Facts of the Case

This is an arbitration-law dispute; GST appears only inside a payment clause of the underlying commercial agreement. Pasupati Agrovet Pvt. Ltd., Cuttack, and Sri Krishna Nutrition India Pvt. Ltd., Ranchi, were parties to a processing agreement dated 29 May 2019, under which the opposite party (the Processor) was to process raw materials supplied by the petitioner (the Company) into finished products at a rate of Rs. 1,300 per MT (GST-inclusive), subject to the Processor raising a proper GST bill each month. Disputes arose and the petitioner issued a notice dated 10 August 2020 invoking the agreement's arbitration clause (Clause 27), which required the Company to appoint a sole arbitrator, but the Company did not do so — it instead gave notice to the Processor for reference to arbitration. Since no arbitrator was appointed, the petitioner approached the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator.

Issues Involved

  1. Whether the petition under Section 11(6) was maintainable despite the agreement allegedly being insufficiently stamped.
  2. Whether the agreement, though styled as a 'processing agreement', was in substance an instrument of conveyance (transferring property), which would affect its validity/stamping and hence the arbitration clause's enforceability.

Petitioner's Arguments

  • Clause 27 of the agreement contained a valid arbitration clause, and since the opposite parties had not appointed the sole arbitrator despite notice, the Court should appoint one under Section 11(6) of the Act.
  • Counsel candidly accepted that, although the clause placed the responsibility of appointing the arbitrator on the petitioner-company itself, this had not been done, necessitating the present petition.

Respondent's Arguments

  • The petition was not maintainable because the agreement was not properly stamped.
  • Despite being styled an 'agreement', the instrument was, in substance, a deed of conveyance — relying on specific clauses (3(a), on delivery of raw materials; 10, on dedicated godown space; and 12, on GST-inclusive processing charges) and on the Supreme Court's ruling in State of Uttaranchal v. Khurana Brothers that any document transferring movable property is a 'conveyance'.

Court Order / Findings

  • The Court examined Clauses 3(a), 10 and 12 of the agreement in detail and found that ownership and control of the raw materials and finished products remained throughout with the petitioner-company; the Processor (opposite party) was paid processing charges but never acquired or transferred any proprietary interest.
  • Since no transfer of property occurred, the Court rejected the argument that the instrument was a deed of conveyance, distinguishing the Khurana Brothers precedent on facts.
  • Holding that the dispute was arbitrable under Clause 27, the Court allowed the petition and appointed a former Judge of the High Court as the sole arbitrator, to conduct proceedings under the High Court of Orissa Arbitration Centre and pass an award within the time stipulated under Section 29-A of the Act.

Important Clarification

This order does not decide any GST law issue — GST is mentioned only as part of the agreed processing-fee formula (Rs. 1,300 per MT, GST-inclusive, against a proper GST bill). The substantive holding concerns when a commercial agreement will, or will not, be treated as a conveyance instrument for stamping purposes, and the threshold for appointing an arbitrator under Section 11(6).

Sections Involved

  • Section 11(6) of the Arbitration and Conciliation Act, 1996 — the provision under which the Court appointed the sole arbitrator.
  • Section 29-A of the Arbitration and Conciliation Act, 1996 — timeline for the arbitrator to render the award.
  • The applicable Stamp Act provisions relating to conveyance instruments were referenced but not applied, since the Court found no transfer of property.
  • GST invoicing under the Central Goods and Services Tax Act, 2017 was mentioned only as a contractual payment term.

Decision – In Favour of

Decided in favour of the petitioner, Pasupati Agrovet Pvt. Ltd. — the arbitration petition was allowed, and a sole arbitrator was appointed to adjudicate the underlying commercial dispute.

Case Details

Court: High Court of Orissa at Cuttack
Case No.: ARBP No. 30 of 2020
Coram: Hon'ble the Chief Justice (S. Talapatra)
Date of Order: 8 September 2023

Link to Download the Order

Click here to view/download the full order

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.