M/S Tast Healthy Foods INDIA PVT. LTD. Through Its Director Mr. Arun Shrivastava vs. M/S R.T. Food Products

Held

The Court held that a single notice raising a dispute and simultaneously invoking the arbitration clause is maintainable under Section 11(6) of the Arbitration and Conciliation Act, 1996, especially when there is no mandatory requirement for pre-arbitration proceedings or amicable settlement stipulated in the agreement. The Court referred to the Supreme Court judgments in Visa International Ltd. v. Continental Resources (USA) Ltd. and Demerara Distilleries (P) Ltd. v. Demerara Distillers Ltd., which indicated that if attempts at amicable settlement have failed or are unlikely to succeed, or if the agreement does not mandate such steps, a direct invocation of arbitration is permissible. The Court found that the applicant's notice dated 21/5/2024, despite the respondent's contention, sufficiently raised a dispute and invoked arbitration. Since the respondent did not file a reply or express readiness for amicable settlement, the Court concluded that the application was maintainable. Consequently, the Court allowed the application, referred the arbitration case to the Madhya Pradesh Arbitration Centre, and appointed Mr. Justice K.K. Trivedi as the sole independent Arbitrator to resolve the dispute.

Facts

M/s TAST HEALTHY FOODS INDIA PVT. LTD. (the applicant) filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator. The applicant and M/s R.T. FOOD PRODUCTS (the respondent) entered into licence/usage cum sale agreements on 24/06/2020 and 25/06/2020, which contained arbitration clauses. The applicant alleged that due to non-grant of Input Tax Credit, its GST number was cancelled, hindering its business. The applicant further claimed that the respondent failed to make payments as per the agreements and subsequently committed dacoity, taking away assets worth Rs. 1,25,22,000/-. The applicant sent a notice invoking arbitration, but the respondent did not reply or agree to appoint an arbitrator. The respondent opposed the application, arguing that no dispute was raised prior to the arbitration notice, making the invocation premature.

Key Issues

1. Whether a single notice raising a dispute and invoking the arbitration clause is maintainable under Section 11(6) of the Arbitration and Conciliation Act, 1996, in the absence of prior amicable settlement attempts or a specific pre-arbitration proceeding requirement in the agreement? (Question of law) Contentions: Petitioner/Applicant: Argued that the notice dated 21/5/2024 was a composite notice, serving both to raise the dispute and invoke the arbitration clause, and therefore, it was maintainable. Relied on the Supreme Court judgments in Visa International Ltd. v. Continental Resources (USA) Ltd. and Demerara Distilleries (P) Ltd. v. Demerara Distillers Ltd. to support the contention that a single notice is sufficient if no amicable settlement is forthcoming or if attempts at settlement have failed. Respondent/Revenue: Contended that the arbitration clause was invoked prematurely as no dispute was formally raised and attempts at amicable settlement were not exhausted. Argued that a dispute must first arise and only if parties fail to resolve it can the arbitration clause be invoked.