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2021 (7) TMI 518 - HC - Indian Laws


Issues:
1. Appointment of a Retired District Judge as the Sole Arbitrator for a dispute regarding reduction in cost per unit.
2. Interpretation of the arbitration clause in the agreement dated 31.08.2017.
3. Dispute resolution mechanism in case of unilateral decisions affecting agreed prices.
4. Validity of invoking arbitration in the absence of mutual agreement on cost alterations due to tax variations.
5. Admissibility of Finance Department's opinion in justifying unilateral cost reduction.

Issue 1: Appointment of Sole Arbitrator
The petitioner sought appointment of a Retired District Judge as the Sole Arbitrator to resolve a dispute with the respondent regarding unilateral reduction in the cost per unit of dispensing counters and storage racks. The Court allowed the petition and appointed a retired District Judge as the Sole Arbitrator to conduct arbitration proceedings at the Arbitration and Conciliation Centre in Bengaluru.

Issue 2: Interpretation of Arbitration Clause
The dispute arose from the respondent unilaterally reducing the cost per unit based on a Finance Department opinion regarding a GST rate reduction. The petitioner argued that the agreed prices were inclusive of all taxes, and any variation should not alter the cost per unit without mutual agreement. The Court found that the controversy fell within the scope of a dispute for arbitration under the agreement dated 31.08.2017.

Issue 3: Dispute Resolution Mechanism
The petitioner invoked the arbitration Clause by nominating a Retired District Judge as the Sole Arbitrator through a legal notice. However, the respondent contended that there was no dispute warranting arbitration due to the Finance Department's conclusive opinion. Despite the petitioner's efforts, the respondent did not signify acceptance of the arbitration nomination, leading to the Court's intervention in appointing the Sole Arbitrator.

Issue 4: Validity of Invoking Arbitration
The respondent justified the cost reduction per unit based on the GST rate change and the Finance Department's opinion, claiming no dispute existed for arbitration. In contrast, the petitioner argued that without a specific agreement allowing cost alterations due to tax variations, the respondent's unilateral decision was impermissible, warranting arbitration as per the agreement terms.

Issue 5: Admissibility of Finance Department's Opinion
The respondent's stance relied on the Finance Department's opinion to support the unilateral cost reduction. However, the Court found that the dispute centered on whether the respondent could insist on reducing the agreed cost per unit following the GST rate reduction, aligning with the arbitration Clause's scope outlined in the agreement dated 31.08.2017.

The judgment emphasized the importance of adhering to contractual agreements, particularly in dispute resolution mechanisms like arbitration. It clarified the role of appointed arbitrators in resolving conflicts arising from unilateral decisions affecting agreed terms. The decision underscored the need for parties to engage in good faith discussions and adhere to contractual obligations to maintain the sanctity of commercial agreements.

 

 

 

 

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