2024 (12) TMI 1445 - HC - Indian Laws

Company's resistance fails as arbitration agreement confirmed under Section 11(6A) for copper supply dispute

The Rajasthan HC confirmed the existence of an arbitration agreement between the parties under a purchase agreement dated 28.07.2014 for copper supply. ... Seeking appointment of a sole Arbitrator for resolution of its claims qua non-applicant Company - resistance for appointment of an Arbitrator in respect of the claim put forth by applicant-Company, has been made fundamentally in view of certain subsequent events, transpired after filing of the instant arbitration application - Time limitation. Seeking appointment of a sole Arbitrator for resolution of its claims qua non-applicant Company - HELD THAT:- This Court finds that as far as execution of purchase agreement dated 28.07.2014, whereunder the copper was agreed to be supplied by non-applicant-Company to the applicant-company and supply of copper in pursuance thereof, is an undisputed fact. The arbitration agreement, contained in such purchase agreement in Clause 16(B) is also not in dispute. A seven judges’ Bench of the Hon’ble Supreme Court in Re: Interplay Between Arbitration Agreements Under The Arbitration and Conciliation Act 1996 And the Indian Stamp Act, 1989 [2023 (12) TMI 897 - SUPREME COURT (LB)], has observed in Para Nos.152 & 154 that the omission of Section 11(6A), through Arbitration and Conciliation (Amendment) Act, 2019 (Act 33 of the 2019), has not been notified in the official gazette and therefore, the said provision continues to remain in full force. It is hereby observed that undeniably the dispute between the parties has not been resolved amicably and the arbitration clause contained in Clause 16(B) of the purchase agreement comes in play. Before filing the arbitration application, the applicant had issued legal notices dated 08.12.2021 and 12.01.2022, of which though, reply of one notice dated 12.01.2022 has been filed by the non-applicant Company on 03.09.2022, but admittedly the Arbitrator has not been appointed. Time limitation - HELD THAT:- The arbitration application is well within limitation. Conclusion - The existence of an arbitration agreement between the parties is confirmed and a sole arbitrator is appoined. The arbitration application is well within limitation. The Arbitration Application stands disposed of accordingly. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions addressed in this judgment include:Whether the arbitration application under Section 11 of the Arbitration and Conciliation Act, 1996, for the appointment of a sole arbitrator, is maintainable given the existence of an arbitration agreement between the parties.Whether the claim of the applicant-company against the non-applicant-company has been extinguished due to the approval of the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016.Whether the court should refrain from appointing an arbitrator due to the alleged extinguishment of the claim.Whether the arbitration application is within the limitation period.2. ISSUE-WISE DETAILED ANALYSISExistence of Arbitration AgreementRelevant Legal Framework and Precedents: The court considered Section 11(6A) of the Arbitration and Conciliation Act, 1996, which confines the court's examination to the existence of an arbitration agreement. The court also referenced judgments from the Supreme Court, including Duro Felguera, S.A. vs. Gangavaram Port Limited and Mayavati Trading Private Limited vs. Pradyuat Deb Burman, which emphasize the limited scope of inquiry under Section 11(6A).Court's Interpretation and Reasoning: The court confirmed the existence of an arbitration agreement in Clause 16(B) of the purchase agreement dated 28.07.2014. The court emphasized that its role is limited to confirming the existence of such an agreement and not to delve into the merits of the underlying dispute.Conclusions: The court concluded that an arbitration agreement exists between the parties, thus warranting the appointment of an arbitrator.Impact of CIRP Approval on Applicant's ClaimRelevant Legal Framework and Precedents: The court examined Section 31(1) of the Insolvency and Bankruptcy Code, 2016, and referenced the Supreme Court judgment in Ghanashyam Mishra & Sons (P) Ltd. vs. Edelweiss Asset Reconstruction Co. Ltd., which discusses the effect of a resolution plan on existing claims.Court's Interpretation and Reasoning: The court noted that the approval of the CIRP plan by the NCLT, Jaipur, occurred after the filing of the arbitration application. It held that the effect of the CIRP approval on the applicant's claim should be determined by the arbitrator, as it pertains to the merits of the claim.Conclusions: The court decided that the issue of whether the applicant's claim has been extinguished due to the CIRP approval is a matter for the arbitrator to decide.Appointment of ArbitratorRelevant Legal Framework: The court referred to the Arbitration and Conciliation Act, 1996, particularly the provisions regarding the appointment of arbitrators.Court's Interpretation and Reasoning: The court found that the arbitration application was filed within the limitation period and that the arbitration clause is operative. It appointed Hon'ble Mr. Justice Ashok Kumar Gaur as the sole arbitrator, subject to a declaration of independence and impartiality under Section 12 of the Act.Conclusions: The court allowed the arbitration application and appointed a sole arbitrator to resolve the dispute.3. SIGNIFICANT HOLDINGSCore Principles EstablishedThe court reaffirmed the principle that its role under Section 11(6A) of the Arbitration and Conciliation Act, 1996, is limited to verifying the existence of an arbitration agreement.The court highlighted that issues concerning the merits of claims, including those affected by CIRP proceedings, should be addressed by the arbitrator.Final Determinations on Each IssueThe court confirmed the existence of an arbitration agreement between the parties and appointed a sole arbitrator.The court left the determination of the impact of the CIRP approval on the applicant's claim to the arbitrator.The arbitration application was deemed to be within the limitation period.The judgment concludes with directions for the appointed arbitrator to proceed with the arbitration process, ensuring adherence to the provisions of the Arbitration and Conciliation Act, 1996, and the Manual of Procedure for Alternative Dispute Resolution. The parties are expected to cooperate with the arbitrator to facilitate the resolution of the dispute.