Delhi High Court Appoints Sole Arbitrator In Gas Supply Dispute, Invalidates Previous Arbitration Clause In View Of CORE Judgment

Brief Facts:

A Gas Supply Agreement (GSA) dated 05.03.2018 was executed between Indraprastha Gas Limited (Petitioner) and M/s Chintamani Food and Snacks (Respondent) for the supply of Piped Natural Gas (PNG).

The petitioner averred that from the date of commissioning of the PNG supply, i.e. 25.08.2012, until October 2020, the respondent was using PNG on a post-paid basis; however, in October 2020, the respondent switched to a prepaid gas service plan. The PNG consumption price was revised multiple times. However, the same was not updated in the prepaid meter of the Respondent. Consequently, in the prepaid meter, lesser tariff rate was updated, instead of correct PNG price payable by the respondent. The petitioner discovered the discrepancy in November 2022. There were alleged outstanding arrears of Rs. 3.50 lakh. The petitioner served a legal notice to seek payment of the outstanding amount. The respondent denied this liability. This resulted in disputes between the parties. The petitioner issued a notice invoking the arbitration clause.

The Petitioner filed the petition under section 11 of the Arbitration and Conciliation Act 1996 seeking constitution of the Arbitral Tribunal.

Observations:

The court referred to SBI General Insurance Co. Ltd. v. Krish Spinning [2024 INSC 532] and Interplay between Arbitration Agreements under the Arbitration & Conciliation Act, 1996 & the Indian Stamp Act, 1899, In re and reiterated that the scope of proceedings was confined to ascertaining the existence of arbitration agreement. It noted that the respondent did not deny execution of GSA.

The court held that the question whether GSA ceased to apply after October 2022 requires interpretation of the contract and is an 'adjudicatory exercise' which must be left to the arbitral tribunal.

The court observed that although the arbitration agreement contemplated that the appointment of the sole Arbitrator shall be made out of a panel of three persons chosen by the petitioner, the said appointment procedure was no longer valid in view of the judgment of the Supreme Court in Central Organisation for Railway Electrification Vs. ECI SPIC SMO MCML (JV) A Joint Venture Company.

The court appointed a sole arbitrator to adjudicate the disputes and directed that the arbitration shall take place under the aegis of the Delhi International Arbitration Centre.

Case Title: INDRAPRASTHA GAS LIMITED vs. M/S CHINTAMANI FOOD AND SNACKS

Case Number: ARB.P. 355/2024

Date of Decision: 29.11.2024