ASHAPURA MINE-CHEM LTD.versusGUJARAT MINERAL DEVELOPMENT CORPORATION

                       [2015] 4 S.C.R. 880


A                ASHAPURA MINE-CHEM LTD.
                                v.
     GUJARAT MINERAL DEVELOPMENT CORPORATION
                 (Civil Appeal No. 3702 of 2015)
B                      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 agreement contained in the MoU, and
      the appellant was fully entitled to invoke the said
      agreement and seek for a reference to the Arbitrator.
 F    In view of th~ finding, since the respondent has
      expressed its disinclination to agree to express its
      concurrence and thereby the parties failed to appoint
      an Arbitrator under the agreed procedure, a retired
      judge is appointed an Arbitrator. [Paras 32, 33, 34]
G     [900-E-H; 901-A-B, D-E]

      Enercon (India) Limited & Ors. v. Enercon GMBH &
  Anr. 2014 (5) SCC 1: 2014 (2) SCR 855; Reva Electric
  Car Company Private Ltd. v. Green Mobile 2012 (2) SCC
H 93: 2011 (13) SCR 359; Today Homes and Infrastructure
  ASHAPURA MINE-CHEM LTD. v. GUJARAT MINERAL                  883
                 DEV. CORP.

Pvt. Ltd. v. Ludhiana Improvement Trust and Anr. 2014 (5)      A
SCC 68: 2013 (3) SCR 589 - relied on.

     SBP & Co. v. Patel Engineering Ltd. & Anr. 2005 (8)
SCC 618: 2005 (4) Suppl. SCR 688; National Insurance
Company Ltd. v. Boghara Polyfab Pvt. Ltd. 2009 (1) SCC         B
267: 2008 (13) SCR 638; Chiaro Controls India Pvt. Ltd.
v. Severn Trent Water Purification Inc. & Ors. 2013 (1) SCC
641: 2012 (13) SCR 402 - referred to.

                  Case Law Reference                           c
 2014 (2 ) SCR 855        relied on.           Para 16

 2011 (13) SCR 359        relied on.           Para 16

 2013 (3) SCR 589         relied on.           Para 16         D
 2005 (4) Suppl.SCR688referred to.             Para 16

 2008 (13) SCR 638        referred to.         Para 16

 2012 (13) SCR 402        referred to.         Para 16         E

    CIVIL APPELLATE JURISDICTION: Civil Appeal No.
3702 of 2015.

    From the Judgment and Order dated 27.09.2013/              F
04.10.2013 of the High Court of Judicature at Ahmedabad
in Petition under Arbitration Act No. 9 of 2013.

    Dushyant Dave, Satyen Thakkur, Parul Shukla,
Pratyush Panjwani, Mahesh Agarwal, E. C. Agrawala, Ankur
Saigal for the Appellant.                                G

    Vikash Singh, Sanjay Kapur, Anmol Chandan, Deepika
Kalia for the Respondent.

    The Judgment of the Court was delivered by                 H
884       SUPREME COURT REPORTS                [2015] 4 S.C.R.


A         FAKKIR MOHAMED IBRAHIM KALIFULLA, J. 1.
      Leave granted. -

         2. This appeal is directed against the judgment of the
   High Court of Judicature of Gujarat at Ahmedabad in
 B Arbitration Petition No. 9/2013 dated 27.9.13/04.10.2013.
   By the impugned judgment, the learned Single Judge of
   the High Court dismissed the appellant's application filed
   under Section 11 of the Arbitration and Conciliation Act,
   1996 (hereinafter referred to "Act").
c
       3. Short facts which are required to be noted are that
  the appellant and the respondent entered into a
  Memorandum of Understanding (MoU) on 17.08.2007.
  Under the said MoU, the appellant proposed to constitute
D a joint venture along with Chinese Company, namely, "M/s
  Qing TongXia Aluminium Group Co. Ltd. Ningxia of China
  (hereinafter referred to as "QTX") as well as the respondent
  for setting up an alumina plant of appropriate capacity in
  the Kutch District of Gujarat. The MoU also records that
E the Government of Gujarat agreed to encourage and
  support the proposed joint venture for setting up of the
  alumina plant. The respondent agreed to supply on priority
  basis, medium grade Bauxite to the proposed plant from
  its 10 existing and 18 expected Bauxite mining leases in
F the Kutch District.

