Subsequent Consulting Agreements Prescribing Arbitration Do Not Bind Parties When MoU Forming Basis Of Claim Doesn't Contain Arbitration Clause: P&H High Court

Punjab and Haryana High Court recently held that where the claim of a party to an agreement is based upon a Memorandum of Understanding which does not contain an arbitration clause, the Court is not required to refer the matter merely because the subsequent Consulting Agreements executed by the parties contemplate arbitration. The bench comprising Justice Augustine George Masih and Justice Sandeep Moudgil in this case noted that there is no clause for arbitration under the MoU and the clause, if any, is in the Consulting Agreements which would not be applicable here since plaintiff's claim is based exclusively on the MoU. The court was dealing with an appeal wherein the order of Commercial Court rejecting the first defendant's application under Order VII Rule 11 (d) of the CPC read with Section 8 of the Arbitration & Conciliation Act, 1996 for rejection of the plaint in terms of Clause 16 in the Consulting Agreement, was challenged. The counsel for the appellant contended that the Court below has misread the provisions of the agreements which have been entered into between the parties. The court noted that the working relationship of the parties is governed by the Memorandum of Understanding dated 17.03.2017. Memorandum of Understanding stated that the respondent No.1 – plaintiff would support the appellant – defendant No.1 on their quantity surveying business in United Kingdom for a period of five years and was renewable in march, 2022. The court further noted that the basis for working relationship governing the conduct between the parties was the Memorandum of Understanding and not the Purchase Orders. Regarding the arbitration clause in the agreement the court noted that it is not in dispute that under the Memorandum of Understanding, there is no clause for arbitration. The clause, if any, is in the Consulting Agreements which would not be applicable since the claim of respondent No.1 – plaintiff is based exclusively on the Memorandum of Understanding. In the given facts and circumstances, the court opined that the dispute and the claims which have been made in the civil suit when do not flow from the Purchase Orders or Consulting Agreements, cannot be made the basis for rejection of the suit and similarly, the question of separation of the claims does not arise. Further, the claim which is based upon an agreement, in which there is no arbitration clause, would not bound the parties. The plea of the appellant that the suit deserves to be dismissed as there is an arbitration clause, therefore, cannot sustain. According, there being no merit in the present appeal, the same stands dismissed.Case Title: M/s Soben Contract and Commercial Ltd. VERSUS M/s Qonquests Technical Solutions Pvt. Ltd. and othersCitation: 2022 LiveLaw (PH) 294 Click Here To Read/Download Order

Subsequent Consulting Agreements Prescribing Arbitration Do Not Bind Parties When MoU Forming Basis Of Claim Doesn't Contain Arbitration Clause: P&H High Court

Drishti Yadav

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