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Tuesday, October 20, 2015

application has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Arbitration Act”) for appointment of an arbitrator to go into the disputes and differences that the petitioner claims to have arisen between the petitioner–Company and the respondents under an Agreement/Memorandum of Understanding dated 17.07.2013.-Whether the petitioner is entitled to performance of the terms of the said MOU dated 17th July, 2013 is the precise dispute between the parties. Therefore, in terms of the arbitration clause contained in the said MOU dated 17th July, 2013, the dispute is liable to be referred to arbitration by appointment of an arbitrator under Section 11(6) of the Arbitration Act. The grounds on which the respondent No.1 seeks to resist the appointment of an arbitrator, namely, that the period contemplated under the MOU dated 4th July, 2013 (one month) within which payment was to be made to the respondent No.1 by the respondent No.2 is over; that clause 12 and clause 19 of the MOU dated 4th July, 2013 had been materially altered by changing the period of payment from one month to three months; and further that the power of attorney was forged by the respondent No.2 are questions that cannot be gone into by the court in exercise of jurisdiction under Section 11(6) of the Arbitration Act. These are matters which can be raised before the learned Arbitrator and answered by the said authority. In this regard, Section 16 of the Arbitration Act may be extracted below. “16. Competence of arbitral tribunal to rule on its jurisdiction.— (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,- (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. (4) The arbitral tribunal may, in either of the cases referred it, in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified. (5) The arbitral tribunal shall decide on a plea referred to in sub section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with die arbitral proceedings and make an arbitral award. (6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.”Consequently and in the light of the above, the court allows the present petition and appoints Shri Justice Mukul Mudgal, Chief Justice (Retd.), Punjab & Haryana High Court, as the Arbitrator.All the disputes including the disputes raised in the present petition are hereby referred to the learned sole Arbitrator. The learned Arbitrator shall be at liberty to fix his own fees/ remuneration/other conditions in consultation with the parties Let this order be communicated to the learned Arbitrator so that the arbitration proceedings can commence and conclude as expeditiously as possible.

                                                              NON-REPORTABLE

                        IN THE SUPREME COURT OF INDIA
                         CIVIL ORIGINAL JURISDICTION
                   ARBITRATION CASE (CIVIL) NO.37 OF 2014

SANGHI BROTHERS (INDORE)
PVT. LTD.                              ...PETITIONER

                       VERSUS

MUKTINATH AIRLINES PRIVATE
LIMITED & ANR.                         ...RESPONDENTS


                               J U D G M E N T


1.          This application has been  filed  under  Section  11(6)  of  the
Arbitration and Conciliation Act,  1996  (hereinafter  referred  to  as  the
“Arbitration Act”) for appointment of an arbitrator to go into the  disputes
and differences that the  petitioner  claims  to  have  arisen  between  the
petitioner–Company and the  respondents  under  an  Agreement/Memorandum  of
Understanding dated 17.07.2013.

2.          According to the petitioner, the  respondent  No.1  -  Muktinath
Airlines Private Limited is the owner of a  Helicopter  Robinson  R44  Raven
II.  The petitioner contends that the respondent No.1 – Company  executed  a
power of attorney dated 20th June, 2013 authorising the  respondent  No.2  –
Galaxy Aviation Incorporation Private Limited to sell the  said  Helicopter.
A Memorandum of Understanding (for short “MOU”) dated  4th  July,  2013  was
entered  into  between  the  respondent  No.1  and   the   respondent   No.2
incorporating the terms for the sale  of  the  Helicopter.   The  petitioner
states that on 17th July, 2013 a MOU was  executed  between  the  petitioner
and  the  respondent  No.1  represented  by  its  power  of  attorney   i.e.
respondent No.2 for sale of the  Helicopter  in  question.   The  price  was
agreed upon and an advance amount of Rs. 5,00,000/- (Five  Lakhs  only)  was
paid by the petitioner to the respondent No. 1.

3.          The petitioner has contended that it was agreed by  and  between
the parties in  the  MOU  dated  17th  July,  2013  that  the  sale  of  the
Helicopter would be completed within two months. The respondents  failed  to
handover  possession  of  the  Helicopter  within  the   aforesaid   period.
According to the petitioner, an addendum to the MOU dated  17th  July,  2013
was executed between the petitioner and the respondent  No.2  for  extension
of time upto 16th December, 2013 for the delivery  of  the  Helicopter.   It
appears that the respondent No.2 demanded a sum  of  Rs.15  lakhs  over  and
above the agreed sale price [Rs.2,04,00,000 (Rupees Two crore  four  lakhs)]
which was responded to by the  petitioner  on  10th  December,  2013,  inter
alia, informing the respondent No.2 of its failure to comply with  clause  4
and clause 13 of the MOU dated 17th July, 2013.  Accordingly,  legal  notice
was  issued  by  the  petitioner  to  the  respondents.  As  the  petitioner
apprehended that the respondents may sell the Helicopter to  a  third  party
it had approached the Delhi High Court by means of a petition under  Section
9 of the Arbitration Act. Accordingly, interim orders  were  passed  by  the
Delhi  High  Court  on  14th  March,  2014.   The  petitioner  invoked   the
arbitration clause (clause 24) of the MOU dated 17th July,  2013  by  notice
dated 13th February, 2014 and as the same had  not  been  responded  to  the
instant petition has been filed.

