Legal Alert:: Arbitration Agreement Contained in MOU Continues to Exists Even After Termination of MOU-Supreme Court of India
Under Section 16(1), the legislature makes it
clear that while considering any objection with respect to the existence or
validity of the arbitration agreement, the arbitration clause which formed part
of the contract, has to be treated as an agreement independent of the other
terms of the contract. To ensure that there is no misunderstanding, Section
16(1)(b) further provides that even if the arbitral tribunal concludes that the
contract is null and void, it should not result, as a matter of law, in an automatic
invalidation of the arbitration clause. Section 16(1)(a) presumes the existence
of a valid arbitration clause and mandates the same to be treated as an
agreement independent of the other terms of the contract. By virtue of Section
16(1)(b), it continues to be enforceable notwithstanding a declaration of the
contract being null and void.
The
disputes that have arisen between the parties clearly relate to the subject
matter of the relationship between the parties which came into existence
through the MOU. Clearly, therefore, the disputes raised by the petitioner
needs to be referred to arbitration. Under the arbitration clause, a reference
was to be made that the disputes were to be referred to a single arbitrator.
Since the parties have failed to appoint an arbitrator under the agreed
procedure, it is necessary for this Court to appoint the Arbitrator.
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Legal Point Foundation
Deepak Miglani [President]
Dinesh Miglani [Treasurer]
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