The main legal point established in the judgment is that the language used in arbitration clauses and the intent of the parties are crucial in determining the survival of the arbitration clause when subsequent agreements are executed.

V. Kameswar Rao, J.

Cm. No. 6506/2019 (for exemption)

Exemption allowed subject to all just exceptions.

Application stands disposed of.

CAV No. 130/2019

Learned counsel for the caveator has put in appearance.

Caveat stands discharged.

FAO(OS) 33/2019

1. The challenge in this appeal is to the order dated November 20, 2018 passed by the learned Single Judge in IA 14031/2018 which is an application filed by the appellant herein under Section 8 of the Arbitration & Conciliation Act, 1996 (for short 'Act of 1996').

2. Some of the relevant facts are that the respondent herein had instituted a suit under Order XXXVII of the CPC for recovery of Rs. 11,79,83,525/- pleading that (i) the appellant was the purchaser of land admeasuring 1.7 acres in Block A of Integrated Residential Colony called "Esencia" in the revenue estate of Village Badshapur, Tehsil and District Gurgaon, Haryana; (ii) that the defendant had entered into an agreement with Universal Buildwell Pvt. Ltd. (UBL) to undertake development and construction over the said land of which the UBL failed to perform its part of the agreement; (iii) that the appellant was in the process of finalizing the termination agreement with UBL and was in need of funds, to pay off UBL; (iv) that the appellant had entered into a Memorandum of Understanding (MoU) dated July 12, 2012 with the respondent herein whereunder the respondent had advanced a sum of Rs. 12 Crores to the appellant to enable the appellant pay off UBL and achieve termination of the agreement with UBL and to pay the balance sale consideration to the owners of the land to achieve execution of sale deed of the land in favour of the appellant; (v) that the appellant under the aforesaid MoU has agreed with the respondent and the respondent will carry out work of development and construction of the aforesaid land and proceeds of the sale of built up area / developed land shall be shared by appellant and the respondent in the ratio of 45% and 55% respectively; (vi) that it terms of the MoU if the appellant did not achieve termination of the earlier agreement with UBL within four months from the date of the MoU, the respondent had the option, either to demand refund of the amount of Rs. 12 crores with interest @ 24% per annum, or to extend the time for the appellant to achieve termination of the earlier agreement with UBL; (vii) the appellant failed to terminate the earlier agreement with UBL and on the contrary ratified the earlier agreement with UBL; (viii) a Deed of Cancellation dated April 20, 2013 was entered into between the respondent and the appellant whereunder the parties cancelled the MoU dated July 12, 2012 and it was agreed that the appellant shall refund the entire amount of Rs. 12 crores with interest at the rate of 24% per annum to be calculated from the date of receipt of the said Rs. 12 crores by the appellant, on or before December 31, 2013; (ix) the appellant did not repay the said amount and sought extension from time to time; (x) the appellant has been deducting tax at source at 10% on the interest accrued and has been depositing the same to the credit of the government; (xi) the appellant has made last on account payment of Rs. 1 crore to the respondent on March 27, 2015; and, (xii) as on the date of filing of the suit, a sum of Rs. 11,79,83,525/- was due from the appellant to the respondent.

3. The issue, which fell for consideration before the learned Single Judge was, whether the Deed of Cancellation dated April 20, 2013 between the parties herein contains an arbitration clause. The plea of the counsel for the appellant before the learned Single Judge was that (i) notwithstanding the Deed of Cancellation, the Arbitration Agreement in the MoU dated July 12,2 012 survives; (ii) the obligation of the appellant to pay the amounts aforesaid to the respondent has its origin in the MoU dated July 12, 2012 which contains an Arbitration Agreement and (iii) reliance was placed on the judgment of the House of Lords i