Indian Sugar Exim Corporation Limited vs. Sakuma Exports Limited

Held

The Court held that the petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, was disposed of by appointing Hon’ble Mr. Justice Pradeep Nandrajog (Retired) as the sole Arbitrator. The Court explicitly stated that it was not expressing any opinion on the merits of the case. The issue of arbitrability of the dispute was expressly left open to be agitated before the learned sole Arbitrator. The Court directed that all defenses of the Respondent to the challenges raised by the Petitioner shall remain open. The parties were directed to contact the learned sole Arbitrator within one week, and the Arbitrator was to file the requisite disclosure under Section 12(2) of the Act within a week of entering on the reference. The Arbitrator's fees would be in accordance with the Fourth Schedule of the Act. The operative direction was the appointment of the sole arbitrator.

Facts

Indian Sugar Exim Corporation Ltd. (Petitioner) filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator to resolve disputes with Sakuma Exports Limited (Respondent). The dispute arose from a facilitation agreement dated November 7, 2019, concerning the export of approximately 60,000 MT of sugar sourced from Balrampur Chini Mills Limited (BCML). The Petitioner contracted to purchase sugar from BCML, with a portion intended for export, and the Respondent agreed to act as a facilitator for this export. The Petitioner alleged that the Respondent failed to make payments for the exported sugar, leading to financial losses, including the crystallization of the Petitioner's Packing Credit in Foreign Currency (PCFC) account with Axis Bank. The Petitioner sought recovery of outstanding amounts, interest, and duty drawback. The Respondent contested the arbitrability of the dispute but did not object to the reference to arbitration, keeping the issue alive.

Key Issues

1. Whether the dispute arising from the facilitation agreement is arbitrable under Section 11(6) of the Arbitration and Conciliation Act, 1996, considering the Respondent's contention that the dispute is not arbitrable. Petitioner's argument: The Petitioner contended that a valid arbitration clause exists in the agreement between the parties, and the disputes arising from the Respondent's failure to fulfill contractual obligations, including payment defaults and causing financial losses, are squarely covered by this clause. They relied on the explicit wording of the arbitration clause which states that any dispute arising out of or related to the contract shall be referred to arbitration. Respondent's argument: The Respondent contested the arbitrability of the dispute. While not elaborating on the specific grounds for contesting arbitrability in the provided text, their counsel indicated this stance. However, they did not object to the prayer for reference of the dispute to arbitration, agreeing to keep the issue of arbitrability alive for the arbitrator to decide.