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The Fertilizer Corporation of India Ltd. and ors. Vs. Ranjit Kumar Mishra - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtOrissa High Court
Decided On
Case NumberCivil Revn. No. 69 of 1979
Judge
Reported inAIR1980Ori152; 49(1980)CLT547
ActsArbitration Act, 1940 - Sections 8, 8(2) and 41; Code of Civil Procedure (CPC) , 1908 - Sections 20
AppellantThe Fertilizer Corporation of India Ltd. and ors.
RespondentRanjit Kumar Mishra
Appellant AdvocateB.K. Beuria and ;A.S. Misra, Advs.
Respondent AdvocateR.K. Rath, ;N.C. Panigrahi and ;G.S. Sarangi, Advs.
DispositionRevision dismissed
Cases Referred(State of Orissa v. Govinda Choudhury
Excerpt:
.....the facts of the present case. the act, when the parties do not concur i in the appointment of an arbitrator or arbitrators or the party who was to appoint the arbitrator does not make a proper appointment in accordance with the agreement within the time prescribed under the law, the court may, on the application of the party who gave the prescribed notice and after giving the other party an opportunity of being heard, appoint an arbitrator or arbitrators, as the case may be, of its own choice, who shall have the like power to act in the reference and to make an award as if he or they had been appointed with the consent of all the parties. it is a case of refusal to act, and it comes clearly under clause (1) (b) of section 8. admittedly the petitioner no. accordingly, this is a case..........the payment at the creditor's place, the corporation must settle its dues towards the opposite party at cuttack and pay the said amount to him at cuttack where he has his permanent place of residence. on the refusal to settle the dues and non-payment of the said amount a part of the cause of action has arisen at cuttack, and hence the court at cuttack has jurisdiction to entertain the petition under section 8 of the act. it is well settled that the common law rule that the debtor must follow the creditor and make the payment at the creditor's place is recognised and followed in india. in the decision reported in ilr (1977) 2 cut 660 (executive engineer, r. e. division, puri v. gangaram chhapolia) it has been held that a cause of action arises where the contract is made or is to be.....
Judgment:

S. Acharya, J.

1. This revision is directed against the order dated 20-1-79, passed by the Subordinate Judge, Cuttack in Misc. Case No. 276/78.

2. The opposite party herein filed a petition under Section 8(2) of the Arbitration Act, 1940, (hereinafter referred to as the 'Act') in the court below for appointment of an arbitrator in accordance with Clause 12 of the agreement (Ext. 2) dated 19-5-78, between the parties. That petition was registered as Misc. Case No. 276/78. The petitioners herein were the opposite parties in the said Misc. Case. According to the opposite party, his taxi ORU 7858, was hired by the petitioners for a period of one year on hire charges of Rs. 50/-per day besides supply of petrol, mobil oil and brake oil as per the terms mentioned in the said agreement. The petrol, mobil and brake oil were not supplied by the petitioners for running the car, and so the opposite party purchased the same from his own money and managed the work entrusted to him. Later on, the petitioners paid only the hire charges, but did not pay the running, expenses of the car as stipulated in the agreement.

So the opposite party issued a notice to the petitioner No. 2 on 12-7-1978, which the petitioner No. 2 received on 15-7-78. By that notice petitioner No. 2 was called upon to exercise his authority as per Clause 12 of the agreement. But he did neither reply nor enter into reference nor authorise any of his representatives to do the said job of arbitration. Hence the said petition.

3. The petitioners resisted the said petition on the grounds that the Subordinate Judge before whom the said petition was filed had no territorial jurisdiction to entertain that petition or to pass any order thereon; the notice issued to petitioner No. 2 was not a notice under Section 8 of the Act; the authority mentioned in Clause 12 of the agreement had not neglected or refused to act but was always ready and willing to act as per the terms contained therein; and that the opposite party has no claim against the petitioners.

4. The court below on a considerationof the evidence and materials before ithas arrived at the finding that the claimof the opposite party against the petitioners for reimbursement of his duesarising out of the agreement (Ext. 2)between the parties is not for the courtto determine, and in accordance withClause 12 of the agreement the saidclaims are required to be assessed andsettled through arbitration. It also findsthat the General Project Manager of theCorporation is the named arbitrator inthe said clause, who was asked by thevalid notice Ext. 1, to exercise his jurisdiction under Clause 12 of the agreement(Ext. 2), but he did neither enter intoreference nor nominate his representativeto act as the arbitrator in the case within the statutory period of 15 days, anddid not reply to the said notice. Accordingly, the General Manager (petitionerNo. 2) lost his right to act as per Clause 12of the agreement, and hence, a court hasthe jurisdiction to appoint the arbitratorto settle the disputes and claims betweenthe parties under the agreement, andthat the court below has jurisdiction toentertain the said petition. On the saidfindings the court has allowed the saidpetition and has directed the parties tosuggest a common name for appointmentas the arbitrator in the case, and if theyfail to suggest any such name, that courtshall appoint the arbitrator. Havingsaid so it has specified 3 disputes whichare to be arbitrated by the arbitrator inthis case.

