Parties must exhaust conciliation procedures before pursuing arbitration under the Arbitration and Conciliation Act, emphasizing adherence to specified dispute resolution clauses in contracts.

JUDGMENT

1. Petitioner - M/s Sanjay Iron & Steel Ltd. claims to be doing business of trading of iron and steel. According to petitioner, respondent -Steel Authority of India Limited is a Government Company, who had invited online tenders for operating as Distributor involving purchasing, transportation, handling and storage, processing and sales to dealers of TMT/TMT Coils/at Panchkula Cluster in the State of Haryana. The petitioner claims to have submitted its tender on 08.08.2019, which was accepted by respondent vide letter of intent/acceptance bearing No. Tender No. SAIL/NR/Distributor/19-20/01A, dated 25.06.2019. Petitioner further claims to have deposited full security amount of Rs.5,00,000/- and bank guarantees to the tune of Rs.1,28,00,000/-, prepared by Union Bank of India in favour of respondent vide letter dated 23.10.2019 and complied with all the terms as per online tender terms vide reference No. CMO/REC/BS/CHA/Distributor-Panchkula/19-20 dated 30.09.2019. Petitioner had entered into an agreement dated 7.11.2019 with respondent for operating as Distributor.

2. According to petitioner, respondent in clear breach of terms of the agreement started executing the orders directly below 50 tones to the small consumers/dealers whereas, it had agreed not to entertain the direct orders from small consumers/dealers below 50 tones and therefore, vide its email dated 26.10.2020, petitioner communicated its unwillingness to extend the bank guarantees and continue with the distributorship. Thereafter, petitioner requested the respondent to release the bank guarantee and credit the balance lying in their account in the form of commission, credit note, discount, EMD and excess amount lying in their account by cancelling petitioner's orders on 22.10.2020. Besides, petitioner also raised grievance by showing difference in the rates supplied to petitioner and other dealer.

3. Petitioner has averred that it had invested huge amount of capital in terms of land, building development, purchase of machine as infrastructure for SAIL, employee the area sales officer as distributor and also took loan for the said purpose, consequently it had become difficult to survive, as respondent was directly feeding the customers of small quantities below the prices of petitioner. Further averred that the said respondent did not pay attention to petitioner's request vide letter dated 03.12.2020 to rectify the breaches and also vide letter dated 19.05.2020 to give relaxation in distribution policy due to covid pandemic but to no avail.

4. At the hearing, learned counsel for petitioner pointed out that petitioner has a huge claim of Rs.3,26,85,940/- approximately against respondent i.e. bank guarantee of Rs.1,28,00,000/-; credit notes of various dealers for a value of Rs.50,00,000/- approximately; and security deposit of Rs.5,00,000/- and to the contrary, respondent issued the termination notice dated 07.11.2020 to the petitioner to rectify the alleged defaults and breaches, which were in fact never committed by the petitioner. Further submitted that within 15 days of issuance of termination notice dated 07.11.2020, respondent directed the bank to encash the said bank guarantee of Rs.1,28,00,000/-, which is against the spirit of respondent's termination notice of dated 7.11.2020 and encashment of the bank guarantee by the said respondent is arbitrary and against the principles of natural justice.

5. Learned counsel for petitioner next submitted that in terms of Clause 10.2 of the contract, if any