        4. The other relevant terms were that the appellant
  should arrange for the equity participation of the QTX in
  the proposed joint venture, that the respondent should
G invest in the equity of the joint venture to the extent
  determined by the Government of Gujarat but not
  exceeding 26% while the appellant and the QTX should
  hold 74% of the equity. The capacity of the proposed plant
  should be 1.00 million tonnes per annum which may be
H enhanced subsequently. On the part of the respondent, it
  ASHAPURA MINE-CHEM LTD. v. GUJARAT MINERAL 885
DEV. CORP. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

should assist the joint venture in obtaining the required land   A
for locating the project. Under Clauses 5, 6, 8, 10 and 11,
the quantity of the medium grade Bauxite to be supplied
by the respondent, the grade of the Bauxite, the
specifications, the rate at which it was to be supplied, the
time within which such supply should be effected were all        B
set out which also included a long term agreement for the
supply to be entered into.

     5. MoU also stipulated certain other conditions by
which the appellant was obligated upon to reimburse to the C
respondent, within 60 days of the signing of the MoU, an
amount of Rs.3.94 crores being the direct expenses
incurred by the respondent on its Alumina Project and
related matter. It is not in dispute that within the stipulated
time limit the appellant gave its cheque for the said sum D
but the respondent did not encash the same. It also
provided for the appellant to pay the respondent a further
sum of Rs.6.25 crores within 60 days of the execution of
the MoU by way of signature bonus apart from providing a
bank guarantee to the value of Rs.10 crores for the due E
observance for the joint venture by the appellant under the
various terms and conditions of the MoU within 30 days of
the signing of the MoU.

     6. Clause 12 of the MoU specifically provided that the      F
rights and privileges were not transferable for a period of
five years and the appellant should not exit the project/joint
venture for a period of five years after the commencement
of commercial production.
                                                                 G
    7. Under Clause 19, it was stipulated that the MoU was
subject to approval of the Board of Directors of the
appellant as well as the respondent, that the equity
investment and decisions of the respondent should be
subject to the concurrence of the Government of Gujarat,         H
886        SUPREME COURT REPORTS                [2015] 4 S.C.R.


A while the investment of the appellant should be subject to
  approval of its shareholders. It was specifically mentioned
  that both the appellant and the respondent should
  endeavour to obtain necessary approval within three
  months from the date of execution of the MoU. It was
B further specifically mentioned that on getting necessary
  approval by both sides, the MoU would be converted into
  an agreement between the appellant and the respondent.
  Clause 21 contained relevant stipulation to the effect that
  in case the concurrence of the Government of Gujarat was
C not forthcoming for equity participation in the project within
                                    '       .
  six months of the signing of the MoU, the MoU would be
  construed as one relating to long term supply of medium
  grade Bauxite to the joint venture by the respondent from
  its Kutch mines.
0
          8. The more important Clauses contained in MoU
      pertaining to arbitration are found in Clauses 26 and 27
      which read as under:

 E         "26. In the event of difference disputes arising
           between the parties in respect of any matter arising
           out of and relating to this MoU, such dispute/
           difference shall, in the first instance, be resolved
           amicably by mutual consultation within 45 days of the
F          reference of disputes by either party.

