The court upheld that for an arbitration, procedural rules must be correctly adhered to, and a Memorandum of Understanding lacking essential terms does not constitute a concluded contract for specific performance.

JUDGMENT :

Sandeep V. Marne, J.

A. THE CHALLENGE

1. These Appeals are filed by the Appellants challenging the order dated 11 October 2006 passed by the learned Single Judge of this Court allowing Arbitration Petition Nos.114 of 2006 and 119 of 2006 and setting aside the Award dated 21 September 2005 passed by the learned sole Arbitrator. By the Award, claim filed by the Appellants for specific performance of the Memorandum of Understanding was allowed by the Arbitral Tribunal.

B. FACTS

2. A Memorandum of Understanding (MoU) dated 20 July 1994 was executed between the original Respondents and the Appellants under which the original Respondents Mr. Rajendra Acharya and Mr. Nandkishor Acharya agreed to sale their respective undivided shares, right, title and interest in the property situated at Paper Mill Lane, bearing City Survey Nos.1596 and 1597 at Girgaon Division, admeasuring 370 square meters (said property). The Memorandum of Understanding contemplated utilization of the entire FSI in respect of the said property as permitted by the local authorities. The consideration agreed for the transaction was Rs.18,00,000/- payable to the Respondents in equal proportion. On 20 July 1994, the General Power of Attorney was executed by the original Respondents authorizing the Appellants to do various acts, deeds and things for development of the said property and to negotiate with tenants and arrive at arrangements. Between 1994 to 1996 Appellants paid amount of Rs.7,50,000/- to the original Respondents. The Appellants apparently started negotiations with the tenants in January 1996 and were apparently successful in securing consent of two tenants. However, on 4 November 1996 original Respondent No.1 terminated the Memorandum of Understanding on the ground that the second installment of Rs.7,50,000/- was not paid, in addition to raising issues of few other breaches allegedly committed by the Appellants. The Appellants disputed the contents of the said notice vide reply dated 2 December 1996. Respondents issued rejoinder dated 21 January 1997

3. In the above background, original Appellant No.1 referred the dispute to arbitration by addressing a letter dated 1 July 1997 to the nominated Arbitrator Mr. R.C. Sampat. Appellants filed statement of claim in October/November 1997, which was served on the Respondents on 15 November 1997. Original Respondent No.1- Mr. Rajendra Acharya requested the Arbitrator for supply of attested copy of papers and also forwarded a sum of Rs.1,500/- towards Arbitrator fees. In November 1997 Respondent No.1 Mr. Rajendra Acharya filed his written statement before the learned Arbitrator raising various defences. He also filed a Counterclaim seeking recovery of amount of Rs.30,00,000/- for mental agony. The learned Arbitrator proceeded to pass Award dated 1 April 1998 awarding the claim in favour of the Appellants. Respondents challenged the Award dated 1 April 1998 by filing Arbitration Petition No.225 of 1998. By order dated 28 September 1998 passed by this Court, the Award was set aside on the ground that notice of closure of arbitration proceedings was not given to the Respondents. The original records were sent back by this Court to the learned Arbitrator. Appellants approached the Arbitrator Mr. R.C. Sampat, who proceeded to fix date of hearing in arbitration proceedings vide letter dated 31 October 1998. One of the Respondents objected to continuation of the learned Arbitrator vide letter dated 4 December 1998 alleging that he was biased against the Respondents. By another letter of 7 December 1998 objection to continuation of Mr. Sampat as arbitrator was rais