2007 (7) TMI 708 - HC - Indian Laws

Summary

Issues Involved:
1. Existence of a binding contract.
2. Validity of invoking Section 9 of the Arbitration and Conciliation Act, 1996.
3. Refund of the earnest money deposit.

Summary:

Existence of a Binding Contract:
The petitioners invoked Section 9 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) based on an initialled draft of a Memorandum of Understanding (MOU). The petitioners claimed that their offer was accepted on 7th August 2005, and subsequent communications and actions indicated a binding contract. However, the court noted that there was no signed MOU executed between the parties. The initialled draft MOU was subject to further approval and signature by the society's members. The court found it difficult to accept the petitioners' contention of a valid contract, as the MOU required circulation among members for final approval, and substantive issues were still being raised by the society members. Therefore, the court concluded that there was no binding contract executed between the parties.

Validity of Invoking Section 9 of the Arbitration and Conciliation Act, 1996:
The court observed that there was no agreement for arbitration in the correspondences or the draft MOU. The petitioners' reliance on Firm Ashok Traders and Anr. v. Gurumukh Das Saluja and Ors. was deemed inapplicable as there was no concluded contract or arbitration agreement in the present case. The court held that in the absence of a binding contract, the petitioners were not entitled to invoke Section 9 of the Arbitration Act. The court also noted that the petitioners had already filed an application u/s 11 of the Arbitration Act for the appointment of an arbitrator, but at this stage, there was no binding contract or arbitration clause to invoke Section 9.

Refund of the Earnest Money Deposit:
The petitioners had deposited Rs. 2 crores with the respondents-society, which was contended to be earnest money and security. The court noted that the amount was deposited in the respondent's account and was agreed to be adjusted or refunded if the parties could not proceed with the agreement. Since the draft MOU was not settled or approved, the respondents refunded the amount. The court found no reason to accept the petitioners' claim that the amount was consideration paid based on the MOU.

Conclusion:
The court dismissed the petition, stating that there was no binding agreement between the parties and no arbitration clause to invoke Section 9 of the Arbitration Act. The interim orders were vacated, and no order as to costs was made.