Case: Ashapura Mine-Chem Ltd Vs. Gujarat Mineral Devlopment Corporation

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.***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.” 28. 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). 29. 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. 30. 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. 31. 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.32. 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.33. 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.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]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 JudgeMr. 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.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.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.32. 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 thenotice 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.33. 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.