          27. If amicable settlement is not reached between the
          parties then such unresolved dispute or difference of
          opinion concerning or arising from the MoU and its
G         implementation, breach or termination whatsoever,
          including any difference or dispute as to the
          interpretation of any of the terms of the MoU, shall
          be referred to the arbitration or a sole arbitrator
          appointed to GMDC and AML. The Arbitrator shall
H         give reasoned award. The Arbitration shall be
  ASHAPURA MINE-CHEM LTD. v. GUJARAT MINERAL 887
DEV. CORP. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

      governed by Arbitration and Conciliation Act, 1996 A
      (India) and conducted in the city of Ahmedabad. The
      language of Arbitration shall be English. The parties
      shall share the cost of Arbitration equally Arbitration
      clause to be acceptable to the Financing sources."
                                                              B
     9. Subsequent to the signing of the above MoU, there
was a Board Resolution of respondent dated 29.10.2007.
The said Resolution stated that the Board resolved to
accord its approval to the MoU executed on 17.08.2007
between the appellant and the respondent subject to the C
modifications noted in the said resolution. Subsequent to
the said resolution which was communicated to the
appellant, correspondence was exchanged between the
appellant and the respondent and on some occasions with
the Principal Secretary of the State of Gujarat between D
17.12.2007 and 10.03.2010. There was a Board Resolution
of the respondent dated 18.03.2010 which disclose that the
Board decided to the effect that in the light of the new
mineral policy announced by the State Government in
November, 2009, major changes were made in respect of E
Bauxite also and, therefore, it was not inclined to extend
the validity of the proposed MoU and also decided to invite
fresh EOI in Bauxite for higher value addition in alumina.
However, in a subsequent communication dated F
26.07.2010, the respondent informed the appellant that to
maintain parity necessary modification in the terms and
conditions of the MoU dated 17.8.2007 as approved by the
Board of the respondent were communicated to the State
Government for approval which was awaited and that on G
receipt of such approval, a fresh MoU may have to be
executed.

    10. But subsequently, by communication dated
25.04.2011, the respondent tacitly informed the appellant H
888        SUPREME COURT REPORTS                [2015] 4 S.C.R.


A     that it decided to forthwith cancel the MoU dated
      17.08.2007 in view of failure on the part of the appellant
      in complying with various terms and conditions of the MoU.
      The respondent, thus, threw the blame on the appellant
      for the proposed project not being able to be finalized.
B
       11. In response to the said letter dated 25.04.2011, the
  appellant wrote a· detailed reply on 11.07.2011 wherein the
  appellant expressed its desire to amicably resolve the
  dispute and requested the respondent to make an attempt
C for an amicable settlement as regards the issues and
  alleged breaches mentioned in the respondent's letter dated
  25.04.2011. Subsequently, the appellant caused a legal
  notice dated 07.12.2012 to the respondent, wherein it was
  claimed that its attempt to amicably resolve the dispute as
D provided under Clause 26 of the MoU failed and, therefore,
  it decided to invoke Clause 27 of the MoU to appoint an
  Arbitrator and suggested the name of a retired High Court
  Judge for appointment with the concurrence of the
  respondent or else the appellant's decision to invoke
E Section 11 of the Act.

      12. On behalf of the respondent, a reply was
  addressed to the appellant on 04.01.2013 stating that there
  was no fault whatsoever on its side and, therefore, there
F was no question of any obligation to be fulfilled on its side
  and it also expressed its decision not to concur for the
  appointment of the Arbitrator.

      13. It was in the above stated sequence of events i.e.
G from the date of MoU to the date of filing of the application,
  the appellant approached the High Court by filing an
  application under Section 11 of the Act and sought for
  appointment of an Arbitrator. By the impugned order, the
  High Court having rejected the appellant's application, the
H appellant has come forward with this appeal.
  ASHAPURA MINE-CHEM LTD. v. GUJARAT MINERAL 889
DEV. CORP. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

