In the attached judgment the issue which fell for consideration before the Hon’ble Delhi High Court was whether there was valid incorporation of arbitration clause from the Memorandum of Undertaking (“MoU”) to the allotment letter, forming part of the same transaction and executed contemporaneously.
Facts in brief:
The appellant vide a letter of allotment allot a commercial shop to the respondents. Subsequent to this allotment letter, a MoU was executed between the parties. The MoU did not contain any arbitration clause and the appellants and argued that the in light of the same, the disputes between the parties are not arbitrable. The learned arbitrator had ruled otherwise and passed an award. On appeal the single judge held that both the MoU and the allotment letter form part of the same transaction and hence the arbitration clause would stand incorporated in the MoU.
Judgment and Analysis:
The Delhi High Court relied on a Division Bench of the Delhi High Court in Mercury Travels (India) Ltd. & Others v. Shri Mahabir Prasad and Anr., (2001) 89 DLT 440, where it was observed that
"27. Many transactions take place by the entry into a series of contracts, for example a sale of land involving an exchange of identical contracts, a sale and lease-back of property; an agreement of sale and a bill of sale and so on. In such cases, where the transaction is in truth one transaction all the contracts may be read together for the purpose of determining their legal effect. In Smith v. Chadwick, Jessel M.R. said:
"...when documents are actually contemporaneous, that is two deeds executed at the same moment,... or within so short an interval that having regard to the nature of the transaction the Court comes to the conclusion that the series of deeds represents a single transaction between the same parties, it is then that they are treated as one deed; and of course one deed between the same parties may be read to show the meaning of a sentence and may be equally read, although not contained in one deed but in several parchments, if all the parchments together in the view of the Court make up one document for this purpose."
The Court distinguished the decision of Supreme Court in M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd. 2009 (7) SCC 696, which laid down the conditions in which an arbitration clause contained in one document can be considered incorporated in another by noting that:
“That was a case in which the parties to the two documents were not the same, and the arbitration clause contained in the main contract was held inapt for the purposes of resolution of disputes under a sub-contract. In the present case, where the documents in question are contemporaneously executed between the same parties and part of the same transaction, this Court is of the opinion that the conditions laid down therein are fulfilled.”
Finally, the Court held that
…..as the subject matter of the MOU and the letter of allotment was identical, merely because one did not incorporate an arbitration clause whereas the other did, did not invalidate the arbitral proceedings for want of jurisdiction.”
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