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IN THE HIGH COURT OF KARNATAKA
Suraj Govindaraj, J.
M/s Bestpay Solutions Private Limited - Appellant
Versus
M/s Razorpay Software Private Limited - Respondent
Civil Misc. Petition No. 565 of 2021
Decided On : 06-07-2022
Arbitration Clause - Dispute Resolution - Arbitration & Conciliation Act, 1996 - Section 11(6)
Fact of the Case:
The petitioner sought the appointment of a sole arbitrator under the Arbitration & Conciliation Act, 1996, due to a dispute arising from a service agreement with the respondent. The respondent had set off an amount from the petitioner's account, leading to the invocation of the arbitration clause.
Finding of the Court:
The court found that the notice issued by the petitioner invoking the arbitration clause was defective as it did not include ICICI Bank, a necessary party to the dispute. As per Section 21 of the Arbitration and Conciliation Act, 1996, the lack of notice to all concerned parties was fatal to the petition, leading to its dismissal.
Issues: The issues revolved around the applicability of the arbitration clause, the involvement of ICICI Bank in the dispute, and the adequacy of the notice issued by the petitioner.
Ratio Decidendi: The court held that the arbitration clause would equally apply to any dispute involving the petitioner, respondent, and ICICI Bank, as the agreements formed a composite transaction. The lack of notice to all concerned parties, as required by Section 21 of the Arbitration and Conciliation Act, 1996, rendered the petition defective and led to its dismissal.
Final Decision: The petition seeking the appointment of a sole arbitrator was dismissed, with liberty reserved for the petitioner to re-agitate its claim by issuing proper notices to all concerned parties.
ORDER
1. The petitioner is before this Court seeking for the following reliefs:-
"A. Pass An Order U/S 11(6) of the Arbitration & Conciliation Act, 1996 appointing a sole arbitrator as per agreement dated entered on dated: 18/11/2020 to the Arbitration and Conciliation Centre, Karnataka (Domestic and International) At Khanija Bhavan, Race Course Road, Bengaluru.
B. Pass any other direction which this Hon'ble Court deems fit under the facts & circumstances of the case".
2. The contention of the petitioner is that the petitioner and the respondent had entered into a service agreement dated 18.11.2020 where under the respondent was required to provide certain gateway services to the petitioner. The said agreement is governed by an Arbitration Clause in terms of Clause 15 thereof, which reads as under:
" 15. GOVERNING LAW AND DISPUTE RESOLUTION:
15.1 This Agreement shall be governed by and construed in accordance with the laws of India. The courts of Bengaluru shall have jurisdiction in respect of any such disputes or claims.
15.2 All disputes, differences and/or claim arising out of this Agreement whether during its subsistence or thereafter shall be settled by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (including any statutory modification (s) or reenactment thereof) and shall be referred to a sole arbitrator nominated with the mutual consent of the parties. The award given by such an arbitrator shall be final and binding on the parties to this Agreement. The seat and venue of arbitration proceedings shall be Bengaluru".
3. The petitioner had also entered into another agreement with ICICI Bank where under they engaged service of respondent Bank as a payment gateway. The respondent has setoff certain amount, which was available in the account of the petitioner on account of alleged dues claimed by the respondent under the agreement with ICICI Bank. Therefore, it is contended that the respondent could not have adjusted the amount under a different agreement, both the agreements occupying different fields and as such deduction made by the respondent being improper, notices were issued by the petitioner to the respondent calling upon them to return/ refund the amount which had been deducted from the account of the petitioner.
4. When no such resolution occurred, the petitioner issued a notice dated 29.06.2021 invoking aforesaid arbitration clause and nominated its arbitrator for respondent choose from. However, the respondent vide its reply dated 01.07.2021 replied that there is no such amount, which is required to be repaid. It is further contented that setoff which was made by the respondent on account of agreement with ICICI and not under agreement with the petitioner and there being no privity of contract for invoking the arbitration clause, invoking of the arbitration clause was rejected. It is in that background the petitioner is before this Court.
5. Sri Lalith Besoya, learned counsel for the petitioner would submit that the respondent in an illegal manner has deducted the amount available in the account of the petitioner. The amount standing in the account of the petitioner under agreement dated 18.11.2020.
6. The Arbitration clause in relation thereto has been invoked by the petitioner and therefore all the disputes are required to be referred to an arbitrator.
7. Sri Vikas Mahendra, learned counsel appearing for respondent submits that the respondent has deducted the amount in view of a lien, which is available under the agreement with ICICI Bank, wherein it is mentioned that M/s Razorpay Software Private Limited would have the right to set off any amounts including as regards any excess credit given to the merchant inadvertently by the payment get to a service provider cum the amount payable to the payer via ICICI Bank, thus is the deduction now made is not under the agreement dated 18.11.2020 but is under tri-parted agreement dated 15.01.2021. Hence, no arbitration can be resorted to
The lack of notice to all concerned parties, as required by Section 21 of the Arbitration and Conciliation Act, 1996, can render a petition seeking arbitration dismissal.
The court upheld the enforcement of an arbitration clause despite objections regarding the respondent's non-signatory status.
The court's authority to appoint a sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
The main legal point established in the judgment is the court's authority to refer disputes to arbitration when both parties have invoked the arbitration clause and there are admitted arbitral disput....
The court appointed an arbitrator as the parties consented to arbitration under the existing arbitration clause, complying with statutory requirements.
Unilateral appointment of an Arbitrator is not acceptable, and an Arbitrator must be appointed in accordance with the arbitration agreement and the provisions of the Standard Conditions of Supply Ord....
Unilateral appointment of an Arbitrator is not acceptable as it defeats the purpose of unbiased adjudication of disputes between the parties.
The court asserted that an Arbitrator must be mutually appointed under contract terms to ensure unbiased resolution of disputes, rejecting unilateral appointments.
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