When an agreement is terminated by one party alleging breach committed by the other, the arbitration clause still survives and continues to be operative. This is particularly so when the contract is revoked by mutual consent and the arbitration clause is framed in general terms, the Supreme Court stated in the case, Hema Khattar Vs Shiv Khera, while setting aside the ruling of the Delhi High Court. In this case, there was an agreement to reconstruct a building between the two parties. But, the land owner found that the construction was faulty and the agreement was terminated. The owner named a sole arbitrator invoking the arbitration clause. But the builder moved the high court in a civil suit claiming dues and other points. The owner opposed it on the ground of the arbitration clause. The high court, however, proceeded on the line of the suit. On appeal, the Supreme Court quashed the orders of the high court and allowed the sole arbitrator named by the owner to decide the issues.

via Brief case: Civil suit stands back for arbitration | Business Standard Column