            referred to          Para 8
E         1942 (1) All. E.R 337   referred to          Para 8

        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    6997 of 2013.

F       From the Judgment and Order dated 10.07.2012 of the
    High Court of Delhi at New Delhi in FAO No. 290 of 2012.

        Manu T. Ramachandran, V.K. Sidharthan for the
    Appellants.

G       Sai Krishna Rajgopal, Vaibhav V., Shantanu Sood, Aamna
    Hasan, Julien, Vijay Kumar for the Respondent.

          The Judgment of the Court was delivered by

          K.S. RADHAKRISHNAN, J. 1. Leave granted.
H
YOUNG ACHIEVERS v. IMS LEARNING RESOURCES 255
     PVT. LTD. [K.S. RADHAKRISHNAN, J.]
     2. IMS Learning Resources Private Limited, the                  A
respondent herein, filed CS (OS) No.2316 of 2011 in the High
Court of Delhi at New Delhi for a permanent injunction
restraining infringement of a registered trademark, infringement
of copyright, passing off of damages, rendition of accounts of
profits and also for other consequential reliefs against the         B
appellant herein. Appellant preferred IA No.18 of 2012 under
Section 8, read with Section 5 of the Arbitration and
Conciliation Act, 1996 for rejecting the plaint and referring the
dispute to arbitration and also for other consequential reliefs.
Respondent-plaintiff raised objection to the said application        c
stating that the suit is perfectly maintainable. The High Court
rejected the application vide its order dated 16.04.2012 holding
that that earlier agreements dated 01.04.2007 and 01.04.2010,
which contained arbitration clause stood superseded by a new
contract dated 01.02.2011 arrived at between the parties by          D
mutual consent. Defendant aggrieved by the said order filed
FAQ {OS) No.290 of 2012 before the Division Bench of the
Delhi High Court, which confirmed the order of the learned
Single Judge and dismissed the appeal against which this
appeal has been preferred by special leave.
                                                                     E
      3. Mr. Manu T. Ramachandran, learned counsel appearing
for the appellant raised the following question of law:

     "a) Whether an arbitration clause is a collateral term in the
     contract, which relates to resolution of disputes, and not      F
     performance and even if the performance of the contract
     comes to an end on account of repudiation, frustration of
     breach of contract, the arbitration agreement would survive
     for the purpose of resolution of disputes arising under or
     in connection with the contract?
                                                                     G
     b) Whether the impugned judgment is contrary to the law
     settled by this Hon'ble Court in Branch Manager, Mis
     Magma Leasing & Finance Limited and another v. Potluri
     Madhavilata and another (2009) 1 O sec 103 and
                                                                     H
    256       SUPREME COURT REPORTS                 [2013) 8 S.C.R.


A         National Agricultural Cooperative Marketing Federation
          India Ltd. V. Gains Trading Ltd. (2007) 5 SCC 692?

          c) Whether the Hon'ble High Court is correct in holding that
          the law settled by this Hon'ble Court in The Branch
          Manager, Mis Magma Leasing & Finance Limited and
B
          another v. Potluri Madhavilata and another (2009) 10
          SCC 103 and National Agricultural Cooperative
          Marketing Federation India Ltd. V. Gains Trading Ltd.
          (2007) 5 sec 692 is applicable in case of unilateral
          termination of agreement by one of the parties and not in
c         mutual termination for accord and satisfaction of the earlier
          contract?"

        4. Learned counsel also submitted that arbitration clause
  is a collateral term in the contract, which relates to resolution
D of disputes and not performance and even if the performance
  of the contract comes to an end on account of repudiation,
  frustration of breach of contract, the arbitration agreement would
  survive for the purpose of resolution of disputes arising under
  or in connection with the contract. Learned counsel also
E submitted that the court has erroneously held that the case of
  the appellant is not a case involving the assertion by the
  respondent of accord and satisfaction in respect of earlier
  contracts, especially when the sole purpose of the Exit paper
  dated 01.02.2011 was to put an end to the contractual
F relationship between them under the aforesaid earlier contracts.
  Apart from the decisions referred hereinbefore, reliance was
  also placed on the judgment of the U.S. Court in Nolde Bros.,
  Inc. v. Bakery Workers 430 US 243.

       5. Mr. Sai Krishna Rajgopal, learned counsel appearing
G for the respondent placing reliance on the detailed counter
  affidavit filed on behalf of the respondent submitted that the
  arbitration clause in the agreements dated 01.04.2007 and
  01.04.2010 cannot be invoked since both the above-mentioned
  agreements were superseded and abrogated by the new
H agreement dated 01.02.2011. Learned counsel also submitted
YOUNG ACHIEVERS v. IMS LEARNING RESOURCES 257
     . PVT. LTD. [K.S. RADHAKRISHNAN, J.]
that in the new agreement it was mutually decided by the A
parties that any violation of the respondent's trade mark IMS
would entitle the respondent to take legal recourse against the
appellant. Reference was made to clause 4 of the penultimate
paragraph of the new agreement dated 01.02.2011. Learned
counsel also submitted that Suit No. CS (OS) 2316 of 2011 B
was based on prior trade mark rights and not on the
agreements dated 01.04.2007 and 01.04.2010. Further it was
also pointed out that the new agreement dated 01.02.2011
records the mutual agreement between the parties that the
appellant shall not be eligible to use the trade mark IMS in any c
form and any breach thereof entitles respondent to seek legal.
recourse on violation of trade mark IMS.

