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Arbitration clause independent of MoU

The arbitration clause in an agreement can be separated from the main contract and each can be decided independently, the Supreme Court has stated in the judgment, Ashapura Mine-Chem Ltd vs Gujarat Mineral Development Corporation. The Supreme Court set aside the judgment of the Gujarat high court which took the wrong view, against precedents. In this case, the Corporation entered into a memorandum of understanding (MoU) under which Ashapura proposed to constitute a joint venture along with a Chinese company as well as the Gujarat Corporation for setting up an alumina plant in Kutch. When differences cropped up, the Corporation cancelled the MoU, which provoked Ashapura to approach the high court for appointment of an arbitrator. The request was rejected as the high court felt that the MoU having been cancelled, there was no question of arbitration. On appeal, the Supreme Court stated that though the joint venture failed to take off, the arbitration clause in the MoU would operate as a stand-alone agreement. The high court ought to have appointed an arbitrator. Since it was not done, the Supreme Court appointed Rekha Doshit, former chief justice of the Patna High Court as the sole arbitrator despite the opposition of the Gujarat corporation.

 Article referred: http://www.business-standard.com/article/opinion/customs-rule-on-handling-charges-illegal-115042600777_1.html

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