The court ruled that allegations of fraud do not negate the enforceability of an arbitration agreement, which operates independently from the underlying contract.

JUDGMENT

[VIA VIDEO CONFERENCING]

Sanjeev Narula, J. The present petition under Section 11 of the Arbitration and Conciliation Act, 1996 [hereinafter, `the Act'], seeks appointment of a Sole Arbitrator. Vide order dated 8th February, 2021, the Respondent [hereinafter, `MSD'] was called upon to file a reply to the petition. No reply had been filed till the next date of hearing, i.e. 8th April, 2021, and further time was sought in this regard. At that stage, after hearing the counsel for the Petitioner [hereinafter, `IMZ'] as well as the learned senior counsel for MSD at considerable length on objections to the petition, the Court had proceeded to decide the case and dictated the order in open court, wherein the present petition was being disposed of.

2. However, upon a closer scrutiny of facts, the matter was directed to be listed for further arguments on 27th April, 2021 on the aspect of payment of insufficient/nil stamp duty and impounding of the MoU executed between the parties, which contains the arbitration clause. Prior to the said hearing, MSD filed its reply to the petition on 19th April, 2021. Thus, the objections raised by MSD's counsel during the hearings, as well those pleaded in the reply, have been taken into consideration herein.

BRIEF FACTS:

3. The factual background leading to the filing of the present petition is that the parties entered into a Memorandum of Understanding on 1st January, 2020 [hereinafter, `MoU'] with the objective of promoting their respective business interests and profitability. The MoU contains an arbitration clause which reads as under:

"3.7 Governing Law and Dispute Resolution:

i. This Agreement shall be governed by and interpreted in accordance with laws of India.

ii. All disputes and differences, arising out of or in connection with this Agreement shall be attempted to be resolved mutually through negotiations between the Parties falling which the same shall be referred and decided by a sole Arbitrator to be appointed by the Parties. The decision of the Arbitrator shall be final and binding on the parties. The provisions of Arbitration and Reconciliation Act 1996 shall be applicable to such arbitration proceedings.

iii. That the venue of arbitration shall be at New Delhi."

CONTENTIONS OF THE PARTIES:

4. According to IMZ, Clause 2.4 of the MoU provided that both the parties agree that they shall not attempt to solicit, contact or attempt to contact employees of each other, as mentioned in the Annexure C and D of the MoU, for the purpose of offering employment. It was contended that disputes have arisen as MSD has breached its obligations under the said clause. On 28th May, 2020, Mr. Siddharth Kasana, director of MSD, failed to acquire the shares of Mr. Ashmeet Singh, director of IMZ, under a Buyout Agreement. Thereafter, MSD indulged in various criminal activities which violate the terms of the MoU, such as tampering the servers of IMZ, forcibly gaining access to the computer database and electronic records of IMZ, sending emails to clients of IMZ including Bihar State Food Corporation (BSFC) and two others, and making false allegations against the directors and employees of IMZ.

5. Thus aggrieved, IMZ invoked arbitration vide notice dated 4th July, 2020 and also sent a request to the Delhi International Arbitration Centre (DIAC) for appointment of an arbitrator. Even the DIAC sent a notice to MSD regarding the same. However, on account of no response from MSD, IMZ has approached this Court by way of the present petition.

6. Mr. Devadutt Kamat, learned Senior Counsel for MSD, on the other hand, controverted the contentions of IMZ. He opposed th