Apidc -Venture Capital PVT. LTD. vs. Tropical Animal Genetics PVT LTD.

Facts

APIDC-Venture Capital Pvt. Ltd. (Applicant) filed an Arbitration Application under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator. The dispute arises from a lease deed dated May 2, 2019, executed between the Applicant and Tropical Animal Genetics Pvt. Ltd. (Respondent). The Applicant claims the Respondent defaulted in rent payments since April 2020, initially citing the COVID-19 pandemic. Despite concessions and a counter-offer, the Respondent failed to make payments. The Applicant issued a final notice for outstanding rents and interest, amounting to Rs. 1,04,72,000/-. Subsequently, a demand notice under the Insolvency and Bankruptcy Code, 2016 (IBC) was issued, to which the Respondent admitted a liability of Rs. 97,68,930/-. An IBC application was filed but not admitted by the NCLT. The Applicant claims total dues of Rs. 2,85,59,725/-, including rents, interest, GST, and maintenance charges. The Respondent approached the Applicant requesting not to invoke the dispute resolution clause, but as dues remained unpaid, the Applicant initiated arbitration proceedings. The Respondent, despite being served notice, did not appear.

Held

The Court held that a dispute has arisen between the parties out of the lease transaction under the lease deed dated May 2, 2019. Since the Respondent did not contest the application and failed to appear before the Court despite service of notice, the Court found no impediment to allowing the arbitration application. The Court reasoned that the purpose of Section 11 of the Arbitration and Conciliation Act, 1996, is to facilitate the appointment of an arbitrator when parties have agreed to arbitration and a dispute arises. The Court appointed Mrs. M. Vijayalakshmi, District and Sessions Judge (Retired), as the Sole Arbitrator to adjudicate the disputes between the Applicant and the Respondent. The Arbitrator is to proceed as per the Arbitration Act, and parties are at liberty to raise all factual and legal grounds. The Arbitrator's fees are to be borne equally by both parties as per Schedule IV of the Act. No costs were awarded.

Key Issues

1. Whether the Court has the power to appoint an arbitrator under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996, when a dispute has arisen between the parties concerning a lease deed? 2. Whether the Respondent's failure to appear and contest the application warrants the appointment of an arbitrator as prayed by the Applicant? Contentions of the Applicant: The Applicant argued that a dispute has arisen out of the lease deed dated May 2, 2019, and that the Respondent has defaulted in payment of rents, interest, GST, and maintenance charges, leading to substantial outstanding dues. The Applicant relied on the lease deed and the subsequent notices issued to establish the existence of a dispute and the Respondent's liability. The Applicant also highlighted the Respondent's failure to appear before the Court despite proper service of notice. Contentions of the Respondent: None appeared on behalf of the Respondent.