| Nimet Resources Inc. is a company
incorporated in Canada and is engaged in trading of metals
conducting its business though its agent, the second Petitioner.
They claim that they entered into certain transactions with
the Respondent for sale and supply of about 100 metric tons
of ferro-vanadium through its agent, the second Petitioner.
The Respondent purchased 20 tons of ferro-vanadium by opening
a letter of credit but failed to open further letters of credit
for the balance quantity of 80 tons of ferro-vanadium. The
Petitioner contended that the fact that the Respondent opened
a letter of credit for 20 tons of ferro-vanadium itself would
indicate that the Respondent had acted upon the terms of the
sales contract and the correspondence between them also would
reveal the Respondent’s acceptance of the sales contract.
Thus the Petitioner contended that a dispute exists between
them and clause 10 of the sales contract between the parties
indicates an agreement providing for resolution of disputes
between the parties by arbitration. The Petitioner sent a
notice to the Respondent to choose a venue for the arbitration
failing which the Petitioner was free to choose the same.
The Respondent denied the existence of the sales contract
stating that it was not signed by them nor was the same confirmed
in any other manner.
The Supreme Court observed that there was some correspondence
between the Petitioner and Respondent with regard to sale
and supply of different quantities of ferro-vanadium on different
dates. But whether these transactions fructified into a contract
with an arbitration clause is not clear. When there is a doubt
as to the existence or otherwise of the arbitration agreement
and when the correspondence or exchange of letters or documents
between the parties is not clear as to the existence or non-existence
of the arbitration agreement in terms of Section 7 of the
Act of 1996, the appropriate course would be that the arbitrator
should decide such a question under Section 16 of the Act
of 1996 rather than the Chief Justice of India or his nominee
under Section 11 of the Act of 1996. The learned Judge said
that he took this view because the power exercised by the
Chief Justice of India or his nominee under Section 11 of
the Act of 1996 is in the nature of an administrative order.
In such a case, unless the Chief Justice of India or his nominee
can be absolutely sure that there exists no arbitration agreement
between the parties, it would be difficult to state that there
should be no reference to arbitration. Further, such a view
may not be conclusive in view of the nature of the powers
that are exercised under Section 11(6) of the Act of 1996.
It would therefore be appropriate to refer the matter to arbitration
and the arbitrator will decide the question as to existence
or otherwise of the arbitration agreement.
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