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New Delhi Municipal Committee Vs. A.M. Jaipuria Public Charitable Trust - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberF.A.O. (O.S.) No. 2 of 1971 in I.A. No. 848 of 1970
Judge
Reported inAIR1971Delhi274
ActsArbitration Act, 1940 - Sections 34
AppellantNew Delhi Municipal Committee
RespondentA.M. Jaipuria Public Charitable Trust
Appellant Advocate D.D. Chawla and; P.N. Jain, Advs
Respondent Advocate V.K. Krishna Menon, ; D.P. Singh, ; N. Nettar and ;
Cases ReferredDelhi Housing and Finance Corporation v. Firm Beni Prasad Sidh Gopal and Co.
Excerpt:
.....the appellant has resolved to make better and extensive use of the land which was allocated to the civic centre so as to provide all public utility services and cultural civic amenities in one complex; 5. in the gaya electric supply co's case [1953]4scr572 (supra) the supreme court were considering a limited arbitration clause which provided that 'in the case of a difference or dispute between the parties over the valuation as arrived at by the government and that arrived at by the company, such difference or dispute including the claim for additional compensation of 20 per cent shall be referred to arbitration .the supreme court held that since the arbitration clause was not comprehensive and was not drafted in broad language namely, in respect of' any agreement, of 'in respect of..........singh road, new delhi, adjacent to the town hall, of the appellant. the agreement recites that the civic centre was to be built at an estimated cost of about rupees ten lacs.under this agreement the appellant committee was to make the land available to design and prepare the plans for the buildings of the civic centre through their own architect and to construct the buildings. the payment of rupees five lacs by the respondent was linked with the progress in the construction of the buildings which were to belong to the appellant. in case the cost of construction was less than rupees ten lacs, the liability of the respondent to donate was to be proportionately reduced but if such cost exceeded rupees ten lacs the appellant committee were to meet the additional cost. recurring expenses for.....
Judgment:

S.N. Andley, J.

1. In Suit No. 215 of 1970 filed by the respondent in this Court the appellant Committee filed an application I.A. No. 84 of 1970 under Section 34 of the Arbitration Act 1940, praying that the proceedings in the suit be stayed pending the adjudication of the disputes between the parties by arbitration. The learned Single Judge dismissed this application by his order dated September 4, 1970 against which the respondent is for specific performance of the agreement dated August 5, 1966, entered into between the parties. According to this agreement, the respondent agreed to donate and/or secure donations of rupees five lacs for the purpose of establishing a cultural unit comprising of an auditorium; an art gallery and a library collectively called a Civil Centre, in a block of buildings to be constructed on a particular plot of land on Jai Singh Road, New Delhi, adjacent to the Town Hall, of the appellant. The agreement recites that the Civic Centre was to be built at an estimated cost of about rupees ten lacs.

Under this agreement the appellant Committee was to make the land available to design and prepare the plans for the buildings of the Civic Centre through their own architect and to construct the buildings. The payment of rupees five lacs by the respondent was linked with the progress in the construction of the buildings which were to belong to the appellant. In case the cost of construction was less than rupees ten lacs, the liability of the respondent to donate was to be proportionately reduced but if such cost exceeded rupees ten lacs the appellant committee were to meet the additional cost. Recurring expenses for the maintenance and up-keep of the buildings etc., were to be incurred by the appellant and the day-to-day working of the Civic Centre was to be managed by an Advisory Board comprising of five members as specified in the agreement.

The agreement further provides that the Civic Centre was to be moved as 'Seth Anandram Jaipuria Civic Centre' and a marble or mental bust of late Seth Anandram Jaipuria was to be installed as the main entrance of the auditorium. The respondent was given certain seating rights in the auditorium and the right to make use or permit the use of the auditorium for such purposes as may be decided and approved by the Advisory Board. Clause 14 of the agreement which falls for consideration provided for arbitration in these terms:-

'14. That in case of any dispute arising with regard to interpretation, implementation and execution of these presents, and rights and obligations of the parties hereto, the same shall be referred to the sole arbitration of the Chief Commissioner of Delhi, whose award shall be final and binding on the parties'.