5. Mr. Rath, the learned counsel for the opposite party, fairly concedes that it is well settled that the court cannot specify the disputes to be arbitrated by the arbitrator, and hence the specification of the disputes made in the impugned order is not in accordance with law. Accordingly, the direction of the court below specifying the disputes in the last paragraph of its order has to be and is hereby expunged. The arbitrator shall be free to adjudicate all disputes arising between the parties under the agreement (Ext. 2).

6. It was at first urged by Mr. Beuria, the learned counsel for the petitioners, that the court below has no territorial jurisdiction to entertain the petition under Section 8(2) of the Act, as within the jurisdiction of this Court none of the petitioners, who figured as opposite parties in the court below, actually and voluntarily resides or carries on business or personally works for gain, nor the cause of action in the suit either wholly or in part arises within its territorial jurisdiction.

In reply to the above contention, Mr. Rath, the learned counsel for the opposite party, submits that petitioner No. 1 (The Fertilizer Corporation of India Ltd.) has a subordinate office at Cuttack, and accordingly that Corporation shall be deemed to carry on business at Cuttack and so the court below has jurisdiction to entertain the said petition. He further submits that a part of the cause of action for the suit arises within the territorial jurisdiction of the court below.

7. It is not disputed that a petition under Section 8(2) of the Act has to be filed in the Civil Court having territorial jurisdiction under the Civil P. C, to entertain a suit in respect of the subject matter in question. Under Section 20(b) C. P. C., a suit can be instituted in a civil court within the local limits of whose jurisdiction any of the defendants voluntarily resides, carries on business or personally works for gain, and either the leave of the court has been taken or the other defendants acquiesce in such institution. Petitioner No. 1 who is in the position of a defendant in the court below is a Corporation. As per the explanation attached to Section 20, C. P. C., a corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinateoffice at such place. Therefore, a suit, against the corporation can be instituted where it has its sole or principal office in India or in respect of any cause of action arising at any place where it has also a subordinate office.

On the evidence of O. P. Ws. 1 and 2 examined in the court below on behalf of the petitioners, it can be said that the corporation has a subordinate office in the Cuttack town. O. P. W. 1 in his cross-examination has categorically stated that an officer designated as 'Purchasing Officer of the Corporation' is posted at Cuttack, and he stayed in a house the rent of which is paid by the Corporation. That house is connected with a telephone connection the charges of which are paid by the Corporation. O. P. W. 2 has also stated that :--

'The house rent and the telephone bills in respect of the house taken on rent at Santa Sahi, Cuttack are being paid by the Fertilizer Corporation of India, Talcher Unit. The Assistant Purchaser, who is stationed at Santa Sahi, Cuttack, is an employee of the F. C. I. transacting business on behalf of the F. C. I. He is making purchases on behalf of the F. C. I. on the basis of purchase orders issued from the Talcher Unit.'

The statement of O. P. W. 1 in examination in chief, that the said officer has been posted at Cuttack only for orders and for making petty purchases as per the directions issued from time to time, is not corroborated by O. P. W. 2. From the latter's deposition it rather appears that a house at Cuttack has been taken on rent by the Corporation and an officer of the Corporation is transacting business on behalf of the Corporation in and from that house. That being so, the said house at Cuttack is nothing but a subordinate office of the Corporation. To become a subordinate office it is not necessary that it should be a miniature replica of the main office in all its aspects. A Corporation can be deemed to carry on its business at a place where it has a subordinate office, irrespective of the nature of the work that is actually carried on there. The explanation to Section 20, while providing the plaintiff a wider field to institute a suit against a Corporation, takes care to see that the defendant in such a suit can conveniently put up its defence through its sole, principal or subordinate office. As an officer of the Corporation is stationed at Cuttack, the petition under Section 8(2) of the Actfiled in the court below can very conveniently be contested by the Corporation through its said officer.

8. Because of the words 'in respect of any cause of action arising at any place' in that explanation it is urged by Mr. Beuria, and there are some decisions to support his submission, that if no part of the cause of action arises at the place of the subordinate office then a suit cannot be instituted at that place. Mr. Rath refutes the above submission by saying that if Mr. Beuria's submission is accepted then the explanation would become absolutely ineffective and redundant, as on the cause of action arising at a particular place the suit can be instituted in a court having jurisdiction over that place, and consideration about the existence of the sole, principal or subordinate office at that place would not at all be of any consequence or avail. There is weight and substance in what is submitted by Mr. Bath in this connection. But it is not necessary to resolve that controversy in this case, as besides the existence of a subordinate office at Cuttack a part of the cause of action for the petition under Section 8 of the Act also arises at this place.

