P&H HC: Subsequent Consulting Agreements b/w Parties Holds no Value, If MoU Forming Basis of Claim Does Not Include Arbitration Clause

P&H HC Law Insider

Aastha Thakur

Published on: 14 November 2022 at 20:41 IST

According to a recent ruling by the Punjab and Haryana High Court, the Court is not entitled to submit a case to arbitration just because the parties’ subsequent Consulting Agreements contain an arbitration clause where one party’s claim is based on a MoU without one.

The bench of Justices Augustine George Masih and Sandeep Moudgil held that the arbitration clause, if there is one, is in the Consulting Agreements and would not apply here since the plaintiff’s claim is solely based on the MoU.

The appeal matter was filed before the court against the order of Commercial Court to dismiss the respondent 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.

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 observed the working relationship between both of the parties as per the MoU w.e.f 17.03.2017. According to which, Respondent No. 1 (here, Appellant) was playing supporting factor for the Appellant’s (here, Respondent No. 1) quantity surveying business for the term of five years in UK and it was renewed again on March, 2022.

The court further emphasised that rather than the Purchase Orders, the Memorandum of Understanding operated as the base for the working relationship that governed the conduct between the parties.

The court remarked that there is no disputing the fact that the Memorandum of Understanding does not contain an arbitration clause with regard to the arbitration provision in the contract. The clause, if there is one, is in the consulting agreements, but it is not significant because respondent No. 1’s plaintiff’s claim is solely based on the MoU.

The Court observed the given relevant facts and circumstances, and held that the dispute and the claims made in the civil suit cannot serve as justification for dismissal of the case if they are unrelated to Purchase Orders or Consulting Agreements. Likewise, the issue of the claims’ separation does not arise.

Furthermore, the parties would not be bound by a claim that is based on a contract without an arbitration clause. Therefore, the appellant’s argument that the lawsuit should be dismissed because it contains an arbitration clause is not satisfactory.

As the court fails to see merit in present appeal, same was dismissed.

Case Title: M/s Soben Contract and Commercial Ltd. v/s M/s Qonquests Technical Solutions Pvt. Ltd. and Ors.

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