     6. We are of the view that survival of the arbitration clause,
as sought by the appellant in the agreements dated 01.04.2007 -
and 01.04.2010 has to be seen in the light of the terms and D
conditions of the new agreement dated 01.02.2011. An
arbitration clause in an agreement cannot survive if the
agreement containing arbitration clause has been superseded/
novated by a later agreement. The agreement dated
01.04.2010 contained the following arbitration clause:              E

    "20. Arbitration

    All disputes and questions whatsoever which may arise,
    either during the substance of this agreement or
                                                                F
    afterwards, between the parties shall be referred to the
    arbitration of trhe managing director of IMS Learning
    Resources Pvt. Ltd. Or his nominee and such arbitration
    shall be in the English language at Mumbai. The arbitration
    shall be governed by the provisions of the Arbitration and
    Conciliation Act, 1996 or any other statutory modification G
    or re-enactment thereof for the time being in force and·
    award or awards of such arbitrator shall be binding ·on all
    the parties to the said dispute."

    7. We have now to examine terms of the subsequent              H
    258        SUPREME COURT REPORTS                [2013] 8 S.C.R.


A   agreement titled "Exit paper" dated 01.02.2011. It is the
    common case of the parties that the Exit paper/agreement
    entered into between the parties does not contain any
    arbitration clause. It is useful to extract the relevant portion of
    the Exit paper, which is as follow:
B
          "With reference to your mail/letter dated 1st February, 2011
          on closing the center, from the aforesaid date with mutual
          consent we have agreed on the following:

          "1. Enrolled students
c
          All enrolled students of IMS with you will be serviced by
          you with respect to their classes, workshops and conduct
          of test series, GD/Pl and any other servicing required as
          per the product manual.
D         2. Premises

          IMS will reserve the first right of utilization to occupy the
          premises. In an eventuality of IMS exercising the right to
          use the premises, then IMS will reimburse the monthly rent '
E         for the corresponding months before changing the rental
          agreement onto IMS name.

          3. Marketing

          From the above-mentioned date you are not eligible to do
F         any marketing and promotional activities in the name of
          IMS.

          4.    Brand

          "From the above-mentioned date you are not eligible to
G
          use IMS brand in any form.

          5. Monthly claims

          The partner abides to deposit all the course fees collected
H         for any of IMS programs till now as per the deposit policy
YOUNG ACHIEVERS v. IMS LEARNING RESOURCES 259
     PVT. LTD. [K.S. RADHl\KRISHNAN, J.]
    of IMS. All monthly claims will be settled till 31st January,   A
    2011 and the claims would be released after the date of
    termination of the partner agreement.

    6. Security Deposit

    The security deposit amount will be refunded back to you        B
    after the completion of servicing of all enrolled IMS
    students. In case of any due on partner to the company
    (unsettled fees, loan or advance for centre activities etc.),
    same amount will be deducted from the security deposit.
                                                                    c
    7. Non Compete Clause

    The partner has averred that neither he, nor his family
    members are directly or indirectly interested in any
    business in direct competition with that of IMS and the
    partner agrees and undertakes to ensure that neither he         0
    nor his family members shall be involved in or connected
    to any business in direct competition with that of IMS at
    any time during the currency of this agreement and for a
    further period of six months therafter.
                                                                    E
    8. Full and final settlement

    I/We accept all the above-mentioned points and confirm
    that upon receipt of the sum stated hereinafter in full and
    final settlement of all my/our claims, neither me/we nor any
                                                                    F
    person claiming by or through me/us shall have any further
    claims against IMS whatsoever.

    Any violation of points 1,3,4,5 & 7 from the partner's end
    will attract legal course of action and penalties from IMS
    ranging from forfeiture of the security deposit & pending       G
    claims.

    I hereby accept above terms and conditions."
    8. Exit paper would clearly indicate that it is a mutually
agreed document containing comprehensive terms and                  H
    260      SUPREME COURT REPORTS                 [2013] 8 S.C.R.


A   conditions which admittedly does not contain an arbitration
    clause. We are of the view that the High Court is right in taking
    the view that in the case on hand, is not a case involving
    assertion by the respondent of accord a satisfaction in respect
    ofthe earlier contracts dated 01.04.2007 and 01.04.2010. If
B that be so, it could have referred to arbitrator in terms of those
    two agreements going by the dictum in Union of India v.
    Kishorilal Gupta and Bros. AIR 1959 SC 1362. This Court in
    Kishorilal Gupta's case (supra) examined the question whether
    an arbitration clause can be invoked in the case of a dispute
c   under a superseded contract. The principle laid down is that if
    the contract is superseded by another, the arbitration clause,
    being a component part of the earlier contract, falls with it. But
    where the dispute is Whether such contract is void ab intio, the
    arbitration clause cannot operate on those disputes, for its
    operative force depend~:t1pon the existence of the contract and
0
    its validity. The various other observations were made by this
    Court in the above-mentioned judgment in respect of
    "settlement of di~r8:les arising under the original contract,
    including the dispute as to the breach of the contract and its
    consequences". Principle laid down by the House of Lords in
E Heyman v. Darwins Limited 1942 (1) All. E.R. 337 was also
    relied on by this Court for its conclusion. The Collective
    bargaining principle laid down by the US Supreme Court in
    Nolde Bros. case (supra) would not apply to the facts of the
    present case.
F
         9. We may indicate that so far as the present case is
    concerned, parties have entered into a fresh contract contained
    in the Exit paper which does not even indicate any disputes
    arising under the original contract or about the settlement
  · thereof, it is nothing but a pure and simple novation of the
G original contract by mutual consent. Above being the factual and
    legal position, we find no error in the view taken by the High
    Court. The appeal, therefore, lacks merit and stands dismissed,
    with no order as to costs.
H B.B.B.                                         Appeal dismissed.