9. In this case the place of payment of the amount claimed was not agreed between the parties. So under Section 49 of the Indian Contract Act or in accordance with the common law rule that the debtor must seek the creditor and make the payment at the creditor's place, the Corporation must settle its dues towards the opposite party at Cuttack and pay the said amount to him at Cuttack where he has his permanent place of residence. On the refusal to settle the dues and non-payment of the said amount a part of the cause of action has arisen at Cuttack, and hence the court at Cuttack has jurisdiction to entertain the petition under Section 8 of the Act. It is well settled that the common law rule that the debtor must follow the creditor and make the payment at the creditor's place is recognised and followed in India. In the decision reported in ILR (1977) 2 Cut 660 (Executive Engineer, R. E. Division, Puri v. Gangaram Chhapolia) it has been held that a cause of action arises where the contract is made or is to be performed or performance is to be completed or a part of the cause of action arises and that a part of the cause of action arises, at a place where in performance of the contract any money is expressly or impliedly payable. It has been observed therein :--

'After the performance of contract as claimed by the opposite party he is to get some money from the petitioner, and so, the latter is in the position of a debtor as regards the former. In the absence of any stipulation between the parties the general rule is that the debtor must follow the creditor. By application of this principle it follows that the place of payment under the suit contract is the place where the opposite party ordinarily resides or carries on his business.'

In Misc. Appeal No. 250/77 and Civil Revision No. 438/77, disposed of by one judgment on 5-4-1978 by B.K. Ray, J., it has been held:

'In the case of A.K. Raha (Engineers) Ltd. v. State of Punjab reported in AIR 1961 Cal 166 it has been held that after the works are completed the contractor is no longer expected to maintain an establishment at the work site only for the purpose of receiving payments and accordingly the payments if any are to be made to the contractor at his permanent place of residence and that applying the principle that the debtor has to follow the creditor, the permanent place of residence of the contractor where the dues are payable to him is a place where the cause of action partly arises. This view is also supported by the decisions reported in (1977) 1 Cut WR 440: (AIR 1978 Orissa 96) (Orissa Mining Corporation v. Joint Secretary, Ministry of Finance), AIR 1961 Pat 96; (Jitu Mahton v. Widow of Puran Manton) and AIR 1971 All 326, (Manohar Oil Mills v. Bhawani Din Bhagwandin). This principle is clearly applicable to the facts of the present case. The work in the present case has been completed and the construction has been handed over to the Garrison Engineer in May, 1975. Therefore, the O. P. is not expected to maintain an establishment at Jalpaiguri only for the purpose of receiving their dues arising out of the contract. They can lawfully expect their dues, if any to be paid, at their permanent address at Cuttack. Accordingly it cannot be said that no part of the cause of action arises at Cuttack, the permanent place of business of the opposite party.'

On the above basis it was held in that case that the petition under Section 8 of the Actby a contractor to appoint an arbitrator to settle his claims in respect of the construction work which had been entrusted to him under the agreement in question was entertainable by the court which had jurisdiction over the permanent place of residence of the contractor.

9 (a). Mr. Beuria, however, submits that as the claim of the contractor has not as yet been quantified his claim cannot at this stage amount to a debt and, therefore, the said common law rule would not apply to the facts of this case at this stage. In support of this contention he cited the decision reported in AIR 1974 SC 1265 (Union of India v. Raman Iron Foundry). That was a case of realisation of damages arising out of a breach of contract to supply goods. Their Lordships in that case were primarily concerned with the interpretation of the clause 'any claim for the payment of a sum of money' in Clause 18 of the agreement between the parties and the scope and ambit of that clause, they were not concerned with the interpretation or the scope and applicability of the above-mentioned common law rule regarding the debtor following the creditor. After an elaborate discussion of the scope and ambit of Clause 18, their Lordships, in the facts and circumstances of that case and for the purpose of deciding the particular questions raised in that case, held that 'when there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach become entitled to a debt due from the other party'. The observations made in that decision, cannot be availed of for the purpose of deciding the point involved in this case. My view expressed above gets support from the above-mentioned decision noted by me and other decisions noted by B.K. Ray, J. in his judgment in M. A. No. 250/77 and C. R. 438/77.

