Lite Bite Foods PVT. LTD. vs. Airports Authority Of INDIA

Facts

The petitioner, Lite Bite Foods Pvt. Ltd., entered into a license agreement with the respondent, Airports Authority of India, for a food court facility at S.V.P.I. Airport, Ahmedabad, on April 9, 2018. The license period was initially one year, extended to June 30, 2020. The petitioner was required to pay a monthly license fee plus GST and other taxes, and a security deposit. Disputes arose regarding delays in site handover, revised layouts, and the petitioner's request for a refund of license fees for the delayed period, which was rejected. The petitioner's assets worth over one crore remained at the premises after termination due to the COVID-19 pandemic. The respondent subsequently raised invoices for April-June 2020, which the petitioner disputed, claiming an adjustment of Rs. 13,54,454.84. The respondent attempted to encash the bank guarantee, leading the petitioner to file a Section 9 petition under the Arbitration and Conciliation Act, 1996, for interim relief. The petitioner invoked arbitration under Clause 18 of the license agreement, proposing an arbitrator, but the respondent insisted on the petitioner depositing the disputed amount and forming a Dispute Resolution Committee (DRC). The petitioner filed the present Section 11 petition seeking the appointment of an independent arbitrator.

Held

The Court held that the petitioner was not entitled to the appointment of an independent arbitrator at this stage. The Court reasoned that the petitioner had failed to comply with the agreed-upon dispute resolution mechanism stipulated in Clause 18 of the license agreement, which required the formation of a Dispute Resolution Committee and pre-deposit of the disputed amount. The Court found the petitioner's attempt to circumvent this process by directly approaching the Court under Section 11 of the Arbitration and Conciliation Act, 1996, to be an attempt to avoid contractual obligations. The Court distinguished the cited precedents, stating they were not applicable to the peculiar facts of this case, where the petitioner had not made any attempt to approach the DRC. The Court emphasized that while the object of the Arbitration Act is speedy dispute resolution with minimal judicial intervention, it would not encourage litigants who seek to circumvent agreed-upon dispute resolution processes. Therefore, the Court declined to exercise its jurisdiction under Section 11, finding the petition devoid of merit. No specific issue was left undecided; the Court addressed the core issue of arbitrator appointment based on the petitioner's non-compliance with contractual pre-conditions.

Key Issues

1. Whether the petitioner is entitled to the appointment of an independent arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, when the respondent insists on pre-deposit of the disputed amount and formation of a Dispute Resolution Committee as per Clause 18 of the license agreement? Petitioner's arguments: The petitioner contended that clauses requiring pre-deposit of disputed sums before initiating arbitration are arbitrary and unconstitutional, as they deter parties from invoking arbitration. They argued that the formation of a Dispute Resolution Committee is not a mandatory condition and that Clause 18, insisting on pre-deposit, is arbitrary and unconstitutional. The petitioner relied on the principle that clauses deterring arbitration are invalid. Respondent's arguments: The respondent argued that the petitioner had not fulfilled the pre-conditions for arbitration, specifically by not approaching the Dispute Resolution Committee and not depositing the disputed amount. They asserted that the petitioner was attempting to circumvent the agreed-upon dispute resolution process. The respondent also highlighted the petitioner's conduct and the outstanding dues, suggesting the petitioner's conduct was not trustworthy. The respondent's stance was that the issues of dispute, including the petitioner's conduct and the circumstances related to it, should not be examined in a Section 11 petition, and that the appointment of an arbitrator would only come into effect if the petitioner observed the preceding terms.