ORDER : The present Arbitration Application is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter ‘the Act, 1996’) for appointment of arbitrators to resolve the disputes between the parties. 2. Heard Mr. T.Bala Mohan Reddy, learned counsel, representing Sri Vikram Chandra Puttapaga, learned counsel for the petitioner, Mr. Farhan, learned counsel, representing Sri A.Venkatesh, learned counsel appearing for 2nd respondent and Sri Prabhakar Sripada, learned counsel, appearing for respondent No.1. Perused the record. 3. The applicant and Respondent Nos. 1 and 2 entered into supplier agreement dated 09.03.2008. Under the said agreement, it was agreed that the Applicant will supply aviation turbine fuel at the Rajiv Gandhi International Airport and Respondent No. 2 will act as the operator and undertake maintenance of the aviation fuel farm facility at the said airport. The agreement dated 09.03.2008 was succeeded by another supplier agreement dated 08.09.2011 which was subsequently extended till 31.03.2020. 4. Contentions of the Applicant:- i. The dispute revolves around Clause 14 of the agreement dated 08.09.2011. The said clause restricts the annual stock loss to 0.02% and any loss beyond 0.02% will be considered an abnormal loss which shall be investigated by a Joint Coordination Committee (JCC). The JCC after such investigation will appropriately assign such loss to the defaulting party. ii. During the period between 2017-18 and 2019-20, the Applicant suffered operational losses beyond the capped 0.02% which amount to Rs. 83,72,731/-. The operational losses are attributable to Respondent No. 1 as it failed to fulfill its obligations under Clause 6.5.3 and Clause 12 of the agreement dated 08.09.2011. iii. The Applicant vide emails dated 29.01.2020 and 15.06.2020 along with letters dated 14.10.2020 and 05.11.2020 raised the issue of abnormal stock loss and requested the constitution of JCC to investigate the abnormal losses. However, the Respondents have failed to constitute the JCC. iv. The Applicant had made all the efforts to settle the dispute amicably and repeatedly requested the constitution of JCC. However, as no reply was forthcoming, the Applicant invoked Clause 24 of the agreement dated 08.09.2011 and issued an arbitration notice dated 24.02.2021. The Applicant nominated Justice C.V. Nagarjun Reddy (former judge of the then combined High Court for the State of Telangana and the State of Andhra Pradesh at Hyderabad) as its nominee arbitrator and called upon the Respondents to nominate their arbitrators. The Applicant nominated Justice C.V. Nagarjun Reddy (former judge of the then combined High Court for the State of Telangana and the State of Andhra Pradesh at Hyderabad) as its nominee arbitrator and called upon the Respondents to nominate their arbitrators. v. As the Respondents failed to nominate their arbitrators, the present arbitration application is filed. 5. Contentions of Respondent No. 1 i. The claim of the Applicant regarding abnormal stock loss is premature and arbitrary as no JCC was constituted and no stock loss was assigned to Respondent No. 1. ii. The Applicant cannot seek appointment of arbitrators without first getting the stock loss investigated by the JCC. Without attribution of the stock loss by JCC to the defaulting party, there exists no arbitrable dispute. iii. No stock loss limit was mutually agreed between the parties from the year 2012-23. The stock loss limit of 0.02% was only fixed for the first year. In any case, without investigation by JCC, no loss can be arbitrarily attributed to Respondent No. 1. iv. Respondent No. 1 was ready and always willing to constitute JCC for the investigation of abnormal losses. v. Before referring the matter to arbitration, a party must exhaust all the remedies available and agreed under the agreement. Therefore, without investigation by JCC and without amicably settling the matter through negotiations, the Applicant could not have invoked the arbitration clause. Reliance was placed on NHAI v. Bumihiway DDB Ltd. : (2006) 10 SCC 763 , Iron & Steel Co. Ltd. v. Tiwari Road Lines : (2007) 5 SCC 703 , Indian Oil Corporation v. Raja Transport Pvt. Ltd. : (2009) 8 SCC 520 and Datar Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 SCC 151 . vi. No real arbitral dispute exists unless the claims of abnormal stock loss made by the Applicant are investigated by the JCC. vii. After receiving the arbitration notice, Respondent No. 2 agreed to constitute JCC and addressed a letter dated 12.07.2021 requesting the Applicant to nominate their representative for constituting the JCC. However, no person was nominated and the JCC was not constituted. viii. The present application shall be dismissed and the court may grant liberty to the Applicant to submit to JCC proceedings. 