Mittal Appliances Ltd. Thr. Its Managing Director Dinesh Chand Mittal vs India Government Mint & Ors.

The present application has been filed for appointment of Arbitrator in terms of Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act of 1996').

The applicant is a limited company incorporated under the provisions of Indian Companies Act. It is engaged in the business of supplying Bi-Metallic composite Coin Blanks having its corporate office at 303, Apollo Trade Centre, Geeta Bhawan Square, A.B.Road, Indore (MP). The respondent No. 1 is a unit of Security Printing and Minting Corporation of India Ltd. (SPMCIL) and has stated that although its corporate office is situated at New Delhi however, no details of the same are provided.

The respondent issued an NIT inviting global tender on 19.03.2010 for the supply of Rs. 10/- Bi-Metallic composite Coin Blanks in the quantity of 500 MPcs. (million pieces). Pursuant to the aforesaid invitation, the applicant submitted its bid. After completion of process, the applicant was found L1 bidder, as such, the contract was awarded in favour of the applicant, pursuant to which agreement was executed between the applicant and the respondent on 02.02.2011 at Noida for supply of Coin Blanks, according to the agreement the applicant agreed to supply of Rs. 10/- Bi-Metallic Composite Blanks of total quantity at 2004.60 MT (260 MPcs). As per the agreement, the applicant was required to supply the Coin Blanks in four different stages to the four mints of SPMCIL including the respondent IGM, Noida. The Coin Blanks were to be supplied at Noida, Mumbai, Hyderabad and Kolkata.

Pursuant to the agreement, the applicant supplied Coin Blanks to the respondent however, there was some dispute between the applicant and respondents. The last supply was made by the applicant on 05.09.2011. The respondent imposed liquidated damages of Rs. 1.86 Crore on the applicant and deducted the said amount from the invoices for delayed supply considering the each lot as separate and independent. However, subsequently, it was decided that the contract is entire contract as per Clause 11.21 of the procurement manual and not separate contract. As such, an amount of Rs. 1.56 Crores was refunded to the applicant.

However, there were some allegations later on, to the effect that SPMCIL was put to illegal loss of above said amount due to the refund of LD/LME. The consideration was that it was SCGM who was the competent authority to grant extension of delivery period with imposition of LD. As such, the decision as taken by the GM for refund of the aforesaid amount was not a competent decision. Consequently, CBI inquiry was initiated against the officers of IGM, Noida and the applicant firm. During investigation, the amount of Rs. 1.56 Crore was again recovered from the applicant on 16.02.2018 from its on going contract. The CBI ultimately filed closure report by considering the case as an instance of misconduct and not a criminal offence. The closure report was accepted by the concerned Court on 04.05.2024.

As the closure report was accepted by the concerned Court i.e. the Court of Special Judge, Anti Corruption, CBI, Gaziabad, the applicant vide e-mail dated 07.11.2024 and 13.11.2024 raised demand for refund of Rs. 1,56,31,471/-which was deducted from its bills of different ongoing contracts.

It may also be pertinent to point out here that on 16.03.2018 recovery was made of this amount and a notice was sent to the applicant on 16.03.2018 itself which was replied by the applicant on 21.03.2018 thereby denying the contents of the notice and asking for refraining from recovery. However, recovery was made and the communication dated 28.03.2018 was issued to the applicant pursuant to which on 09.04.2018 an objection against the recovery and demand for refund was made. Not only this, a prayer for arbitration was also made. However, as the enquiry before CBI was pending, no further steps were taken.

It is in this backdrop that the e-mail dated 07.11.2024 and 13.11.2024 were sent by the applicant for refund of the amount which according to it, was illegally recovered. Pursuant to the said e-mail, the applicant received communication dated 18.12.2024 from respondent No.1 that after taking direction from the Corporate Office the same will be communicated. Again on 16.01.2025 and 29.01.2025, reminders were sent however, there was no reply. As such, notice dated 03.02.2025 was issued invoking arbitration clause i.e. Clause No. 24 of the agreement (Annexure A/1).