     14. We heard Mr. Dushyant Dave, learned senior            A
counsel for the appellant and Mr. Vikas Singh, learned
senior counsel for the respondent Mr. Dushyant Dave after
referring to the above course of events that has taken place
between the appellant and the respondent from the date
of MoU dated 17.8.2007 till the rejection of the Arbitration   B
Application by the High Court, contended that since
indisputably the respondent terminated the MoU, the
conclusion of the High Court that the same was a still-born
was wholly unjustified. The learned senior counsel
submitted that even if the MoU for the proposed joint          C
venture did not ultimately fructify into the creation of the
joint venture, Clauses 26 and 27 of the MoU by virtue of
the specific terms contained therein would operate as
stand-alone agreement for arbitration and with reference       D
to the said agreed terms, since there was a consensus
ad idem between the parties, the High Court ought to have
appointed the Arbitrator exercising its power under Section
11 of the Act, inasmuch as the respondent declined to
express its consent for the named Arbitrator suggested by      E
the appellant.

     15. As against the above submission Mr. Vikas Singh,
learned senior counsel appearing for the responde:;t
vehemently submitted that the High Court was able to F
highlight that the parties had no consensus ad idem even
with reference to the very MoU itself and in the
circumstances, there was no scope for applying Clauses
26 and 27 for the appointment of Arbitrator as claimed by
the appellant.                                            G

    16. While Mr. Dushyant Dave, learned senior counsel
placed reliance upon the decisions in Enercon (India)
Limited & Ors. v. Enercon GMBH & Anr. - 2014 (5) SCC
1, Reva Electric Car Company Private Ltd. v. Green H
890         SUPREME COURT REPORTS                  [2015] 4 S.C.R.


A Mobil - 2012 (2) SCC 93 and Today Homes and
  Infrastructure Pvt. Ltd. v. Ludhiana Improvement Trust
  and Anr. - 2014 (5) SCC 68, Mr. Vikas Singh relied upon
  the decisions reported as SBP & Co. v. Patel Engineering
  Ltd. & Anr. - 2005 (8) SCC 618, National Insurance
B Company Ltd. v. Boghara Polyfab Pvt. Ltd. - 2009 (1)
  SCC 267 and Chloro Controls India Pvt. Ltd. v. Severn
  Trent Water Purification Inc. & Ors. - 2013 (1) SCC 641
      in support of his submissions.

C         17. Having heard the submissions of the respective
      counsel, we find that the sum and substance of the
      submission of Mr. Dushyant Dave was that the arbitration
      Clause contained in Clause 27 of the MoU was an
      independent arbitration agreement and, therefore, even if
D     respondent chose to terminate the MoU dated 17 .8.2007,
      the Arbitration agreement would continue to remain and
      consequently the parties are entitled to invoke the said
      Clause 27 and exercise their option for appointment of an
      Arbitrator and seek for concurrence of the other party. The
E     learned senior counsel contended that since the respondent
      expressed its decision to terminate the MoU, the appellant
      after exhausting its attempt for an amicable settlement at
      bilateral level as between the appellant and the respondent
F     by invoking Clause 26 had no other option but to invoke
      Clause 27 and opt for the appointment of a retired Judge
      Hon'ble Mr. Justice B.N. Mehta as an Arbitrator and sought
      for the concurrence of the respondent. The learned senior
      counsel submitted that when the respondent refused to
G     concur with the appointment of the said learned Judge as
      an Arbitrator, the appellant was well justified in approaching
      the High Court under Section 11 for the appointment of an
      Arbitrator. The learned senior counsel, therefore,
      contended that the rejection of the said application filed
H     under Section 11 of the Act by the impugned order is liable
  ASHAPURA MINE-CHEM LTD. v. GUJARAT MINERAL 891
DEV. CORP. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

to be set aside and an Arbitrator has to be appointed.        A

     18. According to Mr. Vikas Singh, learned senior
counsel for the respondent inasmuch as the MoU itself was
not a concluded contract, Clauses 26 and 27 of the said
MoU do not survive and consequently there was no scope B
for appointment of an Arbitrator by invoking Clause 27 of
the Mou.

