Parsoli Motors Works Pvt. Ltd. v. BMW India Pvt. Ltd. & Anr.

Introduction

• This case involves a dispute between two BMW companies over finances and dealership rights, highlighting significant arbitration proceedings under the Arbitration and Conciliation Act, 1996 (A&C Act).

Facts

• Parsoli Motors Works Pvt. Ltd., the petitioner, was a Private Company engaged in selling and servicing BMW vehicles.
• Respondent No. 1 was a company involved in manufacturing and dealership of BMW vehicles, while respondent No. 2 was a sister concern providing ancillary services.
  • Both respondents were subsidiaries of Bayerische Motoren Werke (BMW) AG, Germany.
• Various agreements were entered into between the petitioner and respondents, each containing arbitration clauses.
• Disputes arose, including respondent No. 1 allowing other dealers to sell BMW vehicles outside Gujarat, causing losses to the petitioner.
• Additionally, respondent No. 2, a sister concern of respondent No. 1, allegedly paid outstanding dues of the petitioner to respondent No. 1 under a Deferred Payment Facility Agreement (DPFA).
• Respondent No. 2 also filed an Insolvency Petition against the petitioner in 2017, leading to the commencement of Corporate Insolvency Resolution Process (CIRP) in 2020.
• Efforts for arbitration and amicable settlement failed as respondents refused arbitration despite agreements stating otherwise.
• Respondent No. 2, a licensed Non-Banking Financial Company, provided financial services to car dealers under Financing Facility Agreements.
• Despite assertions, the petitioner argued that the agreements and arbitration clauses were interdependent, disputing the maintainability of the petition.
• The Dealership Agreement allowed the sale of BMW vehicles in Gujarat, while the Deferred Payment Facility Agreement facilitated financial assistance from respondent No. 2.

Issue Involved

• Whether the petition under Section 11 of the A&C Act seeking appointment of arbitrators was maintainable considering the disputes between the parties and the ongoing insolvency proceedings against the petitioner?

Observations

• The petitioner sought appointment of arbitrators for four separate contracts with respondent Nos. 1 and 2.
• Respondents argued that the agreements were independent, each with its arbitration mechanism and venue.
• There were objections regarding the validity of the Notice of Invocation of Arbitration and the arbitrability of disputes.
• Courts had the authority to appoint arbitrators even if parties failed to agree on the procedure.
• The disputes were arbitrable despite previous adjudication attempts in other forums.
• The Delhi High Court found that there were valid arbitration agreements between the parties.

Conclusion

• Justice Manmohan Sarin was appointed as the sole arbitrator to adjudicate the disputes.
  • The parties were directed to raise objections before the arbitrator.