Section 11 – Arbitration Act – MOU between the individual -promoter & the Respondent – Non-signatory Petitioner Company whose Chairman is the Promoter cannot enforce arbitration clause

By the agreement dated 2.11.2007, the Pimpri-Chinchwad Municipal Corporation had given rights to the Trust in the land in Survey No.09 Part admeasuring 2.56 hectares at village Theargaon, Pune, for 30 years for construction of playground and cricket academy / gymkhana.

On 16.6.2011, MOU was executed between the Respondent-Trust and the Promotor Shri Sonigara to establish DV Gymkhana and Clubhouse.  DVGC shall engage the promoter or agent / assignee for the activities.

The promoter is the Chairman of the Petitioner-Company which has claims through the promoter.   As per the MOU the arbitration clause extends to the petitioner-company through the promoter.

The petition for appointment of arbitration was opposed on three grounds namely;

(i)      the petitioner has no locus standi in the MOU between the Trust and the promoter and cannot enforce arbitration clause

(ii)     MOU is not a valid document since it is unregistered and unstamped and

(iii)    the arbitration petition is time barred.

HELD that one of the major ingredients of a valid contract is consensus ad idem between the parties.  The principles of Contract Act also envisage the doctrine of privity which means that a contract cannot confer rights or impose liabilities on any person except the parties to the contract.  Thus, a third party cannot acquire rights and entitlements under a contract to which he is not a party.   The arbitration clause in MOU is between an individual promoter and the Trust.   Admittedly, the Petitioner Company is not a party to the MOU.  It does not remotely or impliedly refer to the promoter as acting on behalf of the Company or involvement of the company.   Thus, the petition for enforcement of arbitration clause is not maintainable.

Judgment dated  .1.2024 in Arbitration Petition No.216 of 2022 of M/s. Devike Constructions and Developers Pvt Ltd Vs. Dilip Vengsarkar Foundation