In pursuance of this agreement, the respondent admittedly made an advance payment of Rs.50,000/-. After some time, the respondent received a letter dated October 15, 1969 from the Secretary of the appellant stating that the appellant has resolved to make better and extensive use of the land which was allocated to the Civic Centre so as to provide all public utility services and cultural civic amenities in one complex; that such a complex was likely to cost more than rupees three crores while including a Civic Centre therein and in view of the enhanced cost it was felt that it would not be appropriate to name the Civic Centre after a donor for a donation of rupees five lacs unless the respondent agreed to pay half the revised cost. The respondent was requested to state whether it would be possible to increase the donation equal to half the revised cost which was then estimated at rupees thirty-five lacs. The respondent was informed that if this proposal was not acceptable, the appellant will have no objection in refunding the amount of Rs.50,000/- already paid by the respondent together with interest thereon. The matter stood there when the respondent on July 15, 1970 filed the present suit. The appellant put in appearance in Court on July 17, 1970 and filed the aforesaid application under Section 34 of the Arbitration Act 1940.

2. This application invoked the aforesaid arbitration clause and stating that the appellant were ready and willing to do all things necessary to the proper conduct of the arbitration prayed for the stay of the proceedings of the suit. The only plea raised by the respondent in answer to this application was that the Lieutenant Governor, Mr. A.N. Jha, had presided over the meeting of the appellant held on July 14, 1969 whereat the decision to alter the plan for the construction of the Civic Centre has been taken and for that reason he was disqualified from being the arbitrator, as he had made up his mind as regards the dispute arising out of the contract. For these conclusions, the respondent relied upon the aforesaid letter dated October 15, 1969, from the Secretary of the appellant. It was further averred in the reply that the Lieutenant Governor had laid the foundation stone of the New Civic Centre as revised and had thereby disqualified himself from being an arbitrator in the dispute. The appellant filed rejoinder controverting the allegations and stating that the Lieutenant Governor had not presided over any such meeting of the appellant and had not, thereforee, disqualified himself.

It was averred that the Lieutenant Governor was independent, that, in any case, the question whether he had disqualified after the matter had been referred and that the matter was such as can equitably be decided by arbitration. The respondent filed a reply to the rejoinder affidavit and raised certain other points. It was averred that by resolving to make a new cultural centre in the proposed Town Hall complex the appellant had repudiated the agreement; that the subject matter of the suit was not compressed in the arbitration clause and was not a matter with respect to which there was an agreement to refer to arbitration; that the Lieutenant Governor was named the arbitrator having regard to his special qualifications and position and if he had disqualified himself to act as arbitrator for any reason, the vacancy was not intended to be filled by any other person and, thereforee, the arbitration clause becomes inoperative and invalid and that the dispute was not of such a nature as could equitably be decided by arbitration.

3. The learned Single Judge did not frame issues with regard to all the controversies raised because he dismissed the application on the ground that the agreement had been repudiated 'on a new and a different consideration and the avoidance of the contract does not arise out of the terms of the contract' with the result that the arbitration clause could not be set up as a bar to the suit. The learned Single Judge relied upon the decision of the Supreme Court reported in : [1953]4SCR572 in re: Gaya Electric Supply Co., Ltd. v. State of Bihar.

4. It will be seem from the respondent's case as laid in the plaint that the respondent was relying upon the terms of the said agreement to pray for the relief of specific performance. In substance the respondent's case is that there was a contract to construct the Civic Centre as provided by the agreement for which a maximum donation of rupees five lac was to be made or secured by the respondent and that by asking for a higher donation of about rupees seventeen lacs for the Civic Centre to be constructed in the new Town Hall complex, the appellant had committed a bench of the terms of the said agreement and thereforee, the arbitration clause becomes inoperative. In our opinion, there was no new or different consideration and the avoidance of the said agreement did arise out of the terms of the contract.

