The main legal point established in the judgment is the importance of adhering to the settled procedure for appointing the arbitrator as agreed upon by the parties in the MOU, and the lack of merit in the Petitioner's claim for the appointment of a sole arbitrator.

Manmohan Singh, J.

1. By this order I propose to decide the arbitration petition filed under Section 10 and 11(5) & (6) of the Arbitration and Conciliation Act, 1996, praying to make an order of appointment of an independent person as a sole arbitrator for adjudication of the disputes in view of high cost likely to be incurred by referring the claim/dispute to the Arbitral Tribunal or refer it to the Delhi High Court Arbitration Centre for appointment of a sole arbitrator.

2. It was submitted by the learned Counsel for the Petitioner that in view of the high cost involved in the entire dispute resolving mechanism through the constitution of an Arbitral Tribunal of three arbitrators, it would be in the interest of the parties that a sole arbitrator be appointed which was the intention of the parties but could not be agreed to in respect of the choice of the sole arbitrator. It was further submitted that as per the nature of the dispute which involves determination of damages, it is likely to take many hearings leading to high cost of arbitral proceedings and incidental expenses which cannot be borne by the Petitioner.

3. As per the parties, the following are the brief facts:

i. The Petitioner company is carrying on business of real estate and construction etc. The Respondent was desirous of opening one of its retail showrooms in the Mahagun Metro Mall. The Petitioner and Respondent company had entered into an MOU dated 07.08.2007 for the purpose of leasing out the premises by the Petitioner to the Respondent. It is specifically mentioned in the MOU that both the parties shall be bound by the terms and conditions thereof. As per Article III of the MOU, it was specifically provided that if the terms and conditions of the would be breached by the Petitioner company, then the Respondent shall be at liberty to terminate the agreement by giving notice and in the said eventuality, the security deposit (deposited by the Respondent with the Petitioner) shall be refunded by the Petitioner to the Respondent.

ii. The Article X of the MOU deals with the dispute clause.

The same is reproduced below:

Any divergence of opinion or dispute on the interpretation or application of the present MOU shall be resolved amicably by means of consultation or negotiation between the contracting parties.

In the event where the dispute cannot be resolved in the manner aforementioned, the parties will present the dispute to an arbitration tribunal in accordance with the following provisions: each of the parties designate a member and the two designated members will in turn, by consensus, elect a third member, who will act as president of the tribunal of arbitration.

iii. According to the Respondent, the Petitioner had breached various terms and conditions of the MOU and the Respondent terminated the same vide letter dated 11.08.2008 and by reminder letter dated 04.02.2009, the Petitioner was asked to refund the security amount within 15 days. The Petitioner, on the other hand, stated that MOU can only be terminated as per conditions stated in Article III of the MOU. It was also stated that the Petitioner carried out massive alterations and change of design keeping in view that the expense would be recovered through the lease rent and therefore, refused to refund the security deposit.

iv. The Respondent thereafter issued notice under Section 433 and 434 of the Companies Act, 1956 dated 15.04.2009 and demanded payment of Rs. 8,25,000/- from the Petitioner on account of refund of security deposit within 21 days of the receipt of the notice failing which the Respondent will file the petition for liquidation of the Petitioner company.

v. The Petitioner replied to the notice by reply dated 08.05.2009 by stating that the Petitioner had incurred heavy expenses on massive alterations, redesigning and modification of the mall as per the requirements of the Respondent and if the Respondent terminated the MOU, then the Respondent would be liable to damage to the tune of Rs.