M/S. REVA ELECTRIC CAR CO. P. LTD.versusM/S. GREEN MOBIL

                 (2011) 13 (ADDL.) S.C.R. 359


          M/S. REVA ELECTRIC CAR CO. P. LTD.                           A
                                 v.
                      M/S. GREEN MOBIL
              (Arbitration Petition No.18 of 2010)
                     NOVEMBER 25, 2011.
                                                                       B
               [SURINDER SINGH NIJJAR, J]

     ARBITRATION AND CONCILIATION ACT, 1996:

      s.11 (4), (5), (6) and 9 - Decision as to existence of a valid   c
arbitration - HELD: It is for Chief Justice of India/his designate
to decide about the existence of a valid arbitration agreement
- In the instant case, the MOU contained an arbitration clause,
and there existed a valid arbitration agreement - The contract
existed till the date of its termination - Therefore, it cannot        0
be said that the disputes arising between the parties cannot
be referred to Arbitral Tribunal - The disputes have arisen in
relation to the termination of the MOU and the consequences
thereof - Such disputes would be clearly covered under the
arbitration clause - Clearly, therefore, the disputes raised bx        E
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 to appoint an arbitrator- In exercise
of powers u/s 11 (4) and (6) of the Act, read with Paragraph 2         F
of the Scheme of 1996, arbitrator is appointed to adjudicate
the disputes that have arisen between the parties -
Appointment of the Arbitrators by the Chief Justice of India
Scheme, 1996 - Para 2.
                                                                       G
    s.16(1)(a) - Arbitration agreement - Scope of - HELD:
Section 16(1)(a) provides that an arbitration clause which
forms part of the contract shall be treated as an agreement
independent of the other terms of the contract - Even on the
                             359                                       H
    360   SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A termination of the contract, the arbitration agreement would
  still survive - By virtue of s.16(1)(b), it continues to be
  enforceable notwithstanding a declaration of the contract
  being null and void - In view of the provisions contained in s.
  16(1) of the Act, it cannot be said that with the termination of
B the MOU, the arbitration clause would also cease to exist.

           The petitioner filed the instant application for
      appointment of arbitrators stating that memos of
      understanding (MOU) were entered· into between the
      parties on 25.9.2007, 22.4.2008, 24.8.2008 and 1.4.2009 for
  C supply of cars to the respondent to be sold in Belgium
    · Region. However, as the respondent did not have the
      necessary resources to build up the brand of the
      petitioner, the latter through e-mail dated 25.9.2009
      terminated the contract and asked the respondent to
  D immediately cease the sales and marketing activities on
      its behalf. The petitioner stated to have received a Writ
      of Summons dated 14.1.2010 of legal proceedings
      initiated by the respondent in the Commercial Court at
      Brussels in Belgium claiming damages on ac:count of
  E termination of fhe MOU dated 25.9.2007. The petitioner
      thereafter issued' a notice dated 24.3.2010 to the
      respondent invoking the arbitration clause of the MOU.
      The respondent in its reply dated 7 .4.2010 denied
      existence of any contractual relationship between the
· F parties on the date of termination of MOU on 25.9.2009.
      The petitioner filed an arbitration application uls 9 of the
      Arbitration and Conciliation Act 1996 before_the Court of
      Principal· City Civil and Sessions Judge, Bangalore
      praying for an order of injunction restraining the
  G respondent from proceeding with the legal proceedings
      in the Commercial Court at Brussels, Belgium. The
      petitioner was granted a of temporary injunction.
      Thereafter the petitioner filed the instant application.

        The stand of the respondent was that the MOU dated
 H 25.9.2007 expired on 31.12.2007, as it related to the "Test
REVA ELECTRIC CAR CO. P. LTD. v. GREEN MOBIL 361


and Trial period" which came to end on 31.12.2007 after          A
which the parties decided to enter into a distribution
agreement which was sent by the petitioner to the
respondent on 15.11.2007 i.e. after 15 days prior to the
expiry of MOU. Therefore, the arbitration clause relied
ijpon by the petitioner did not cover any disputes/claims        B
that relate to any period beyond 31.12.2007.

     Disposing of the petition, the Court

     Held: 1.1 In a petition u/s 11 (4),(5),(6) and (9) of the
Arbitration and Conciliation Act, 1996, it is for the Chief      C
Justice of India/his designate to decide about the
existence of a valid arbitration agreement. [para 19] [376-
A-B]

     A.P. Tourism Development Corporation Ltd. Vs. Pampa         o
                              =
Hotels Ltd. 2010 (4) SCR 942 2010 (5) SCC 425; and Alva
Aluminium Limited, Bangkok Vs. Gabriel India Limited 2010
(13) SCR 803 = 2011 (1) SCC 167; Brigadier Man Mohan
Sharma, FRGS (Retd.) Vs. Lieutenant General Depinder
Singh 2008 (16) SCR 701 =2009 (2) SCC 600; National              E
Insurance Company Limited Vs. Boghara Polyfab Private
Limited 2008 (13) SCR 638 = 2009(1) SCC 267; and SBP
& Co. Vs. Patel Engineering Ltd. & Anr. 2005 (4) Suppl.
          =
 SCR 688 2005 (BJ sec 618 - relied on

     1.2 There is no dispute that the parties had entered        F
into a legally valid and enforceable MOU dated 25.9.2007.
There is also no dispute that Clause 11 provides that the
disputes arising between the parties, at any time, in
relation to the MOU, shall be referred to arbitration. Clause
(2) of the MOU, undoubtedly, fixes the trial period upto         G
31.12.2007. However, the clause also provides that the
petitioner may unilaterally decide to extend the MOU, if it
considers necessary. The correspondence between the
parties would show that the petitioner had proposed a
draft distribution agreement to the respondent for               H
                                                                 ;
      362   SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


