PNP 1 ARBAP48-8.10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. ARBITRATION APPLICATION NO.48 OF 2010 M/s. Nath Securities Ltd. ..Applicant. Vs. Badal Mittal ..Respondent. .... Mr. O.S. Kutty i/b Ramadasan K.V. for the Applicant. None for the Respondent. ..... CORAM : DR.D.Y.CHANDRACHUD, J. 8 October 2010. P.C. : 1. The Respondent has been served and an affidavit of service has been filed. 2. This is an application under Section 11(6) of the Arbitration and Conciliation Act, 1996. An agreement styled as a term sheet agreement was entered into by the Applicant and the Respondent on 19 October 2006 under which the Applicant agreed to acquire 22,40,000 equity shares comprising 38.5 % of the total issued and paid up capital of a company, Aurangabad Paper Mills Limited, at and for a consideration of Rs.27 Crores. The agreement records that an amount of Rs.1 Crore was paid as earnest PNP 2 ARBAP48-8.10 money. The Applicant terminated the agreement by its notice dated 15 November 2007. On 20 February 2008 the Applicant invoked arbitration and claimed a refund of the earnest money together with interest. By its reply dated 3 April 2008, the Respondent s advocate stated that since the ’ agreement had been terminated, there was no arbitration agreement and hence, there is no occasion to invoke arbitration. 3. The term sheet agreement provides in Clause 14 that all disputes shall be resolved by appointing an arbitrator in accordance with the provisions of the Arbitration and Conciliation Act 1996. There is therefore a valid agreement to refer disputes to arbitration. The Respondent has not denied the existence of an arbitration agreement, but has only contended that upon the termination of the agreement, the Arbitration clause would not survive. Under Section 16(1)(a) an arbitration clause which forms part of a contract is to be treated as an agreement independent of the other terms of the contract. There is evidently a dispute between the parties and the provision for arbitration has been validly invoked. In N.Srinivasa v. Kuttukaran Machine Tools Ltd.1 the Supreme Court has held that even if an agreement ceases to exist, the 1 2009(6) Mh.L.J.331. PNP 3 ARBAP48-8.10 arbitration clause would continue to remain in force and any dispute pertaining to the agreement would be liable to be resolved by arbitration. 4. In the circumstances, this application is disposed of by directing that the disputes and differences between the parties arising out of the term sheet agreement dated 19 October 2006 shall be referred to Smt. Justice Sujata Manohar, Former Judge of the Supreme Court who shall act as sole arbitrator under the Arbitration and Conciliation Act, 1996. The Prothonotary and Senior Master is directed to forthwith communicate a copy of this order to the Learned Arbitrator together with a memorandum containing the address of the parties. (Dr. D.Y.Chandrachud, J.)