A.K. Sikri, CJ.
By means of this petition filed under Section 11(5) of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as ‘the Act’), the petitioner has prayed for appointment of the Arbitrator couching the relief clause in the following words:-
a) Appoint a sole arbitrator under Clause 17 of the agreement dated 22.01.2008 for adjudicating the disputes that have arisen between the parties with respect to the petitioner’s claim for refund of security deposit mentioned in para 7.12 above.
2. According to the petitioner, the disputes between the parties which need to be adjudicated upon by the Arbitral Tribunal, have arisen in the following circumstances:-
i) The petitioner company is engaged in business in Retail, having various retail outlets throughout India providing household consumer items, allied and incidental services through its retail outlets. The respondent is engaged in the business of providing food processing, packaging and warehousing services. It is having its premises situated at Bara Farm, KM 201-202 near Radha Swami Satsang, G.T. Road, N.H.-1, Sirhind. The respondent was desirous of offering services to the petitioner and the petitioner was desirous of availing such services in accordance to the terms and conditions of the agreement dated 22.01.2008. The same came to be effective from 01.02.2008.
ii) In view of the said agreement, the respondent was to handle the warehousing reprocessing and packaging activities concerning the stocks of the petitioner that was to be indicated by the petitioner in writing from time to time and in such quantities as may be deemed fit and necessary by the petitioner. As agreed between the parties subject to the terms of the agreement, the petitioner invested and installed machineries worth more than a crore of rupees for the work to be undertaken by the respondent in the premises of the respondent at Bara Farm, KM 201-202 near Radha Swami Satsang, G.T.Road, N.H.-1, Sirhind, Punjab, which is also the respondent’s registered office.
iii) In view of the terms of the agreement, the agreement was considered as deemed to be effective from 1st of February, 2008 which was the commencing date and the agreement was to remain in force for the period of 60 months from the commencement date with a review of after 6 months from the commencement date (Clause 3.1 of the agreement). Further, it has been mentioned that the services granted under the agreement are non-exclusive and the petitioner reserves its rights without reference or consent of the respondents to permit any other person to provide similar services or otherwise. Similarly, PAVL (respondent herein) could provide the services to other clients (Clause 4.1 of the agreement). Thus, in view of the terms of the agreement, either party had the right to avail/provide the services to any other person/company as per the terms of the agreement.
iv) That further, in exercise of the power conferred as per the terms of the agreement, the petitioner had the sole right to terminate the agreement by giving the other party three months prior notice in writing without assigning any reason thereof. Thus while exercising the said powers duly provided in the agreement; the petitioner terminated the agreement in view of the clause 10.1 of the same on 23.01.2009. Further, the petitioner specifically mentioned in the notice calling upon the respondent to complete the formalities as per clause 11 (Consequences of Termination) of the said agreement.
3. It is the case of the petitioner that inspite of receiving the aforesaid termination notice, the respondent failed to fulfill its obligation under Clause 11 of the said agreement. The respondent also hindered and restrained the peaceful removal of the petitioner’s assets/machinery and threatened the officials of the petitioner. The police complaint was filed against the respondent which is pending.
The respondent, however, filed a suit before Civil Judge (Senior Division), Chandigarh for declaration that action of the petitioner in terminating the agreement dated 22.01.2008 vide notice dated 23.01.2009 is without assigning any reason and illegal. In the said suit, the petitioner filed application under Section 8 of the Act submitting that since the suit was not maintainable, as there is an arbitration agreement between the parties, contained in Clause 22 of the agreement dated 02.01.2008. On this application, the respondent withdrew the suit unconditionally. However, the respondent has not allowed the petitioner to remove its machinery inspite of notice dated 12.09.2009 and 03.10.2009 served upon the respondents. The petitioner thereafter sent notice dated 23.07.2010 invoking arbitration agreement contained in Clause 22 of the agreement dated 02.01.2008 and proposed two names requesting the respondent to give its approval to one of them.
However, the respondent vide reply dated 20.08.2012 opposed the names suggested by the petitioner. According to the petitioner, the value of the machinery, equipment and other damages which the petitioner is claiming is Rs.33,63,49,813/- and it is entitled to recover from the respondents with interest. Clause 22 of the agreement reads as under:-
a) In case of any dispute and differences arising from or relating to this agreement, the same shall be referred to arbitration and the arbitration proceedings shall be governed by the Arbitration & Conciliation Act, 1996.
b) The venue for arbitration shall be at Delhi and the proceedings shall be conducted in English only.'
4. The petitioner has also averred that it has even filed an application under Section 9 of the Act before the Court of District Judge, Fatehgarh Sahib which is pending adjudication.
5. In the reply filed by the respondent it is stated that the objective of the present petition is to frustrate the defence taken in the petition filed by the respondent under Section 9 of the Act and the petitioner has not approached the Court with clean hands. It is further submitted that the agreement was terminated by the petitioner on 23.01.2009 and the present petition is filed on 01.10.2012 i.e. after lapse of 3 years 8 months and is thus time barred as well. It is also alleged that the respondent company is in losses due to the misadventure of the petitioner which losses have accumulated to the tune of Rs.1.36 Crores during the financial year 2011-12. It is submitted that its reserves are nil and for these reasons the respondents cannot afford the expenses pertaining to arbitration. For this reason, the respondent has not invoked the arbitration though it had a claim of Rs.6,03,84,000/- against the petitioner.
6. From the aforesaid reply, it is clear that the respondent accepts not only that there are disputes between the parties ( infact the respondent is alleging that the termination of the agreement was illegal and the respondent has counter claims against the petitioner), the existence of the arbitration agreement is also accepted. Once there is an arbitration agreement and there are disputes, the respondent cannot object to the constitution of the Arbitral Tribunal merely because it does not have the liquidity.
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hen learned counsel for the respondent was confronted with this fact, he submitted that he has no objection for appointment of the Arbitrator provided the Arbitrator so appointed charge reasonable amount of fee. In this backdrop suggestions given to the parties who want arbitration to be conducted under the aegis of Delhi High Court Arbitration Centre so that fee as per the schedule can be charged and there are no administrative expenses involved as well. Learned counsel for the parties accepted this course of action. 8. Accordingly, this petition is allowed. With the consent of the parties, Mrs. Justice Usha Mehra, a retired Judge of Delhi High Court is appointed as Arbitrator to adjudicate the disputes between the parties who shall proceed with under the aegis of Delhi High Court Arbitration Centre.