Kellton Tech Solutions Limited vs. Actas Technologies Private Limited

Facts

Kellton Tech Solutions Limited (Petitioner) and Actas Technologies Private Limited (Respondent) entered into a Software Development and Service Agreement on September 17, 2020, for an e-wallet platform, with payment of Rs. 2 crores plus GST. The Petitioner claims to have provided services and raised invoices, which the Respondent failed to pay. The Petitioner's attempt to initiate insolvency proceedings before the NCLT was dismissed due to disputed questions, and the subsequent appeal to NCLAT was also dismissed. The Respondent then invoked pre-litigation mediation under Section 12A of the Commercial Courts Act, 2015, which also failed. Consequently, the Petitioner filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. The Respondent raised a preliminary objection regarding the vagueness and invalidity of the arbitration clause.

Held

The Court held that the petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, was not maintainable because the Petitioner had not issued a notice under Section 21 of the Act. This was based on settled law, citing precedents like Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd., BSNL v. Nortel Networks (India) Private Limited, and Arif Azim Co. Ltd. v. Aptech Ltd. Furthermore, the Court found the arbitration clause to be vague and unclear. Clause 3.4 suggested arbitration for "disputed service fees," while Clause 16 stipulated that "unresolved disputes" would be referred to the Courts of New Delhi. The Petitioner failed to clarify which clause applied to the present dispute. Relying on Sara International Ltd. v. Golden Agri International (P) Ltd., the Court stated that an arbitration clause must disclose a determination and obligation to arbitrate, not merely a contemplation of the possibility. The Court also noted the Petitioner's participation in pre-litigation mediation under Section 12A of the Commercial Courts Act, 2015, as further evidence of ambiguity regarding the dispute resolution forum. Consequently, the petition was dismissed.

Key Issues

1. Whether the petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, is maintainable without a prior notice under Section 21 of the Act. 2. Whether the arbitration clause in the Agreement is vague and invalid, making it unenforceable. Petitioner's arguments: The Petitioner sought the appointment of an arbitrator to resolve disputes arising from the Agreement. The Petitioner's arguments regarding the Section 21 notice are not explicitly recorded, but the filing of the petition implies an assertion of its necessity or waiver by the respondent. The Petitioner likely argued that the arbitration clause, particularly Clause 3.4, clearly mandates arbitration for disputed service fees. Respondent's arguments: The Respondent's primary contention was that the arbitration clause is vague and invalid. They argued that Clause 3.4, which refers disputes to arbitration, is contradicted by Clause 16, which vests exclusive jurisdiction in the Courts of New Delhi for "unresolved disputes." The Respondent also highlighted the Petitioner's participation in pre-litigation mediation under Section 12A of the Commercial Courts Act, 2015, as an indication that arbitration was not the sole agreed-upon dispute resolution mechanism.