The court reaffirmed that the existence of an arbitration agreement must be established, and disputes should generally be referred to arbitration unless clearly non-arbitrable.

JUDGMENT :

Manindra Mohan Shrivastava, C.J.

1. By instant application under Section 11(5) read with Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act of 1996), the applicant has prayed for appointment of an Arbitrator for settlement of dispute between the parties on the pleadings, inter-alia, that the applicant, a partnership firm registered as micro scale industry under the provisions of Micro Small Medium Development Act, 2006, and engaged in the business of manufacturing of glassware, glass bottle, glass bangles and other glass items, submitted its offer pursuant to notice inviting E-bid for rate contract of new glass nips 180 ml and bottles 750 ml with/without corrugated boxes for country liquor and emerged as lowest bidder. A letter of acceptance dated 13.08.2021 was issued intimating that the bid of the applicant has been accepted. The applicant was directed to provide performance security guarantee of the amount equivalent to 2.50% of the cost of contract. It was also informed that terms and conditions, as mentioned under the bid document, shall be applicable over the said work. Thereafter, the applicant submitted performance guarantee for an amount of Rs.95,25,000/-. Thereafter, an agreement was entered into between the applicant and the respondent on 08.09.2021 for supply of new glass nips 180 ml and bottles 750 ml at various reduction centers of the respondent. The period of agreement was one year from the signing of the agreement, extendable for a further period of three months.

2. After execution of the agreement, the respondent issued several purchase orders for supply of the items in specified quantity to the referred reduction centers of respondent and the applicant started making supply. Vide letter dated 14.03.2022, the respondent required the applicant to meet supply schedule of the glass bottles for the month of March, 2022. It is the case of the applicant that owing to certain increase in the cost of manufacturing and the agreement being silent on the issue of variation in cost in case of increase, it became impossible for the applicant to perform its obligation and continue its supply. The applicant sent notices on 16.03.2022 and 25.03.2022, informing the reason for its inability to continue the supply. According to the applicant, it was on account of pandemic situation resulting in steep rise in cost of material including raw material required to be procured for manufacturing of glass bottles as well as nips. Because of the sudden and unforeseen inflation in price of the dominant raw material for manufacturing of bottles, it became impossible to continue supplies. The respondent did not respond to applicant's application and, therefore, the applicant was under belief that the request of the applicant has been acceded to. However, the respondent issued a letter on 16.05.2022 to the banker of the applicant requiring to revoke the bank guarantee furnished by the applicant owing to the fact that the applicant is not making supplies of bottles, which was informed to the applicant by its banker on 20.05.2022. In these circumstances, the applicant filed a suit praying for permanent injunction against its banker not to entertain any request for encashment of the bank guarantee, whereupon an interim order directing the parties to maintain status quo was passed by the Civil Court on 23.05.2022. The applicant also submitted an application under Section 9 of the Act of 1996 before the Commercial Court. The said application was however rejected on 18.07.2022, against which an appeal under Section 37 of the Act of 1996 was preferred and the same is pending.

3. During pendency of the aforesaid proceedings, the applicant received an office order dated 25.05.2022 intimating that the respondent has terminated the contract awarded to the applicant and it has also been blacklisted. Recovery of an amount of Rs.2,05,34,844/- was raised. Thereafter, another letter was issued on 04.07.