~ Adiscussion. Thereafter, a series of e-mails were
   exchanged between the parties, but making it apparent
   that no final consensus was reached. It would, therefore,
   appear that the MOU was duly extended till it was
   terminated as averred by the petitioner. [para 20) [376-C-
 B E]
           1.3 The petitioner has categorically pleaded that the
      MOU was terminated on 25.9.2009 and has placed on
      record the e-mail dated 25.9.2009 in which it is clearly
      stated that MOU was entered into on 25.9.2007 for a test
 C    period of six months from the date of arrival of the trial
      cars. It is further stated that.this period was extended on
      an informal and voluntary basis by the petitioner for a
      period extending to two years from the date of signing
      of the MOU. During this two years period, a total of 15
 D    REVA cars have been sold and as the respondents did
      not have in place the necessary resources to build the        •
      REVA brand and to launch the M1 v~hicles introduced by
      REVA at the Frankfurt IAA, the respondent was asked to
      immediately cease all sales and marketing activities on
 E    behalf of REVA brand. This termination of the agreement
      has been acknowledged by the respondents in its e-mail
      dated 7.10.2009. A perusal of this e-mail would also
      demonstr~te that the disputes had clearly arisen between
      the parties at that time. Clearly, therefore, the MOU has
 F    been extended till its termination on 25.9.2009. It is also
      evident that the parties had failed to reach any fresh
      agreement with regard to sale of REVA cars in Europe by
      the respondents. The pleadings and the material on
      record has clearly established that there was ai valid
 G    arbitration agreement incorporated in Clause 11 of the
      MOU. [para 21] [376-F-H; 377-A-E]
        2.1 The claims made by the respondents before the
   Court at Brussels, clearly pertained to the contract under
   the MOU dated 25.9.2007 which was terminated on
 H 25.9.2009. It would be for the Arbitral Tribunal to decide
REVA ELECTRIC CAR CO. P. LTD. v. GREEN MOBIL 363


as to whether claims made are within the arbitration           A
clause. The Arbitral Tribunal would also have to decide
the merits of the claim put forward by the respective
parties. [para 25 and 27] [379-D-F-G)
     Bharat Petroleum Corporation Ltd. Vs. Great Eastern
Shipping Co. Ltd. 2007 (11 ) SCR 117 = (2008 (1) sec 503       B
- referred to.

     2.2 The conclusion is inescapable that
notwithstanding the initial period under the MOU expiring
by 31.12.2007, the same was extended by the petitioner         C
in exercise of its discretion under Clause (2) of the MOU.
The extended MOU was terminated only on 25.9.2009.
Therefore, it cannot be said that the disputes arising
between the parties cannot be referred to the Arbitral
Tribunal. The disputes have arisen in relation to the          D
termination of the MOU and the consequences thereof.
Such disputes would be clearly covered under the
Arbitration clause which provides that in the event of any
dispute or difference arising at any time between the
parties in relation to the agreement shall be referred to a    E
Sole Arbitrator. The clause is clearly not limited to the
disputes relating only to the initial period of the MOU till
31.12.2007. [para 30] [381-F-H; 382-A-B]

    2.3 Irrespective of whether the MOU is now in
existence or not, the arbitration clause would survive.        F
The disputes that have arisen between the parties clearly
pertain to the subject matter of the MOU. [para 31) [382-
B-C; 383-E]

    Everest Holding Limited Vs. Shyam Kumar Shrivastava        G
& Ors. 2008 (14) SCR 1221    =2008 (16) &CC 774 - relied
on·

    2.4 Even assuming that MOU was not extended
beyond 31.12.2007, it would make little difference. Section
                                                               H
   364    SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A 16(1 )(a) of the Act provides that an arbitration clause
  which forms part of the contract shall be treated as an
  agreement independent of the other terms of the contract.
  The plain meaning of the said clause would tend to show
  that even on the termination of the agreement/contract,
B the arbitration agreement would still survive. To ensure
  that there is no misunderstanding, s. 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 invalidat,ion of the
c arbitration clause. By virtue of s.16(1)(b), it continues to
  be enforceable notwithstanding a declaration of the
  contract being null and void. In view of the provisions
  contained in s. 16(1) of the Act, it cannot be said that with
  the termination of the MOU on 31.12.2007, the arbitration
  clause would also cease to exist. [para 33-34] [383-F-H;
0
  385-A-D]

         UNCITRAL Model Law - referred to.

        2.5 In the instant case, the disputes that have arisen
E 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 need to be referred to
   arbitration. Under the arbitration clause, a reference was
F 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 an arbitrator. In exercise of
   powers u/s 11 (4) and (6) of the Act, read with Paragraph
G. 2 of the Appointment of Arbitrator by the Chief Justice of
   India Scheme, 1996, the Sole Arbitrator is appointed to
   adjudicate the disputes that have arisen between the
   parties, on such terms and conditions as the Sole
   Arbitrator deems fit and proper. [para 34-35] [385-D-H;
   386-A]                                .
H
 REVA ELECTRIC CAR. CO. P. LTD. v. GREEN MOBIL 365


                      Case Law Reference:                          A
     2007 (11) SCR 117              relied on         para 15
     2008 (14) SCR 1221             relied on         para 15
     2008 (16) SCR 701              relied on         para 16
                                                                   B
     2008 (13) SCR 638              relied on         para 16
     2005 (4) Suppl. SCR 688        relied on        para 16
     2010 (4) SCR 942               relied on        para 18
     2010 (13) SCR 803              relied on        para 18       c
     2007 (11) SCR 117             referred to       para 28
    CIVIL ORIGINAL JURISDICTION : Arbitration Petition No.
18 of 2010.
                                                                   D
    Under Sections 11 (4) and 6 of the Arbitration and
Conciliation Act, 1996.
    P.S. Narasimha, Vyapak Desai, P.V. Dinesh, Cherrie
Alexander for the Petitioner.
                                                                   E
      Tasneem Ahamadi, Sudhir Kumar Gupta, Manish Gupta
for the Respondent.
     The Order of the Court was delivered by

                          ORDER                                    F
      SURINDER SINGH NIJJAR, J. 1. The petitioner has filed
the present application under Sections 11 (4) and (6) of the
Arbitration and Conciliation Act, 1996 read with paragraph 2
of the Appointment of the Arbitrators by the Chief Justice of
India Scheme, 1996. It is stated that the parties had entered      G
into a legally valid and enforceable Memorandum of
Understanding ('MOU') dated 25th September, 2007,
providing, inter alia, for the respective obligation of both the
parties in connection with the marketing of the cars of the
petitioner. :rhough the term of the MOU was till December,         H
    366    SUPREME COURT REPORTS [2011] 13 (ADDL.) $.C.R.


