M GOPAL OF BANGALORE Vs. PRERANA A THAKORE
LAWS(BOM)-2007-6-268
HIGH COURT OF BOMBAY
Decided on June 21,2007

M Gopal Of Bangalore Appellant
VERSUS
Prerana A Thakore Respondents


Referred Judgements :-

INDIA HOUSEHOLD AND HEALTHCARE LTD. VS. LG HOUSEHOLD AND HEALTHCARE LTD. [REFERRED]
S P CHENGALVARAYA NAIDU VS. JAGANNATH [REFERRED]
S B P AND CO VS. PATEL ENGINEERING LTD [REFERRED]


JUDGEMENT

- (1.)The applicant claimed that he was involved in industrial and consultancy activities. The respondent is a major promoter/shareholder of the Companies operating under the names and style of M/s. Jayant Vitamins Limited and M/s. Rutvij Chemicals Limited. In terms of the order of the High Court of Bombay, both these concerns had to shut down their activities and cease all operations. With the hope of reviving the Companies, the respondent executed a special power of attorney dated 7th July, 2005 authorizing the applicant to appear and represent the respondent before any Bank for the purpose of ascertaining the terms of negotiated settlement in respect of its liabilities towards the said financial institutions. On 3rd December, 2005, a Memorandum of Understanding (hereinafter referred to as "the MoU") was executed between the parties for revival of these companies. Clause 10 of the MoU provided for resolution of disputes by appointment of a sole Arbitrator in accordance with the terms and conditions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act" for short). Clause 10 of the MoU reads as under:
" That in case of any disputes under this agreement the parties shall refer the dispute to a sole Arbitrator as per the provisions of the Arbitration Act, 1996 or such substituted Act as may be applicable at Mumbai".

A clarification to the above MoU was executed between the parties on 20th January, 2006. Pursuant thereto, the applicant had initiated necessary steps in furtherance to the said agreement and had spent lot of money and time and claims to have put in his best efforts to revive the said Companies.

(2.)All of a sudden, the respondent, without any reasonable cause, issued a notice dated 19th September, 2006 , to the applicant unilaterally cancelling and terminating the said MoU. It is the case of the applicant that vide letter dated 25th September, 2006, the applicant pointed out to the respondent that there was no provision for terminating the agreement between the parties and action of the respondent was totally unilateral and impermissible. One of the instances given by the applicant to show that the MoU was acted upon and the applicant had spent lot of money and put more efforts, which was appreciated was that the applicant had filed a suit wherein Notice of Motion No. 676 of 2006 was taken out which is pending in the Bombay High Court. According to the applicant, there is wrongful and unilateral termination of the MoU and that this termination had given rise to disputes between the parties in regard to the MoU. Despite notice, the respondent failed to withdraw the notice dated 19th September, 2006, and did not carry out her obligation under the MoU. This resulted in issuance of a noticecumrequest by the applicant to the respondent on 10th October, 2006, to concur with the appointment of a sole arbitrator amongst the list of arbitrators mentioned therein to resolve the disputes and/or differences. Despite receipt of the said notice on 12th October, 2006, at ExhibitE, the respondent failed to respond, resulting in filing of the present application.
(3.)In fact, in the letter dated 9th October, 2006, written by the respondent to the applicant, false and baseless allegations were also made which itself became a dispute. In the affidavitinreply filed by the respondent, no dispute has been raised with regard to the existence of the arbitration agreement. The sole ground taken is that the agreement itself was terminated and once the agreement was terminated nothing survived and there existed no dispute which could be referred for adjudication to the sole arbitrator as claimed by the applicant. According to the respondent, the disputes are not arbitrable and as the applicant had failed to meet the threshold conditions for the commencement of the memorandum of understanding, no issue or dispute can be held to be arbitrable. While relying upon the judgment of the Supreme Court in the case of S.P. Chengalvaraya Naidu (dead) by L.Rs. vs. Jagannath (dead) by L.Rs and others, 1994 AIR(SC) 853, the contention raised was that such a petition should be thrown out at the very outset as the applicant had withheld an important document. There is no dispute that the MoU was executed between the parties but the letter of termination dated 19th September, 2006, had put an end to the matter and much water had flown in the matter and having granted ample opportunity of nine months for the applicant to produce results and as nothing happened, the MoU was terminated.


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