M/S Yash Fans and Appliances Ltd v. M/S Ottomate International Private Limited

1. This is a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996[1] for reference of disputes between the parties to arbitration.

2. The petitioner and respondent entered into a Master Purchase Agreement dated 16 October 2018 whereunder the petitioner agreed to manufacture fans for the respondent under the brand name and style of “Ottomate”.

3. Disputes regarding payment having arose, the petitioner, by notice dated 3 August 2023, invoked Clause 22 of the Master “the 1996 Act” hereinafter Purchase Agreement and sought reference of disputes to arbitration. The respondent responded vide notice dated 13 September 2023. Thereafter, both the parties arrived at a settlement agreement dated 26 February 2024.

4. Clause 22 of the Master Purchase Agreement reads thus:

22.

GOVERNING LAW & DISPUTE RESOLUTION 22.[1] This Agreement shall be governed by and construed in accordance with the laws of India. Subject to the dispute resolution provisions as hereunder. 22.[2] In the event of any dispute or disagreement (a “Dispute”) relating to any provision of this Agreement or in respect of any transaction herein contemplated, the Parties shall first attempt to settle such Dispute through discussion and negotiations. In the event the Parties are unable to settle the Dispute through negotiation within thirty (30) days, then the matter shall be decided by arbitration to be conducted by the Sole Arbitrator in accordance with the Arbitration and Conciliation Act, 1996 or any of its subsequent amendments. It is specifically agreed that the Sole Arbitrator shall be appointed at the discretion of Purchaser with Information to Supplier. 22.[3] During the conduct of arbitration proceedings, the Parties shall bear the cost of the arbitration in equal proportions. The arbitration shall be conducted in English and the place of Arbitration shall be at New Delhi, India. The award of the arbitrator shall be final and binding on parties. 22.[4] Subject to the foregoing, the courts of law located in New Delhi shall have the exclusive jurisdiction to any matter arising out of or in relation to this Agreement.

5. Mr. Amulya Dhingra, learned Counsel for the respondent, submits that no arbitral dispute survives for consideration as the entire amount payable to the petitioner stands paid and the settlement agreement, which manifests this fact has been placed on record by the petitioner himself.

6. Learned Counsel for the petitioner, on the other hand, submits that the petitioner was constrained to accept the settlement under financial duress and that there are claims owed to his client by the respondent which are still outstanding.

7. After the judgment of the Supreme Court in SBI General Insurance Co Ltd v Krish Spinning[2], which specifically notes that the aspect of discharge of the debt by accord and satisfaction is not an aspect which can be examined by a Section 11(6) court, it is not open for this Court to enter into this arena. The Court has only to examine whether there exists an arbitration agreement between the parties.

8. In view of the fact that there exists an arbitration agreement between the parties, a Section 21 notice stands issued by the petitioner to the respondent on 3 August 2023, and the present petition has been filed within three years from the issuance of such notice, the Court has necessarily to refer the dispute to arbitration.

9. The Court accordingly appoints Mr. Rajiv Mishra, Advocate (Mob: 9971149344) as the arbitrator to arbitrate on the dispute between the parties.

10. The arbitrator shall be entitled to charge fees as per the Fourth schedule of the 1996 Act.

11. The learned Arbitrator is requested to file the requisite disclosure under Section 12(2) of the 1996 Act within a week of entering on the reference.

12. All questions of fact and law are left open to be agitated before the learned arbitral tribunal by all parties.

13. The petition stands allowed in the aforesaid terms.