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SUPREME COURT OF INDIA
SURINDER SINGH NIJJAR, JJ.
M/S. REVA ELECTRIC CAR CO. P. LTD. - Petitioner
VERSUS
M/S. GREEN MOBIL - Respondent
Arbitration Petition No.18 of 2010-
Decided on 25-11-2011.
(a) Arbitration and Conciliation Act, 1996 – Section 11 – Existence of arbitration clause is a jurisdictional fact and a preliminary issue – Court has to decide this issue for making an order u/s 11. (Para 18, 19)
(2005) 8 SCC 618; (2009) 1 SCC 267 – Relied upon
(b) Arbitration and Conciliation Act, 1996 – Section 11 – Disputes relate to the MOU – Disputes arising in relation to termination of MOU and the consequences thereof – Arbitration clause not limited to the initial period of the MOU but also its extended period – Whether the claims fall within the arbitration clause – Matter to be decided by the arbitrator – Merits of the claims also to be decided by arbitrator. (Para 27, 30)
(2008) 1 SCC 503 – Relied upon
(c) Arbitration and Conciliation Act, 1996 – Section 7 and 16(1)(a) – An arbitration clause forming part of the contract is an agreement independent of the other terms of the contract – MOU containing arbitration clause – Even if MOU is terminated, arbitration clause survives. (Para 31, 33)
(2008) 16 SCC 774 – Relied upon
(2009) 2 SCC 600 – Referred
Facts of the case:
This is a case u/s 11(4) and (6) of the Arbitration and Conciliation Act, 1996 for appointment of arbitrator.
Finding of the Court:
There is a valid arbitration agreement between the parties and the Court is competent to appoint a sole arbitrator.
Result: Application disposed of. Arbitrator appointed.
Key Points: - Parties entered into MOU dated 25.09.2007 for marketing cars, with initial term till Dec 2007, extended by petitioner's acts under Clause 2, terminated on 25.09.2009 (!) [1000510900001] (!) (!) - Disputes arose post-termination regarding claims/counter-claims, covered by Clause 11 arbitration clause for disputes at any time relating to the MOU (!) [1000510900004] (!) (!) - Court under Section 11 must decide existence of valid arbitration agreement as jurisdictional fact; here, valid MOU and Clause 11 confirmed (!) (!) (!) (!) - Disputes relate to MOU termination and consequences, to be decided by arbitrator, not court; merits and scope under clause left to tribunal (!) (!) (!) (!) - Arbitration clause independent of other contract terms per Section 16(1)(a); survives even if MOU terminated or void (!) (!) (!) (!) (!) - Respondent's Brussels suit claims pertain to MOU period and termination, acknowledging contractual relationship till 25.09.2009 [1000510900003] (!) (!) (!) - No fresh agreement executed post-MOU; continued performance extended MOU terms (!) [1000510900010] (!) - Court appointed Hon. Mr. Justice R.V. Raveendran (Retd.) as Sole Arbitrator under Section 11(4) & (6) (!) - Relied on precedents: SBP & Co. (2005)8 SCC 618 for Section 11 scope; Bharat Petroleum (2008)1 SCC 503 for extended contracts (!) (!)
ORDER
Surinder Singh Nijjar, J.-The petitioner has filed the present application under Sections 11(4) and (6) of the Arbitration and Conciliation Act, 1996 read with paragraph 2 of the Appointment of the Arbitrators by the Chief Justice of India Scheme, 1996. It is stated that the parties had entered into a legally valid and enforceable Memorandum of Understanding (`MOU') dated 25th September, 2007, providing, inter alia, for the respective obligation of both the parties in connection with the marketing of the cars of the petitioner. Though the term of the MOU was till December, 2007, it was extended by the acts of the parties in terms of Clause 2 of the MOU.
2. The petitioner makes a reference to various requests made by the respondent for supply of cars in terms of MOU on 22nd April, 2008; 24th August, 2008; and 1st April, 2009. The petitioner further claims that some time in September 2009, disputes arose between the parties. Numerous e-mails were exchanged between the parties, apart from the personal discussions between their representatives, touching and covering the disputes. It is the petitioner's claim that during the term of MOU, merely 15 cars of the petitioner had been sold in the Belgium Region. The petitioner, therefore, claimed that the respondent did not have in place the necessary resources to build the brand of the petitioner. Consequently, through e-mail dated 25th September, 2009 the petitioner requested the respondent to immediately cease sales and marketing activities on its behalf and take necessary steps of providing after sales and service to existing car owners, till such time the petitioner appointed its new distributor. The petitioner claims that the aforesaid e-mail duly constituted the termination of the contractual relationship between the parties as covered under the MOU.
3. As a consequence of the aforesaid termination, the parties have exchanged various e-mails raising claims and counter claims on 6th /7th /8th October, 2009.
4. The petitioner further claims to have received a Writ of Summons dated 14th January, 2010 of legal proceedings initiated by the respondent in Belgium before the First Divisional Court, Room A of the Commercial Court in Brussels. According to the petitioner, the claims made by the respondent before the Commercial Court, Brussels disclose that the respondent instituted the legal proceedings inter alia claiming damages from the petitioner on account of termination of the MOU dated 25th September, 2007. On 15th March, 2010, the counsel for the respondent sent an e-mail communication that the respondent was willing to negotiate a global settlement with the petitioner and that the respondent through its counsel would be available to discuss any such proposal. According to the petitioner, the aforesaid communication also acknowledges the fact that the rights and obligation of both the parties were covered by the distributorship agreement, i.e. the MOU, which stood duly terminated.
5. The petitioner thereafter issued a notice dated 24th March, 2010 through its counsel in terms of Clause 11 of the MOU invoking arbitration under the MOU and referring all disputes between the parties to arbitration. The petitioner in fact nominated Mr. Justice Jayasimha Babu (Retired) as the Sole Arbitrator, and failing confirmation by the respondent, as the arbitrator of the petitioner on the three member Arbitral Tribunal to be constituted in terms of Clause 11.
6. The respondent through its counsel sent a reply to the notice dated 7th April, 2010 denying existence of any contractual relationship between the parties on the date of termination of MOU on 25th September, 2009.
7. The petitioner, therefore, filed Arbitration Application No.576 of 2010 under Section 9 of the Arbitration and Conciliation Act, 1996 before the Court of the Principal City Civil & Sessions Judge at Bangalore praying for an order of injunction restraining the respondent from proceeding with the legal proceedings initiated
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