The respondent No.1 replied to this notice vide its letter dated 03.05.2025 thereby stating that it has no faith in the proposed Sole Arbitrator thus, advised the applicant to approach the High Court of Delhi for appointment of Arbitrator in terms of Section 11 of the Act of 1996, pursuant to which the applicant has filed the present application before this Court.

The submission of the learned Senior Counsel for the applicant is that the refusal to consent for the name as suggested by the applicant for acting as Arbitrator for resolution of dispute between the parties entailed this application for appointment of Arbitrator in terms of Section 11(6) of the Act of 1996. He submits that there is no dispute regarding any other point as is evident from the reply submitted by the respondent No.1 except the dispute regarding territorial jurisdiction. He submits that the Assistant Manager vide communication dated 03.05.2025 has suggested the applicant to approach the Delhi High Court for appointment of the Arbitrator which according to learned Senior Counsel is not correct for the reason that the agreement containing arbitration clause (Annexure A/1) was executed between the parties i.e. applicant and respondent no.1. The registered office of the applicant is situated at Indore and the registered office of respondent No.1 is situated at Noida which is evident from the agreement itself. He further submits that the goods were supplied pursuant to the agreement from Pithampur District Dhar (MP) to the factory situated at Noida Uttar Pradesh. Learned Senior Counsel submits that in any case the jurisdictional Court could have either been the High Court of MP or the Allahabad High Court. As such, the reply (Annexure A/3) suggesting for approaching the High Court of Delhi is not tenable.

Learned Senior Counsel refers to provisions of Section 11(6), unamended provisions of Section 11(12)(b) and provisions of Section 2(1)(e) of the Act of 1996, and submits that the jurisdictional High Court would be this Court or the Allahabad High Court at the election by either of the parties. As the applicant has chosen to file application before this Court, hence the Arbitrator should be appointed by this Court only as this Court has jurisdiction in view of the aforesaid provisions of the Act of 1996. In support of his contentions, learned Senior Counsel has placed reliance on the judgment passed by the Hon'ble Apex Court in case of State of West Bengal and Ors. vs. Associated Contractors, (2015) 1 SCC 32.

In reply to the submissions of learned Senior Counsel, learned counsel appearing for the respondents submits that in fact the agreement was executed on 02.02.2011 and the last delivery was made by the applicant on 05.09.2011. The amount under dispute was recovered on 16.03.2018 and the CBI filed its closure report on 04.05.2024. In view of the arbitration clause itself, the notice to other party requiring that all matters in dispute or difference to be arbitrated should have been given within a period of 20 days from the date of failure of amicable resolution of the dispute. He submits that the arbitration clause was invoked only on 17.11.2024 when the first demand for refund of recovered amount was made. He thus submits that the applicant has failed to invoke arbitration clause within the stipulated period of 28 days. As such, the arbitration for an amount recovered on 16.03.2018 cannot be initiated by invoking arbitration clause in the year 2024.

Learned counsel further submits that as per the arbitration clause itself i.e. Clause 24 of the agreement, the venue of arbitration was to be decided by the General Manager of respondent No.1 who vide his reply (Annexure A/3) has suggested for approaching the Delhi High Court for appointment of Arbitrator. He thus submits that venue has been decided by the General Manager which is binding upon the applicant in view of the terms of Clause 24 of the agreement. In support of his submission, he places reliance on the judgment of this Court rendered in the case of Ms. Colliers International (India) Property Service Pvt. Ltd. vs. Patanjali Ayurved Ltd., Arbitration Case No. 45 of 2025 ; Lite Bite Foods Pvt. Ltd. vs. Airports Authority of India, Arbitration Petition No. 36 of 2021 (High Court of Gujarat); Faith Constructions vs. NWGEL Church, Arbitration Petition No. 1318/2024 (High Court of Delhi) and; Vijay Kumar Mishra Construction Pvt. Ltd. vs. The Oriental Insurance Co. Ltd., Arbitration Petition No. 219/2022 (High Court of Delhi).