6. Contentions of Respondent No. 2:- i. As per the terms of the agreement, the Applicant agrees that Respondent No. 2 is not responsible for any stock loss. ii. viii. The present application shall be dismissed and the court may grant liberty to the Applicant to submit to JCC proceedings. 6. Contentions of Respondent No. 2:- i. As per the terms of the agreement, the Applicant agrees that Respondent No. 2 is not responsible for any stock loss. ii. Under Clause 14, stock loss target of 0.02% was agreed only for the first year of the agreement i.e., 2008. The said stock loss target of 0.02% cannot be applied to subsequent years. iii. No JCC can be constituted unless the Applicant and Respondent No. 1 agree upon an annual stock loss target. No annual stock loss target was agreed upon by the parties. Hence, no question of constitution of JCC arises. iv. No breach can be attributed to Respondent No.2 for non-constitution of JCC as no stock loss target was agreed for the years post 2008. v. The present arbitration application is premature as the Applicant has failed to follow the procedure under Clause 14. vi. Respondent No. 2 is not a necessary party and is not liable or responsible for stock loss issues. Findings of the Court:- 7. From the facts of the case and the contentions raised by the parties, it is clear that the question before this Court is whether the present arbitration application is premature as no stock loss target was agreed and no JCC was constituted to investigate the alleged abnormal losses suffered by the Applicant. The relevant clauses are extracted below: Clause 14 :-Actual Stock Loss/ gain shall be distributed amongst the Supplier and all Other Suppliers on the last day of each Month in the proportion which the aggregate Sales of Aviation Turbine Fuel for their account during such month bears to the aggregate Sales of Aviation Turbine Fuel from the Facility during such month. - Actual Losses will be reviewed on monthly basis by the ORC – a committee comprising one member of each Supplier, Operator and GHIAL. - Any abnormal losses will be investigated by the committee and corrective measures will be recommended. - A mutually agreed annual stock loss performance target of 0.02% has been fixed for the first year, after which period the stock loss shall be reviewed/revised mutually. - Any abnormal losses will be investigated by the committee and corrective measures will be recommended. - A mutually agreed annual stock loss performance target of 0.02% has been fixed for the first year, after which period the stock loss shall be reviewed/revised mutually. Any abnormal losses which lead to total losses exceeding the agreed annual target will be investigated by the JCC and appropriately assigned to the defaulting party/parties as identified by JCC. Such losses shall be valued at produce landed price at the Fuel Farm for the month/fortnight inclusive of applicable taxes, for the month in which loss has been incurred. Clause 24:-Law, Arbitration and Jurisdiction 24.1:- Negotiations and Conciliation The parties shall endeavour to settle any dispute, difference, claim, question or controversy between the Parties arising out of, in connection with or in relation to this Agreement (‘Dispute’) amicably between themselves, through negotiation. 24.2:- Reference to Arbitrator 24.2.1:-Any Dispute which the Parties are unable to resolve pursuant to Clause 24.1 within thirty (30) days of the written notification by one Party to the other of the existence of a Dispute shall be finally determined by Arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof. 24.2.2:-All arbitration proceedings shall be conducted in English language. For the purpose of such arbitration, an arbitration panel consisting of three (3) arbitrators shall be set up to decide any dispute or claim under this agreement. Each party shall appoint one arbitrator to the arbitration panel. The Arbitrator shall decide any such dispute or claim strictly in accordance with the governing law specified above. The arbitration shall be conducted in accordance with Arbitration and Conciliation Act, 1996. Clause 24.3: the venue of arbitration shall be Hyderabad. Each party shall bear their respective expenses in relation to the arbitration and the eventual liability for the cost shall be in terms of the arbitral award. Clause 24.4: Decision/Award:- Any decision or award of the Arbitrator appointed pursuant to this Clause 24 shall be final and binding upon the Parties. Clause 24.5: Governing Laws/Jurisdiction:-This Agreement shall be governed by and construed in accordance with the laws of India. Subject as provided in Clause 24.1 to 24.4 each of the Parties hereto