A   2007, it was extended by the acts of the parties in terms of
    Clause 2 of the MOU.
        2. The petitioner makes a reference to various requests
  made by the respondent for supply of cars in terms of MOU on
  22nd April, 2008; 24th August, 2008; and 1st April, 2009. The
8 petitioner further claims that some time in September 2009,
  disputes arose between the parties. Numerous e-mails were
  exchanged between the parties, apart from the personal
  discussions between their representatives, touching and
  covering the disputes. It is the petitioner's claim that during the
C term of MOU, merely 15 cars of the petitioner had been sold
  in the Belgium Region. The petitioner, therefore, claimed that
  the respondent did not have in place the necessary resources
  to build the brand of the petitioner. Consequently, through e-
  mail dated 25th September, 2009 the petitioner requiested the
D respondent to immediately cease sales and marketing
  activities on its behalf and take necessary steps of providing
  after sales and service to existing car owners, till such time the
  petitioner appointed its new distribut x. The petitioner claims
  that the aforesaid e-mail duly constituted the termination of the
E contractual relationship between the parties as covered under
  the MOU.
         3. As a consequence of the aforesaid termination, the
    parties have exchanged various e-mails raising claims and
F   counter claims on 6th /7th /8th October, 2009.
       4. The petitioner further claims to have received a Writ of
  Summons dated 14th January, 2010 of legal proceedings
  initiated by the respondent in Belgium before the First
  Divisional Court, Room A of the Commercial Court in Brussels.
G According to the petitioner, the claims made by the respondent
  before the Commercial Court, Brussels disclose that the
  respondent instituted the legal proceedings inter alia claiming
  damages from the petitioner on account of termination of the
  MOU dated 25th September, 2007. On 15th March, 2010, the
H counsel for the respondent sent an e-mail.communi~tion that
REVA ELECTRIC CAR CO. P. LTD. v. GREEN MOBIL 367
         [SURINDER SINGH NIJJAR, J.]
the respondent was willing to negotiate a global settlement with       A
the petitioner and that the respondent through its counsel would
be available to discuss any such proposal. According to the
petitioner, the aforesaid communication also acknowledges the
fact that the rights and obligation of both the parties were
covered by the distributorship agreement, i.e. the MOU, which          B
stood duly terminated.

     5. The petitioner thereafter issued a notice dated 24th
March, 2010 through its counsel in terms of Clause 11 of the
MOU invoking a:rbitration under the MOU and .referring all             C
disputes between the parties to arbit.ration. The petitioner in fact
nominated Mr. Justice Jayasimha Babu (Retired) as the Sole
Arbitrator, and failing confirmation by the respondent, as the
arbitrator of the petitioner on the three member Arbitral Tribunal
to be constituted in terms of Clause 11.
                                                                       D
    6. The respondent through its counsel sent a reply to the
notice dated 7th April, 2010 denying existence of any
contractual relationship between the parties on the date of
termination of MOU on 25th September, 2009.
                                                                       E
      7. The petitioner, therefore, filed Arbitration Application
No.576 of 2010 under Section 9 of the Arbitration and
Conciliation Act, 1996 before the Court of the Principal City
Civil & Sessions Judge at Bangalore praying for an order of
injunction restraining the respondent from proceeding with the
legal proceedings initiated before the First Divisional Court,
                                                                       F
Room A of Commercial Court of Brussels, Belgium.

     8. The petitioner had also moved l.A.No.1 in the aforesaid
suit dated 19th April, 2010 seeking an order of temporary
injunction which was granted by the Principal City Civil &             G
Sessions Judge at Bangalore on 21st April, 2010. Thereafter
the petitioner has moved the present application for
appointment of the Arbitrator in terms of Clause 11 of the MOU
which reads as under:-
                                                                       H
    368     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A         "11. Governing Law and Jurisdiction

          i. This MOU shall be construed and enforced in·
          accordance with the laws of India.

          ii. In the event of any dispute or difference arising at any
B         time between the parties hereto as to the construction,
          meaning or effect of this Agreement or thing contained
          herein or the rights, duties, liabilities and obligations of the
          parties hereto in relation to this Agreement, the same shall
          be referred to a single arbitrator, in case the parties can
c         agree u"pon one (1) within a period of lhirty days upon
          being called by a party to do so and failing such
          agreement to three (3) arbitrators one (1) each to be
          appointed by GREENMOBIL and RECC and the third to
          be appointed by the two arbitrators so appointed. The
D         award passed by such arbitrator(s) shall be final and
          binding on both the parties.

          All such arbitration proceedings shall be held in Bangalore
          as per the Arbitration and Conciliation Act, 1996 as
          amended from time to time."
E
        9. In reply to the aforesaid petition, the respondent claimed
  that the MOU dated 25th September, 2007 expired on 31st
  December, 2007. The petition does not clearly set out the claim
  or the period of the claim but the documents and implication
F of the contents of the present petition seem to indicate that the
  claim of the petitioner is in respect of the commercial
  distribution of the cars which commenced from 1st January,
  2008 i.e. after the expiry of Memorandum of understanding. It
  is also the plea of the respondent that the MOU relate to a test
G and trial period which came to an end on 31st December,
  2007, after which the parties decided to enter into a distribution
  agreement which was sent by the petitioner to the respondent
  on 15th November, 2007, i.e., 15 days prior to the expiry of the
  MOU. Therefore, the arbitration clause relied upon by the
H petitioner does not cover any disputes/claims that relate to any
REVA ELECTRIC CAR CO. P. LTD. v. GREEN MOBIL369
         [SURINDER SINGH NIJJAR, J.]
period beyond 31st December, 2007. It is further claimed that A
th·e petition is' only a counterblast to the proceedings filed by
the respondent before the Commercial Court at Brussels. This,
according to the respondent, is evident from the fact that the
respondent had instituted the proceedings in the Commercial
Court at Brussels on 14th January, 2010; the petitioner was B
intimated about the said proceedings vide e-mail dated 15th
March, 201 O; and the notice invoking the arbitration clause in
the MOU is dated 24th March, 2010. It is, therefore, clear that
the arbitration clause is invoked only to avoid proceedings
before the Commercial Court at Brussels. It is emphasised that c
the proceedings before the Commercial Court at Brussels
related to the period beyond the MOU when the parties had
commenced work of distributorship or dealership after the test
trial period under the MOU had come to an end.

