ORDER :

The present Arbitration Application is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter ‘the Act, 1996’) for appointment of arbitrators to resolve the disputes between the parties.

2. Heard Mr. T.Bala Mohan Reddy, learned counsel, representing Sri Vikram Chandra Puttapaga, learned counsel for the petitioner, Mr. Farhan, learned counsel, representing Sri A.Venkatesh, learned counsel appearing for 2nd respondent and Sri Prabhakar Sripada, learned counsel, appearing for respondent No.1. Perused the record.

3. The applicant and Respondent Nos. 1 and 2 entered into supplier agreement dated 09.03.2008. Under the said agreement, it was agreed that the Applicant will supply aviation turbine fuel at the Rajiv Gandhi International Airport and Respondent No. 2 will act as the operator and undertake maintenance of the aviation fuel farm facility at the said airport. The agreement dated 09.03.2008 was succeeded by another supplier agreement dated 08.09.2011 which was subsequently extended till 31.03.2020.

4. Contentions of the Applicant:-

i. The dispute revolves around Clause 14 of the agreement dated 08.09.2011. The said clause restricts the annual stock loss to 0.02% and any loss beyond 0.02% will be considered an abnormal loss which shall be investigated by a Joint Coordination Committee (JCC). The JCC after such investigation will appropriately assign such loss to the defaulting party.

ii. During the period between 2017-18 and 2019-20, the Applicant suffered operational losses beyond the capped 0.02% which amount to Rs. 83,72,731/-. The operational losses are attributable to Respondent No. 1 as it failed to fulfill its obligations under Clause 6.5.3 and Clause 12 of the agreement dated 08.09.2011.

iii. The Applicant vide emails dated 29.01.2020 and 15.06.2020 along with letters dated 14.10.2020 and 05.11.2020 raised the issue of abnormal stock loss and requested the constitution of JCC to investigate the abnormal losses. However, the Respondents have failed to constitute the JCC.

iv. The Applicant had made all the efforts to settle the dispute amicably and repeatedly requested the constitution of JCC. However, as no reply was forthcoming, the Applicant invoked Clause 24 of the agreement dated 08.09.2011 and issued an arbitration notice dated 24.02.2021. The Applicant nominated Justice C.V. Nagarjun Reddy (former judge of the then combined High Court for the State of Telangana and the State of Andhra Pradesh at Hyderabad) as its nominee arbitrator and called upon the Respondents to nominate their arbitrators.

v. As the Respondents failed to nominate their arbitrators, the present arbitration application is filed.

5. Contentions of Respondent No. 1

i. The claim of the Applicant regarding abnormal stock loss is premature and arbitrary as no JCC was constituted and no stock loss was assigned to Respondent No. 1.

ii. The Applicant cannot seek appointment of arbitrators without first getting the stock loss investigated by the JCC. Without attribution of the stock loss by JCC to the defaulting party, there exists no arbitrable dispute.

iii. No stock loss limit was mutually agreed between the parties from the year 2012-23. The stock loss limit of 0.02% was only fixed for the first year. In any case, without investigation by JCC, no loss can be arbitrarily attributed to Respondent No. 1.

iv. Respondent No. 1 was ready and always willing to constitute JCC for the investigation of abnormal losses.

v. Before referring the matter to arbitration, a party must exhaust all the remedies available and agreed under the agreement. Therefore, without investigation by JCC and without amicably settling the matter through negotiations, the Applicant could not have invoked the arbitration clause. Reliance was placed on NHAI v. Bumihiway DDB Ltd. : (2006) 10 SCC 763, Iron & Steel Co. Ltd. v. Tiwari Road Lines : (2007) 5 SCC 703 , Indian Oil Corporation v. Raja Transport Pvt. Ltd. : (2009) 8 SCC 520 and Datar Switchgears