On the consistent view of this Court on this point I am inclined to hold that on the facts of the present case before me a part of the cause of action has arisen at Cuttack, and so as per Section 20(c), C. P. C. the court below has jurisdiction to entertain the petition under Section 8(2) of the Act.

10. The contention of Mr. Beuria, that none other than the persons named in Clause 12 of the agreement can , beappointed by the court as arbitrator in this case, is without any force or substance.

As per the provisions of Section 8 of! the Act, when the parties do not concur I in the appointment of an arbitrator or arbitrators or the party who was to appoint the arbitrator does not make a proper appointment in accordance with the agreement within the time prescribed under the law, the court may, on the application of the party who gave the prescribed notice and after giving the other party an opportunity of being heard, appoint an arbitrator or arbitrators, as the case may be, of its own choice, who shall have the like power to act in the reference and to make an award as if he or they had been appointed with the consent of all the parties. In this case admittedly the notice as prescribed under Section 8 of the Act had been served on the petitioner No. 2 by the opposite party and the latter, who was required to act as the arbitrator or to appoint an arbitrator in the case, did not at all act in any manner as provided in Clause 12 of the agreement, nor did he reply to the said notice. Accordingly he lost his right to act as the arbitrator or to nominate an arbitrator in this case. So the court has jurisdiction to appoint an arbitrator of his choice in this case. There is nothing in the Act which requires the court, under such circumstances to again give an opportunity to the defaulting party to exercise his authority under the arbitration clause. If the conditions prescribed in Section 8(2) of the Act are fulfilled then the court has absolute power and discretion to appoint an arbitrator of its own choice. However, the said discretion has to be exercised by the court properly and not arbitrarily. My above view gets support squarely from the decisions in AIR 1961 Pat 228 (Union, of India v. D.P. Singh); AIR 1979 Orissa 19 (Fertilizer Corporation of India Ltd. v. Ravi Kumar Ohri) and M. A. No. 250/ 77 and C. R. No. 438/77, disposed of by this Court on 5-4-1978.

In the decision reported in (1969) 35 Cut LT 630: (AIR 1969 Orissa 280) (State of Orissa v. Govinda Choudhury) it has been held that 'when no arbitrator was appointed in terms of the arbitration clause, the court gets the jurisdiction to appoint the arbitrator of its own choice, and once such an appointment is made by the court -- whether with the consent of the parties ornot -- the question of reviewing that order does not arise, and, at any rate, the defaulting party has no locus standi to question it with reference to the terms of the arbitration clause.'

Apart from the above consideration, Mr. Beuria himself states that the General Manager of the Corporation (petitioner No. 2) is not interested to arbitrate the matter. The opposite party makes allegation of bias against the petitioner No. 2. In this view of the matter also, the above submission of Mr. Beuria does not deserve any serious consideration.

11. Mr. Beuria contends that the court could not have assumed jurisdiction under Section 8(2) of the Act as the prerequisites to exercise jurisdiction under said provision, viz., 'notice to concur in the appointment or in supplying the vacancy,' were not present in this case. This contention is absolutely frivolous. Under Clause 12 of the agreement all disputes relating to the contract in question are required to be referred to the sole arbitration of the General Project Manager of the Corporation (Petitioner No. 2) or to his authorised representative. Petitioner No. 2, even after service of notice, did not act as the arbitrator, nor did he nominate his representative to do that job. So the question of 'concurrence in the appointment' as provided in Section 8(1)(a) does not arise in this case. It is a case of refusal to act, and it comes clearly under Clause (1) (b) of Section 8. Admittedly the petitioner No. 2 has also not nominated his representative to arbitrate the disputes in question. Accordingly, this is a case also of failure to supply the vacancy. On the above facts, and the admitted fact that the notice for arbitration of the disputes as per Clause 12 of the agreement, had actually been served on the petitioner No. 2 before 15 days of the filing of the petition under Section 8(2) in the court below, the court certainly had jurisdiction to entertain that petition and to pass proper and necessary orders on the same.

12. On hearing the counsel appearing for the parties I am left with the impression that the persons managing the affairs of the Corporation, without taking steps for the early settlement of the disputes under Clause 12 of the agreement, are now taking recourse to the delaying process of contesting the claim in different courts on untenable and/or doubtful technical, grounds, thus involving the Corporation in the public sector to heavy expenditure on this account. It would have been less expensive for the Corporation and more graceful on the part of petitioners 2 and 3 if they would have made an honest effort to settle the disputes either with or without the aid of Clause 12 of the agreement. Mr. Beuria's persistently lengthy argument, even on points which are by now well settled by a series of authoritative decisions, was not at all called for in this case.

13. I do not find any merit in this revision and it is accordingly dismissed. Hearing fee Rs. 300/- (Three hundred).


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