     19. To appreciate the respective contentions and
having regard to the law on this issue been already settled   c
in more than one decision, we are of the view that the
statement of law so declared by this Court can be
straightaway noted in order to render our decision in tune
with the said proposition of law declared by this Court.
                                                              D
    20. In this context, we find, the reliance placed upon
by Mr. Dushyant Dave, learned senior counsel for the
appellant on the decisions in Reva Electrical Car
Company Private Ltd. (supra), Today Homes and
Infrastructure Pvt. Ltd. (supra) and Enercon (India) E
Limited (supra) fully support the stand of the appellant.
The decision in Reva Electrical Car Company Private Ltd.
(supra) was a case which arose under Section 11 cf ihe
Act. A question was raised on behalf of the respondent in
the said case to the effect that with the termination of the F
MoU itself, the Arbitration Clause would cease to exist.
Dealing with the said question, the learned Judge has held
as under in paragraphs 54 and 55:

      "54. Under Section 16(1), the legislature makes it G
     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 H
892        SUPREME COURT REPORTS                  [2015] 4 S.C.R.


A          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)
 B         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
c          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 submission of Ms Ahmadi that with the
           termination of the MoU on 31-12-2007. the arbitration
D
           clause would also cease to exist.

           55. 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
E          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 to be made that the disputes were to be referred
           to a single arbitrator. Since the parties have failed to
F
           appoint an arbitrator under the agreed procedure, it
           is necessary for this Court to appoint the arbitrator."

                                                (Emphasis added)

G         21. In Today Homes and Infrastructure Pvt. Ltd.
      (supra), this Court approved the statement of law stated
      by the learned Judge of this Court in Reva Electrical Car
      Company Private Ltd. (supra). Paragraph 14 can be
      usefully referred to which reads as under:
H
  ASHAPURA MINE-CHEM LTD. v. GUJARAT MINERAL 893
DEV. CORP. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

     "14. The same reasoning was adopted by a member          A
     of this Bench (S.S. Nijjar, J.), while deciding Reva
     Electric Car Co. (P) Ltd. v. Green Mobil, wherein the
     provisions of Section 16(1) in the backdrop of the
     doctrine of kompetenz kompetenz were considered
     and it was inter alia held that under Section 16(1), B
     the legislature makes it clear that while considering
     any objection with regard to the existence or validity
     of the arbitration agreement, the arbitration clause,
     which formed part of the contract, had to be treated
     as an agreement independent of the other terms of C
     the contract. Reference was made in the said
     judgment to the provisions of Section 16(1 )(b) of the
      1996 Act, which provides that even if the Arbitral
     Tribunal concludes that the contract is null and void, D
     it should not result, as a matter of law, in an automatic
     invalidation of the arbitration clause. It was also held
     that Section 16(1)(a) of the 1996 Act presumes the
     existence of a valid arbitration clause and mandates
     the same to be treated as an agreement independent E
     of the other terms of the contract. By virtue of Section
     16(1 )(b) of the 1996 Act, the arbitration clause
     continues to be enforceable, notwithstanding a
     declaration that the contract was null and void."
                                                               F
                                            (Emphasis added)

    22. Again this very question came up for consideration
in Enercon {India) Limited {supra) to which one of us
(F.M.I Kalifulla, J.) was a party. In the said decision, the G
nature of transaction between the parties was more or less
identical to the facts of this case. The contention raised
on behalf of the appellant in that case was that there can
be no arbitration agreement in the absence of a concluded
contract, that, therefore, there was no question of an H
894         SUPREME COURT REPORTS                  [2015] 4 S.C.R.


A     arbitration agreement coming into existence and, therefore,
      there was no scope for referring the dispute for arbitration.