irrevocably submits to the sole and exclusive jurisdiction of the courts at Hyderabad, India, the venue of arbitration shall be Hyderabad. Clause 24.5: Governing Laws/Jurisdiction:-This Agreement shall be governed by and construed in accordance with the laws of India. Subject as provided in Clause 24.1 to 24.4 each of the Parties hereto irrevocably submits to the sole and exclusive jurisdiction of the courts at Hyderabad, India, the venue of arbitration shall be Hyderabad. Each party shall bear their respective expenses in relation to the arbitration and the eventual liability for the cost shall be in terms of the arbitral award. Clause 1 of Annexure -A of JCC:- Annexure –A JOINT CO-ORDINATION COMMITTEE (JCC) JCC means the joint coordination committee that shall be established to review abnormal and crisis situations, in addition to issues referred to it by GHIAL on behalf of Suppliers/Operators/Airlines and recommend measures and for supporting the smooth and efficient operations of the Facility. 1. The membership of the JCC comprises of one representative of each of the following group: a. GHIAL (as Chairman): b. The Operator: c. Affected Domestic Air Carriers; d. Affected Foreign Air Carriers, and e. Affected Suppliers f. Any other party nominated by GHIAL (which is directly related to the provisions of Aviation Turbine Fuel at the Airport) GHIAL may not nominate parties listed above and who are not related to the issue to be addressed in the JCC committee meeting. 8. Before deciding the issue at hand, it is relevant to note the importance of adhering to procedure agreed upon by the parties before invoking arbitration. It is trite that arbitration as a mode of dispute resolution is a creature of the contract. It is a result of consensus arrived between the parties. Therefore, the court ought to give due importance to the procedure as agreed between the parties. Once the parties agree on a procedure, none of them can by-pass the said procedure. It is the duty of the court to see that the parties adhere to the procedure agreed by them. To the said extent, this Court agrees with the decisions relied upon by Respondent No.1. However, in cases where the procedure cannot be followed due to non-cooperation of any of the parties or in cases where such procedure defeats the contractual right of getting the dispute resolved through arbitration, the courts can refer the dispute to arbitration. 9. To the said extent, this Court agrees with the decisions relied upon by Respondent No.1. However, in cases where the procedure cannot be followed due to non-cooperation of any of the parties or in cases where such procedure defeats the contractual right of getting the dispute resolved through arbitration, the courts can refer the dispute to arbitration. 9. In the case at hand, the appointment of arbitrator is opposed by the Respondents on the ground that issue of abnormal stock loss can only be referred to arbitration after an investigation conducted by JCC. It was contended that by Respondent No 2 that JCC could not have been constituted as no annual stock loss target was agreed between the parties. This Court cannot accept the said contentions of the Respondents. 10. It is clear from Clause 14 of the agreement that stock losses will be distributed between the Applicant and Respondent No. 1. Further, the annual stock loss target for the first year was fixed as 0.02% which shall be reviewed/revised annually. The clause provides that any losses beyond the agreed annual stock loss target shall be investigated by the JCC which will assign such losses, if found, to the defaulting party. However, in the present case, no annual stock loss target was agreed after the first year. This raises the following questions: a. Whether in the absence of agreement on an annual stock loss target or in the absence of any review of such annual stock loss target, the stock loss target of 0.02% will continue to apply. b. Whether JCC could not have been constituted in the absence of an agreement on annual stock loss target? c. Whether the constitution of JCC is mandatory under the agreement to determine and attribute losses, given the fact that no JCC was constituted despite requests from the Applicant? The said questions are factual and cannot be decided in an application under Section 11 of the Act, 1996. 11. It is relevant to note that the scope of High Court’s power under Section 11 of the Act, 1996 is extremely limited. The Court has to only see whether prima facie an arbitration agreement exists. The Court cannot go into disputed questions of facts which are to be decided by the arbitrator. 12. 