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2012 (10) TMI 270 - SC - Indian LawsApplication for appointment of the Arbitrator - Memorandum of Understanding for the marketing of the cars of the petitioner alleged that respondent did not have in place the necessary resources to build the brand of the petitioner termination of contract - plea of the respondent that the MOU relate to a test and trial period which came to an end on 31st December, 2007, after which the parties decided to enter into a distribution agreement which was sent by the petitioner to the respondent on 15th November, 2007, i.e., 15 days prior to the expiry of the MOU. Therefore, the arbitration clause relied upon by the petitioner does not cover any disputes/claims that relate to any period beyond 31st December, 2007 Held that - Section 16(1)(a) of the Arbitration and Conciliation Act, 1996 provides that an arbitration clause which forms part of the contract shall be treated as an agreement independent of the other terms of the contract - even on the termination of the agreement/contract, the arbitration agreement would still survive - disputes raised by the petitioner needs to be referred to arbitration - Since the parties have failed to appoint an arbitrator under the agreed procedure, it is necessary for this Court to appoint the Arbitrator
Issues Involved:
1. Validity and enforceability of the Memorandum of Understanding (MOU). 2. Existence and applicability of the arbitration clause. 3. Extension and termination of the MOU. 4. Jurisdiction of the arbitration tribunal. 5. Appointment of an arbitrator. Detailed Analysis: 1. Validity and Enforceability of the MOU: The petitioner filed an application under Sections 11(4) and (6) of the Arbitration and Conciliation Act, 1996, based on a legally valid and enforceable MOU dated 25th September 2007. The MOU initially covered the marketing of the petitioner's cars and was supposed to be effective until December 2007. However, the term was extended through the acts of the parties, as per Clause 2 of the MOU. 2. Existence and Applicability of the Arbitration Clause: Clause 11 of the MOU provided for arbitration in case of disputes. The petitioner invoked this clause, nominating a sole arbitrator. The respondent contested the applicability of the arbitration clause, arguing that the MOU expired on 31st December 2007 and any disputes arising after this period were not covered by the arbitration clause. The court, however, found that the arbitration clause was broad enough to cover disputes arising at any time in relation to the MOU. 3. Extension and Termination of the MOU: The petitioner claimed that the MOU was extended informally and terminated on 25th September 2009 due to the respondent's failure to build the petitioner's brand effectively. The respondent acknowledged the termination but argued that the MOU had already expired by efflux of time on 31st December 2007. The court found that the MOU was extended beyond its initial term, as evidenced by the continuous supply of cars and ongoing communications between the parties. 4. Jurisdiction of the Arbitration Tribunal: The court examined whether it had the jurisdiction to decide on the existence of a valid arbitration agreement. Citing previous judgments, it concluded that it was within its purview to decide on the validity of the arbitration agreement before appointing an arbitrator. The court found that there was a valid arbitration agreement in Clause 11 of the MOU, which survived the termination of the MOU. 5. Appointment of an Arbitrator: Given the disputes and the failure of the parties to mutually appoint an arbitrator, the court exercised its powers under Section 11(4) and (6) of the Arbitration and Conciliation Act, 1996. The court appointed Hon. Mr. Justice R.V. Raveendran, a former Judge of the Supreme Court of India, as the sole arbitrator to adjudicate the disputes between the parties. The arbitrator was directed to decide all disputes without being influenced by any prima facie opinions expressed in the court's order. Conclusion: The court concluded that the arbitration clause in the MOU was valid and enforceable, covering all disputes arising from the MOU. The MOU was extended beyond its initial term and was validly terminated on 25th September 2009. The court appointed a sole arbitrator to resolve the disputes, ensuring that the arbitration process would proceed as per the terms of the MOU and the Arbitration and Conciliation Act, 1996.
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