       23. As against the above submissions, it was
  contended on behalf of the respondent in the said decision
B that even if the existence of the main contract is under
  dispute, the Court is concerned only with the arbitration
  agreement, i.e. the arbitration clause and that when once
  such a Clause is very much present, that would by itself
  result in the matter being referable for arbitration. In fact,
C in the said case, the Clause relating to arbitration was found
  in Clause No.18.1 which provided for an attempt to resolve
  the dispute, controversy or difference through mutual
  consultation and if it is not resolved through mutual
  consultation within 30 days after commencement of
D discussion, then the parties may refer the dispute,
  controversy or difference for resolution to an Arbitral
  Tribunal.

           24. Dealing with the said Clause and the arguments
E     raised on behalf of the respective parties, the law has been
      laid down as under in paragraphs 82 and 83 which are to
      the following effect:

           "82. Further, the arbitration agreement contained in
 F         Clauses 18.1 to 18.3 of IPLA is very widely worded
           and would include all the disputes, controversies or
           differences concerning the legal relationship between
           the parties. It would include the disputes arising in
           respect of the IPLA with regard to its validity,
G          interpretation, construction, performance, enforcement
           or its alleged breach. Whilst interpreting the arbitration
           agreement and/or the arbitration clause, the court
           must be conscious of the overarching policy of least
           intervention bv courts or judicial authorities in matters
H          covered by the Indian Arbitration Act, 1996. In view
  ASHAPURA MINE-CHEM LTD. v. GUJARAT MINERAL 895
DEV. CORP. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

   of the aforesaid, it is not possible for us to accept the A
   submission of Mr Nariman that the arbitration
   agreement will perish as the IPLA has not been
   finalised. This is also because the arbitration clause
   (agreement) is independent of the underlying contract
   i.e. the IPLA containing the arbitration clause. Section B
   16 provides that the arbitration .clause forming part
   of a contract shall be treated as an agreement
   independent of such a contract.

   83. The concept of separability of the arbitration         C
   clause/agreement from the underlying contract is a
   necessity to ensure ·that the intention of the parties
   to resolve the disputes by arbitration does not
   evaporate into thin air with every challenge to the
   legality. validity, finality or breach of the underlying   D
   contract. The Indian Arbitration Act, 1996, as noticed
   above, under Section 16 accepts the concept that the
   main contract and the arbitration agreement form two
   independent contracts. Commercial rights and
   obligations are contained in the underlying,               E
   substantive, or the main contract. It is followed by a
   second contract, which expresses the agreement and
   the intention of the parties to resolve the disputes
   relating to the underlying contract through arbitration.   F
   A remedy is elected by parties outside the normal civil
   court remedy. It is true that support of the national
   courts would be required to ensure the success of
   arbitration, but this woultl not detract from the
   legitimacy or independence of the collateral arbitration   G
   agreement. even if it is contained in a contract. which
   is claimed to be void or voidable or unconcluded by
   one of the parties."

                                       (Emphasis added) H
896        SUPREME COURT REPORTS                 [2015] 4 S.C.R.


A       25. Mr. Vikas Singh, learned senior counsel for the
   respondent by referring to the Seven Judge Bench decision
   of this Court in Patel Engineering Ltd. (supra) sought to
   contend that the reliance placed upon the said decision by
   this Court in Today Homes and Infrastructure Pvt. Ltd.
 B (supra) with particular reference to the position stated in
   paragraph 13 of the said judgment was not appropriate.

          26. We are not inclined to entertain the said
  submission, as we find that we are not concerned with the
C said issue as to whether what was held in paragraph 13
  of Today Homes and Infrastructure Pvt. Ltd. (supra)
  judgment was correct or not when it makes reference to
  the Seven Judge Bench decision in Patel Engineering
  Ltd.(supra). We are only concerned with the question
D whether an Arbitration Clause contained in the MoU is a
  stand alone agreement or not. For that purpose, what has
  been stated in Today Homes and Infrastructure Pvt. Ltd.
  (supra) in paragraph 14 is only relevant and we find the
  legal position stated therein in tune with the ratio decidendi
E laid down consistently by this Court in very many decisions.

