An arbitration clause survives the termination of the substantive contract, allowing disputes to be resolved by the arbitrator regardless of the contract's lapse due to time constraints.

ORDER :

K. LAKSHMAN, J.

The present Arbitration Application is filed under Section 11 (5)& (6) of the Arbitration and Conciliation Act, 1996 (hereinafter ‘the Act, 1996’) seeking appointment of a sole arbitrator.

2. Heard Mr. Sunil B. Ganu, learned senior counsel representing Mrs. Manjari S. Ganu, learned counsel for the Applicant and Mr. Avinash Desai, learned senior counsel representing Mr. Vadeendra Joshi, learned counsel for 2^nd Respondent.

3. The Applicant is a developer. The Respondents are the owners of land admeasuring Ac. 2.00 Gts. in Sy. Nos. 9 and 10 situated at Khajaguda Village, Serlingampally Mandal, Rangareddy District (hereinafter ‘subject land’). The parties herein had entered into a Memorandum of Understanding (hereinafter ‘MoU’) dated 01.07.2020. The said MoU was for joint development of the subject land as a real estate project.

4. Under the terms of the MoU, the subject land was to be developed within a period of 48 months and a mutual extension of 12 months was permissible. The Respondents, under the MoU were entitled to 2,10,000 sq. feet of constructed area. Further, the Respondents were to receive Rs. 10 crores as refundable security deposit. Out of the said Rs. 10 crores, Rs. 1 crore was to be paid on the date of the MoU and remaining Rs. 9 crore on or before execution of a development agreement within 30 days of the MoU. The said MoU imposed certain obligations on both the parties. The MoU stated that the Respondents shall provide the relevant title documents and execute ‘transaction documents’ including agreement of sales before 10.07.2020. Likewise, it was provided that the Applicant, in addition to paying the refundable security deposit, shall also execute ‘transaction documents’.

5. Thereafter, an agreement of sale dated 01.07.2020 was executed whereby the Respondents agreed to sell the subject land for a sale consideration of Rs. 80 crores. The said agreement stated that out of the total sale consideration of Rs. 80 crores, the Applicant shall pay Rs. 2 crore on the date of the MoU, Rs. 18 crores within thirty (30) days of the agreement, and the remaining Rs. 60 crores within six (06) months from the date of the agreement which can be further extended by three (03) months.

6. The Applicant claims that the proposed development project required several approvals, permissions, and NOCs which would require significant time. Therefore, according to the Applicant, the parties agreed that the timelines mentioned in the MoU will not be strictly adhered to.

7. The Applicant contends that all the efforts to obtain the relevant approvals were being made. Further, the Applicant claims that it had paid a total of Rs. 13,52,80,000/- as on 01.01.2023. According to the Applicant, despite all its efforts, it had learnt that the Respondents were trying to enter into development agreements with third parties. Therefore, they filed an application under Section 9 of the Act, 1996. The said application was allowed vide order dated 19.08.2024 and a temporary injunction restraining the Respondents from alienating the subject property or creating encumbrances was granted.

8. Thereafter, an arbitration notice dated 10.01.2023 invoking the following clauses in the MoU dated 01.07.2020 and the agreement of sale dated 01.07.2020:

Clause in Memorandum of Understanding dt 1-7-2020 on page 5 reads as under:-

"In case of any conflict with the terms of this Binding Term Sheet shall be mutually resolved through a jointly appointed Arbitrator, whose resolution judgment shall be final and binding between the parties."

The Arbitration