Indian Kanoon - Search engine for Indian Law

5. Whether the arbitration tribunal has no jurisdiction in the matter in view of the execution of the MoU dated 08.10.2015? OPR"

9. The learned arbitrator came to the conclusion that the MoU crystallized the liability of the respondent at ₹132 lakhs, subject to the petitioner handing over the assets and consumables, mentioned in the annexure thereto, to the respondent. Noting that a sum of ₹67,86,200/- was paid by the respondent to the petitioner [which was not disclosed in the statement of claims], the learned arbitrator came to the conclusion that, even upon the petitioner's case that the MoU was not fully complied with, it would not lead to the conclusion that the arbitration clause contained in the 2014 Contract stood revived. As the parties moved from a BoQ/item rate basis of payment in the 2014 Contract to a "cost plus" basis in the MoU, the learned arbitrator found that there could be no question of "revival" of the 2014 Contract, even if the MoU's terms were breached. In coming to this conclusion, he relied upon the judgment of the Supreme Court in Young Achievers vs. IMS Learning Resources Pvt. Ltd. 3 and the judgment of this Court in Ansal Housing & Construction Ltd. vs. Samyak Projects Pvt. Ltd.4 Submissions of learned counsel for the parties

2018 SCC OnLine Del 12866.

2014 Contract, and to "file any legal measures" for this purpose. He further argued that Clause 3 of the MoU contemplated execution of a new contract on cost plus basis, which was not done. Therefore, he submitted that the claims placed before the learned arbitrator were under the 2014 Contract - not under the MoU - and were thus correctly agitated by way of arbitral proceedings. According to Mr. Dholakia, the observations in the impugned award have the effect of taking away the petitioner's right to make claims for its dues and losses under the 2014 Contract, contrary to the express terms of Clause 1(C) of the MoU.

19. The MOU specifically records the words "canceled", ''closed contract", "new contract" indicating intention of the parties to abandon the previous original contract. The MOU further records that a new contract/agreement, would be executed on 'Cost Plus' basis and the second party i.e. the respondent would pay Rs. 150 lakhs in advance under the new contract in installments. The terms recorded in the MOU were to be reflected in the new contract which was to be signed and closed before 15th Oct 2015. It is not in controversy that no such new contract came into existence. The claimant did not divulge as to what steps were taken by it after 15th Oct 2015 to make the respondent abide by his promise to enter into a new contract.

(Emphasis given)

20. Since terms and conditions of the previous original contract were not capable to be performed by the claimant due to various reasons, it led to the, execution of MOU dated 08.10.15; it clearly demonstrates intention of the parties to 'cancel' the previous contract; abide by the terms and conditions of the MOU and thereafter to execute a fresh/new contract. The parties thus had intentionally brought an end to the previous contract. It is inconceivable to infer that the parties intended its revival on failure of the respondent to make the complete payment as described in the MOU. The fact that the MOU did not provide for the survival of arbitration clause, unequivocally indicates that the parties had given up the terms of the old contract including the arbitration clause. The MOU dated 08.10.15 does not whisper about settlement of any dispute arising under the original contract through arbitration. Needless to say execution of MOU is. a pure novation of the original contract by mutual consent of the parties. Settled position is that where a contract containing an arbitration clause is substituted by another contract, the arbitration clause perishes with the original contract unless there is anything in the new contract to show that the parties intended the arbitration clause in the original contract to survive."21