    10. I have heard the learned counsel for the parties.       D

     11. Mr. Narasimha, learned senior counsel appearing for
the petitioner submits that the averments made by the
respondent in reply to the petition make it abundantly clear that
the disputes pertained tq the MOU dated 25th September, E
2007. According to the learned counsel, there was no fresh
agreement entered into between the parties. Cars were being
supplied to the respondent in terms of Clause 2 of the MOU.
Making a reference to Clause 2, learned counsel submits that
the aforesaid clause makes it clear that the MOU was effective F
for a period of three to six months, from the date of arrival of
the cars in Belgium. This term was to be considered as the trial
period. On completion of the trial period but not later than 3rd
December, 2007, the parties were to mutually decide to
continue the marketing, sales, and service of the work hours G
by the respondent. They were also to enter into a fresh long term
agreement on mutually agreed terms and conditions. He
submits that till the date of the termination of the MOU, no fresh
agreement had been entered into between the parties. Relying
on the last sentence of the Clause 2, Mr. Narasimha submits
                                                                H
    370     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A   that it was the sole discretion of the petitioner to extend the
    MOU in case the petitioner believed that the additional time is
    required to complete the trial period. The aforesaid portion of
    Clause 2 is as under :-

          "RECC, at its sole discretion, may decide to extend the
B
          MOU if RECC believes that additional time is requir~d to
          complete the trial period."

         12. He further submits that although the cars were being
    supplied to the respondent but the petitioner was not satisfied
C   with the prbgress made in the number of cars sold by the
    respondent. Therefore, the respondent was constrained ·to
    terminate the MOU, after a period of two years from the
    commencement.

0         13. According to Mr. Narasimha, respondent has initiated
    the proceedings in the Brussels Court only to pre-empt the
    initiation of legal proceedings by the petitioner. He points out
    that the pleadings in the Writ of Summons, clearly show: that
    the respondent was only concerned with the effect of the
    termination and not the period of the MOU. Respondent has
E   admitted that the contractual relationship started in 2007. The
    respondent has admitted that there is no other subsequent
    agreement. In Paragraph 18 of the Writ of Summons, the
    respondent admits that the contractual relationship was
    subsisting till September, 2009. In Paragraph 30, it is admitted
F   by the respondent that "the party summoned below terminated
    the contract in an untimely and brutal manner on 25th
    September, 2009".

        14. He points out that the disputes have arisen in relation
G to the termination of the MOU and the consequences thereof.
  Such disputes are clearly covered by the arbitration clause
  which clearly provides for resolution of disputes through
  arbitration. The clause provides that in the event of any dispute
  or difference arising at any time between the parties in relation
H to the agreement shall be referred to a Sole Arbitrator. The
REVA ELECTRIC CAR CO. P LTD. v. GREEN MOBIL 371
         [SURINDER SINGH NIJJAR, J.)
clause, according to the learned senior counsel, is not limited       A
to the disputes relating only to the initial period of the MOU till
31st December 2007.

     15. He submits irrespective of whether the MOU is now in
existence or not, the Arbitration clause would survive. He relies
                                                                  8
on the decisions of this Court in- the cases of Bharat Petroleum
Corporation Ltd. Vs. Great Eastern Shipping Company Ltd. 1
and Everest Holding Limited Vs. Shyam Kumar Shrivastava
& Ors. 2 He further submits that this Court is required to refer
the disputes between the parties to the Sole Arbitrator, without C
any in-depth examination of the disputes. The Court is merely
to be satisfied that the disputes fall within the ambit of the
Arbitration Clause. In support of this submission, he relies on
the judgment of this Court in Brigadier Man Mohan Sharma,
FRGS (Retd.) Vs. Lieutenant General Depinder Singh. 3 He
also relies on the judgment in the case of National Insurance D
Company Limite_d Vs. Boghara Polyfab Private Limited4, in
support of the submission all disputes are such which need to
be decided by the Sole Arbitrator on merits, and can not be
decided by this Court in a petition under Section 11 (4) and 6
of the Arbitration and Conciliation Act, 1996. Learned counsel E
further submits that in accordance with the aforesaid clause the
petitioner had already nominated the Sole Arbitrator. The
respondent has, however, not accepted the aforesaid arbitrator.
At the same time, it had expressed its willingness to negotiate
the global settlement with the petitioner.                        F

      16. On the other hand, Ms. Tasneem Ahamadi, has
submitted that the MOU having come to an end by efflux of time,
there was no question of any termination as claimed by the
petitioner. She further submits that the notice invoking G
arbitration was sent only as a counterblast to the summons
1.   2008 (1) sec 503.
2.   2008 (16) sec 774.
3.   2009 (2) sec 600.
4.   2009 (1) sec 267.                                                H
    372     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A   receiyed by the petitioner from the Brussels Commercial Court.
    Learned counsel further submitted that the disputes which form
    the basis of the claim in the Brussels Commercial Court
    pertained to a period subsequent to the period covered by the
    MOU. The arbitration clause in the MOU relates only to disputes
B   which relate to the test and trial period. Hence, an arbitrator can
    not be appointed for settlement of disputes which occurs I relate
    to a period after 31st December, 2007. The disputes raised
    before the Commercial Court at Brussels are not covered by
    the arbitration clause in the MOU. She had made a detailed
C   reference to numerous e-mails exchanged between the parties
    to submit that the parties had in fact entered into a long term
    contract. This was only to be reduced to a formal document.
    Since the disputes are not covered by the arbitration clause,
    there can be no reference. In support of the aforesaid
    submission, learned counsel relies on a judgment of this Court '
0
    in the case of SBP & Co. Vs. Patel Engineering Ltd. & Anr. 5•
    In view of the law laid down in the aforesaid judgment, according
    to the learned counsel, the arbitration petition deserves to be
    dismissed.

