Case: The Branch Manager, M/s. Magma Leasing &amp; Finance Limited &amp; Another Vs. Potluri Madhavilata &amp; Another

3. MAGMA Leasing Limited Public United Company (for short, `MAGMA) is a financial institution engaged in the business of providing funds for purchase of plant and machinery and other assets by way of hire purchase. Smt. Potluri Madhavilata-respondent no. 1 (hereinafter referred to as `hirer) entered into an agreement of hire purchase with MAGMA for purchase of a motor vehicle (Bolero Camper-AP 16 TV 1263) on January 31, 2005. As per the terms of hire purchase agreement, the hirer was required to pay hire purchase price in 46 installments. It appears that the hirer committed default in payment of few installments and as a result thereof, MAGMA seized the said vehicle from the hirer on August 6, 2005. MEGMA also sent a notice to the hirer intimating her that hire purchase agreement has been terminated. Thereafter some correspondence seems to have ensued between the parties.4. The hirer then filed a suit against MAGMA in the Court of Senior Civil Judge, Vijayawada seeking recovery of possession of the aforesaid vehicle and for restraining MAGMA from transferring the said vehicle.5. MAGMA, upon receipt of notice of the aforesaid proceedings, made an application (I.A. No. 490 of 2006) before the trial court under Section 8 of the Arbitration and Conciliation Act, 1996 (for short , `Act, 1996) read with Section 151 of the Code of Civil Procedure praying therein that the dispute raised in the suit be referred to an arbitrator and the proceedings in the suit be stayed.6. The hirer contested the aforesaid application on the ground that the hire purchase agreement having been terminated, the arbitration agreement does not survive and the matter need not be referred to the arbitration.7. The First Additional Senior Civil Judge, Vijayawada vide order dated December 4, 2006 dismissed the application made by MAGMA under Section 8 of the Act, 1996.8. Not satisfied with the order of the trial court, MAGMA filed a civil revision petition before the High Court of Andhra Pradesh.9. The Division Bench dismissed the revision petition on April 30, 2007 holding that upon termination of the hire purchase agreement, the arbitration agreement does not survive. The present appeal by special leave arises from this order.MAGMA Leasing Limited Public United Company (for short, `MAGMA) is a financial institution engaged in the business of providing funds for purchase of plant and machinery and other assets by way of hire purchase. Smt. Potluri Madhavilata-respondent no. 1 (hereinafter referred to as `hirer) entered into an agreement of hire purchase with MAGMA for purchase of a motor vehicle (Bolero Camper-AP 16 TV 1263) on January 31, 2005. As per the terms of hire purchase agreement, the hirer was required to pay hire purchase price in 46 installments. It appears that the hirer committed default in payment of few installments and as a result thereof, MAGMA seized the said vehicle from the hirer on August 6, 2005. MEGMA also sent a notice to the hirer intimating her that hire purchase agreement has been terminated. Thereafter some correspondence seems to have ensued between the parties.4. The hirer then filed a suit against MAGMA in the Court of Senior Civil Judge, Vijayawada seeking recovery of possession of the aforesaid vehicle and for restraining MAGMA from transferring the said vehicle.5. MAGMA, upon receipt of notice of the aforesaid proceedings, made an application (I.A. No. 490 of 2006) before the trial court under Section 8 of the Arbitration and Conciliation Act, 1996 (for short , `Act, 1996) read with Section 151 of the Code of Civil Procedure praying therein that the dispute raised in the suit be referred to an arbitrator and the proceedings in the suit be stayed.6. The hirer contested the aforesaid application on the ground that the hire purchase agreement having been terminated, the arbitration agreement does not survive and the matter need not be referred to the arbitration.7. The First Additional Senior Civil Judge, Vijayawada vide order dated December 4, 2006 dismissed the application made by MAGMA under Section 8 of the Act, 1996.8. Not satisfied with the order of the trial court, MAGMA filed a civil revision petition before the High Court of Andhra Pradesh.9. The Division Bench dismissed the revision petition on April 30, 2007 holding that upon termination of the hire purchase agreement, the arbitration agreement does not survive. The present appeal by special leave arises from this

Reasoning:
18. The statement of law expounded by Viscount Simon, L.C. in the case of Heyman as noticed above, in our view, equally applies to situation where the contract is terminated by one party on account of the breach committed by the other particularly in a case where the clause is framed in wide and general terms. Merely because the contract has come to an end by its termination due to breach, the arbitration clause does not get perished nor rendered inoperative; rather it survives for resolution of disputes arising "in respect of" or "with regard to" or "under" the contract. This is in line with the earlier decisions of this Court, particularly as laid down in Kishori Lal Gupta & Bros.19. In the instant case, clause 22 of the hire purchase agreement that provides for arbitration has been couched in widest possible terms as can well be imagined. It embraces all disputes, differences, claims and questions between the parties arising out of the said agreement or in any way relating thereto. The hire purchase agreement having been admittedly entered into between the parties and the disputes and differences have since arisen between them, we hold, as it must be, that the arbitration clause 22 survives for the purpose of their resolution although the contract has come to an end on account of its termination.Section 8 is in the form of legislative command to the court and once theconditions as aforestated are satisfied, the court must refer the parties to arbitration. As a matter of fact, on fulfillment of conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration.24. There is nothing on record that theconditions of Section 8 are not fully satisfied in the present case. The trial court, in the circumstances, ought to have referred the parties to arbitration as per arbitration clause 22.