Managing Director Bihar State Food And Civil Supply Corporation Limited & Anr. Vs Sanjay Kumar (Supreme Court of India)
The Supreme Court dismissed appeals arising from a Patna High Court judgment allowing 11 applications under Section 11 of the Arbitration and Conciliation Act, 1996 and appointing arbitrators in disputes between Bihar State Food and Civil Supplies Corporation and rice millers. The Court considered substantial arguments concerning arbitrability where serious fraud and criminality are alleged, but ultimately held that the scope of a referral court under Section 11(6), read with Section 11(6A), is confined to examination of the existence of an arbitration agreement. Since an arbitration agreement admittedly existed, the remaining jurisdictional objections were left open for determination by the arbitral tribunal.
The Corporation procured paddy from farmers under a Food Corporation of India scheme and entered into agreements with rice millers for custom milling. The millers were required to deliver rice quantified at 67% of the paddy supplied. Clause 15 contemplated recovery of amounts due under the Bihar and Orissa Public Demands Recovery Act, 1914, while Clause 16 provided that disputes not resolved through mutual discussions would be referred to arbitration, with the District Collector of the concerned district named as arbitrator. Recovery proceedings were initiated after alleged failure by the millers to supply the agreed quantity of milled rice. Earlier writ proceedings were disposed of by the Patna High Court on the basis that the agreements provided the parallel remedy of arbitration.