E       17. I have considered the submissions made by the
  learned counsel for the parties. It appears that the submissions
  made by Ms. Ahamadi that the question with regard to the
  existence of a valid arbitration agreement would have to be
  decided by this Court, is not without merit. This Court has on a
F number of occasions examined the scope and ambit of the
  jurisdiction of the Chief Justice or his designate under Section
  11 of the Arbitration and Conciliation Act, 1996. A reference
  in this connect.ion can be made to the judgment of this Court in
  SBP & Co. (supra) wherein a Constitution Bench of this Court
G has clearly held as under :

           "39. It is necessary to define what exactly the Chief Justice,
           approached with an application under Section 11 of the
           Act, is to decide at that stage. Obviously, he has to decide
H   5.    2005 (8) sec 618.
REVA ELECTRIC CAR CO. P. LTD. v. GREEN MOBIL 373
         [SURINDER SINGH NIJJAR, J.]
     his own jurisdiction in the sense whether the party making      A
     the motion has approached the right High Court. He has
     to decide whether there is an arbitration agreement, as
     defined in the Act and whether the person who has made
     the request before him, is a party to such an agreement. It
     is necessary to indicate that he can also decide the            B
     question whether the claim was a dead one; or a long-
     barred claim that was sought to be resurrected and
     whether the parties have concluded the transaction by
     recording satisfaction of their mutual rights and obligations
     or by receiving the final payment without objection. It may     c
     not be possible at that stage, to decide whether a live claim
     made, is one which comes within the purview of the
     arbitration clause. It will be appropriate to leave that
     question to be decided by the Arbitral Tribunal on taking
     evidence, along with the merits of the claims involved in
                                                                     0
     the arbitration. The Chief Justice has to decide whether
     the petitioner has satisfied the conditions for appointing
     an arbitrator under Section 11 (6) of the Act. For the
     purpose of taking a decision on these aspects, the Chief
     Justice can either proceed on the basis of affidavits and       E
     the documents produced or take such evidence or get
     such evidence recorded, as may be necessary. We think
     that adoption of this procedure in the context of the Act
     would best serve the purpose sought to be achieved by
     the Act of expediting the process of arbitration, without too
     many approaches to the court at various stages of the           F
     proceedings before the Arbitral Tribunal."

     In the case of National Insurance Co. Ltd. (supra), this
Court again examined the question with regard to the scope
of the jurisdiction under Section 11 (6). In doing so, this Court    G
explained the ratio of the Constitution Bench in SBP & Co.
(supra). In Para 21 of the Judgment, the power of the Arbitral
Tribunal in cases where the disputes are referred to arbitration
without the intervention of the court has been distinguished from
the power in matters where the intervention of the court is sought   H
    374     SUPREME COURT REPORTS [2011] 13 (AODL.) S.C.R.


A for appointment of an Arbitral Tribunal. In case where the matters
  are sought to be referred to arbitration without the intervention
  of the court it has been held that the Arbitral Tribunal can
  decide the following questions l:lffecting its jurisdiction: (a)
  whether there is an arbitration agreement; (b) whether the
B arbitration agreement is valid; (c) whether the contract in which
  the arbitration clause is found is null and void, and if so, whether
  the invalidity extends to the arbitration clause also.

       18. In matters, where the intervention of the Chief Justice
C of India has been sought for appointment of a sole arbitrator
  under Section 11(4), (5) and (6) of the Arbitration Act, 1996,
  the Chief Justice or his designate will have to decide certain
  preliminary issues. It would be apposite to notice here the
  relevant observations made in Para 22, which are as follows :-

D         "22. This Court identified and segregated the preliminary
          issues that may arise for consideration in an application
          under Section 11 of the Act into three categories, that is,
          (1) issues which the Chief Justice or his designate is bound
          to decide; (i1) issues which he can also decide, that is,
E         issues which he may choose to decide; and (iii) issues
          which should be left to the Arbitral Tribunal to decide.

          22.1. The issues (first category) which the Chief Justice/
          his designate will have to decide are:

F         (a) Whether the party making the application has
          approached the appropriate High Court.

          (b) Whether there is an arbitration agreement and whether
          the party who has applied under Section 11 of the Act, is
G         a party to such an agreement.

          22.2. The issues (second category) which the Chief
          Justice/his designate may choose to decide (or leave
          them to the decision of the Arbitral Tribunal) are:

H                (a) Wtiether the claim is a dead (long-barred) claim
REVA ELECTRIC CAR CO. P. LTD. v. GREEN MOBIL 375
         [SURINDER SINGH NIJJAR, J.]
               or a live claim.                                         A
              (b) Whether the parties have concluded the
              contract/transaction by recording satisfaction of their
              mutual rights and obligation or by receiving the final
              payment without objection.
                                                                        B
      22.3. The issues (third category) which the Chief Justice/
      his designate should leave exclusively to the Arbitral
      Tribunal are:

               (1) Whether a claim made falls within the arbitration    c
              clause (as for example, a matter which is reserved
              for final decision of a departmental authority and
              excepted or excluded from arbitration).