5. In the Gaya Electric Supply Co's case : [1953]4SCR572 (supra) the Supreme Court were considering a limited arbitration clause which provided that 'in the case of a difference or dispute between the parties over the valuation as arrived at by the Government and that arrived at by the company, such difference or dispute including the claim for additional compensation of 20 per cent shall be referred to arbitration ... ... ...' The Supreme Court held that since the arbitration clause was not comprehensive and was not drafted in broad language namely, 'in respect of' any agreement, of 'in respect of something arising out of it' the proposition that a party cannot rely on a term of the contract to repudiate it and still say the arbitration clause should not apply would not hold good. The Supreme Court accepted the words of Viscount Simon L.C in Heyman v. Darwins Ltd 1942 Ac 356 that the answer to the question whether a dispute falls within an arbitration clause in a contract made depend on (a) what is the dispute and (b) what disputes the arbitration clause covers. The Supreme Court then said:-

'If the arbitration agreement is broad and comprehensive and embraces any disputes between the parties, in respect of the agreement, or in respect of any proviso in the agreement, or in respect of anything arising out of it, and one of the parties seeks to avoid the contract, the dispute is referable to arbitration if the avoidance of the contract arises out of the terms of the contract itself. Where, however the party seeks to avoid the contract, for reasons de hors it, the arbitration clause cannot be resorted to as it goes along with other terms of the contract'.

What we understand from the above quoted observations is that if the dispute is in respect of the agreement or any provision of it or in respect of anything arising out of it then the dispute is referable to arbitration. The observation, 'if the avoidance of the contract arises out of the terms of the contract itself' means that the beach resulting in the avoidance of the contract itself. It is not necessary for us to refer to the case of 1942 Asc 356 in any detail because this case was again noticed by the Supreme Court in the case reported in : [1969]2SCR224 in re: Union of India v Salween Timber and Construction Co. (India). In this case the arbitration clause was as wide as in the present case before us and while determining whether a dispute arises out of the contract or is in connection with the contract it was observed:-

'The test for determining the question is whether recourse to the contract by which both the parties are bound is necessary for the purpose of determining whether the claim of the respondent firm is justified or otherwise. If it is necessary to tae recourse to the terms of the contract for the purpose of deciding the matter in dispute, it must be held that the matter is within the scope of the arbitration clause and the arbitrators have jurisdiction to decide this case'.

6. The respondent has sued for specific performance of the aforesaid agreement. In other words he has approached to implement the agreement and to determine the rights and obligations of the parties in relations to the Civic Centre. According to the respondent the appellant has committed breach of the said agreement is not proceeding to construct the Civic Centre as agreed to but in resolving to construct a Town Hall complex and in asking the respondent to contribute more than it had agreement for the Civic Centre to be constructed in the said Town Hall complex.

The respondent cannot succeed in the suit without having recourse to the said agreement for the purpose of showing that the claim of the respondent is justified. In this case it will be necessary to have recourse to the terms of the agreement to determine the matters in dispute, namely , whether the appellant is entitled to as for a larger contribution from the respondent. The avoidance of the agreement arises out of the terms of the agreement itself because the contract is sought to be avoided by committing a breach of that clause of the agreement which fixes the maximum contribution of the respondent. Without having recourse to the agreement, the respondent will undoubtedly fail in his suit. It is, thereforee, clear that the matter in dispute in the suit squarely fall within the scope of the arbitration clause.

7. We do not think the respondent can derive any assistance from the decision of the Supreme Court D/- 17-9-1968 in Civil Appeal No. 1152 of 1966 in re: M/s. Delhi Housing and Finance Corporation v. Firm Beni Prasad Sidh Gopal and Co., where it was observed:-

'The suit sought to be stayed under Section 34 must be in respect of matter which the parties have agreed to refer to arbitration. If the suit is in respect of a matter not agreed to be referred, the arbitrator has no authority to decide the dispute and the suit cannot be stayed under Section 34.

We fail to see how these observations can be availed of by the respondent in its favor. The question of implementation of the said agreement which is what is sought for by the respondent in its suit was agreed to be referred by the arbitration clause. If anything these observations go against the respondent.

8. In the result, this appeal is allowed and the judgment of the learned Single Judge on the point decided by him, namely, that the dispute does not arise out of the agreement, is set aside and we do not express any opinion on the points not decided by him. The learned Single Judge will now proceed to decide the other points raised by the parties in connection with I.A. No. 84 of 1970. The parties or their counsel will appear before the Deputy Registrar (Judicial) on May 3, 1971 for taking a date for further proceedings on the original side. The appellants will have its costs of this appeal. Counsel's fee Rs.100/-

9. Appeal allowed.


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