In rejoinder submission, learned Senior Counsel for the applicant submits that in fact the counsel for the respondents has ignored the documents which are available on record. He points out that first notice of recovery was issued on 16.03.2018 which was duly replied on 21.03.2018 and when the communication regarding recovery was made on 28.03.2018, the applicant not only duly replied by its letter dated 09.04.2018 (Annexure A/7) but it also requested for refund of recovered amount and for invoking arbitration clause. He thus submits that from the date of recovery and refusal to settle the dispute amicably within 28 days, arbitration clause was invoked however, it was due to the pendency of criminal investigation by the CBI that no further steps were taken by either of the parties and it is only after the closure report by the CBI filed on 18.07.2022 and its acceptance on 04.05.2024 that the applicant immediately followed its earlier demand of invoking arbitration clause on 09.04.2018 by issuance of its e-mail dated 07.11.2024. He thus submits that not only the arbitration clause was duly followed but even the invocation of arbitration is within limitation in view of the peculiar facts of the present case.

Heard learned counsel for the parties and perused the case file.

The agreement between the present parties consists of an arbitration agreement in Clause 24 in the following terms :

A perusal of the arbitration agreement would show that the parties agreed to resolve their dispute through arbitration in case their efforts to resolve the dispute by amicable settlement fails. It would further reveal on perusal of the said clause that there is no express seat of arbitration determined in the agreement. However, a mention is there that venue of arbitration shall be in India and shall be decided by the General Manager of respondent No.1.

It is thus seen that the venue of arbitration is determined to be within India however, the place is not decided. The purport of the arbitration clause as is evident from its reading suggest that once the arbitration is invoked, the venue shall be decided by the General Manager. However, a close scrutiny of the agreement would also show that it provides in clause 29 and even in clause 24 also that the contract shall be governed by the laws of India. Again there is no clarity about any place in India. A perusal of the title of agreement would show that the respondent No.1 is situated in Noida and the applicant is situated in Indore. Absence of a clear expression of place in the agreement results in a situation where there is no clarity about intention of the parties to anchor the arbitral proceedings to one place. The intention has to come from arbitration agreement which is not forthcoming from a careful perusal of the arbitration agreement, in absence of which, resort to the provisions of the Arbitration and Conciliation Act, 1996 as well as Code of Civil Procedure, 1908 has to be taken.

The Act of 1996 in Section 11(6) provides that appointment of arbitrator shall be made on a application by the party in case of an arbitration other than international commercial arbitration by the High Court. Then, as per Section 2(1)(e) Civil Court of original jurisdiction having jurisdiction to decide the questions forming the subject-matter of arbitration would be the same as had it been the subject-matter of a suit within Civil Court where the said suit would lie is having the jurisdiction. As such, in ordinary course of a dispute, if a suit would lie to the principal Civil Court, then the High Court within whose jurisdiction that Civil Court is coming would have the jurisdiction to entertain the application filed under Section 11 of the Act of 1996.

Apart from above, it is clear from the reading of the Agreement that there is no seat or even venue provided in the entire agreement. Even no clause conferring exclusive jurisdiction to a particular court is available in the entire agreement. As such, along with provisions of section 2(1)(e), this court can also rely on the provisions of section 16 to 20 of the CPC. The Hon'ble Supreme Court in the case of Indian Performing Rights Society Ltd. v. Sanjay Dalia , (2015) 10 SCC 161 while considering the provisions of section 20 of the CPC has held in para 8, 14 to 17 as under:

In the present case, part of cause of action has arisen within the jurisdiction of Civil Court which is situated within the territorial jurisdiction of this Court i.e. principal Civil Court at Dhar/Indore as one party of the agreement resides in Indore and the supply of goods has been made from Pithampur, District Dhar to Noida. And the amount has been recovered from the payment for such supply of goods, the communication of the deduction has been conveyed to the petitioner at Indore/Dhar. Thus, in view of the provisions of Section 11(6) read with Sections 2(1)(e) of the Act of 1996, as also the provisions of Section 20 of the Code of Civil Procedure, this Court has the jurisdiction to entertain this application.

