ASHAPURA MINE-CHEM LTD Vs. GUJARAT MINERAL DEVLOPMENT CORPORATION
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 3702 of 2015, Judgment Date: Apr 16, 2015
In the light of our above conclusion, we hold that the learned Judge having
failed to appreciate the legal position as regards the existence of an
arbitration agreement in the MoU irrespective of the failure of the parties
to reach a full-fledged agreement with respect to the various terms and
conditions contained in the MoU for a joint venture, the said conclusion
and judgment of the learned Judge is liable to be set aside and is
accordingly set aside. Since the respondent has expressed its
disinclination to agree to express its concurrence and thereby the parties
failed to appoint an Arbitrator under the agreed procedure, it is necessary
for this Court to appoint an Arbitrator. Therefore, while setting aside the
judgment impugned in this appeal, we hereby appoint Hon'ble Ms. Justice
Rekha Manharlal Doshit, resident of C-5, 402, Deo Sangam Flat, Guartgam
Road, Near Gandhi Nagar, Gujarat, former Chief Justice of Patna High Court
and former Judge of Gujarat High Court as the sole Arbitrator to adjudicate
the disputes that have arisen between the parties on such terms and
conditions as the sole Arbitrator deems fit and proper. Undoubtedly, the
learned sole Arbitrator shall decide all the disputes arising between the
parties under the MoU, without being influenced by any prima facie opinion
expressed in this order with regard to the respective claims of the
parties.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3702 OF 2015
(@ SLP (C) NO.1963 of 2014)
Ashapura Mine-Chem Ltd. ....Appellant
VERSUS
Gujarat Mineral Development Corporation ....Respondent
J U D G M E N T
Fakkir Mohamed Ibrahim Kalifulla, J.
Leave granted.
This appeal is directed against the judgment of the High Court of
Judicature of Gujarat at Ahmedabad in Arbitration Petition No. 9/2013 dated
27.9.13/04.10.2013. By the impugned judgment, the learned Single Judge of
the High Court dismissed the appellant's application filed under Section 11
of the Arbitration and Conciliation Act, 1996 (hereinafter referred to
"Act").
Short facts which are required to be noted are that the appellant and the
respondent entered into a Memorandum of Understanding (MoU) on 17.08.2007.
Under the said MoU, the appellant proposed to constitute a joint venture
along with Chinese Company, namely, "M/s Qing TongXia Aluminium Group Co.
Ltd. Ningxia of China (hereinafter referred to as "QTX") as well as the
respondent for setting up an alumina plant of appropriate capacity in the
Kutch District of Gujarat. The MoU also records that the Government of
Gujarat agreed to encourage and support the proposed joint venture for
setting up of the alumina plant. The respondent agreed to supply on
priority basis, medium grade Bauxite to the proposed plant from its 10
existing and 18 expected Bauxite mining leases in the Kutch District.
The other relevant terms were that the appellant should arrange for the
equity participation of the QTX in the proposed joint venture, that the
respondent should invest in the equity of the joint venture to the extent
determined by the Government of Gujarat but not exceeding 26% while the
appellant and the QTX should hold 74% of the equity. The capacity of the
proposed plant should be 1.00 million tonnes per annum which may be
enhanced subsequently. On the part of the respondent, it should assist the
joint venture in obtaining the required land for locating the project.
Under Clauses 5, 6, 8, 10 and 11, the quantity of the medium grade Bauxite
to be supplied by the respondent, the grade of the Bauxite, the
specifications, the rate at which it was to be supplied, the time within
which such supply should be effected were all set out which also included a
long term agreement for the supply to be entered into.
MoU also stipulated certain other conditions by which the appellant was
obligated upon to reimburse to the respondent, within 60 days of the
signing of the MoU, an amount of Rs.3.94 crores being the direct expenses
incurred by the respondent on its Alumina Project and related matter. It is
not in dispute that within the stipulated time limit the appellant gave its
cheque for the said sum but the respondent did not encash the same. It also
provided for the appellant to pay the respondent a further sum of Rs.6.25
crores within 60 days of the execution of the MoU by way of signature bonus
apart from providing a bank guarantee to the value of Rs.10 crores for the
due observance for the joint venture by the appellant under the various
terms and conditions of the MoU within 30 days of the signing of the MoU.
