Ashapura Mine-Chem Ltd vs Gujarat Mineral Devlopment ...

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.

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.

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.

April 16, 2015