              (ii) Merits or any claim involved in the arbitration."
                                                                        D
     These observations were further reiterated by this Court
in the case of A.P. Tourism Development Corporation Ltd. Vs.
Pampa Hotels Ltd. 8 • The aforesaid ratio of law has been
reiterated by this Court in Alva Aluminium Limited, Bangkok
Vs. Gabriel India Limited7. Upon consideration of the entire            E
case law, it has been observed as follows :-

      "18. It is in the light of above pronouncements, unnecessary
      to delve any further on this issue. It is clear that once the
      existence of the arbitration agreement itself is questioned
                                                                        F
      by any party to the proceeding initiated under Section 11
      of the Act, the same will have to be decided by the Chief
      Justice/designate as the case may be. That is because
      existence of an arbitration agreement is a jurisdictional
      fact which will have to be addressed while making an order
      on a petition under Section 11 of the Act."                       G

      19. In view of the aforesaid authoritative dicta, the

6.   [2010 (5) sec 425.J.
1.   12011 (1) sec 161.                                                 H
    376    SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A   submission of Ms. Ahamadi has to be accepted that in a
    petition under Sections 11 (4)(5)(6) and (9) of the Arbitration Act,
    1996, it is for the Chief Justice of India/his designate to decide
    about the existence of a valid arbitration agreement. Now let
    me examine the facts in the present case keeping in view the
s   aforesaid well settled principles.

        20. There is no dispute that the parties had entered into a
  legally valid and enforceable MOU dated 25th September,
  2007. There is also no dispute that Clause 11 provides that
C disputes arising between the parties, at any time, in relation to
  the MOU, shall be referred to arbitration. Clause (2) of the MOU,
  undoubtedly, fixes the trial period upto 31st December, 2007.
  However, the clause also provides that the petitioner may
  unilaterally decide to extend the MOU, if it considers necessary.
  The correspondence between the parties would show that the
D petitioner had proposed a draft distribution agreement to the
  respondent for discussion. Thereafter, a series of e-mails were
  exchanged between the parties, but making it apparent that no
  final consensus was reached. It would, therefore, appear that
  the MOU was duly extended till it was terminated as averred
E by the petitioner.

       21. The petitioner has categorically pleaded that the MOU
  was terminated on 25th September, 2009. The petitioner has
  placed on record the e-mail dated 25th September, 2009 in
F which it is clearly stated that MOU was entered into on 25th
  September, 2007 for a test period of six months from the date
  of arrival of the trial cars. It is further stated that this period was
  extended on an informal and voluntary basis by the petitioner
  for a period extending to two years from the date of signing of
G the MOU. During this two years period, a total of 15 REVA cars
  have been sold. It is pointed out-that inspite of the best efforts
  of the respondent and the efforts of the petitioner to support the
  respondent, following a review of the European operations it
  is believed that the respondents do not have in place the
  resources to build the REVA brand, invest in the appropriate
H
REVA ELECTRIC CAR CO. P. LTD. v. GREEN MOBIL 377
         [SURINDER SINGH NIJJAR, J.]
infrastructure, obtain necessary fiscal and/or subsidy and           A
infrastructure support and are not adequately prepared to
launch the M1 vehicles introduced by REVA at the Frankfurt IAA.
Thereafter it requests the respondents to immediately cease
all sales and marking activities on behalf of REVA brand. This
termination of the agreement has been acknowledged by the            B
 respondents in its e-mail dated 7th October, 2009. A perusal
 of this e-mail would also demonstrate that the disputes had
 clearly arisen between the parties at that time. The e-mail
 makes a grievance that the respondents had not been notified
 of the termination of its dealership activities a few weeks ago     C
 when it had informed the petitioner of its negotiations with
 potential Dutch partners. The respondents also repeated its
 disappointment that the win-win soft-landing solution it proposed
 on 25th September, 2009 was rejected by the petitioner. Rest
 of the correspondence between the parties continues in the
  same tenor.. Clearly, therefore, the MOU has been extended till    D
  its termination on 25th September, 2009. It is also evident that
  the parties had failed to reach any fresh agreement with regard
  to sale of REVA cars in Europe by the respondents. In my
   opinion, the pleadings and the material on record has clearly
  established that there was a valid arbitration agreement           E
   incorporated in Clause 11 of the MOU.
      22. This takes me to the second submission of
 Ms.Ahamadi that, in any event, the disputes cannot be referred
 to arbitration as it pertained to a period subsequent to the term   F
 of the MOU. Mr.Narasimha has, however, pointed out that
 according to the case pleaded by the respondents in the
 Brussels Court which is evident from the writ of summons, all
 the disputes pertained to the period prior to the termination of
 the agreement by the petitioner. The writ of summons clearly        G
 mentions as follows :
      "Whereas the first cars of the make REVA were marketed
      in India from June 2001 onwards, then in the UK in 2003
      and worldwide from 2007.
                                                                     H
     378     SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.


A          That the party summoned below had however promised
           the arrival of more performing Lithium batteries that would
           be installed in their vehicles from the middle of 2008, as
           well as a new or more competitive and more attractive car
           model by the end of 2008, the REVA 'NXR'.
B          Whereas the contractual relationships between the
           petitioner and the party summoned below started in 2007.

         Whereas the distribution of the REVA cars by the
         petitioner took place in two stage.
c        That during an initial period the petitioner ran a pilot project
         for the party summoned below to assess the marketing
         possibilities of the REVA on the Belgian market.

         That after a certain period of time the petitioner became
D        an exclusive distributor of REVA cars for the BENULEX."

       23. The writ of summons further mentions that the petitioner
  had to run a pilot project of three to six months to test the
  marketing possibilities of the REVA cars on the Belgium
E market. It is further pleaded that at the end of the test period
  and at the latest on 31st December, 2007, the parties had to
  decide jointly whether the petitioner would continue to provide
  the promotion, sales and service of REVA Cars in Belgium
  within the framework of a long-term distribution contract. The
F respondents further pleaded that :-

        'Whereas, in spite of the absence of the signing of a written
        contract between the parties, the petitioner de facto
        became the exclusive distributor of REVA vehicles in the
        BENELUX starting the month of January, 2008."
G
        24. Thereafter the respondents gave details of the efforts
    made by it for marketing of the REVA Cars from January, 2008
    onwards. In paragraph 19 of the writ of summons, it is clearly
    admitted as follows:-
H
REVA ELECTRIC CAR CO. P. LTD. v. GREEN MOBIL 379
         [SURINDER SINGH NIJJAR, J.)
    "Whereas on the 25th of September, 2009, as soon as the A
    first REVA cars fitted with Lithium batteries and of the new
    REVA NXR model arrive in Belgium the petitioner is going
    to be ejected all of a sudden by the party summoned
    below.
                                                                 B
    That during a telephone conversation on 25th September,
    2009, confirmed in an email of the same date the party
    summoned below suddenly announced its decision to
    terminate the concession granted to the petitioner for the
    Belelux, with immediate effect;
                                                                 c
    That the party summoned below asked the petitioner to
    immediately stop the sale and promotion of the REVA cars
    as well as the use of the REVA mark."