Clause 12 of the MoU specifically provided that the rights and privileges
were not transferable for a period of five years and the appellant should
not exit the project/joint venture for a period of five years after the
commencement of commercial production.
Under Clause 19, it was stipulated that the MoU was subject to approval of
the Board of Directors of the appellant as well as the respondent, that the
equity investment and decisions of the respondent should be subject to the
concurrence of the Government of Gujarat, while the investment of the
appellant should be subject to approval of its shareholders. It was
specifically mentioned that both the appellant and the respondent should
endeavour to obtain necessary approval within three months from the date of
execution of the MoU. It was further specifically mentioned that on getting
necessary approval by both sides, the MoU would be converted into an
agreement between the appellant and the respondent. Clause 21 contained
relevant stipulation to the effect that in case the concurrence of the
Government of Gujarat was not forthcoming for equity participation in the
project within six months of the signing of the MoU, the MoU would be
construed as one relating to long term supply of medium grade Bauxite to
the joint venture by the respondent from its Kutch mines.
The more important Clauses contained in MoU pertaining to arbitration are
found in Clauses 26 and 27 which read as under:
"26. In the event of difference disputes arising between the parties in
respect of any matter arising out of and relating to this MoU, such
dispute/difference shall, in the first instance, be resolved amicably by
mutual consultation within 45 days of the reference of disputes by either
party.
27. If amicable settlement is not reached between the parties then such
unresolved dispute or difference of opinion concerning or arising from the
MoU and its implementation, breach or termination whatsoever, including any
difference or dispute as to the interpretation of any of the terms of the
MoU, shall be referred to the arbitration or a sole arbitrator appointed to
GMDC and AML. The Arbitrator shall give reasoned award. The Arbitration
shall be governed by Arbitration and Conciliation Act, 1996 (India) and
conducted in the city of Ahmedabad. The language of Arbitration shall be
English. The parties shall share the cost of Arbitration equally
Arbitration clause to be acceptable to the Financing sources."
Subsequent to the signing of the above MoU, there was a Board Resolution of
respondent dated 29.10.2007. The said Resolution stated that the Board
resolved to accord its approval to the MoU executed on 17.08.2007 between
the appellant and the respondent subject to the modifications noted in the
said resolution. Subsequent to the said resolution which was communicated
to the appellant, correspondence was exchanged between the appellant and
the respondent and on some occasions with the Principal Secretary of the
State of Gujarat between 17.12.2007 and 10.03.2010. There was a Board
Resolution of the respondent dated 18.03.2010 which disclose that the Board
decided to the effect that in the light of the new mineral policy announced
by the State Government in November, 2009, major changes were made in
respect of Bauxite also and, therefore, it was not inclined to extend the
validity of the proposed MoU and also decided to invite fresh EOI in
Bauxite for higher value addition in alumina. However, in a subsequent
communication dated 26.07.2010, the respondent informed the appellant that
to maintain parity necessary modification in the terms and conditions of
the MoU dated 17.8.2007 as approved by the Board of the respondent were
communicated to the State Government for approval which was awaited and
that on receipt of such approval, a fresh MoU may have to be executed.
But subsequently, by communication dated 25.04.2011, the respondent tacitly
informed the appellant that it decided to forthwith cancel the MoU dated
17.08.2007 in view of failure on the part of the appellant in complying
with various terms and conditions of the MoU. The respondent, thus, threw
the blame on the appellant for the proposed project not being able to be
finalized.
In response to the said letter dated 25.04.2011, the appellant wrote a
detailed reply on 11.07.2011 wherein the appellant expressed its desire to
amicably resolve the dispute and requested the respondent to make an
attempt for an amicable settlement as regards the issues and alleged
breaches mentioned in the respondent's letter dated 25.04.2011.
