JUDGMENT

Introduction

1. The petitioner has filed the present petition under Section 11 of the Arbitration and Conciliation Act, 1996 (hereafter the `A&C Act'), inter alia, praying that an arbitrator be appointed to adjudicate the disputes that have arisen between the parties in terms of Clause 18.6 of the Brand Usage Agreement dated 13.02.2019 (hereafter referred to as the `Agreement').

2. The petitioner claims that the brand name, `Avantha', was created by the petitioner as a common brand to cater to diverse businesses under the Avantha Group. It claims that it is an exclusive licensee of the `Avantha Brand' and has the right to sub-license the same to other entities for its use and promotion.

3. The petitioner claims that the respondent had entered into an Avantha Brand License and Brand Support Agreement dated 25.01.2010 (hereafter the `2010 Royalty Agreement'), in terms of which the respondent has been using the `Avantha Brand' since 01.10.2009.

4. The petitioner claims that in terms of the Agreement, the respondent had agreed to pay the petitioner Brand Royalty computed at the rate of 1% of its Annual Consolidated Net Operating Revenue. The Agreement provides that 50% of the said royalty would be paid in lump sum computed at the Net Present Value (NPV) of the Royalty in perpetuity, quantified at Rs.411,20,00,000/- (Rupees Four Hundred and Eleven Crores and Twenty Lakhs only). The remaining 50% of the Brand Royalty would be paid on a quarterly basis commencing from 01.10.2018.

5. The petitioner claims that at the request of the respondent, it had raised an invoice for the aforesaid amount of Rs.411,20,00,000/- and Rs.74,01,60,000/- being the GST payable on the said Royalty. However, the petitioner was compelled to withdraw the said invoice as the respondent had failed to make the payment under the invoice raised. This was because if the petitioner did not withdraw the invoices, it would be liable to pay the GST without recovering any amount from the respondent.

6. The petitioner claims that since the Brand Royalty was not paid, it addressed a letter dated 06.05.2019 proposing to settle the entire liability of the respondent to pay Brand Royalty liability against a onetime lumpsum payment, which would be adjusted against the advances payable by the petitioner to the respondent and its subsidiary, CG Power Solutions Ltd. The respondent declined to pay the same and, by a letter dated 26.11.2019, rescinded the Agreement leveling certain allegations. The petitioner claims that in view of the aforesaid dispute, it had issued a notice dated 23.07.2020 invoking the arbitration under Clause 18.6 of the Agreement, however, the respondent has declined to concur on appointment of an arbitrator. The petitioner claims that this has led it to file the present petition.

7. The respondent has contested and opposed the present petition on the ground that the subject disputes are not arbitrable. According to the respondent, the Agreement as setup by the petitioner, is a product of a serious fraud; the disputes under the subject agreement are inextricably intertwined with fraud concerning third parties, who are not parties to the Agreement; and, the fraud concerns wider public interest including public shareholders of the respondent. It was also contended that the dispute regarding the fraud perpetuated in respect of the affairs of the petitioner company is the subject-matter of investigation by the Securities and Exchange Board of India (SEBI) and Serious Fraud Investigation Office (SFIO). The respondent further contends that the Civil Courts are also seized of the issues regarding the fraud, which is pending investigation; therefore, the said disputes are not arbitrable.

8. Concededly, in terms of Section 11 (6A) of the A&C Act, the scope of examination under the A&C Act is limited to the existence of the arbitration agreement. However, the question whether an arbitration agreement exists cannot be considered in the context of and in r