CIVIL APPEAL NO. 12234 OF 2024
The present appeal arises from the final judgment and order passed by the Bombay High Court in a Commercial Arbitration Application. In the instant case, Goqii Technologies Private Limited (“Appellant”) sought appointment of an arbitrator under Clause 18.12 of their Master Services Agreement (MSA) to resolve a dispute over payments for services rendered by Sokrati Technologies Private Limited (“Respondent”). The High Court had dismissed the Appellant’s application, stating that there was no valid dispute warranting arbitration. The factual background of the case was that the Appellant, a wellness technology company, entered into an MSA with the Respondent, a digital marketing service provider. In 2022, the MSA was extended for three years. Between August 2021 and April 2022, the Appellant paid Rs 5.53 crore for the Respondent’s services. However, in mid-2022, allegations surfaced about malpractices involving Sokrati’s parent company, Dentsu, leading the Appellant to conduct an independent audit. The audit revealed issues such as fraudulent clicks, poor returns on investment, and overcharging. In response to an outstanding demand under the Insolvency and Bankruptcy Code (IBC), the Appellant invoked arbitration and filed a counterclaim for refunds and damages based on the audit findings. The High Court dismissed the Appellant’s request for an arbitrator, stating that while the audit report showed poor performance, it did not substantiate fraud or justify withholding payment. The High Court concluded that there was no legitimate dispute, deeming the Appellant’s attempt to invoke arbitration as “dishonest” because it was based on a non-existent dispute. The High Court also noted that the Appellant had not pursued the investigation suggested by the audit report. Ultimately, the Court found that the Appellant had failed to provide sufficient evidence of deficiencies in the services provided by the Respondent.
Dissatisfied with the High Court’s decision, the Appellant filed the present appeal, stating that the High Court exceeded its jurisdiction by conducting a detailed review of the facts and the audit report, which was inappropriate at the stage of Section 11 of the Arbitration and Conciliation Act, 1996. At this stage, the court should only determine whether there is a prima facie case for arbitration, and not assess the merits of the dispute. The Appellant further argued that the dispute involved complex technical issues related to digital marketing services, which required expert knowledge. The Appellant contended that the High Court should have referred the matter to arbitration, where experts could properly assess the dispute. The Appellant clarified that the audit report, which revealed the issues, was only provided in February 2023, making it impossible for them to have raised the dispute earlier. Additionally, they had raised concerns about the invoices in emails prior to receiving the audit report, challenging the High Court’s finding that the dispute had not been raised earlier. On the other hand, the Respondent’s counsel argued that the High Court correctly found no genuine dispute and emphasized that a mere arbitration clause does not automatically lead to arbitration. The court must ensure that a legitimate dispute exists before referring the matter to arbitration. The Respondent further argued that the Appellant’s dispute was an afterthought and that they had never previously raised any concerns or identified deficiencies in the services provided. The Respondent contended that the Appellant was not entitled to any damages or refunds, as the claims were vague and lacked sufficient documentation and also accused the Appellant of filing the arbitration petition with mala fide intent to avoid paying legitimate dues and to disrupt the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC).