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of <h1>Court appoints retired Judge as Sole Arbitrator in cost dispute emphasizing contractual obligations</h1> <h3>M/s PANCHAMI ENTERPRISES Versus MYSORE SALES INTERNATIONAL LTD (MSIL)</h3> The Court allowed the petition and appointed a retired District Judge as the Sole Arbitrator to resolve a dispute regarding unilateral cost reduction in ... Appointment of a Retired District Judge as the Sole Arbitrator - alteration of cost per unit in the event there is any variation in the tax paid or otherwise - HELD THAT:- This Court prima facie opines that the controversy between the petitioner and the respondent would include the question whether the respondent could have insisted for reduction in the agreed cost per unit consequent to reduction in the GST rate., and the controversy would be within the fold of a dispute contemplated for resolution by arbitration under the agreement dated 31.08.2017. The petitioner has invoked the arbitration Clause in issuing the legal notice dated 16.12.2020 calling upon the respondent to convey willingness for accepting the nomination by the petitioner, but the respondent has failed to signify such acceptance. Smt. H.S.Kamala, retired District Judge, is appointed as the Sole Arbitrator to enter reference of the dispute between the petitioner and respondents and conduct the arbitration proceeding at the Arbitration and Conciliation Centre (Domestic and International), Bengaluru according to the Rules governing the said Arbitration Centre - Petition allowed. Issues:1. Appointment of a Retired District Judge as the Sole Arbitrator for a dispute regarding reduction in cost per unit.2. Interpretation of the arbitration clause in the agreement dated 31.08.2017.3. Dispute resolution mechanism in case of unilateral decisions affecting agreed prices.4. Validity of invoking arbitration in the absence of mutual agreement on cost alterations due to tax variations.5. Admissibility of Finance Department's opinion in justifying unilateral cost reduction.Issue 1: Appointment of Sole ArbitratorThe petitioner sought appointment of a Retired District Judge as the Sole Arbitrator to resolve a dispute with the respondent regarding unilateral reduction in the cost per unit of dispensing counters and storage racks. The Court allowed the petition and appointed a retired District Judge as the Sole Arbitrator to conduct arbitration proceedings at the Arbitration and Conciliation Centre in Bengaluru.Issue 2: Interpretation of Arbitration ClauseThe dispute arose from the respondent unilaterally reducing the cost per unit based on a Finance Department opinion regarding a GST rate reduction. The petitioner argued that the agreed prices were inclusive of all taxes, and any variation should not alter the cost per unit without mutual agreement. The Court found that the controversy fell within the scope of a dispute for arbitration under the agreement dated 31.08.2017.Issue 3: Dispute Resolution MechanismThe petitioner invoked the arbitration Clause by nominating a Retired District Judge as the Sole Arbitrator through a legal notice. However, the respondent contended that there was no dispute warranting arbitration due to the Finance Department's conclusive opinion. Despite the petitioner's efforts, the respondent did not signify acceptance of the arbitration nomination, leading to the Court's intervention in appointing the Sole Arbitrator.Issue 4: Validity of Invoking ArbitrationThe respondent justified the cost reduction per unit based on the GST rate change and the Finance Department's opinion, claiming no dispute existed for arbitration. In contrast, the petitioner argued that without a specific agreement allowing cost alterations due to tax variations, the respondent's unilateral decision was impermissible, warranting arbitration as per the agreement terms.Issue 5: Admissibility of Finance Department's OpinionThe respondent's stance relied on the Finance Department's opinion to support the unilateral cost reduction. However, the Court found that the dispute centered on whether the respondent could insist on reducing the agreed cost per unit following the GST rate reduction, aligning with the arbitration Clause's scope outlined in the agreement dated 31.08.2017.The judgment emphasized the importance of adhering to contractual agreements, particularly in dispute resolution mechanisms like arbitration. It clarified the role of appointed arbitrators in resolving conflicts arising from unilateral decisions affecting agreed terms. The decision underscored the need for parties to engage in good faith discussions and adhere to contractual obligations to maintain the sanctity of commercial agreements.
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