The Karnataka Fisheries Development Corporation LTD. vs. Sri D Pampapathi
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The Karnataka Fisheries Development Corporation Ltd. (Petitioner) filed a Civil Miscellaneous Petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. The dispute arose from a license agreement dated January 14, 2019, entered into between the Petitioner and Sri. D. Pampapathi (Respondent) for operating a fish retail outlet in Bellary. The Respondent was the successful bidder for a five-year license commencing January 15, 2019, with a monthly license fee of Rs. 31,000/- plus GST and a security deposit. The Petitioner alleged that the Respondent failed to adhere to the agreement terms, specifically by not paying the license fee and electricity bills, amounting to Rs. 8,12,061/- as of December 27, 2021. Despite notices issued on December 27, 2021, November 19, 2022, and July 28, 2023, the Respondent did not pay the outstanding amounts. The Petitioner invoked Clause 24 of the license agreement, which provides for arbitration, by issuing a notice. The Respondent failed to reply or suggest an arbitrator, leading to the present petition.
Held
The Court held that the Petitioner had made out sufficient grounds to refer the dispute to an Arbitrator. It was not disputed that the Petitioner and the Respondent had entered into an agreement dated January 14, 2019. As per the terms of this agreement, the Respondent was liable to pay the electricity charges and license fee. The Petitioner's case was that the Respondent had failed to pay these amounts, and despite a legal notice being issued, the Respondent neither paid nor responded. Clause 24 of the license agreement clearly stipulated that any dispute or difference arising out of or in connection with the contract shall be settled under arbitration. Since a dispute had arisen concerning the license agreement, and both parties admitted the execution of the agreement which contained an arbitration clause, the Court found that the Petitioner had established the necessary grounds for referring the matter to arbitration. Accordingly, the petition was allowed, and Sri. D. Vishveshwaraiah Bhat, Former District Judge, was appointed as the Arbitrator to adjudicate the dispute.
Key Issues
1. Whether the Petitioner has made out sufficient grounds to refer the dispute to an Arbitrator in terms of Clause 24 of the License Agreement? The Petitioner argued that a license agreement was executed on January 14, 2019, and as per its terms, the Respondent was obligated to pay the electricity charges and license fee. The Petitioner contended that the Respondent failed to make these payments and continued the business, despite receiving legal notices. The Petitioner further submitted that the arbitration clause (Clause 24) was invoked by issuing a legal notice on July 28, 2023, but the Respondent neither replied nor suggested an arbitrator. Therefore, the Petitioner prayed for the appointment of an arbitrator. The Respondent, despite being served notice, did not appear before the Court, and therefore, no arguments were recorded on behalf of the Respondent.
Sections Cited
Section 11(6), Arbitration and Conciliation Act 1996
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Cause title — parties, addresses and appearances
ORAL ORDER
This Civil Miscellaneous Petition is filed under Section-11(6) of the Arbitration And Conciliation Act, 1996, seeking for an appointment of an Arbitrator in terms of Clause-24 of the License Agreement, dated 14.01.2019 to resolve the dispute and differences between the petitioner and the respondent.
Brief facts for filing this petition are as under:
The petitioner has established a fish retail outlet as Matsyadarshinis in various cities and towns of Karnataka State to sell its fish and fishery products through retail sale counters and restaurants. The petitioner used to sell NC: 2024:KHC:32147 its products through its sales counter and also used to tender the sale retail outlets by establishing the fish restaurants and sell its products through retail outlets. The petitioner to establish fish retail outlets and restaurants issued tenders and the respondent was the successful bidder for operating and running Matsyadharshini and Fish Sales Counter situated at Bellary outlet on license for a period of five years from 15.01.2019, as per the license agreement dated 14.01.2019 on a monthly license fee of Rs.31,000/- plus GST along with Security deposit of Rs.3,00,000/- for the first year of license and 10% escalation on monthly license fee each year on the previous year license fee during the 2nd, 3rd, 4th and 5th year as per the terms and conditions of the Tender Notification dated 04.07.2018. An agreement came to be entered into between the petitioner and respondent on 14.01.2019 for running Matsyadharshini and Fish Sales Counter at Bellary outlet. NC: 2024:KHC:32147
It is contended that the respondent has failed to perform the terms and conditions of the license agreement in non-payment of the license fee and electricity bill for a sum of Rs.8,12,061/- as on 27.12.2021. The petitioner got issued a notice on 27.12.2021 and 19.11.2022 which has not yielded any result. The petitioner got issued a legal notice on 28.07.2023. The said notice was served on the respondent. But the respondent has never paid the electricity bill nor the license fee. The petitioner has invoked the arbitration clause No.24 of license agreement by issuing a notice. The said notice was duly served. But the respondent has not replied to the said notice nor suggested the name of the Arbitrator. Hence this petition.
A notice was issued to the respondent. Inspite of service of notice, none appeared for the respondent.
Heard the learned counsel for the petitioner. NC: 2024:KHC:32147
Learned counsel for the petitioner submitted that the petitioner and the respondent had entered into a license agreement on 14.01.2019 and as per the terms and conditions of the license agreement, the respondent is liable to pay the electricity charges and license fee. The respondent has not paid the same and without paying the license fee, they are continuing the business. Hence, he submitted that the legal notice was issued to the respondent to pay the electricity charges and license fee. But the respondent neither replied nor paid the electricity charges or license fees. Hence, the petitioner invoked the arbitration clause No.24 of the license agreement by issuing a legal notice dated 28.07.2023. The respondent has neither replied nor suggested the name of the Arbitrator. Hence, prayed to allow the petition.
Perused the records and considered the submissions of the learned counsel for the petitioner. The point that arises for consideration is: NC: 2024:KHC:32147 i) Whether the petitioner has made out a ground to refer the dispute to Arbitrator in terms of clause No.24 of the License Agreement?
It is not in dispute that the petitioner and the respondent have entered into an agreement dated 14.01.2019. In terms of the agreement, the respondent is liable to pay the electricity charges and license fee. Though it is the case of the petitioner that, the respondent has neither paid the electricity charges nor the license fee, the petitioner got issued a legal notice calling upon the respondent to pay the same. Inspite of the same, the respondent has neither paid the electricity charges nor the license fee. The arbitration clause No.24 in the license agreement reads as under:
"
Any dispute or difference or claim arising out to, or in connection with, or relating to the present contract or the breach, termination or invalidity thereof shall be referred and settled under the Arbitration Centre - Karnataka (Domestic & International) Rules, 2012 by one and more arbitrators appointed in accordance NC: 2024:KHC:32147 with its rules and award passed by the arbitrator shall be binding upon the parties to this agreement."
From a perusal of clause No.24 of the license agreement, if any dispute arises between the parties in regard to the terms and conditions of the agreement, it has to be settled under the arbitration by appointing an Arbitrator in accordance with the Rules. As the dispute has been arisen between the parties in respect of the license agreement and also both the parties have admitted the execution of an agreement and there exists an arbitration clause, hence, the petitioner has made out a ground to refer the matter to an Arbitrator to resolve the dispute arisen between the petitioner and respondent.
Accordingly, the petition is allowed. Sri.D.Vishveshwaraiah Bhat, Former District Judge is appointed as an Arbitrator to adjudicate the dispute between the parties. Office is directed to forward a copy of this order to the Arbitrator and Arbitration and Conciliation NC: 2024:KHC:32147 Center, Bangalore. Office is directed to return the original Annexure-A, after retaining a photocopy of the same. (ASHOK S.KINAGI) JUDGE
JJ List No.: 1 Sl No.: 28
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.