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1 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

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2 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

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3 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

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4 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

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5 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

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6 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

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7 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.”

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

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8 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