The Delhi High Court opined that the issue related to whether the dispute arose from the MoU or the Letter of intent can be looked into by the Arbitrator as according to Section 16 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “A&C Act”), the Arbitrator can decide his jurisdiction. The present case was not one where it was alleged that no arbitration clause existed between the parties.
Further, it was ruled that if the Memorandum of Understanding (“MoU”) and Letter of Intent are found to be 2 independent contracts, then also the Arbitration clause in MoU would be given effect.
Brief Facts:
The present petition has been preferred under Section 11 of the A&C Act to seek the appointment of an arbitrator.
Brief Background:
As per the petition, the Petitioner’s bid was accepted by the Oil and Natural Gas Corporation (“ONGC”), due to which the Parties entered into a MoU for the execution of the work under a Tender granted by the ONGC. Per the MoU, the Respondent had to act like a technical collaborator and make technical expertise available to the Petitioner.
The MoU contained an arbitration clause as per which the arbitration was to be conducted by 3 arbitrators.
Further, due to the MoU, the parties entered into a contract and thereafter, a letter of intent was executed for declaring the operation of the project.
It was alleged that the Respondent delayed the execution of the work as proper documents were not submitted. Due to the delay caused on part of the Respondent, ONGC issued a notice to the Petitioner and later, terminated the contract.
Hence, the Petitioner claimed the repayment of money paid and losses incurred. For this, the Petitioner invoked Arbitration and even recommended a panel of 3 arbitrators, however, the Respondent chose not to reply.
Therefore, the present petition.
Contentions of the Petitioner:
It was submitted that a fresh notice of invocation was issued to the Respondent as the earlier one was not in accordance with the MoU. Again, a panel of arbitrators was suggested, However, the Respondent did not give consent to refer the dispute to Arbitration.
It was argued that as per Section 11(6) of the A&C Act, the Court only has to examine the existence of an Arbitration agreement and the Respondent has admitted the arbitration agreement’s existence.
Contentions of the Respondent:
It was argued that the purpose of the MoU was only for submitting bids towards the Tender. Further, the letter of intent was independently issued by the Respondent and therefore, should be seen as an independent agreement, devoid of any arbitration clause.
It was argued that the disputes have arisen from the letter of intent and not the MoU; hence, there can be no arbitration. It was also contended that the dispute pertains to unsigned and unexecuted MoU. Therefore, there was no arbitration clause as such between the parties.
Observations of the Court:
It was noted that the present proceedings were the second round of litigation between the parties.
The Bench opined that the Arbitrator can decide whether the dispute arose from the MoU or the Letter of intent. According to Section 16, the Arbitrator can decide his jurisdiction. The present case was not one where it was alleged that no arbitration clause existed between the parties.
Further, it was ruled that if the contention of the Respondent that the dispute relates to the Letter of Intent which had no arbitration clause was not substantiated, then the dispute would necessarily have to be decided via arbitration. If the MoU and Letter of Intent are found to be 2 independent contracts, then also the Arbitration clause in MoU would be given effect.
The decision of the Court:
The High Court appointed an Arbitrator for adjudication of disputes and accordingly, the petition was disposed of.
Case Title: Newton Engineering and Chemicals Limited v. UEM India Private Limited
Coram:Hon’ble Mr. Justice V. Kameswar Rao
Case No.:Arb. P. 95/2022
Advocates for Petitioner: Advs. Mr. Akash Nagar, Ms. Ruchi Bhargarh Nagar, Mr. Samarpit Chauhan, Ms. Akanksha Chauhan
Advocates for Respondent:Advs. Mr. Kirti Uppal, Mr. Debopriyo Maulik, Ms. Riya Gulati
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