The main legal point established in the judgment is that a compromise deed constituting a novation, altering the original contract and introducing a new arbitration clause, affects the jurisdiction of the court and the applicability of Section 42 of the Arbitration and Conciliation Act, 1996.

JUDGMENT :

Jaishree Thakur, J.

This First Appeal against the Order has been filed against the judgment dated 5.11.2012 passed by the Additional District Judge, Chandigarh, whereby a petition filed by the appellants under Section 34 (2) (iv) (v) and 2 (b) of the Arbitration and Conciliation Act, 1996 (for short 'the Act') against the arbitral award dated 6.3.2009 has been dismissed.

2. In brief, the facts are that in September, 2002, the appellant- Corporation entered into a Memorandum of Understanding (MoU) with the respondent at Chandigarh to secure export orders in the name of the appellant for the commodities identified under the said MoU. Thereafter, on 9.9.2002, the appellant entered into separate Associate Agreements with the respondent company for export of wheat and rice to foreign countries. As per the said Associate Agreements, the respondent was to pay for the value of the goods at the prevalent market rate declared by the Food Corporation of India for export of wheat. The respondent was to remit the value of the goods by cheque payable to the appellant within 48 hours of faxing of the copy of the order. For this, the respondent was entitled to service charges as specified in the Associate Agreements, which was 0.50 US$ to 0.60 US$ per metric ton. Under the various Associate Agreements, the respondent lifted 5,27,578 metric tons of wheat in various crop years, the stock value of which comes to Rs.2,61,46,35,430/-. On this amount, the interest rate due from the respondent comes to Rs.7,66,08,120 and service charge comes to Rs.1,35,76,882/- upto 15.10.2004. Thus, the total amount due and payable by the respondent for the wheat lifted by it for the purpose of export as on 15.10.2004 was Rs.2,79,71,88,813/-. However, the respondent against the aforesaid amount made payment till that date amounting to Rs.2,30,36,19,418/-, leaving an outstanding payment to the tune of Rs.49,69,57,294/- payable to the appellant against the stocks of wheat lifted by the respondent. It is alleged that when inspite of repeated notices, the respondent did not make the payment, the appellant by letter dated 29.11.2004 invoked the arbitration clause in all these agreements and named Sh. D.S. Chatha, Additional District & Sessions Judge (Retd.) and sought confirmation of the respondent, as provided in the arbitration clause. Since the respondent did not give any acceptance in respect of the letter of the appellant dated 29.11.2004, therefore, the appellant filed an application under Section 11 (5) of the Act before this Court being, Application No.1 of 2005. Notice was issued by this Court. However, the respondent instead of appearing before this Court filed an application under Section 11 of the Act before the High Court at Calcutta for appointment of an Arbitrator being A.P. No. 40 of 2005.

3. The appellant appeared before the Calcutta High Court and submitted that since an application for appointment of an Arbitrator has already been filed prior to the application filed in the Calcutta High Court, therefore, the same was not maintainable and contested the petition on the ground of jurisdiction also. However, the Calcutta High Court ordered appointment of an Arbitrator by order dated 4.4.2005. Aggrieved against the order, the appellant filed an SLP before the Supreme Court, being SLP No. 10963 of 2005. Eventually, the SLP came to be disposed of by order dated 20.2.2006, which reads as under:-

"We have heard the counsels of both the sides who have agreed and an arbitrator will be appointed in the matter. We are informed that the respondent has business office in Delhi. Although the petitioner's counsel insists that the arbitration should be held in Chandigarh, it will be more convenient for the parties if the arbitration proceedings are held in Delhi. Hence, we appoint Mr. Justice S.C. Aggarwal Retired Judge of this Court to be arbitrator (subject to his consent) on such terms as the Ld. Arbitrator may decide. It is made clear that the arbitration pr