Disputes arising out of an agreement containing arbitration clause, must be settled through arbitration

Karnataka High Court: A Single judge bench comprising of Dinesh Maheshwari, J. while hearing a petition praying for the appointment of an arbitrator, ruled that if an agreement between parties provides for arbitration and a dispute arises therefrom then it must be settled through arbitration.

The petitioner company, involved in exporting of fruit products, approached the respondent to process mangoes for export purpose. On respondent’s assurance that it possessed the necessary machinery and expertise to process mangoes, an agreement was executed between the parties. However, respondent delayed in the process of unloading mangoes. Since the season was drawing to a close and there was a loss in business due to the delays caused by respondent, the petitioner gave it a concession for procuring mangoes on its own and a further concession for processing the rejections into mango pulp. But still the respondent did not take steps to procure mangoes and also failed to meet the quantity and quality of the finished product.

Despite these lapses, the respondent raised an invoice which the petitioner refused to clear. In turn, the petitioner sent it a legal notice demanding payment for loss caused due to respondent’s failure to meet its contractual obligations. Since respondent did not revert to the said notice, petitioner invoked arbitration clause of the agreement nominating an arbitrator and called upon respondent to do the same. Respondent’s failure to even nominate an arbitrator, constrained the petitioner to file the instant petition.

The limited aspect for the court’s consideration was whether there existed an arbitration agreement between the parties. On perusal of the agreement executed between parties, the court noted that clause 5 of the said agreement provided that in case of disputes between parties not being settled amicably, the same would be settled in arbitration.

It was held if a dispute between the parties cannot be resolved amicably and there is the failure to appoint an arbitrator, then in such a case, it is just and proper that an independent arbitrator be appointed to adjudicate upon and decide such dispute. Accordingly, the petition was disposed of by appointing a retired judge as an arbitrator.[Pellagic Food Ingredients (P) Ltd. v. Oceanic Edibles International Limited, Civil Miscellaneous Petition No. 300 of 2016, decided on 09-10-2018]

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    In a contract,if a contract is terminated and the arbitration clause is there in the contract agreement.can the claimant get the contract and also the claim.or the the agreement is terminated and only the claim part survives.

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