ORDER :

Heard Mr. Kakara Venkata Rao, learned counsel for the applicant. Also heard Mr. C.V. Mohan Reddy, learned senior counsel, assisted by Mr. A. Krishnam Raju, learned counsel for the respondent.

2. This application is filed under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (for short, ‘the Act of 1996’) seeking appointment of a sole arbitrator to resolve the dispute between the parties under the agreement dated 04.09.2015.

3. The case of the applicant company, in short, is that the applicant company is a private limited company engaged in the business of production of oil and natural gas and marketing of the same. The respondent company, which is also a private limited company, is involved in the business of manufacturing and sale of ceramic tiles and sanitary-ware. The respondent company had approached the applicant for supply of 40,000 standard cubic meters of natural gas per day to its factory at Samalkot. Accordingly, the applicant company had entered into an agreement with the respondent company on 04.09.2015 for supply of natural gas at a daily contracted quantity of 40,000 standard cubic meters. The period of the agreement is 36 months from the date of the agreement or the date of commencement of production, whichever is later. The production of natural gas by the applicant company had commenced on 01.03.2016 and therefore, 36 months’ period would expire by 01.03.2019. The applicant company has been supplying gas to the respondent from 01.03.2016 onwards as per the terms of the agreement. But, the respondent has not been able to fulfil and comply with the Minimum Guaranteed Off-take condition. While so, in the meeting held on 05.03.2018, the respondent company had proposed to stop taking gas supply from the applicant company with effect from 01.04.2018, on account of a better pricing option available to it. The applicant company had conveyed its disagreement to the said proposal. However, on 06.03.2018, the respondent company sent an e-mail dated 01.03.2018 to the applicant company stating that in accordance with Clause 6.1.5 of the agreement dated 04.09.2015, the respondent company would be unable to take gas supply from the applicant company with effect from 01.04.2018 due to operational reasons. The applicant company had sent a reply to the said e-mail on 07.03.2018 refusing to accept the same. As the respondent company had failed to adhere to the conditions in the agreement and there was a shortfall in the minimum guaranteed off-take of gas by the respondent company during the period from November, 2016 to February, 2018, on 17.03.2018, the applicant company had raised invoices for an amount of Rs.11,97,41,921/-towards payment of charges for the said shortfall quantity, but the respondent had not paid the said amount. In those circumstances, the applicant company had filed a petition, being A.O.P.No.14 of 2018, before the X Additional District Judge, East Godavari, Rajahmundry, on 28.03.2018, under Section 9 of the Act of 1996, to grant interim injunction against the respondent company from acting upon its e-mail dated 01.03.2018, pending resolution of disputes arose between the parties through arbitration. Though initially, an interim order was passed in the said AOP, subsequently, the AOP was returned on the ground of jurisdiction and to present it before proper Court. The applicant company had issued a notice dated 31.05.2018 to the respondent company invoking arbitration clause under the agreement and seeking appointment of Mr. Justice P.S. Narayana (Retired) as the sole arbitrator to resolve the disputes between them. The respondent company had issued reply notice dated 26.06.2018 disagreeing for appointment of the arbitrator. It is stated that the applicant company has suffered loss to the tune of Rs.57.72 crores. In these circumstances, this arbitration application came to be filed.

4. The respondent filed counter-affidavit putting forth its own version of events and denying the alleg