International Nut Alliance LLC vs Binu John

V. Chitambaresh, J.—The finding on the maintainability in OP (Arb.) No. 167/2010 filed under Section 34 of the Arbitration and Conciliation Act, 1996 is impugned. The petitioner relies on Ext. P10 Broker Contract which contains the following Clause:

"Arbitration -AFI"

The maintainability is challenged on the ground that only arbitration by the Association of Food Industries (AFI) can be resorted to by the parties, it is the case of the petitioner that Part I of the Arbitration and Conciliation Act, 1996 is therefore excluded by implication. Reliance is placed on the following decisions for this purpose:

i) Videocon Industries Limited Vs. Union of India (UOI) and Another,

ii) Sakuma Exports Ltd. Vs. Louis Dreyfus Commodities Suisse S.A.,

iii) Reliance Industries Limited and Another v. Union of India 2014 KHC 4404 : 2014 STPL (Web) 402 SC

It is the contention of the petitioner that the seat of the arbitration is at New York and that only New York State laws apply in the instant case. Moreover the Arbitrator under the AFI rules has already answered the question regarding the law in the award passed abroad ex-parte. Therefore invocation of Section 34 falling under Part I of the Arbitration and Conciliation Act, 1996 is liable to be nipped in the bud.

An immediate look at the Arbitration Rules adopted by the Association of Food Industries is apposite and the following Clause is relevant:

"2. The Clause providing for arbitration by the Association of Food Industries must appear on the front of the contract or, at least, on the side which is signed by both parties, and the following minimum wording is required:

ARBITRATION: Any controversy or claim arising out of this contract shall be settled in binding arbitration by the Association of Food Industries, Inc., of New York in accordance with its rules then obtaining. [See addendum for recommended arbitration clause.]"

Thus a minimum wording is required even under the Arbitration Rules to bind the parties to arbitration by the Association of Food Industries. A mere inscription of the word ''AFI'' as found in Ext. P10 Broker Contract falls short of the prescribed minimum to make the parties binding, it is trite law that an exclusionary Clause has to be construed strictly and the jurisdiction has otherwise to be found.

Whether the agreement allegedly containing an arbitration clause is vitiated by fraud or against public policy are matters which do not arise now. The petitioner has a case that such arguments have to be raised before the Arbitrator only and not in proceedings to set aside the award. Whether these pleas are available to the respondent in the proceedings pending are yet to be considered by the Court below. Suffice it to say that it cannot safely be concluded that there has been an exclusion of Part I of the Arbitration and Conciliation Act, 1996. The reliance on Doctor''s Associates, Inc. and Nick Lombardi, Petitioners v. Paul Casarotto et ux. by the petitioner is misplaced. The said decision only deals with the conflict between the Federal Arbitration Act and the State laws in the United States and has little relevance. A piecemeal adjudication on the maintainability without affording the parties an opportunity to adduce evidence cannot at all be appreciated. Every endeavour shall be made by the Court of the IInd Additional District Judge of Kollam to dispose of OP(Arb.) No. 167/2010 at the earliest. I do not however find any error of jurisdiction in the order impugned warranting interference in this supervisory jurisdiction at this stage.

The Original Petition is dismissed. No costs.