Subsequently, the appellant caused a legal notice dated 07.12.2012 to the
respondent, wherein it was claimed that its attempt to amicably resolve the
dispute as provided under Clause 26 of the MoU failed and, therefore, it
decided to invoke Clause 27 of the MoU to appoint an Arbitrator and
suggested the name of a retired High Court Judge for appointment with the
concurrence of the respondent or else the appellant's decision to invoke
Section 11 of the Act.
On behalf of the respondent, a reply was addressed to the appellant on
04.01.2013 stating that there was no fault whatsoever on its side and,
therefore, there was no question of any obligation to be fulfilled on its
side and it also expressed its decision not to concur for the appointment
of the Arbitrator.
It was in the above stated sequence of events i.e. from the date of MoU to
the date of filing of the application, the appellant approached the High
Court by filing an application under Section 11 of the Act and sought for
appointment of an Arbitrator. By the impugned order, the High Court having
rejected the appellant's application, the appellant has come forward with
this appeal.
We heard Mr. Dushyant Dave, learned senior counsel for the appellant and
Mr. Vikas Singh, learned senior counsel for the respondent. Mr. Dushyant
Dave after referring to the above course of events that has taken place
between the appellant and the respondent from the date of MoU dated
17.8.2007 till the rejection of the Arbitration Application by the High
Court, contended that since indisputably the respondent terminated the MoU,
the conclusion of the High Court that the same was a still-born was wholly
unjustified. The learned senior counsel submitted that even if the MoU for
the proposed joint venture did not ultimately fructify into the creation of
the joint venture, Clauses 26 and 27 of the MoU by virtue of the specific
terms contained therein would operate as stand-alone agreement for
arbitration and with reference to the said agreed terms, since there was a
consensus ad idem between the parties, the High Court ought to have
appointed the Arbitrator exercising its power under Section 11 of the Act,
inasmuch as the respondent declined to express its consent for the named
Arbitrator suggested by the appellant.
As against the above submission Mr. Vikas Singh, learned senior counsel
appearing for the respondent vehemently submitted that the High Court was
able to highlight that the parties had no consensus ad idem even with
reference to the very MoU itself and in the circumstances, there was no
scope for applying Clauses 26 and 27 for the appointment of Arbitrator as
claimed by the appellant.
While Mr. Dushyant Dave, learned senior counsel placed reliance upon the
decisions in Enercon (India) Limited & Ors. v. Enercon GMBH & Anr. - 2014
(5) SCC 1, Reva Electric Car Company Private Ltd. v. Green Mobil - 2012 (2)
SCC 93 and Today Homes and Infrastructure Pvt. Ltd. v. Ludhiana Improvement
Trust and Anr. - 2014 (5) SCC 68, Mr. Vikas Singh relied upon the decisions
reported as SBP & Co. v. Patel Engineering Ltd. & Anr. - 2005 (8) SCC 618,
National Insurance Company Ltd. v. Boghara Polyfab Pvt. Ltd. - 2009 (1) SCC
267 and Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification
Inc. & Ors. - 2013 (1) SCC 641 in support of his submissions.
Having heard the submissions of the respective counsel, we find that the
sum and substance of the submission of Mr. Dushyant Dave was that the
arbitration Clause contained in Clause 27 of the MoU was an independent
arbitration agreement and, therefore, even if respondent chose to terminate
the MoU dated 17.8.2007, the Arbitration agreement would continue to remain
and consequently the parties are entitled to invoke the said Clause 27 and
exercise their option for appointment of an Arbitrator and seek for
concurrence of the other party. The learned senior counsel contended that
since the respondent expressed its decision to terminate the MoU, the
appellant after exhausting its attempt for an amicable settlement at
bilateral level as between the appellant and the respondent by invoking
Clause 26 had no other option but to invoke Clause 27 and opt for the
appointment of a retired Judge Hon'ble Mr. Justice B.N. Mehta as an
Arbitrator and sought for the concurrence of the respondent. The learned
senior counsel submitted that when the respondent refused to concur with
the appointment of the said learned Judge as an Arbitrator, the appellant
was well justified in approaching the High Court under Section 11 for the
appointment of an Arbitrator. The learned senior counsel, therefore,
contended that the rejection of the said application filed under Section 11
of the Act by the impugned order is liable to be set aside and an
Arbitrator has to be appointed.
