M/s National Commodities Management Services Limited formerly known v. M/s Vishnu Rice Mill, a Partnership Firm, situated at Tikara Toli, Nagri

O R D E R Per, Shree Chandrashekhar,J. M/s National Commodities Management Services Limited has filed this petition under section 11(6) of the Arbitration and Conciliation Act, 1996 (in short, AC Act) for appointment of an Arbitrator in terms of Clause 19 of the agreement dated 16th April 2016.

2. This petition was filed on 25th March 2022 and at least till 24th November 2022 the petitioner was not able to serve notice upon the respondent.

3. On 20th January 2023, Arb. Appl. No. 23 of 2019, Arb. Appl. No. 35 of 2021 and Arb. Appl. No. 17 of 2022 were listed together. On that day, the respondent put his appearance through Mr. J.N. Upadhyay (in Arb. Appl. No. 23 of 2019) and Ms. Sonal Sodhani (in Arb. Appl. No. 17 of 2022), the learned counsels.

4. On 20th January 2023, this Court has passed the following order: 2 AA No. 17 of 2022 “In these arbitration applications, M/s National Collateral Management Services Limited (now, M/s National Commodities Management Services Limited) is seeking appointment of an arbitrator under section 11 (6) of the Arbitration and Conciliation Act, 1996 (in short, “AC Act”). It appears that there is a written agreement between the parties in all three cases. It further appears that in all the cases in the “Agreement For FCI Procurement” there is a clause for arbitration. In all these three arbitration applications, M/s National Collateral Management Services Limited has invoked the arbitration clause without giving written notice of dispute to the other party. Obviously, there is no notice to the other party as regards the nature of dispute and claim, if any, made by the applicant or any other subject of the like nature in respect of which M/s National Collateral Management Services Limited is seeking resolution through appointment of an arbitrator. Prima-facie, these applications appear to be not maintainable. However, on the request of Mr. Vikas Pandey, the learned counsel for the petitioner(s), post these matters on 27th January 2023 under the heading “Final Disposal” to be listed in the supplementary cause list.”

5. At the outset, this needs to be indicated that the learned counsel for M/s Vishnu Rice Mill has raised a preliminary objection on maintainability of the present petition invoking the powers under section 11(6) of the AC Act.

6. The petitioner has pleaded that a Milling Agreement dated 16th April 2016 was entered into with M/s Vishnu Rice Mill for the purpose of milling of paddy and other activities incidental thereto like transportation, logistic and safekeeping etc. In terms thereof, the following are the responsibility and obligations of the respondent: “2. (c) The responsibility & obligation of RM shall be as follows: i.) To Transportation of paddy to the Storage Centers/Purchase Centers to rice mills ii.) To loading from purchase center and unloading at the iii.) To stenciling and branding in gunny bags iv.) To Mill of Paddy to Rice of specified quality as specified by FCI/GOI. v.) To Transportation/delivering of rice to the Delivery centers of FCI. vi.) To Submission of Documents of NCML as mentioned in the agreement or as required for fulfillment of terms and conditions of agreement. vii.) To follow the time line as prescribed in various clauses of this agreement.”

7. Thus, there is an elaborate procedure provided under the 3 AA No. 17 of 2022 agreement dated 16th April 2016 for procurement, packaging and delivery of rice. There are also stipulations pertaining to payment, representation and warranties, inspection, insurance, force-majeure and confidentiality.

8. Under Clause 19 of the agreement, there is a provision for settlement of all claims and disputes through arbitration.

9. Clause 19 of the agreement reads as under: “19. Dispute Resolution a) Any and all claims and disputes arising out of or in connection with this Agreement or its performance shall be settled by arbitration though an arbitrator to be mutually agreed on. In the event of disagreement, each party will appoint one arbitrator. The arbitration proceedings shall be held in Ranch in accordance with the provisions of the Arbitration and Conciliation Act, 1996. b) The decision of the arbitrator shall be final and binding upon the parties both as to law and to fact, and shall not be appealable to any court in any jurisdiction. The expenses of the arbitrator shall be shared equally by the parties, and each party shall bear its own legal costs.”

10. The respondent has not raised any dispute as to existence of the agreement and the dispute resolution mechanism.

11. The objection raised by the respondent is that without raising a claim through written notice and a denial thereof by the respondent, the petitioner cannot straightaway invoke the provision under section 11(6) of the AC Act through letter dated 23rd February 2021 seeking appointment of the Arbitrator through the process of Court.

