Punjab-Haryana High Court
Erisha Agritech Private Ltd vs Punjab Agro Industries Corporate ... on 14 November, 2022
ARB No. 90 of 2022 (O&M) -1-
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
ARB No. 90 of 2022 (O&M).
Date of Decision: July 14, 2022
ERISHA AGRITECH PVT. LTD. .... Applicant(s)
Versus
PUNJAB AGRO INDUSTRIES CORPORATE LTD. ..... Respondent(s)
CORAM:- HON'BLE MRS. JUSTICE LISA GILL
Present: Mr. Karanveer Jindal, Advocate
for the applicant.
Mr. Anupam Singla, Advocate
for the respondent.
***
LISA GILL, J.
This petition under Section 11(5) of the Arbitration and
Conciliation Act, 1996 (for short - 'the Arbitration Act'), has been filed for
appointment of the sole Arbitrator for deciding the disputes arising out of
Agreement dated 03.03.2021 (Annexure P-3), executed between the parties.
It is submitted that Invoice dated 10.12.2020 (Annexure P-1)
confirming the order for delivery of machine 'Self-propelled Forage
Harvester FS60' was issued by the applicant on 10.12.2020 on the basis of
discussions and negotiations held with the respondent. Purchase order dated
23.12.2020 (Annexure P-2), it is stated intentionally deviated from the terms
of payment as mentioned in the Invoice dated 10.12.2020 wherein it is
clearly stipulated that 50% of the payment was to be made in advance and
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balance 50% within seven days after receipt of the machine. It is stated that
this deviation was pointed out by the applicant and objection in this regard
was raised vide e-mail dated 24.12.2020. However, on request of the
respondent, the Forage Machine was delivered and duly accepted by the
respondent on 05.02.2021 but balance payment of 50% within 7 days of
delivery was not released. Certain doubts were unnecessarily raised by the
respondent regarding the Forage Machine despite the same being brand new
and genuine. However, in order to dispel any kind of doubt, the applicant
even offered to replace the Forage Machine with a new one without any
additional cost. Agreement dated 03.03.2021 (Annexure P-3) was executed
between the parties wherein it was agreed that the applicant would supply
another Forage Harvester Machine on or before 31.07.2021 to replace the
one which was in possession of the respondent with the agreement that said
Forage Machine would be returned to the applicant on or before 31.07.2021.
It is submitted that though the second new Forage Machine was ready for
delivery in the month of June, 2021, respondent sought to initiate discussion
in June, 2021 for delivery of a higher version of the Forage Machine at the
same price of earlier machine already in its possession. Due to the conduct
and indecisiveness on the part of the respondent, there was deviation in the
agreement dated 03.03.2021 and it failed to take delivery of subsequent
Forage Machine. Respondent, it is stated, is still in possession of the earlier
Machine since February, 2021 and is using the same without releasing full
payment and not possession of the other one. The applicant, it is submitted,
is now stuck with two Forage Machines on account of negligence of the
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respondent and it accordingly asked for interest and penalty on the amount
in question. It is further submitted that surprisingly respondent issued legal
notice dated 05.10.2021 (Annexure P-5) to the applicant seeking refund of
the amount of Rs.78,00,000/- (seventy eight lacs) in terms of agreement
dated 03.03.2021. Legal notice was duly replied to on 23.10.2021
(Annexure P-6). Applicant, it is stated, issued a demand-cum-legal notice
dated 01.11.2021 (Annexure P-7), whereupon the respondent chose to
invoke Clause 9 of the agreement, which provides for settlement of dispute
through arbitration and reads as under:-
"In the event of any question, dispute or difference
arising between the parties in relation to this agreement or in
connection therewith the same shall be referred to the sole
arbitrator to be appointed by the Managing Director, Punjab
Agro Industries Corporation Limited. The award of the
Arbitrator will be final and binding upon both the parties. The
Arbitrator proceedings will be governed under the Arbitration
and Conciliation Act, 1996 and the office of the Arbitration will
be at Chandigarh."
Learned counsel for the applicant submits that the Managing
Director of the respondent-Corporation unilaterally appointed the sole
Arbitrator vide order dated 15.12.2021 without seeking consent of the
applicant, which is clearly in derogation of the specific provision of the
Arbitration Act as well as judgment of the Hon'ble Supreme Court in
Perkins Eastman Architects DPC and another Vs. HSCC (India) Ltd.,
2019 SCC Online SC 1517. Accordingly, this petition has been filed.
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Despite opportunity, no reply has been filed on behalf of the
respondent. However, arguments addressed on behalf of the parties have
been heard.