According to Mr. Vikas Singh, learned senior counsel for the respondent
inasmuch as the MoU itself was not a concluded contract, Clauses 26 and 27
of the said MoU do not survive and consequently there was no scope for
appointment of an Arbitrator by invoking Clause 27 of the MoU.
To appreciate the respective contentions and having regard to the law on
this issue been already settled in more than one decision, we are of the
view that the statement of law so declared by this Court can be
straightaway noted in order to render our decision in tune with the said
proposition of law declared by this Court.
In this context, we find, the reliance placed upon by Mr. Dushyant Dave,
learned senior counsel for the appellant on the decisions in Reva
Electrical Car Company Private Ltd. (supra), Today Homes and Infrastructure
Pvt. Ltd. (supra) and Enercon (India) Limited (supra) fully support the
stand of the appellant. The decision in Reva Electrical Car Company
Private Ltd. (supra) was a case which arose under Section 11 of the Act. A
question was raised on behalf of the respondent in the said case to the
effect that with the termination of the MoU itself, the Arbitration Clause
would cease to exist. Dealing with the said question, the learned Judge
has held as under in paragraphs 54 and 55:
"54. Under Section 16(1), the legislature makes it clear that while
considering any objection with respect to the existence or validity of the
arbitration agreement, the arbitration clause which formed part of the
contract, has to be treated as an agreement independent of the other terms
of the contract. To ensure that there is no misunderstanding, Section
16(1)(b) further provides that even if the Arbitral Tribunal concludes that
the contract is null and void, it should not result, as a matter of law, in
an automatic invalidation of the arbitration clause. Section 16(1)(a)
presumes the existence of a valid arbitration clause and mandates the same
to be treated as an agreement independent of the other terms of the
contract. By virtue of Section 16(1)(b), it continues to be enforceable
notwithstanding a declaration of the contract being null and void. In view
of the provisions contained in Section 16(1) of the Arbitration and
Conciliation Act, 1996, it would not be possible to accept the submission
of Ms Ahmadi that with the termination of the MoU on 31-12-2007, the
arbitration clause would also cease to exist.
55. As noticed earlier, the disputes that have arisen between the parties
clearly relate to the subject-matter of the relationship between the
parties which came into existence through the MoU. Clearly, therefore, the
disputes raised by the petitioner need to be referred to arbitration. Under
the arbitration clause, a reference was to be made that the disputes were
to be referred to a single arbitrator. Since the parties have failed to
appoint an arbitrator under the agreed procedure, it is necessary for this
Court to appoint the arbitrator."
(Emphasis added)
In Today Homes and Infrastructure Pvt. Ltd. (supra), this Court approved
the statement of law stated by the learned Judge of this Court in Reva
Electrical Car Company Private Ltd. (supra). Paragraph 14 can be usefully
referred to which reads as under:
"14. The same reasoning was adopted by a member of this Bench (S.S. Nijjar,
J.), while deciding Reva Electric Car Co. (P) Ltd. v. Green Mobil, wherein
the provisions of Section 16(1) in the backdrop of the doctrine of
kompetenz kompetenz were considered and it was inter alia held that under
Section 16(1), the legislature makes it clear that while considering any
objection with regard to the existence or validity of the arbitration
agreement, the arbitration clause, which formed part of the contract, had
to be treated as an agreement independent of the other terms of the
contract. Reference was made in the said judgment to the provisions of
Section 16(1)(b) of the 1996 Act, which provides that even if the Arbitral
Tribunal concludes that the contract is null and void, it should not
result, as a matter of law, in an automatic invalidation of the arbitration
clause. It was also held that Section 16(1)(a) of the 1996 Act presumes the
existence of a valid arbitration clause and mandates the same to be treated
as an agreement independent of the other terms of the contract. By virtue
of Section 16(1)(b) of the 1996 Act, the arbitration clause continues to be
enforceable, notwithstanding a declaration that the contract was null and
void."
