If MOU arise out of an agreement containing Arbitration Clause reference of MOU is valid

Recently. the Delhi High Court, in the case of [Juki Private Limited v M/s Capital Apparels Technology Private Limited], decided that if an MoU signed by the parties states that arbitration can be sought for settlement of dues, then arbitration can be sought for any such violation of the terms of the MoU even if there is no Arbitration Clause in the MoU.

Facts of the Case: 

The facts of the Case of Juki Private Limited are as follows:

• The Parties i.e. Juki Private Limited (petitioner) and M/s Capital Apparels Technology Private Limited (respondent) signed a Distribution agreement. Later some dispute arose to which the parties signed a MoU to settle all the past dues, and the respondent agreed to pay all the outstanding dues to the Petitioner.
• Demand Notices were issued by the petitioner when the respondent failed to comply by the terms of the MoU. Afterwards, the petitioner invoked the Arbitration Clause as was decided by the parties in the agreement.
• An application was filed before the Delhi High Court by the petitioner under Section 11(6) of the A&C Act for the appointment of an arbitrator for Deciding over the dispute between the parties.
• It was contended before the High Court by the respondent M/s Capital Apparels Technology that the dispute between the parties were resolved under the MOU, however there wasn’t any Arbitration Clause in the MoU. Hence, the Arbitration Clause could not be invoked by the petitioner. Also, that the  High Court does not have the jurisdiction to entertain the petition.
• It was contended by the petitioner that no place was mentioned in the distribution agreement and also no clause decided the territorial jurisdiction to any particular Court. Also, it was mentioned that no “venue” or “seat” was decided for holding the arbitral proceedings.
• The petitioner referred to the judgment of the Delhi High Court in the case of Aarka Sports Management Pvt. Ltd. v Kalsi Buildcon Pvt. Ltd. (2020). In this case the Delhi High Court held that if the seat of arbitration has not been decided by the Parties, the seat of arbitration will be decided by the Arbitral Tribunal under Section 20(2) of the Arbitration and Conciliation Act, also as the seat of arbitration has not been decided, then the the Court to entertain the application under Section 11 of the A &C Act would be the “court”  defined under Section 2 (1)(e) of the A&C Act read with Section 16to 20 of the CPC.
• As Section 20 of the CPC provides that the suit could be filed in the court under whose jurisdiction the defendant resides, carries on business or where the cause of action wholly or partially arises.

Judgment- 

• It was observed by the High Court that the registered office of the respondent is in Delhi, as well as some of the invoices were also raised against the respondent in Delhi.
• Hence, in the view of the judgment given by the Delhi High Court in the case of Aarka Sports Management Pvt. Ltd. v Kalsi Buildcon Pvt. Ltd. (2020) and the provisions under Section 2(1)(e)(i) of the A&C Act and Section 20 of the CPC, The Delhi High Court has the territorial jurisdiction to decide the petition.
• The Court held that the dispute arose out of the Distribution Agreement and the MoU was also a part of the transactions which arose out of the Distribution Agreement. The Distribution Agreement provided the Arbitration Clause. The Court ruled that the dispute between the parties could be referred to arbitration.