          27. The reliance was also placed upon the decision in
      National Insurance· Company Ltd. (supra). Paragraphs
      19, 20 and 21 were referred to in the said judgment.
F     Paragraph 19 can be usefully referred, which reads as
      under:

           "19. In SBP & Co. v. Patel Engg. Ltd., a seven-Judge
           Bench of this Court considered the scope of Section
G          11 of the Act and held that the scheme of Section 11
           of the Act required the Chief Justice or his designate
           to decide whether there is an arbitration agreement
           in terms of Section 7 of the Act before exercising his
           power under Section 11 (6) of the Act and its
H          implications. It was of the view that sub-sections (4),
  ASHAPURA MINE-CHEM LTD. v. GUJARAT MINERAL 897
DEV. CORP. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

   (5) and (6) of Section 11 of the new Act, combined A
   the power vested in the court under Sections 8 and
   20 of the old Act (the Arbitration Act, 1940). This Court
   held: (SCC pp. 660-61 & 663, paras 39 & 47)
   "39. It is necessary to define what exactly the Chief      8
   Justice, approached with an application under Section
   11 of the Act, is to decide at that stage. Obviously,
   he has to decide his own jurisdiction in the sense,
   whether the party making the motion has approached
   the right High Court. He has to decide whether there       c
   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 question
   whether the claim was a dead one; or a long-barred         D
   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 not be possible at that stage, to        E
   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 the arbitration. The      F
   Chief Justice has to decide whether the applicant 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      G
   can either proceed on the basis of affidavits and 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          H
898         SUPREME COURT REPORTS                 [2015] 4 S.C.R.


A          achieved by the Act of expediting the process of
           arbitration, without too many approaches to the court
           at various stages of the proceedings before the
           Arbitral Tribunal.

B          ***

           .47. (iv) The Chief Justice or the Designated Judge
           will have the right to decide the preliminary aspects
           as indicated in the earlier part of this judgment. These
c          will be his own jurisdiction to entertain the request,
           the existence of a valid arbitration agreement, the
           existence or otherwise of a live claim, the existence
           of the condition for the exercise of his power and on
           the qualifications of the arbitrator or arbitrators."
D
          28. Having gone through the said paragraphs, we do
      not find any position in law contrary to what has been stated
      in Today Homes and Infrastructure Pvt. Ltd. (supra),
      Reva Electrical Car Company Private LtcL (supra) and
E     Enercon (India) Limited (supra).

      29. Similarly, the reliance placed upon in Chloro
  Controls India Pvt. Ltd. (supra) also does not in any
  manner dislodge the legal position relating to the stand
F alone Arbitration Clause in a substantive transaction
  recorded in writing. Therefore, we do not find any useful
  purpose by referring to the said decision as well.


G       30. Having thus ascertained the legal position regarding
  the stand alone agreement relating to arbitration with
  particular reference to arbitration agreement in a legal
  transaction between the parties, when we refer to Clause
  27. of th~ Mo.U, we wish to find out whether the saiq Clause
H sa.tisfies the principles set down and applicable to a stand
  ASHAPURA MINE-CHEM LTD. v. GUJARAT MINERAL 899
DEV. CORP. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

alone Arbitration Agreement. When we refer to Clause 27,         A
we find that in the event of failure 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, then such
unresolved dispute or difference concerning or arising from      B
the MoU, its 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, irrespective of the question or as        C
to the fact whether the 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
                                                                 0
MoU, specific agreement has been entered into by the
appellant and the respondent under Clause 27 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,         E
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.

