2012 (10) TMI 270 - SC - Indian Laws

Court upholds validity of MOU and arbitration clause, appoints arbitrator under Arbitration Act

Reva Electric Car Co. (P) Ltd. Versus Green Mobil

Reva Electric Car Co. (P) Ltd. Versus Green Mobil - 2012 (2) SCC 93, 2012 AIR 739 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.