1 arb165.10.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGNAL CIVIL JURISDICTION ARBITRATION APPLICATION NO. 165 OF 2010 M/s Heritage Enterprises ....Applicant. versus Apsara Co-operative Housing Society Ltd. ....Respondent Mr. S.A. Oak i/by Mahesh Menon & Co. for the Applicant. Mr. Vaibhav Karnik I/by Ms. Kamini S. Ahuja for the Respondent. CORAM : DR.D.Y.CHANDRACHUD, J 19 November 2010. P.C. : 1. This is an application under section 11(6) of the Arbitration and Conciliation Act, 1996. On 30th April, 2008 a Memorandum of Understanding (MOU) was entered into between the applicant and respondent, under which the respondent granted to the applicant development rights to construct on the property of the respondent a new building on the terms and conditions as set out in the MOU. Clause 47 of the MOU contains a provision for arbitration in the following terms: All disputes and differences between the parties “ hereto in connection with or arising out of this Mou including the interpretation of any term or condition hereof either during the subsistence of this Mou or subsequent thereto, shall be referred to arbitration which shall be governed by the provisions of the Arbitration and 2 arb165.10.sxw Conciliation Act, 1996 or its statutory modifications for the time being in force. The Arbitration shall be held in Mumbai and the Courts of Mumbai shall alone have jurisdiction in the matter. " 2. The contention of the applicant is that the respondent failed to take steps to perform its obligations under the MOU, upon which the applicant issued a letter on 21st May, 2009 through its advocate. By a notice dated 29th June, 2010 the applicant invoked arbitration and purported to nominate a sole arbitrator. 3. An affidavit in reply has been filed by the respondent. The respondent is a Co-operative Housing society. The respondent has stated that in or about 2007 it decided to undertake the redevelopment of its building and several quotations were received. A Special General Body Meeting was held on 11th November, 2007. On 18th February, 2008 the respondent issued a letter of intent to the applicant. On 30th April, 2008 an MOU was entered into between the parties. In May, 2008 the applicant forwarded drafts of a development agreement, power of attorney and affidavits to the respondent. On 5th July, 2008 the respondent raised certain queries. The applicant responded by a letter dated 7th July 2008. According to the respondent, the applicant refused to accede to the request made by respondent, including on the validity and subsistence of the Bank Guarantee and on penal consequences for a delay in construction. Meantime, on 20th March, 2009 the Deputy Registrar of Co-operative Societies required elections to be held of the Society. The applicant addressed a notice under section 164 of the Maharashtra Co-operative Societies Act, 1960 stating that a dispute had arisen upon the refusal 3 arb165.10.sxw of the respondent to issue a no objection certificate or to execute a development agreement. On 24th May, 2009 a new Managing Committee was constituted. On 31st May, 2009 the Co-operative Housing Society cancelled and terminated the MOU. The respondent informed the Deputy Registrar on 2nd July, 2009 of the cancellation of the MOU and on 21st July, 2009 the Deputy Registrar declined the request of the applicant on his application made under section 164. On 21st July, 2009 the Deputy Registrar directed the respondent to abide by the guidelines issued by the State Government in matters of redevelopment. On 9th August, 2009 at an Annual General Meeting the respondent decided to black-list the applicant. 4. At the hearing of the application, the defence that has been raised by the respondent is that before an application under Section 11(6) can be allowed, the Designated Judge must come to the conclusion that there is an arbitrable dispute. In the present case, it was urged that no dispute subsists, since the agreement has been terminated by the respondent. 5. There is no merit in the submission which has been urged by the respondent. The fact that the MOU was entered into between the parties is not disputed, nor is it in dispute that the MOU contains an arbitration agreement in clause 47. Evidently, disputes have arisen between the parties as a result of which the respondent terminated the MOU on 31st May, 2009. The applicant has contended that the respondent failed to comply with its obligations under the MOU; whereas, according to the respondent, it was the applicant who was in default as a result of which the MOU has been terminated. At this 4 arb165.10.sxw stage, in an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, the Court is not called upon to evaluate the merits of the rival contentions. What is relevant at this stage is whether there is an arbitration agreement, whether disputes have arisen between the parties and whether this Court has jurisdiction to entertain the application. As already noted earlier there is an arbitration agreement. Section 16(1)(a) of the Arbitration and Conciliation Act, 1996 provides that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. As a matter of fact, even a decision of the Arbitral Tribunal that the contract is null and void does not ipso jure entail the invalidity of the Arbitration clause. The submission that upon the termination of the agreement, there can be no valid arbitration agreement or subsisting dispute must therefore, be rejected. There are evidently disputes between the parties. This Court has jurisdiction to entertain the arbitration application. Hence, under section 11(6) of the Arbitration and Conciliation Act, 1996, the Arbitral Tribunal would have to be constituted in accordance with clause 47 of the MOU. 6. Hon'ble Shri Justice A.V. Savant, former Judge of this Court and former Chief Justice of the Kerala High Court is appointed as Sole Arbitrator. 7. Before concluding it is necessary to record that all the observations contained in the present order are confined to the disposal of the application under Section 11(6) of the Arbitration and Conciliation Act 1996 and nothing contained in this order would be 5 arb165.10.sxw construed as the expression of any opinion by the Court on the merits of the rival contentions in dispute, which should be addressed during the course of the arbitral proceedings. 8. The arbitration application is accordingly disposed of. 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.)