Courts examine the existence of an arbitration agreement at a preliminary stage without delving into substantive issues or contract novation; such matters are reserved for the Arbitrator.

JUDGMENT :

JASMEET SINGH, J.

1. The present petition has been filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 (“1996 Act”), seeking directions for the appointment of a Sole Arbitrator for adjudication of disputes between the parties arising out of a Distribution Agreement dated 01.08.2014 and Settlement Agreements dated 29.06.2016, 01.10.2019 and 29.12.2020 due to the failure of the parties to mutually appoint an Arbitrator within a period of 30 days.

FACTUAL BACKGROUND

2. The petitioner herein, Benetton India Private Limited, incorporated under the Companies Act, 1956,is a subsidiary of Italy based Benetton Group, known fashion company in the world and is engaged in a business of manufacturing, distributing and sale of apparel and accessories in India.

3. The respondent is a company incorporated under Companies Act, 1956 and is engaged in the business of manufacturing and distribution of textiles apparels and luxury goods.

4. The parties entered into a Distribution Agreement (“DA”) dated 01.08.2014. Under the said DA the petitioner had appointed the respondent as its distributor to sell and distribute products under the brand, interalia, United Colors of Benetton and any other brand owned by the petitioner company through the respondent owned multi brand retail outlets which were located in different locations across India.

5. In terms of the DA, the petitioner supplied the products and raised invoices against each supply. As per General Conditions of Sale, as specified in Clause 10 of Schedule I of the DA, the respondent was bound to make payments against the invoices raised.

6. The respondent failed to make payments as per the invoices raised, thereby failing to discharge the liability under the DA to the tune of Rs. 8,97,57,566/- Crores along with the interest rate of 2% per month on the unpaid amount.

7. The parties, thereafter, agreed to extend the payment deadlines and thus entered into various Settlement Agreements (“SA”), the details of which are as follows:

a. SA 1 dated 29.06.2016 for an outstanding amount of Rs. 8,97,57,566/- Crores to the petitioner

b. SA 2 dated 01.10.2019 for an outstanding amount of Rs. 3,91,81,453/-Crores

c. SA 3 dated 29.12.2020 for an outstanding amount of Rs. 2,70,81,454/-Crores

8. Despite the repayment schedule as per SA 3, a sum of Rs. 96,21,454/-Lakhs remained due and payable. In furtherance of the default made by the respondent, the petitioner issued a demand notice dated 09.02.2024 for the release of outstanding amount of Rs. 96,21,454/- Lakhs.

9. Since the respondent failed to clear the outstanding amount, the petitioner issued a legal notice dated 14.03.2024, invoking arbitration and called upon the respondent to mutually appoint an Arbitrator in terms of Clause No. 10 (j) of the DA. The Clause No. 10 (j) reads as under:

“10. GENERAL PROVISIONS:

….

(j) In the event of any difference, dispute, claim or question arising out of this Agreement or touching any matter or thing, hereunder during, the continuance of this Agreement or upon or after the termination thereof, such difference or dispute shall be referred to arbitration in New Delhi, to the arbitration of a sole Arbitrator to be jointly appointed by the Parties to the difference or dispute who shall be retired Judge of High Court. In the event the Parties are not mutually agreeable to such appointment, one arbitrator shall be nominated by both the Parties and such two (2) arbitrators shall jointly nominate the third arbitrator whose decision shall be binding on the Parties.T