The factual position in respect to execution of agreement dated
03.03.2021 between the parties is not in dispute and neither is the existence
of the arbitral clause or the arbitrable dispute between the parties. Learned
counsel for the respondent is unable to deny that in view of Section 12(5) of
the Arbitration Act and judgment of the Hon'ble Supreme Court in Perkins
Eastman's case (supra), the sole arbitrator could not have been appointed by
the Managing Director of the respondent-Corporation. The Hon'ble Supreme
Court in Perkins Eastman's case has observed as under:-
20. We thus have two categories of cases. The first, similar to the
one dealt with in TRF Limited where the Managing Director
himself is named as an arbitrator with an additional power to
appoint any other person as an arbitrator. In the second category,
the Managing Director is not to act as an arbitrator himself but is
empowered or authorised to appoint any other person of his choice
or discretion as an arbitrator. If, in the first category of cases, the
Managing Director was found incompetent, it was because of the
interest that he would be said to be having in the outcome or result
of the dispute. The element of invalidity would thus be directly
relatable to and arise from the interest that he would be having in
such outcome or decision. If that be the test, similar invalidity
would always arise and spring even in the second category of cases.
If the interest that he has in the outcome of the dispute, is taken to
be the basis for the possibility of bias, it will always be present
irrespective of whether the matter stands under the first or second
category of cases. We are conscious that if such deduction is drawn
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from the decision of this Court in TRF Limited, all cases having
clauses similar to that with which we are presently concerned, a
party to the agreement would be disentitled to make any
appointment of an Arbitrator on its own and it would always be
available to argue that a party or an official or an authority having
interest in the dispute would be disentitled to make appointment of
an Arbitrator.
21. But, in our view that has to be the logical deduction from TRF
Limited. Paragraph 50 of the decision shows that this Court was
concerned with the issue, "whether the Managing Director, after
becoming ineligible by operation of law, is he still eligible to
nominate an Arbitrator" The ineligibility referred to therein, was as
a result of operation of law, in that a person having an interest in the
dispute or in the outcome or decision thereof, must not only be
ineligible to act as an arbitrator but must also not be eligible to
appoint anyone else as an arbitrator and that such person cannot and
should not have any role in charting out any course to the dispute
resolution by having the power to appoint an arbitrator. The next
sentences in the paragraph, further show that cases where both the
parties could nominate respective arbitrators of their choice were
found to be completely a different situation. The reason is clear that
whatever advantage a party may derive by nominating an arbitrator
of its choice would get counter balanced by equal power with the
other party. But, in a case where only one party has a right to
appoint a sole arbitrator, its choice will always have an element of
exclusivity in determining or charting the course for dispute
resolution. Naturally, the person who has an interest in the outcome
or decision of the dispute must not have the power to appoint a sole
arbitrator. That has to be taken as the essence of the amendments
brought in by the Arbitration and Conciliation (Amendment) Act,
2015 (Act 3 of 2016) and recognised by the decision of this Court in
TRF Limited.
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In the given factual matrix, appointment of sole Arbitrator by
the Managing Director of the respondent-Corporation vide order dated
15.12.2021 cannot be an impedement for appointment of an independent
sole Arbitrator in this petition. This has been succinctly explained by the
Hon'ble Supreme Court in Perkin Eastmen's case (supra).
Keeping in view the facts and circumstances as above, there is
no impediment to the appointment of an independent sole Arbitrator to
decide the dispute between the parties. Accordingly, order dated 15.12.2021
(Annexure P-9) is set aside and Mr. Justice (Retd.) Inderjit Singh, former
Judge, Punjab and Haryana High Court, resident of 497, IAS IPS Society,
New Chandigarh, Mobile No.8558809904, is appointed as the Sole
Arbitrator to resolve all the disputes/differences between the parties arising
out of agreement dated 03.03.2021. Appointment is subject to declaration to
be made by the Arbitrator under Section 12 of the Act with regard to his
independence and impartiality to settle the disputes between the parties. The
Arbitrator to complete the proceedings within the time limit specified under
Section 29-A of the Act. The Arbitrator shall be paid fee in accordance with
the Fourth Schedule of the Act, as amended from time to time to be borne
equally by the parties.
A copy of this order be dispatched to Mr. Justice (Retd.)
Inderjit Singh, former Judge, Punjab and Haryana High Court, at the
following address:-
497, IAS IPS Society, New Chandigarh, Mobile
No.8558809904.
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Application is disposed of accordingly.
(Lisa Gill)
July 14, 2022 Judge
Sunil
Whether speaking/reasoned: Yes/No
Whether reportable: Yes/No
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