The Hon'ble Supreme Court in the case of BGS SGS SOMA JV vs. NHPC, (2020) 4 SCC 234 has held in para 82 as under:

In view of the above position of law, there must be clarity about the seat or venue and as held by the Hon'ble Apex Court in certain circumstances, the venue itself can be treated as seat. However, in the present case not even the venue has been provided and it has been left to be decided by the MD of the respondent at a later stage. Thus, the argument of the learned Counsel for the respondent that as the reply of the respondent to the notice invoking arbitration stated that an application for appointment of arbitrator should be filed at Delhi High Court would mean that the MD has decided the venue as Delhi. This submission of the learned Counsel is like putting the cart before the horse. It is not the court based on which venue has to be determined but it is the venue which would have decided the court and that too when venue is also taken to be the seat of arbitration. But, as already noted above, in the present case, agreement simply states in clause 24 and 29 that laws of India will apply without anchoring the proceedings to any particular place. Thus it cannot be held that in view of the reply of the respondent to the notice invoking arbitration the Court at Delhi got the exclusive or even any kind of jurisdiction for that matter.

As regards the issue of not complying with the requirement of Clause 24 in as much as there is no invocation of arbitration within 28 days from the failure of amicable settlement, this contention of the learned counsel for respondents is misplaced for the reason that first notice of recovery was sent on 16.03.2018. The applicant replied on 21.03.2018 and the respondent recovered and communicated the same on 28.03.2018 pursuant to which on 09.04.2018 not only the amount was requested to be refunded but the arbitration was also invoked. As such, the arbitration was invoked within 28 days from accrual of right to invoke arbitration. However, it is only because of pendency of criminal investigation by the CBI that no further steps were taken by the parties. However, as soon as the closure report was accepted by the competent Court on 04.05.2024, application dated 07.11.2024 was sent demanding refund. Hence, in the considered view of this Court, the applicant has invoked the arbitration clause in accordance with the terms of the agreement. Also, in the reply to notice invoking arbitration, the respondent itself suggested for filing application under section 11 of the Act of 1996 without raising any objections on the issue of limitation.

As regards the case law relied upon by the learned counsel for the respondents, the issue in the case Patanjali (supra) was totally different. In the said case, venue and seat both were provided in arbitration clause i.e. Clause 16 therein which specifically provided that all disputes shall be subject to Court at Haridwar only. As regards the case of Lite Bite (supra), the issue was not regarding the place of arbitration or the jurisdiction of the Court but adherence to the terms of agreement. The agreement in the said case provided for a pre-deposit which the Court found to be not arbitrary as the applicant therein accepted the terms of the agreement with open eyes. Thus, the pre-condition of deposit was not set aside and was declined to be entertained by the said Court, which is not the case in the present matter. Similarly, in the case of Faith Constructions (supra) the issue before the Court was difference between the aspects of seat, venue or place as there were different places prescribed. However, in the present case, there is complete absence of any place so as to ascertain the seat or venue. In the case of Vijay Kumar Mishra (supra) again the issue was pre-condition for invocation of agreement which is not the issue in the present case. As such, all four cases are distinguishable on facts.

In view of the above analysis of facts and law, present Arbitration Case is allowed. The Court is satisfied about the existence of an arbitration agreement and live dispute, as also the fact that parties failed to appoint Arbitrator with consent.

Consequently, the name of Hon'ble Shri Justice Mohammad Rafique (Former Chief Justice of High Court of M.P. {Retired}) is proposed to be appointed to act as Sole Arbitrator for resolution of the dispute between the parties.

Let a declaration in terms of Section 11(8) read with Section 12(1) of the Act of 1996 in the prescribed form as contained in the Sixth Schedule of the Act be obtained from the proposed Arbitrator by the Principal Registrar of this Court before the next date of hearing.

This court has recorded the findings only for the purpose of deciding the present application. As the law is already settled, the parties are free to raise their objections on arbitrability and other issues involved in the case before the learned Arbitrator.

List the matter on 02.04.2026.