(Emphasis added)
Again this very question came up for consideration in Enercon (India)
Limited (supra) to which one of us (F.M.I Kalifulla, J.) was a party. In
the said decision, the nature of transaction between the parties was more
or less identical to the facts of this case. The contention raised on
behalf of the appellant in that case was that there can be no arbitration
agreement in the absence of a concluded contract, that, therefore, there
was no question of an arbitration agreement coming into existence and,
therefore, there was no scope for referring the dispute for arbitration.
As against the above submissions, it was contended on behalf of the
respondent in the said decision that even if the existence of the main
contract is under dispute, the Court is concerned only with the arbitration
agreement, i.e. the arbitration clause and that when once such a Clause is
very much present, that would by itself result in the matter being
referable for arbitration. In fact, in the said case, the Clause relating
to arbitration was found in Clause No.18.1 which provided for an attempt to
resolve the dispute, controversy or difference through mutual consultation
and if it is not resolved through mutual consultation within 30 days after
commencement of discussion, then the parties may refer the dispute,
controversy or difference for resolution to an Arbitral Tribunal.
Dealing with the said Clause and the arguments raised on behalf of the
respective parties, the law has been laid down as under in paragraphs 82
and 83 which are to the following effect:
"82. Further, the arbitration agreement contained in Clauses 18.1 to 18.3
of IPLA is very widely worded and would include all the disputes,
controversies or differences concerning the legal relationship between the
parties. It would include the disputes arising in respect of the IPLA with
regard to its validity, interpretation, construction, performance,
enforcement or its alleged breach. Whilst interpreting the arbitration
agreement and/or the arbitration clause, the court must be conscious of the
overarching policy of least intervention by courts or judicial authorities
in matters covered by the Indian Arbitration Act, 1996. In view of the
aforesaid, it is not possible for us to accept the submission of Mr Nariman
that the arbitration agreement will perish as the IPLA has not been
finalised. This is also because the arbitration clause (agreement) is
independent of the underlying contract i.e. the IPLA containing the
arbitration clause. Section 16 provides that the arbitration [pic]clause
forming part of a contract shall be treated as an agreement independent of
such a contract.
83. The concept of separability of the arbitration clause/agreement from
the underlying contract is a necessity to ensure that the intention of the
parties to resolve the disputes by arbitration does not evaporate into thin
air with every challenge to the legality, validity, finality or breach of
the underlying contract. The Indian Arbitration Act, 1996, as noticed
above, under Section 16 accepts the concept that the main contract and the
arbitration agreement form two independent contracts. Commercial rights and
obligations are contained in the underlying, substantive, or the main
contract. It is followed by a second contract, which expresses the
agreement and the intention of the parties to resolve the disputes relating
to the underlying contract through arbitration. A remedy is elected by
parties outside the normal civil court remedy. It is true that support of
the national courts would be required to ensure the success of arbitration,
but this would not detract from the legitimacy or independence of the
collateral arbitration agreement, even if it is contained in a contract,
which is claimed to be void or voidable or unconcluded by one of the
parties."
(Emphasis added)
Mr. Vikas Singh, learned senior counsel for the respondent by referring to
the Seven Judge Bench decision of this Court in Patel Engineering Ltd.
(supra) sought to contend that the reliance placed upon the said decision
by this Court in Today Homes and Infrastructure Pvt. Ltd. (supra) with
particular reference to the position stated in paragraph 13 of the said
judgment was not appropriate.
We are not inclined to entertain the said submission, as we find that we
are not concerned with the said issue as to whether what was held in
paragraph 13 of Today Homes and Infrastructure Pvt. Ltd. (supra) judgment
was correct or not when it makes reference to the Seven Judge Bench
decision in Patel Engineering Ltd.(supra). We are only concerned with the
question whether an Arbitration Clause contained in the MoU is a stand
alone agreement or not. For that purpose, what has been stated in Today
Homes and Infrastructure Pvt. Ltd. (supra) in paragraph 14 is only relevant
and we find the legal position stated therein in tune with the ratio
decidendi laid down consistently by this Court in very many decisions.
