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Fertilizer Corporation of India Ltd. Vs. Rasananda Pradhan - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtOrissa High Court
Decided On
Case NumberCivil Revn. No. 771 of 1980
Judge
Reported inAIR1986Ori18
ActsArbitration Act, 1940 - Sections 33
AppellantFertilizer Corporation of India Ltd.
RespondentRasananda Pradhan
Appellant AdvocateJayant Das, ;Yasobant Das, ;T. Hafiz and ;A.S. Misra, Advs.
Respondent AdvocateG. Rath, ;R.K. Rath, ;N.C. Panigrahi and ;B.K. Nayak, Advs.
DispositionRevision dismissed
Cases ReferredDamodar Valley Corpn. v. K. K. Kar
Excerpt:
.....of deposit under first proviso to sub-section (1) of section 173 is necessary. [new india assurance co. ltd. v md. makubur rahman, 1993 (2) glr 430 and new india assurance co. ltd. v smt rita devi, 1997(2) glt 406, approved. new india assurance co. ltd. v birendra mohan de, 1995 (2) gau lt 218 (db) and union of india v smt gita banik, 1996 (2) glt 246, are not good law]. - since the opposite party failed to supply the bricks, notice of determination of conttact was issued on 19-2-1979 (ext. the position of law is also well settled that a contract can be spelt out from the correspondence between the parties even though no formal document might have been executed by them and there is no particular form in which an arbitration agreement is to be entered into between the parties. this..........kiln burnt bricks (hereinafter referred to as m. k. b. bricks). in pursuance to this notice, the opposite party submitted his tender on 22-9-1978 for supply of such bricks @ rs. 127/- per thousand. there is dispute whether the opposite party agreed to supply m.k.b. bricks or k. b, (kiln burnt) bricks. on 5-1-1979 the opposite party in a discussion with the officials of the corporation came to learn that his tender was accepted and the letter of acceptance had been sent to him by the deputy chief engineer (civil), f.c.i., but he had not received the same. subsequently, he received a letter dated 16-1-1979 inviting him to execute an agreement in the printed form containing the terms and conditions thereof. admittedly no written agreement was executed between me parties. however, the.....
Judgment:
ORDER

D.P. Mohapatra, J.

1. The short question involved in this case is whether there exists an arbitration agreement between the parties so as to justify reference of the dispute to the Arbitrator. The question having been answered in the negative by the Court below, the Fertilizer Corporation of India Ltd, (The 'Corporation' for short) has filed this revision petition.

The facts relevant for the present proceedingare that on 16-8-1978 the Corporation actingthrough its Chief Engineer (Civil) invited sealedtenders from experienced brick manufacturersfor supply of 35 lakhs of Modular Kiln Burnt Bricks (hereinafter referred to as M. K. B. bricks). In pursuance to this notice, the opposite party submitted his tender on 22-9-1978 for supply of such bricks @ Rs. 127/- per thousand. There is dispute whether the opposite party agreed to supply M.K.B. bricks or K. B, (Kiln burnt) bricks. On 5-1-1979 the opposite party in a discussion with the officials of the Corporation came to learn that his tender was accepted and the letter of acceptance had been sent to him by the Deputy Chief Engineer (Civil), F.C.I., but he had not received the same. Subsequently, he received a letter dated 16-1-1979 inviting him to execute an agreement in the printed form containing the terms and conditions thereof. Admittedly no written agreement was executed between me parties. However, the opposite party was given a work order whereafter he submitted a programme for supply of bricks to the Corporation. Subsequently, the opposite party expressed his inability to supply M. K. B. bricks but the officials of the Corporation on visiting the place of manufacture of bricks found some M.K.B. bricks already prepared and directed the opposite party to stick to his schedule for supply ot bricks. Since the opposite party failed to supply the bricks, notice of determination of conttact was issued on 19-2-1979 (Ext. N) and the contract was rescinded on 27-2-1979 (Ext.Q). Thereafter, the Corporation gave a notice to the opposite party on 8-3-1979 for appointment of Arbitrator and Sri J. P. Nanda, Chief Engineer (Electrical), F.C.I. Ltd., wasappointed as Arbitrator.

2. The appointment of Arbitrator was challenged by the opposite party in an application under Section 33 of the Arbitration Act. The stand taken by the petitioner (Contractor) was that there was neither a concluded contract between the parties, nor an arbitration agreement between them. The opposite party contended that he had not offered to supply M.K.B. bricks but had expressed his willingness to supply only K. B. Bricks. Since the Corporation had insisted on supply of M. K. B, bricks he had expressed his unwillingness to execute the agreement with the Corporation.

The case of the Corporation, on the other hand, was that there was a concluded contract (Ext.H) between the parties to which general directions and conditions of the contract,Ext.M, (hereinafter referred to as G. D. C. C.) were applicable and Clause 65 of G.D.C.C. contained an arbitration agreement. A dispute having arisen out of the contract between the parties, the same was available to be referred to arbitration.

3. On considering the pleas taken to the parties, the Court below framed the following two questions for consideration

(i) Whether there was a concluded contract between the petitioner and the opposite parties in respect of supply of 35 lakhs of M.K.B. bricks.