     31. In the case on hand, as we have noted earlier, after F
the signing of the MoU on 17.8.2007, the Board of Directors
of the Respondent passed a Resolution on 29.10.2007
which expressed its approval to the MoU, subject, however,
to modification of the conditions. Thereafter,
correspondence exchanged between the parties from G
17.12.2007 to 10.03.2010. There was a subsequent Board
Resolution of the respondent on 18.03.2010 which st~ted
that the Board took a decision that it was notdllll!llfrt~to
extend the validity of proposed MoU due to chang·e in the
mineral policy of the State Government. However, on H
900         SUPREME COURT REPORTS                 [2015] 4 S.C.R.


A 26.07.2010, the respondent informed the appellant that to
  maintain parity, necessary modification in the terms and
  conditions of the MoU dated 17.8.2007 was communicated
  to the State Government for approval which was awaited
  and that on receipt of such approval, a fresh MoU can be
B executed. Thereafter, by communication dated 25.4.2011,
  the respondent categorically informed the appellant that it
  decided to forthwith cancel the MoU dated 17 .8.2007
  alleging fault on the side of the appellant with regard to
  failure to comply with the various terms and conditions of
C the MoU. Thus, from the above referred to sequence of
  events which occurred between 17.8.2007 and 25.4.2011,
  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
D of the parties to seek for ah amicable settlement in the first
  instance as specified in Clause 26 of the MoU.

            32. We find from the materials on record that the
      appellant in its letter dated 11.07 .2011 addressed to
E     respondent 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
      on 07.12.2012 by invoking Clause 27 of the MoU for
F     appointment of an Arbitrator and also suggested the name
      of a retired High Court Judge and sought for the
      concurrence of the respondent. In the legal notice, the
      appellant specifically intimated that in the event of the
      respondent failing to express its concurrence for the
G     appointment of the named Arbitrator, it will have no other
      option but to move the High Court under Section 11 of the
      Act. The respondent having made it clear in its reply dated
      04.01.2013 to the lawyer's notice stating that it was not
      inclined to agree for a reference, the appellant had no other
H     option except to move the High Court by filing an
  ASHAPURA MINE-CHEM LTD. v. GUJARAT MINERAL 901
DEV. CORP. [FAKKIR MOHAMED IBRAHIM KALIFULLA, J.]

application under Section 11 of the Act.                    A
    33. Having noted the above factors and inasmuch as
we are convinced that Clause 27 is a valid arbitration
agreement contained in the MoU dated 17.8.2007, the
appellant was fully entitled to invoke the said agreement   B
and seek for a reference to the Arbitrator.

     34. In the light of our above conclusion, we hold that
the learned Judge having failed to appreciate the legal
position as regards the existence of an arbitration c
agreement in the MoU irrespective of the failure of the
parties to reach a full-fledged agreement with respect to
the various terms and conditions contained in the MoU for
a joint venture, the said conclusion and judgment of the
learned Judge is liable to be set aside and is accordingly o
set aside. Since the respondent has expressed its
disinclination to agree to express its concurrence and
thereby the parties failed to appoint an Arbitrator under the
agreed procedure, it is necessary for this Court to appoint
an Arbitrator. Therefore, while setting aside the judgment E
impugned in this appeal, we hereby appoint Hon'ble Ms.
Justice Rekha Manharlal Doshit, resident of C-5, 402, Dea
Sangam Flat, Guartgam Road, Near Gandhi Nagar,
Gujarat, former Chief Justice of Patna High Court and
former Judge of Gujarat High Court as the sole Arbitrator F
to adjudicate the disputes that have arisen between the
parties on such terms and conditions as the sole Arbitrator
deems fit and proper. Undoubtedly, the learned sole
Arbitrator shall decide all the disputes arising between the
parties under the MoU, without being influenced by any G
prima facie opinion expressed in this order with regard to
the respective claims of the parties.

    35. The Registry is directed to communicate this order H
902          SUPREME COURT REPORTS       [2015] 4 S.C.R.


A to the sole Arbitrator to enable him to enter upon the
  reference and decide the matter as expeditiously as
  possible.

       36. The appeal stands allowed with the above
B directions.

      Devika Gujral                         Appeal allowed.