12. Mr. Vikas Pandey, the learned counsel for the petitioner has referred to the pleadings particularly the averments in paragraph nos. 4 and 5 to submit that the respondent has sufficient notice of the claim raised by the petitioner.

13. For invoking the powers under section 11(6) of the AC Act, the petitioner has made the following statements: “4. That the petitioner is a limited company duly incorporated with Registrar of Companies under the Companies Act, 1956, not known as M/s National Commodities Management Services Limited (Formerly known as National Collateral Management Services Limited) engaged in providing procurement, warehousing, gradation, inspection, including risk assessment, management etc. The petitioner is engaged in business of procurement of paddy under MSP Scheme from farmers at sector level procurement centres and delivery of resultant custom milled rice on principal to principal basis in whole country including in the State of Jharkhand. valuation, monitoring services quality testing, 4 AA No. 17 of 2022

5. That the petitioner entered into Milling Agreement dated 16.04.2016 with the Respondent and clause 5(f) of the said milling agreement stipulates that respondent has to complete milling of paddy within a period of 10 working days from the date of lifting of paddy and intimate petitioner accordingly. The relevant portion is quoted herein below for ready reference; “5(f) The RM shall complete milling of paddy within a period of Seven (10) working days from the date of lifting of paddy and intimate NCML accordingly. On receipt of such intimation, NCML shall issue a rice delivery certificate (RDC) to FCI as per format agreed with FCI. 6. That the petitioner vide Notice dated 23.02.2021 invoked Arbitration Clause and claimed Rs. 7,78,054/- (Rupees Seven Lakh Seventy Eight Thousand Fifty Four Only) for the work which was late performed by Respondent and also for the gunny bags which was not returned to the petitioner. 7. That as petitioner had no other alternative but to invoke clause 19 of the aforesaid milling agreement which is an arbitration clause and in terms of the same petitioner appointed Shri Ashok Kumar Pandey practicing Advocate of this Hon'ble Court as Arbitrator. 8. That the respondent has not adhered to the aforesaid milling agreement and rice was deposited much after the stipulated time as per the agreement, the respondent were interalia, liable to pay old and surplus gunny bags of paddy and rice to the petitioner and the respondent is liable to pay aforesaid amount to the petitioner. 9. That said notice dated 23.02.2021 was posted on 24.02.2021 and duly served upon the respondent as the same has not returned undelivered and more than 30 days has lapsed but the respondent failed to give consent despite lapse of thirty days from the receipt of the said letter. 10. That since the respondents have neither settled the claims nor they have referred the claims/disputes under the agreement to arbitration, the petitioner has got no other efficacious, economic and speedy remedy than to move before this Hon'ble Court under the provisions of Arbitration and Conciliation Act, 1996, for appointment of an independent and impartial Arbitrator to go in for arbitration of the disputes. 11. That since the respondents have failed to give consent on the aforesaid name and or appoint the arbitrator in terms of arbitration agreement even though the aforesaid letter/notice issued to them by the petitioner to do so within a period of 30 days of such notice served by the petitioner, and as such this Hon'ble Court may be pleased to appoint a sole independent and impartial arbitrator under section 11 (6) of the Arbitration and Conciliation Act, 1996.”

14. From the above, it is apparent that before sending notice dated 23rd February 2021 to the respondent invoking the Arbitration Clause under the agreement the petitioner did not put the respondent to notice as to the claim which he has indicated in the aforesaid notice dated 23rd February 2021. 5 AA No. 17 of 2022

15. A plain reading of the provisions under the AC Act would indicate that the foundation for invoking the provisions under the AC Act is existence of differences and disputes between the parties. In “Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority” (1988) 2 SCC 338 the Hon'ble Supreme Court has observed that a dispute arises when there is a claim and a denial or repudiation of the claim. Therefore, the existence of a dispute is essential for appointment of an Arbitrator wherever there is a provision for arbitration in the agreement. It has further been held that there should be a dispute, and that there can be a dispute only when a claim is asserted by one party and denied by the other on whatever grounds and mere failure or inaction to pay does not lead to an inference of the existence of a dispute. Therefore, this Court is not required to reiterate that for invoking the powers under section 11(6) of the AC Act the aforesaid requirement in law, that the petitioner has put to notice the respondent about his specific claim and such claim was disputed or repudiated by the respondent, must be fulfilled and then only the petitioner can have recourse to the mechanism as provided under the Arbitration Clause, must be satisfied.

16. While so, the present petition being premature is held not maintainable and dismissed as such. (Shree Chandrashekhar, J.) RKM/