Case Note & Summary
The petitioner, M/s. Devike Constructions and Developers Pvt. Ltd., filed a petition under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator to adjudicate disputes arising out of a Memorandum of Understanding (MOU) dated 16 June 2011. The petitioner is a company engaged in construction and land development, while the respondent, Dilip Vengsarkar Foundation, is a public trust registered under the Bombay Public Trust Act, 1950. The Pimpri-Chinchwad Municipal Corporation (PCMC) had vested certain rights in land bearing Survey No.09(Part) admeasuring approximately 2.56 Hectares at village Theargaon, Pune for a period of 30 years in the Trust, permitting it to construct a playground and run a Cricket Academy. The MOU was executed between the respondent Trust and one Shri. Dhanraj Keshrimal Sonigara, referred to as 'Promoter', for the development of the playground and Cricket Academy through a special purpose entity named 'DV Gymkhana and Clubhouse' (DVGC). The petitioner claimed to be the assignee of the promoter. Disputes arose between the parties, and the petitioner invoked the arbitration clause in the MOU. The respondent opposed the appointment, contending that the MOU was not a binding contract as the special purpose entity was never formed, and that the arbitration clause was not applicable. The court examined the MOU and found that it contained a clear arbitration clause. The court held that the MOU was a binding contract between the parties, and the arbitration clause was valid and enforceable. The court rejected the respondent's argument that the MOU was only an agreement to agree, noting that the parties had acted upon the MOU. The court also held that the non-formation of the special purpose entity did not render the MOU void or the arbitration clause inoperative. Accordingly, the court allowed the petition and appointed a sole arbitrator to adjudicate the disputes between the parties.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11 of Arbitration and Conciliation Act, 1996 - Existence of Arbitration Agreement - The court examined whether the MOU dated 16 June 2011 contained a valid arbitration clause. The respondent argued that the MOU was not binding as the special purpose entity was not formed. The court held that the arbitration clause in the MOU is binding and the dispute falls within its ambit, as the MOU was executed between the parties and the arbitration clause is clear and unambiguous. (Paras 1-17) B) Arbitration Law - Binding Nature of MOU - Section 7 of Arbitration and Conciliation Act, 1996 - The court considered whether the MOU was a concluded contract. The respondent contended that the MOU was only an agreement to agree. The court held that the MOU is a binding contract as it contains essential terms and the parties acted upon it, and the arbitration clause is part of that contract. (Paras 18-25) C) Arbitration Law - Reference to Arbitration - Section 11 of Arbitration and Conciliation Act, 1996 - The court addressed the issue of whether the dispute is arbitrable. The petitioner sought appointment of an arbitrator for disputes arising from the MOU. The court held that the disputes are arbitrable and appointed a sole arbitrator to adjudicate the same. (Paras 26-30)
Issue of Consideration
Whether the MOU dated 16 June 2011 contains an arbitration agreement binding the parties, and whether the petitioner is entitled to appointment of an arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.
Final Decision
The petition is allowed. A sole arbitrator is appointed to adjudicate the disputes between the parties arising out of the MOU dated 16 June 2011.
Law Points
- Arbitration agreement
- existence and validity
- Section 11 of Arbitration and Conciliation Act
- 1996
- MOU
- binding nature
- non-formation of special purpose entity
- reference to arbitration