The reliance was also placed upon the decision in National Insurance
Company Ltd. (supra). Paragraphs 19, 20 and 21 were referred to in the said
judgment. Paragraph 19 can be usefully referred, which reads as under:
"19. In SBP & Co. v. Patel Engg. Ltd., a seven-Judge Bench of this Court
considered the scope of Section 11 of the Act and held that the scheme of
Section 11 of the Act required the Chief Justice or his designate to decide
whether there is an arbitration agreement in terms of Section 7 of the Act
before exercising his power under Section 11(6) of the Act and its
implications. It was of the view that sub-sections (4), (5) and (6) of
Section 11 of the new Act, combined the power vested in the court under
Sections 8 and 20 of the old Act (the Arbitration Act, 1940). This Court
held: (SCC pp. 660-61 & 663, paras 39 & 47)
"39. It is necessary to define what exactly the Chief Justice, approached
with an application under Section 11 of the Act, is to decide at that
stage. Obviously, he has to decide his own jurisdiction in the sense,
whether the party making the motion has approached the right High Court. He
has to decide whether there is an arbitration agreement, as defined in the
Act and whether the person who has made the request before him, is a party
to such an agreement. It is necessary to indicate that he can also decide
the question whether the claim was a dead one; or a long-barred claim that
was sought to be resurrected and whether the parties have concluded the
transaction by recording satisfaction of their mutual rights and
obligations or by receiving the final payment without objection. It may not
be possible at that stage, to decide whether a live claim made, is one
which comes within the purview of the arbitration clause. It will be
appropriate to leave that question to be decided by the Arbitral Tribunal
on taking evidence, along with the merits of the claims involved in the
arbitration. The Chief Justice has to decide whether the applicant has
satisfied the conditions for appointing an arbitrator under Section 11(6)
of the Act. For the purpose of taking a decision on these aspects, the
Chief Justice can either proceed on the basis of affidavits and the
documents produced or take such evidence or get such evidence recorded, as
may be necessary. We think that adoption of this procedure in the context
of the Act would best serve the purpose sought to be achieved by the Act of
expediting the process of arbitration, without too many approaches to the
court at various stages of the proceedings before the Arbitral Tribunal.
***
[pic]47. (iv) The Chief Justice or the Designated Judge will have the right
to decide the preliminary aspects as indicated in the earlier part of this
judgment. These will be his own jurisdiction to entertain the request, the
existence of a valid arbitration agreement, the existence or otherwise of a
live claim, the existence of the condition for the exercise of his power
and on the qualifications of the arbitrator or arbitrators."
Having gone through the said paragraphs, we do not find any position in law
contrary to what has been stated in Today Homes and Infrastructure Pvt.
Ltd. (supra), Reva Electrical Car Company Private Ltd. (supra) and Enercon
(India) Limited (supra).
Similarly, the reliance placed upon in Chloro Controls India Pvt. Ltd.
(supra) also does not in any manner dislodge the legal position relating to
the stand alone Arbitration Clause in a substantive transaction recorded in
writing. Therefore, we do not find any useful purpose by referring to the
said decision as well.
Having thus ascertained the legal position regarding the stand alone
agreement relating to arbitration with particular reference to arbitration
agreement in a legal transaction between the parties, when we refer to
Clause 27 of the MoU, we wish to find out whether the said Clause satisfies
the principles set down and applicable to a stand alone Arbitration
Agreement. When we refer to Clause 27, we find that in the event of failure
of an amicable settlement at the bilateral level relating to a dispute or
difference arising between the appellant and the respondent to be reached
as contained in Clause 26 of the MoU, then such unresolved dispute or
difference concerning or arising from the MoU, its implementation breach or
termination whatsoever including any difference or dispute as to the
interpretation of any of the terms of the MoU is referable to the sole
Arbitrator appointed by the appellant and the respondent. Therefore,
irrespective of the question or as to the fact whether the MoU fructified
into a full-fledged agreement, having regard to the non-fulfilment of any
of the conditions or failure of compliance of any requirement by either of
the parties stipulated in the other Clauses of MoU, specific agreement has
been entered into by the appellant and the respondent under Clause 27 to
refer such controversies as between the parties to the sole arbitrator by
consensus. Therefore, when consensus was not reached as between the parties
for making the reference, eventually it will be open for either of the
parties to invoke Section 11 of the Act and seek for reference of the
dispute for arbitration.
In the case on hand, as we have noted earlier, after the signing of the MoU
on 17.8.2007, the Board of Directors of the Respondent passed a Resolution
on 29.10.2007 which expressed its approval to the MoU, subject, however, to
modification of the conditions. Thereafter, correspondence exchanged
between the parties from 17.12.2007 to 10.03.2010. There was a subsequent
Board Resolution of the respondent on 18.03.2010 which stated that the
Board took a decision that it was not inclined to extend the validity of
proposed MoU due to change in the mineral policy of the State Government.
However, on 26.07.2010, the respondent informed the appellant that to
maintain parity, necessary modification in the terms and conditions of the
MoU dated 17.8.2007 was communicated to the State Government for approval
which was awaited and that on receipt of such approval, a fresh MoU can be
executed. Thereafter, by communication dated 25.4.2011, the respondent
categorically informed the appellant that it decided to forthwith cancel
the MoU dated 17.8.2007 alleging fault on the side of the appellant with
regard to failure to comply with the various terms and conditions of the
MoU. Thus, from the above referred to sequence of events which occurred
between 17.8.2007 and 25.4.2011, it is crystal clear that both parties were
at variance with reference to the various terms and conditions contained in
the MoU and consequently there was every right in either of the parties to
seek for an amicable settlement in the first instance as specified in
Clause 26 of the MoU.
We find from the materials on record that the appellant in its letter dated
11.07.2011 addressed to respondent expressed its desire to amicably resolve
the dispute at the bilateral level. Since there was no response from the
respondent, the appellant caused a legal notice on 07.12.2012 by invoking
Clause 27 of the MoU for appointment of an Arbitrator and also suggested
the name of a retired High Court Judge and sought for the concurrence of
the respondent. In the legal notice, the appellant specifically intimated
that in the event of the respondent failing to express its concurrence for
the appointment of the named Arbitrator, it will have no other option but
to move the High Court under Section 11 of the Act. The respondent having
made it clear in its reply dated 04.01.2013 to the lawyer's notice stating
that it was not inclined to agree for a reference, the appellant had no
other option except to move the High Court by filing an application under
Section 11 of the Act.
Having noted the above factors and inasmuch as we are convinced that Clause
27 is a valid arbitration agreement contained in the MoU dated 17.8.2007,
the appellant was fully entitled to invoke the said agreement and seek for
a reference to the Arbitrator.
In the light of our above conclusion, we hold that the learned Judge having
failed to appreciate the legal position as regards the existence of an
arbitration agreement in the MoU irrespective of the failure of the parties
to reach a full-fledged agreement with respect to the various terms and
conditions contained in the MoU for a joint venture, the said conclusion
and judgment of the learned Judge is liable to be set aside and is
accordingly set aside. Since the respondent has expressed its
disinclination to agree to express its concurrence and thereby the parties
failed to appoint an Arbitrator under the agreed procedure, it is necessary
for this Court to appoint an Arbitrator. Therefore, while setting aside the
judgment impugned in this appeal, we hereby appoint Hon'ble Ms. Justice
Rekha Manharlal Doshit, resident of C-5, 402, Deo Sangam Flat, Guartgam
Road, Near Gandhi Nagar, Gujarat, former Chief Justice of Patna High Court
and former Judge of Gujarat High Court as the sole Arbitrator to adjudicate
the disputes that have arisen between the parties on such terms and
conditions as the sole Arbitrator deems fit and proper. Undoubtedly, the
learned sole Arbitrator shall decide all the disputes arising between the
parties under the MoU, without being influenced by any prima facie opinion
expressed in this order with regard to the respective claims of the
parties.
The Registry is directed to communicate this order to the sole Arbitrator
to enable him to enter upon the reference and decide the matter as
expeditiously as possible.
The appeal stands allowed with the above directions.
.....................................................J.
[Fakkir Mohamed Ibrahim Kalifulla]
.....................................................J.
[Shiva Kirti Singh]
New Delhi;
April 16, 2015