IMPORTANT POINT
Clause in MoU requiring the parties to seek arbitration on failure to amicably settle the dispute or difference concerning or arising from the MoU, its implementation breach or termination whatsoever including any difference or dispute as to the interpretation of any of the terms of the MoU is a standalone arbitration agreement. Even cancellation of the MoU does not affect such agreement.

Judgment

Fakkir Mohamed Ibrahim Kalifulla, J.

1. Leave granted.

2. This appeal is directed against the judgment of the High Court of Judicature of Gujarat at Ahmedabad in Arbitration Petition No. 9/2013 dated 27.9.13/04.10.2013. By the impugned judgment, the learned Single Judge of the High Court dismissed the appellant’s application filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to “Act”).

3. Short facts which are required to be noted are that the appellant and the respondent entered into a Memorandum of Understanding (MoU) on 17.08.2007. Under the said MoU, the appellant proposed to constitute a joint venture along with Chinese Company, namely, “M/s Qing TongXia Aluminium Group Co. Ltd. Ningxia of China (hereinafter referred to as “QTX”) as well as the respondent for setting up an alumina plant of appropriate capacity in the Kutch District of Gujarat. The MoU also records that the Government of Gujarat agreed to encourage and support the proposed joint venture for setting up of the alumina plant. The respondent agreed to supply on priority basis, medium grade Bauxite to the proposed plant from its 10 existing and 18 expected Bauxite mining leases in the Kutch District.

4. The other relevant terms were that the appellant should arrange for the equity participation of the QTX in the proposed joint venture, that the respondent should invest in the equity of the joint venture to the extent determined by the Government of Gujarat but not exceeding 26% while the appellant and the QTX should hold 74% of the equity. The capacity of the proposed plant should be 1.00 million tonnes per annum which may be enhanced subsequently. On the part of the respondent, it should assist the joint venture in obtaining the required land for locating the project. Under Clauses 5, 6, 8, 10 and 11, the quantity of the medium grade Bauxite to be supplied by the respondent, the grade of the Bauxite, the specifications, the rate at which it was to be supplied, the time within which such supply should be effected were all set out which also included a long term agreement for the supply to be entered into.

5. MoU also stipulated certain other conditions by which the appellant was obligated upon to reimburse to the respondent, within 60 days of the signing of the MoU, an amount of Rs.3.94 crores being the direct expenses incurred by the respondent on its Alumina Project and related matter. It is not in dispute that within the stipulated time limit the appellant gave its cheque for the said sum but the respondent did not encash the same. It also provided for the appellant to pay the respondent a further sum of Rs.6.25 crores within 60 days of the execution of the MoU by way of signature bonus apart from providing a bank guarantee to the value of Rs.10 crores for the due observance for the joint venture by the appellant under the various terms and conditions of the MoU within 30 days of the signing of the MoU.

6. Clause 12 of the MoU specifically provided that the rights and privileges were not transferable for a period of five years and the appellant should not exit the project/joint venture for a period of five years after the commencement of commercial production.

7. Under Clause 19, it was stipulated that the MoU was subject to approval of the Board of Directors of the appellant as well as the respondent, that the equity investment and decisions of the respondent should be subject to the concurrence of the Government of Gujarat, while the investment of the appellant should be subject to approval of its shareholders. It was specifically mentioned that both the appellant and the respondent should endeavour to obtain necessary approval within three months from the date of execution of the MoU. It was further specifically mentioned that on getting necessary approval by both sides, the MoU would be converted into an agreement between the appellant and the respondent. Clause 21 contained relevant stipulation to the effect that