     25. The claims made by the respondents clearly pertained    o
to the contract which was terminated on 25th September, 2009.
In paragraph 30 of the writ of summons, it is pleaded as under


    "That the parties summoned below terminated the contract
    in any untimely and brutal manner on 25th September, E
    2009."

   26. On the aforesaid basis, the responde_nts claim
compensation and damages amounting to Euro 454,000.
                                                                 F
     27. The aforesaid averments and the material on record
would clearly demonstrate that the disputes that have arisen
between the parties clearly relate to the MOU dated 25th
September, 2007. It would be for the Arbitral Tribunal to decide
as to whether claims made are within the arbitration clause. The G
Arbitral Tribunal would also have to decide the merits of the
claim put forward by the respective parties. In view of the
material placed on record, it would not be possible to accept
the submissions of Ms. Ahamadi that the disputes were beyond
the purview of the arbitration clause.
                                                                 H
     380       SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.

A       28. A similar matter was examined by this Court in the case
   of Bharat Petroleum Corporation Ltd. Vs. Great Eastern
   Shipping Co. Ltd. 8 In the aforesaid case, an agreement called •
  time charter party was entered into between the appellant and
  the respondent on 6th May, 1997 for letting on hire vessels for
B a period of two years from 22nd September, 1996 to 3oth June,
  1997 and from 1st July, 1997 to 30th June, 1998. It appears
  that certain disputes arose between the parties. Thereafter, on
  the basis of the correspondence exchanged between the
  parties with regard to the disputes, claims and counter claims
c were filed before the Arbltral Tribunal. Issues were duly framed
  of which the following three issues may be of some relevance
  in the present context viz.

            "issue 1.-Whether the Hon'ble Arbitral Tribunal has no
           jurisdiction to adjudicate upon the dispute between the
D          claimant and the respondent for the period September
           1998 to August 1999 irr respect of the vessel Jag Praja
           for the reasons stated in Para 1 of the written statement?

           issue 2.-Whether there is any common practice that if the
E          vessel is not redelivered at the end of the period mentioned
           in the time charter the vessel would be governed by the
           charter party under which originally it was chartered?
           •    •   •                   •
F          issue 5.-Whether the time charter party dated 6-5-1997
           came to an end by efflux of time on 30-8-1998? •
        29. The Arbitral Tribunal by its order dated 12th May, 2003
  came to the conclusion that the appellant having invoked the
G arbitration clause contained in the charter party agreement
  dated 6th May, 1997, which was valid upto 31st December,
   1998 and as the dispute between the parties related to the
  period subsequent to 31st August, 1998, they had no
  jurisdiction to decide the reference. The tribunal held that the
H   8.   12008) c1) sec so3J.
REVA ELECTRIC CAR CO. P. LTD. v. GREEN MOBIL 381
         [SURINDER SINGH NIJJAR, J.]
charter party agreement dated 6th May, 1997 was superseded               A
by .a fresh agreement. Therefore, original charter party dated
6th May, 1997 got extinguished. The respondents challenged
the said award before the High Court. Learned Single Judge
set aside the award and held that the Arbitral Tribunal has the
jurisdiction to adjudicate the disputes between the parties as           B
the vessel continued to be hired by the appellant for the period
subsequent to 31st August, 1998 on the same terms and
conditions, as were contained in charter party agreement dated
6th May, 1997. It was held that the charter party dated 6th May,
 1997 did not come tci an end by efflux of time and it was               c
extended by the party on the same terms and conditions.
 Correctness of this order was challenged in this Court. On
examination of the entire fact situation, it was held as follows :-

     "19. It is, no doubt, true that the general rule is that an offer
     is not accepted by mere silence on the part of the offeree,         D
     yet it does not mean that an acceptance always has to be
     given in so many words. Under certain circumstances,
     offeree's silence, coupled with his conduct, which takes the
     form of a positive act,,.may constitute an acceptance-an
     agreement sub silentio. Therefore, the terms of a contract          E
     between the parties can be proved not only by their words
     but also by their conduct."

      30. Examining the fact situation in the present case, I am
of the opinion that the conclusion is inescapable that                   F
notwithstanding the initial period under the MOU expiring by
31st December, 2007, the same was extended by the petitioner
in exercise of its discretion under Clause (2) of the MOU. The
extended MOU was terminated only on 25th September, 2009.
Therefore, it is not possible to accept the submission of Ms.            G
Ahamadi that the disputes arising between the parties cannot
 be referred to the Arbitral Tribunal. In my opinion, Mr.
 Narasimha has rightly submitted that the disputes have arisen
 in relation to the termination of the MOU and the consequences
 thereof. Such disputes would be clearly covered under the
                                                                         H



                                                                         '
    382    SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.

