ASHAPURA MINE-CHEM LTD. versus GUJARAT MINERAL DEVELOPMENT CORPORATION

Citation: [2015] 4 S.C.R. 880 · Decided: 16-04-2015 · Supreme Court of India · Bench: F.M. IBRAHIM KALIFULLA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
B 
[2015] 4 S.C.R. 880 
ASHAPURA MINE-CHEM LTD. 
v. 
GUJARAT MINERAL DEVELOPMENT CORPORATION 
(Civil Appeal No. 3702 of 2015) 
APRIL 16, 2015 
[FAKKIR MOHAMED IBRAHIM KALIFULLA AND 
SHIVA KIRTI SINGH, JJ.) 
C 
Arbitration and Conciliation Act, 1996: ss.11, 16(1)(a) 
-Arbitration clause - Invocation of- s.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 s.16(1)(b), 
D the arbitration clause continues to be enforceable, 
notwithstanding a declaration that the contract was null and 
void -
The main contract and the arbitration agreement 
form two independent contracts - In the instant case, 
irrespective of the question or as to the fact whether the 
E MoU fructified into a full-fledged agreement, having regard 
to the non-fulfilment of any of the conditions or failure of 
compliance of any requirement by either of the parties 
stipulated in the other Clauses of MoU, specific agreement 
had been entered into by the appellant and the respondent 
F to refer such controversies as between the parties to the 
sole arbitrator by consensus - Therefore, when consensus 
was not reached as between the parties for making the 
reference, it was open for either of the parties to invoke 
s. 11 of the Act and seek for reference of the dispute for 
G arbitration. 
Allowing the appeal, the Court 
H 
880 
ASHAPURA MINE-CHEM LTD. v. GUJARAT MINERAL 
881 
DEV. CORP. 
HELD: 1. As per Clause 27, in the event of failure A 
of an amicable settlement at the bilateral level relating 
to a dispute or difference arising between the appellant 
and the respondent to be reached as contained in 
Clause 26 of the Mou, such unresolved dispute or 
difference concerning or arising from the MoU, its B 
implementation breach or termination whatsoever 
including any difference or dispute as to the 
interpretation of any of the terms of the Mou is 
referable to the sole Arbitrator appointed by the 
appellant and the respondent. Therefore, when C 
consensus was not reached as between the parties for 
making the reference, eventually it will be open for 
either of the parties to invoke Section 11 of the Act and 
seek for reference of the dispute for arbitration. In the D 
case on hand, after the signing of the MoU, the Board 
of Directors of the Respondent passed a Resolution 
which expressed its approval to the MoU, subject, 
however, to modification of the conditions. Thereafter, 
correspondence exchanged between the parties from E 
17.12.2007 to 10.03.2010. There was a subsequent 
Board Resolution of the respondent on 18.03.2010 
which stated that the Board took a decision that it was 
not inclined to extend the validity of proposed MoU due 
to change in the mineral policy of the State F 
Government. However, on 26.07 .2010, the respondent 
informed the appellant that to maintain parity, 
necessary modification in the terms and conditions of 
the MoU was communicated to the State Government 
for approval which was awaited and that on receipt of G 
such approval, a fresh MoU can be executed. 
Thereafter, by communication dated 25.4.2011, the 
respondent categorically informed the appellant that it 
decided to forthwith cancel the MoU alleging fault on 
the side of the appellant with regard to failure to H 
882 
SUPREME COURT REPORTS 
[2015] 4 S.C.R. 
A comply with the various terms and conditions of the 
MoU. Thus, from the sequence of events, it is crystal 
clear that both parties were at variance with reference 
to the various terms and conditions contained in the 
MoU and consequently there was every right in either 
B of the parties to seek for an amicable settlement in the 
first instance as specified in Clause 26 of the MoU. 
[Paras 30, 31] [899-A-H; 900-A-D] 
2. The materials on record showed that the 
C appellant expressed its desire to amicably resolve the 
dispute at the bilateral level. Since there was no 
response from the respondent, the appellant caused a 
legal notice by invoking Clause 27 of the MoU for 
appointment of an Arbitrator and also suggested the 
D name of a retired High Court Judge and sought for the 
concurrence of the respondent. The respondent having 
made it clear in its reply that it was not inclined to 
agree for a reference, the appellant had no other option 
except to move the High Court by filing an application 
E under Section 11 of the Act. Clause 27 is, therefore, a 
valid arbitration agree

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