4.          The respondent No.2 has chosen not to appear before  the  Court.
The respondent No.1, who is represented, has filed an  affidavit  contending
that in terms of MOU dated 4th July, 2013, between the respondents,  it  was
agreed that if the respondent No.2 failed to make payment within  one  month
from the date of the MOU (i.e. 4th July,  2013)  then  the  said  MOU  would
stand terminated.  It was stated that the  respondent  No.2  had  failed  to
make such payment and, therefore, the MOU between the respondents dated  4th
July, 2013 had become non-est in  law.   The  respondent  No.1  has  further
contended that it is not bound by the MOU dated 17th July, 2013  as  it  was
not a party to the same. It is the  further  contention  of  the  respondent
No.1 that the power of attorney was forged by the respondent No.2  and  also
that the  MOU  dated  4th  July,  2013  between  the  respondents  has  been
materially altered in respect of clause 12 and clause  19  thereof  altering
the periods specified in the said clauses from one month to three months.

5.          I have heard the learned counsels for the  parties  and  I  have
considered the submissions advanced. Clause 24 of the MOU dated  17th  July,
2013 which provides for arbitration is in the following terms:

           “24)        This MOU will be governed by the provision of Indian
           Arbitration  and  Conciliation   Act,   1996   and   any   other
           modification   or   re-enactment   thereof.    The   arbitration
           proceedings shall be held in  New  Delhi  and  the  language  of
           arbitration shall be English.”

6.          There is no manner of doubt that the said MOU dated  17th  July,
2013 was executed by and between the petitioner on one hand  and  respondent
No.1 represented by respondent No.2 as its power of attorney holder  on  the
other.  Clearly and evidently, sale  and  purchase  of  the  Helicopter  and
delivery thereof in terms of the aforesaid MOU dated  17th  July,  2013  has
not  materialized  till  date.   Whether  the  petitioner  is  entitled   to
performance of the terms of the said  MOU  dated  17th  July,  2013  is  the
precise  dispute  between  the  parties.   Therefore,  in   terms   of   the
arbitration clause contained in the said MOU  dated  17th  July,  2013,  the
dispute is liable to  be  referred  to  arbitration  by  appointment  of  an
arbitrator under Section 11(6) of the Arbitration Act. The grounds on  which
the respondent No.1 seeks  to  resist  the  appointment  of  an  arbitrator,
namely, that the period contemplated under the  MOU  dated  4th  July,  2013
(one month) within which payment was to be made to the  respondent  No.1  by
the respondent No.2 is over; that clause 12 and clause 19 of the  MOU  dated
4th July, 2013 had  been  materially  altered  by  changing  the  period  of
payment from one month to three  months;  and  further  that  the  power  of
attorney was forged by the respondent No.2  are  questions  that  cannot  be
gone into by the court in exercise of jurisdiction under  Section  11(6)  of
the Arbitration Act. These are  matters  which  can  be  raised  before  the
learned Arbitrator and answered by the  said  authority.   In  this  regard,
Section 16 of the Arbitration Act may be extracted below.
           “16.  Competence  of  arbitral   tribunal   to   rule   on   its
           jurisdiction.—


           (1)    The arbitral tribunal may rule on its own jurisdiction,
                 including ruling on any objections with respect to the
                 existence or validity of the arbitration agreement, and for
                 that purpose,-

                 (a)   an arbitration clause which forms part of a  contract
                      shall be treated as an agreement independent  of  the
                      other terms of the contract; and

                 (b)   a decision by the arbitral tribunal that the contract
                      is null and void  shall  not  entail  ipso  jure  the
                      invalidity of the arbitration clause.

           (2)    A  plea  that  the  arbitral  tribunal  does   not   have
                 jurisdiction shall be raised not later than the  submission
                 of the statement of defence; however, a party shall not  be
                 precluded from raising such a plea merely because  that  he
                 has appointed, or participated in the  appointment  of,  an
                 arbitrator.

           (3)  A plea that the arbitral tribunal is exceeding the scope of
                 its authority shall be raised as soon as the matter alleged
                 to be beyond the scope of its authority  is  raised  during
                 the arbitral proceedings.

           (4)   The arbitral tribunal may, in either of the cases referred
                 it, in sub-section (2) or sub-section (3),  admit  a  later
                 plea if it considers the delay justified.

           (5)   The arbitral tribunal shall decide on a plea  referred  to
                 in sub section  (2)  or  sub-section  (3)  and,  where  the
                 arbitral tribunal takes  a  decision  rejecting  the  plea,
                 continue with die arbitral proceedings and make an arbitral
                 award.

           (6)   A party aggrieved by such an arbitral award  may  make  an
                 application for setting aside such  an  arbitral  award  in
                 accordance with section 34.”


1


7.          Consequently and in the light of the  above,  the  court  allows
the present petition and appoints Shri  Justice Mukul Mudgal, Chief  Justice
(Retd.), Punjab & Haryana High Court, as the Arbitrator.

8.          All the disputes including the disputes raised  in  the  present
petition are hereby referred to the learned sole  Arbitrator.   The  learned
Arbitrator shall be at liberty  to  fix  his  own  fees/  remuneration/other
conditions in consultation with the parties.

9.          Let this order be communicated  to  the  learned  Arbitrator  so
that the arbitration proceedings can commence and conclude as  expeditiously
as possible.

10.         The Arbitration Petition is disposed of accordingly.  No  costs.




                                                ………......................,J.
                                                    (RANJAN GOGOI)

NEW DELHI
OCTOBER 15, 2015




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