A Arbitration clause which provides that in the event of any dispute
   or difference arising at any time between the parties in relation
   to the agreement shall be referred to a Sole Arbitrator. The
   clause is clearly not limited to the disputes relating only to the
   initial period of the MOU till 31st December, 2007.
B
         31. I also find merit in the submission of Mr. Narasimha
   that irrespective of whether the MOU is now in existence or not,
   the arbitration clause would survive. The observations made by
   this Court in the case of Everest Holding Ltd. (supra) would
   clearly support the submission made by the learned senior
C counsel. In the aforesaid case, the parties had entered into a
   Joint Venture Agreement·(tor short 'JVA') dated 25th
   September, 2003 for the purpose of mining, processing and
   export of Iron Ore. On 26th March, 2004, another JVA was
   executed between the parties, particularly to iron out certain
D controversy in respect of JVA dated 25th September, 2003.
  Article 14.3 of the said JVA contained an arbitration clause
  providing that if the parties failed to resolve the matter through
  mutual agreement, the dispute shall be reft::1Ted to an Arbitrator
  appointed by mutual agreement of the two parties. The stand
E of the petitioner in the aforesaid case was that on 20th
  September, 2004, it was shocked and surprised to receive
  unwarranted notices for cancellation of JVA. The aforesaid
  notice was replied on 6th October, 2004. Since the disputes
  between the parties were not resolved, the petitioner invoked
F the arbitration clause. Respondent No. 1 in reply to the notice
  refuted the claim of the petitioner and also refused to refer the
  matter to arbitration on the ground that the JVA between the
  petitioner and the respondent No.1 is not in existence as the
  same had been terminated by respondent No.2. It was stated
G that in view of the aforesaid position, there could be no
  invocation of Clause 14.3 of JVA.
         32. Considering the aforesaid fact situation, this Court
    observed that under Clause 14.2, the parties had agreed that
    they would use all reasonable efforts to resolve ~he disputes,
H
REVA ELECTRIC CAR CO. P. LTD. v. GREEN MOBIL 383
         [SURINDER SINGH NIJJAR, J.]
controversy or claim arising out of or relating to these A
agreements. Since the parties have failed to resolve their
differences, the same had to be referred to Arbitration under
Clause 14.3. It was held that there is a valid Arbitration
Agreement between the parties as contained in the JVA, which
the parties are required to adhere to and are bound by the B
same. In other words, if there is any dispute between the parties
to the agreement arising out of or in relation to the subject
matter of the said JVA, all such disputes and differences have
to be adjudicated upon and decided through the process of
Arbitration by appointing a mutually agreed Arbitrator. This     c
Court observed as follows:-

    "Though the JVA may have been terminated and cancelled
    as stated. but it was a valid JVA containing a valid
    arbitration agreement for settlement of disputes arising out
    of or in relation to the subject-matter of the JVA. The D
    argument of the respondent that the disputes cannot be
    referred to the arbitration as the agreement is not in
    existence as of today is therefore devoid of merit."
     In my opinion, the aforesaid observations are squarely      E
applicable to the facts in the present case. The disputes that
have arisen between the parties clearly pertain to the subject
matter of the MOU.

     33. Even if, I accept the submission of Ms.Ahamadi that F
MOU was not extended beyond 31st of December, 2007, it
would make little difference. Section 16(1 )(a) of the Arbitration
and Conciliation Act, 1996 provides that an arbitration clause
which forms part of the contract shall be treated as an
agreement independent of the other terms of the contract. The
plain meaning of the aforesaid clause would tend to show that ·G
even on the termination of the agreement/contract, the
arbitration agreement would still survive. It also seems to be
the view taken by this Court in Everest Holdings Ltd. (supra).
Accepting the submission of Ms.Ahamadi that the arbitration
                                                                 H
    384      SUPREME COURT REPORTS [2011] 13 (ADDL.) S.C.R.

A   clause came to an end as the MOU came to an end by efflux
    of time on 31st December, 2007 would lead to a very uncertain
    state· of affairs, destroying the very efficacy of Section 16(1).
    The aforesaid section provides as under :
          "16. Competence of arbitral tribunal to rule on its
B
          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 -
c           (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
D                  is null and void shall not entail ipso jure the invalidity
                   of the arbitration clause."

      . 34. The aforesaid provision has been enacted by the
  legislature keeping in mind the provisions contained in Article
  16 of the UNCITRAL Model Law. The aforesaid Article reads
E as under:-

          "Article 16 - Competence of arbitral tribunal to rule on its
          jurisdiction -

          (1) The arbitral tribunal may rule on its own jurisdiction,
F
          including any objections with respect to the existence or
          validity of the arbitration agreement. For that purpose, an
          arbitraiion clause which forms part of a contract shall be
          treated as an agreement independent of the other terms
          of the contract. A decision by the arbitral tribunal that the
G         contract is null and void shall not entail ipso Jure the
          invalidity of the arbitration clause.
          (2) ............................................................ ..

H         (3) .............................................................. :
REVA ELECTRIC CAR CO. P. LTD. v. GREEN MOBIL 385
         [SURINDER SINGH NIJJAR, J.]
      Under Section 16(1 ), the legislature makes it clear that A
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) 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 c
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. In view of the
 provisions contained in Section 16(1) of the Arbitration and
 Conciliation Act, 1996, it would not be possible to accept the 0
 submission of Ms.Ahmadi that with the termination of the MOU
 on 31st December, 2007, the arbitration clause would also
 cease to exist. As noticed earlier, 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 E
 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.             F

     35. In exercise of my powers under Section 11 (4) and (6)
of the Arbitration and Conciliation Act, 1996 read with
Paragraph 2 of the Appointment of Arbitrator by the Chief
Justice of India Scheme, 1996, I hereby appoint Hon.Mr.Justice     G
R.V. Raveendran, R/o 8/2, Krishna Road, Basavangudi,
Bangalore, Former Judge of the Supreme Court of India, as
the Sole Arbitrator to adjudicate the disputes that have arisen
between the parties, on such terms and conditions as the
                                                                   H
    386      SUPREME C.OURT REPORTS (2011] 13 (ADDL) S.C.R.


A learned Sole Arbitrator deems fit and proper. Undoubtedly, the
  learned Sole Arbitrator shall decide all the disputes arising
  between the parties without being influenced by any prima facie
  opinion expressed in this order, with regard to the respective
  claims of the parties.
B
       36. The registry is directed to communicate this order to
  the Sole Arbitrator to enable him to enter upon the reference
  and decide the matter as expeditiously as possible.

           37. The Arbitration Petition is accordingly disposed of.
c
    R.P.                           Arbitration Petition disposed of.