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2020 Supreme(Del) 1312

IN THE HIGH COURT OF DELHI AT NEW DELHI
Jyoti Singh, J.
Cardio Fitness India Pvt. Ltd. - Appellant
Versus
Sportsfit World Pvt. Ltd. - Respondent
Arbitration Petition No. 798 of 2018; Interlocutory Application No. 12977 of 2019
Decided On : 12-05-2020

Advocates Appeared:
Simran Brar, Advocate, Apporva Neral, Advocate, Anjali Dwivedi, Advocate, Jagdeep Singh Lamba, Advocate, Chhavi Gupta Narula, Advocate, Pravir Singh, Advocate

The court's examination under Section 11(6) was limited to the existence of an arbitration agreement, and the allegations of fraud were held to be within the arbitrator's domain.

Headnote:

Arbitration - Appointment of Sole Arbitrator - Arbitration and Conciliation Act, 1996 - Section 11(6)

Fact of the Case:

The petitioner, engaged in supplying fitness and spa products, entered into an agreement with the respondent for the purchase of equipment. The respondent failed to fulfill its obligations, leading to a dispute. The petitioner invoked arbitration under the agreement, which the respondent contested on the grounds of non-execution and fraud.

Finding of the Court:

The court found that an arbitration agreement existed between the parties, and the allegations of fraud were to be decided by the arbitrator. The court appointed a former judge as the sole arbitrator to adjudicate the disputes.

Issues: Existence of arbitration agreement, allegations of fraud, appointment of arbitrator

Ratio Decidendi: The court's examination under Section 11(6) was limited to the existence of an arbitration agreement. Allegations of fraud were held to be within the arbitrator's domain. The court emphasized the severability of the arbitration agreement from the main contract, even if the contract was declared null and void due to fraud.

Final Decision: The petition was allowed, and a former judge was appointed as the sole arbitrator to adjudicate the disputes between the parties.

JUDGMENT

Jyoti Singh, J. - Present petition has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ''the Act'') for appointment of a Sole Arbitrator.

2. The brief facts as narrated by the Petitioner are that the Petitioner is engaged in the business of supplying fitness and spa products and accessories including cardiovascular, strength and spa equipment and other accessories to various Gymnasium chains and Fitness Centres. Owing to the desire of the Respondent of setting up Fitness Centres at different locations within the country, Respondent approached the Petitioner for purchase of health and fitness equipments. Accordingly, an Agreement dated 10.01.2013 was executed between the Petitioner and the Respondent for sale and purchase of these equipments. There was an express representation made by the Respondent that Petitioner will be the preferred supplier of equipment for the purposes of the Agreement.

3. Thereafter on 18.02.13, two Purchase Orders were issued by the Respondent for health and fitness equipment for its Gurgaon and Chandigarh Centres. Consequently, Petitioner imported the equipment required under the said Orders and issued Invoices for the said purchase as per the terms of the Agreement. However, Respondent failed to perform its obligations of taking delivery of the equipment and also failed to make payments towards the Invoices raised.

4. It is the case of the Petitioner that numerous requests were made for payment and reminders were also sent to the Respondent, from time to time. Despite repeated assurances given by the Respondent, no payment was remitted against the invoices and the debit notes raised by the Petitioner. Since the Respondent failed to fulfill its obligations under the Agreement, Petitioner sent an email dated 03.02.2016 to the Respondent bringing to its notice its outstanding liability, as on 31.12.2015 and requested to pay an amount of Rs. 1,70,00,000/-. A meeting was held on 05.04.2016 between the representatives of the Respondent and the Petitioner to discuss the modalities of the outstanding payments.

5. Subsequent to the meeting, a Settlement was arrived at between the parties, whereby Respondent was to remit an amount of Rs.1,20,00,000/- to the Petitioner. Although the total outstanding amount was Rs. 1,87,00,000/-, however, on an assurance from Mr. Arun Pandey on behalf of the Respondent that there would be regular business between the parties on an exclusive basis, as also to end the disputes, Petitioner agreed to a figure of Rs.1,20,00,000/-. It is the case of the Petitioner that a Schedule was also agreed between the parties for the payment, as per which Rs.90 lakhs was to be paid on or before 30.06.2016, with further extension up to 31.07.2016, if any, and the balance of Rs. 30 lakhs was to be paid in instalments of Rs. 5 lakhs each, all of which were to be paid before 31.12.2016.

6. Petitioner avers that despite the said Settlement and the Schedule having been worked out, Respondent failed to pay. Hence, the parties were back to the original position where the Respondent owed an amount of Rs. 1,91,50,287/-. Instead of clearing the liability, Respondent sent a demand notice dated 14.09.2017, raising a frivolous claim of Rs.25,44,953/- on the Petitioner. Petitioner duly replied to the said notice on 10.10.2017, denying any liability to pay.

7. Since all attempts to resolve the disputes amicably failed, Petitioner sent a notice invoking Arbitration under Clause 5.2 of the Agreement on 28.08.2018 and suggested the name of a Senior Advocate as a Sole Arbitrator. Respondent vide its reply dated 19.09.2018 denied the execution of the Agreement dated 10.01.2013 and asked the Petitioner to withdraw the notice invoking Arbitration. Left with no other remedy, present petition was filed.

8. Respondent filed a reply to the petition and contested its maintainability on the ground that Agreement dated 10.01.2013 was never executed between the

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