FACTS:-

• The parties entered into a ‘Construction Agreement’ in November, 2014 for a construction project named ‘MIST’, in Noida, given to the petitioners by the respondents.
• The said contract contained an arbitration clause by virtue of which the parties could appoint an arbitrator by mutual consent in case of any dispute arising out of the contract.
• On October 8, 2015, certain disputes between the parties had been settled by way of a Memorandum of Understanding (MoU) which expressly provided that the ‘Construction Agreement’ stood cancelled, along with details of payments due from the respondents to the petitioners.
• Upon non-payment of dues, the petitioners invoked the arbitration clause of the 2014 agreement, however the arbitrator concluded that the MoU amounted to the novation of the original agreement and a breach of the MoU will not revive the terms of the agreement.

ISSUE:-

• Whether the MoU between the parties led to the Novation of construction agreement and the arbitration clause contained in it;
• Whether the failure to abide by the terms of MoU, amount to the revival of the contract?
• Whether this court Is empowered to review the decision taken by the arbitral tribunal under section 34 of the A&C act?

JUDGEMENT:-

• The court while citing Union of India v. Kishorilal Gupta & Bros. held that in cases wherein an original contract is substituted by a new contract (in this case an MoU), the entire contract along with the arbitration clause perishes with it.
• Further, the court held that the failure to fulfil the conditions of the MoU would not amount to the revival of the original contract.
• While relying on the Ssangyong Engg. & Construction Co.Ltd v. NHAI, the court emphasized that it does not have the power to set aside a decision of an Arbitrator under Section 34 of the act unless it is patently illegal. The interpretation of the terms of a contract by an arbitrator can be interfered with only if the finding is found to be irrational and perverse.
• The court u/s 34 is not empowered to interpret the clauses, they are a matter of contractual interpretation.
• The relevant clause of the MoU providing for the cancellation of the agreement is independent of the fulfilment of conditions stated therein.