11. It is relevant to note that the scope of High Court’s power under Section 11 of the Act, 1996 is extremely limited. The Court has to only see whether prima facie an arbitration agreement exists. The Court cannot go into disputed questions of facts which are to be decided by the arbitrator. 12. It is relevant to note that the Supreme Court in Supreme Court in Vidya Drolia v. Durga Trading Corporation : (2021) 2 SCC 1 , laid down the test to exercise power under Section 11 of the Act, 1996. In his separate opinion, Justice NV Ramana held as follows: 244. Before we part, the conclusions reached, with respect to Question 1, are: 244.1. Sections 8 and 11 of the Act have the same ambit with respect to judicial interference. 244.2. Usually, subject-matter arbitrability cannot be decided at the stage of Section 8 or 11 of the Act, unless it is a clear case of deadwood. 244.3. The court, under Sections 8 and 11, has to refer a matter to arbitration or to appoint an arbitrator, as the case may be, unless a party has established a prima facie (summary findings) case of non-existence of valid arbitration agreement, by summarily portraying a strong case that he is entitled to such a finding. 244.4. The court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above i.e. “when in doubt, do refer”. 244.5. The scope of the court to examine the prima facie validity of an arbitration agreement includes only: 244.5.1. Whether the arbitration agreement was in writing? or 244.5.2. Whether the arbitration agreement was contained in exchange of letters, telecommunication, etc.? 244.5.3. Whether the core contractual ingredients qua the arbitration agreement were fulfilled? 244.5.4. On rare occasions, whether the subject-matter of dispute is arbitrable? 13. It is also relevant to note that Clause 24 of the agreement provides an arbitration clause. The said clause states that any dispute shall be resolved amicably within 30 days of issuing a notice raising the dispute. If the dispute is not resolved amicably, then an arbitral tribunal shall be constituted. The only sine qua non for invoking arbitration in the present case is amicable settlement of dispute through negotiation and conciliation. The said clause states that any dispute shall be resolved amicably within 30 days of issuing a notice raising the dispute. If the dispute is not resolved amicably, then an arbitral tribunal shall be constituted. The only sine qua non for invoking arbitration in the present case is amicable settlement of dispute through negotiation and conciliation. In the present case, the Applicant had addressed various letters and emails to the Respondents to resolve the disputes. However, the disputes were not resolved. In any case, it is open for the Respondents to raise the said ground before the arbitral tribunal that the Applicant failed to resolve the dispute through negotiation and conciliation before invoking arbitration. 14. It is also relevant to note that constitution of JCC is not a sine qua non to invoke arbitration under Clause 24. The role of JCC was limited to investigate and attribute abnormal losses to defaulting party. It wasn’t contemplated by the parties to make constitution of JCC part of pre-arbitral dispute resolution mechanism under the agreement. While it may be the case that determination of abnormal losses has to be decided by the JCC, but the same does not mean that arbitration clause could not have been invoked. As stated above, the questions whether the constitution of JCC was mandatory and whether only JCC could have decided the claims pertaining to abnormal losses have to be decided by the arbitral tribunal. 15. This Court finds that a prima facie arbitration agreement exists between the parties in terms of Clause 24 of the agreement dated 08.09.2011. Therefore, without prejudice to any defences available to the parties, this Court deems it appropriate to refer the matter to arbitration. 16. In light of the aforesaid discussion, the law laid down by the Apex Court and in view of Clause-24.2.2 of the Supplier Agreement, dated 08.09.2011, the present Arbitration Application is allowed. Accordingly, Hon’ble Sri Justice G.V.Seethapathy, Former Judge of the then High Court of Andhra Pradesh, at Hyderabad, is appointed as the Arbitrator on behalf of Respondent No. 1 and Hon’ble Sri Justice, S.Anand Reddy, Former Judge of the then High Court of Andhra Pradesh, at Hyderabad, is appointed as an Arbitrator on behalf of Respondent No. 2 to resolve the disputes between the parties. In addition to the above Arbitrators, Hon’ble Sri Justice C.V. Nagarjuna Reddy, Former Judge of the erstwhile combined High Court for the State of Telangana and the State of Andhra Pradesh, at Hyderabad, shall be nominee Arbitrator on behalf of the Applicant. Consequently, miscellaneous Petitions, pending if any, shall stand closed.