(ii) Whether there existed an arbitration agreement between the petitioner and the opposite parties?

Both the parties placed reliance on documentary evidence produced by them. On consideration of the materials produced before him the Court below answered the first question against the opposite party and held that there was a concluded contract between him and the Corporation for supply of the bricks. Regarding the second question, the Court below held that there was no arbitration agreement between the parties and the reference to Arbitrator was null and void.

4. The contentions raised by the parties before the trial Court have been reiterated before me. Sri Y. Das, learned counsel for the petitioner contends that the learned Subordinate Judge did not exercise his jurisdiction properly in regard to the second question framed by him which, according to him, should have been answered in favour of the Corporation holding that there was an arbitration agreement between the parties and the appointment of Arbitrator was in accordance with the said agreement. Sri G. Rath, learned counsel for the opposite party, on the other hand, contends that from the voluminous documentary evidence available on record it is clear that there was no concluded contract between the parties for supply of M. K. B. bricks and hence the question of there being an arbitration agreement between the parties did not arise at all. Sri Rath while supporting the order of the Subordinate Judge has questioned his finding on the first point indicated above.

5. The position is controverted that arbitration depends on the volition of the parties and it cannot be thrust upon them. Therefore, it has to be ascertained whether the parties at all entered into a completed contract and if they did whether there was any agreement to refer disputes arising therefrom to Arbitrator. The position of law is also well settled that a contract can be spelt out from the correspondence between the parties even though no formal document might have been executed by them and there is no particular form in which an arbitration agreement is to be entered into between the parties. In the present case, as it appears from the several documents filed by the parties, a notice was issued inviting experienced manufacturers of bricks for supply of M. K. B. bricks. The opposite party submitted his tender which was accepted by the petitioner. He was asked to execute an agreement in the form prescribed by the Corporation, but no such agreement was executed by the opposite party. It is also clear from the documents that right from the inception there has been controversy regarding type of brick to be supplied. While the Corporation was insisting on supply of M. K. B. bricks, the opposite party was reiterating that he would supply K. B. Bricks. Though the opposite party submitted a schedule of programme for supply of materials, it was never acted upon since the admitted factual position is that no bricks were supplied by him. Since the controversy remained unresolved, there was termination of the contract from both the sides. In these circumstances, though technically there might have been a completed contract between the parties, it was never worked upon, and no action in pursuance to the contract was taken by the opposite party. Regarding the question of arbitration agreement, there is absolutely no material to show that both the parties were at ad idem regarding terms of such an agreement i.e. nature of dispute to be covered under arbitration agreement, procedure for appointment of arbitrator and selection of the Arbitrator etc. In the facts and circumstances of this case merely from a reference to G. D. C.C. in some correspondence it is not possible to hold that the parties consciously and on application of mind agreed to a position that the disputes arising out of or in connection with the agreement would be referred to an Arbitrator. Thus, the Court below has rightlyheld that there was no arbitration agreement between the parties and hence the unilateral action of the Corporation in appointing an Arbitrator cannot be sustained.

The learned counsel for the petitioner has relied upon the decision of this Court in the case of State of Orissa v. B. K. Parida & Brothers, AIR 1982 Orissa 147 where the Court held that the existence of the arbitration clause could be spelt out from the correspondence and conduct of the parties. This case is clearly distinguishable. Though there was no written agreement between the parties, it was found that tenders were invited by the State Government for sinking of tube-wells, the quotation of the plaintiff was accepted and accordingly he executed the work, but his claims were not settled. Further, the specific assertion of the plaintiff that the tenders contained the arbitration clause was not denied by the defendants. Considering the facts and circumstances of the case particularly non-traverse of the plaintiff's assertion to the existence of arbitration clause in the tender, the defendant were precluded from raising the question of existence of arbitration clause at a subsequent stage. In the present case, as already noticed, right from the inception there had been controversy between the parties and the agreement had never been acted upon and no materials had been supplied by the opposite party in pursuance to the agreement The case of Thawardas Pherumal v. Union of India, reported in AIR 1955 SC 468 has no application to the present case since the question of existence of an arbitration agreement or otherwise was not in issue in that case.

Sri G. Rath, the learned counsel for the opposite party has placed reliance on a decision of the Supreme Court in the case of Damodar Valley Corpn. v. K. K. Kar, AIR 1974 SC 158 wherein it was held that where the dispute between the parties is that the contract itself does not subsist either as a result of its being substituted by a new contract or by rescission or alteration, that dispute cannot be referred to the arbitration as the arbitration clause itself would perish if the averment is found to be invalid. This decision has been relied upon by the learned Subordinate Judge and in my opinion, rightly, to hold that in view of the nature of objection raised and in view of the admitted fact that there has been rescission ofthe contract by both the parties, even if the arbitration agreement existed it is no longer available to be acted upon.

6. In view of the aforesaid analysis, all the contentions raised on behalf of the petitioner fail being devoid of merit. Accordingly, the Civil Revision is dismissed, but in the circumstances of the case, without cost of this proceeding.


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