THE HON’BLE Ms. JUSTICE G.ROHINI Arbitration Application No.146 of 2010 Date: 18.03.2011 Arbitration Application No. 146 of 2010 Between: M/s. ICIT Software Center Private Limited, Hyderabad …Applicants And M/s. Bio Life Technologies Limited, Hyderabad. …Respondents THE HON’BLE Ms. JUSTICE G.ROHINI Arbitration Application No. 146 of 2010 O R D E R : This application is filed for appointment of an Arbitrator for resolving the disputes arising between the parties out of the Memorandum of Understanding, dated 17.5.2008. Heard the learned counsel for both the parties. The respondent herein had obtained leasehold rights over 15108.60 square yards of land situated in plot No.165 and 166 of Phase V of IDA, Jeedimetla, Hyderabad from M/s A.P. Industrial Infrastructure Corporation. The said leasehold rights were transferred to the applicant company under a Memorandum of Understanding dated 17.05.2008 executed between the applicant and the respondent herein for a total consideration of Rs.7,40,32,140/- @ Rs.4900/- per square yard. As per the agreement, the leasehold rights in relation to 11422.40 square yards should be transferred to the applicant company and the balance 3,678.40 square yards should be transferred to the sister concern of the applicant. It is pleaded that the applicant had accordingly paid a total sum of Rs.1,85,00,000/- by way of cheques towards payment of consideration for transfer of the leasehold rights. M/s. APIIC vide letter dated 02.09.2008 had also confirmed the request and sought payment of transfer fee. However, the respondent did not transfer the physical possession on the ground that the sub-lessee by name M/s. Sumitomo Chemicals Private Limited was in actual physical possession. Despite several requests, the respondent-company was unable to get the said M/s. Sumitomo Chemicals Private Limited evicted from the premises. Since the respondent failed to give peaceful and vacant possession of the property, the applicants were constrained to terminate the Memorandum of Understanding and accordingly, a letter of cancellation dated 20.04.2009 was issued to the respondent. However as the respondent was attempting to alienate the property to third parties, the applicant was constrained to file O.P.No.1228 of 2009 on the file of the Court of the II Additional District Judge, Ranga Reddy District under Section 9 of the Arbitration and Conciliation Act, 1996 seeking recovery of a sum of Rs.1,85,00,000/- along with interest @ 8% per annum as well as a sum of Rs.62,66,760/- + Rs.13,12,800/- being the transfer fee paid to M/s. APIIC along with interest @ 24% per annum. That apart while invoking the arbitration clause under the Memorandum of Understanding, dated 20.04.2009, the applicant got issued a notice dated 26.07.2010. While proposing a panel of Arbitrators, the respondents were called upon to refer the aforesaid disputes to anyone of the arbitrators proposed by the applicant. Having received the said notice, the respondent did not reply. Hence, the present application under Section 11 of the Act. The respondent filed a counter affidavit contending that the applicant is fully responsible to comply with the terms and conditions of the Memorandum of Understanding. It is also alleged that the applicant itself had violated the terms and conditions. It is also contended that the arbitration clause under the agreement cannot be invoked since even according to the applicant, the Memorandum of Understanding stood terminated. I have heard the learned counsel for both the parties. The fact that the both the parties entered into a Memorandum of Understanding is not in dispute. The said Memorandum of Understanding contained an arbitration clause as under: “11. In case of any dispute between the parties arising out of or in connection with the interpretation of any clause of this MOU then the parties shall resolve the same in accordance with the provision of the Arbitration and Conciliation Act, 1996.” It is true that the applicant got the Memorandum of Understanding cancelled by notice dated 20.04.2009. However that does not preclude the applicant to invoke the arbitration clause. In P.Manohar Reddy & Brothers v. Maharashtra Krishna Valley Development Corporation and others[1] it was held by the Supreme Court as under: “An arbitration clause, as is well known, is a part of the contract. It being a collateral term need not, in all situations, perish with coming to an end of the contract. It may survive. This concept of separability of the arbitration clause is now widely accepted. In line with this thinking, the UNCITRAL Model Law on International Commercial Arbitration incorporates the doctrine of separability in Article 16 (1).” I n Branch Manager, Magmaleasing and Finance Limited and another v. Potluri Madhavilata and another[2] it has been reiterated that merely because the contract has come to an end due to breach, the arbitration clause does not perish nor is rendered inoperative; rather it survives for resolution of disputes arising in respect of or with regard to or under the contract. It was also explained in National Agricultural Cooperative Marketing Federation India Ltd., and Gains Trading Ltd.,[3] that an arbitration clause is a collateral term in the contract, which relates to resolution of disputes, and not performance. In the light of the settled legal position, the contention of the respondent that it is not open to the applicant to invoke the arbitration clause cannot be accepted. So far as the merits of the case are concerned, it is not necessary for this Court to express any opinion since it was agreed upon by the parties for resolution of the disputes by way of arbitration. As noticed above, as there is no dispute about the execution of the Memorandum of Understanding which contained an arbitration clause and there is also no dispute as to the jurisdiction of this Court, the application is hereby allowed and Sri Justice R.Ramanujam, a former Judge of this Court, is hereby appointed as the sole Arbitrator for resolving the disputes between the parties. It is open to the learned Arbitrator to fix his fees and the same shall be borne by both parties equally. The Arbitration Application is hereby allowed. No costs. _______________ G. ROHINI, J Date: 18.03.2011 KLP [1] (2009) 2 SCC 494 [2] (2009) 10 SCC 103 [3] (2007) 5 SCC 692