1. This is an application by Messrs. Greenland Foods Private Ltd. (hereinafter called the petitioner) under Section 20 of the Arbitration Act for the filing of the arbitration agreement, contained in the Acceptance of Tender No. 16/2/1147/ 68-Pur-V dated the 20th December, 1968 and for directing the Secretary to the Government India, Ministry of Food and Agriculture, for appointing an arbitrator in terms of the arbitration agreement. The petitioner entered into a contract for the supply of 8,117 packs (Vegetarian) 5-Men Comp Pack rations at Rs. 42.10 per pack for delivery on various dates to be completed by 25th May, 1969 with the respondent Union of India (Chief Director of Purchases, Ministry of Food and Agriculture, Department of Food, New Delhi). The petitioner delivered the contracted quantity of stores in terms of the contract. On completion of the supply of the contracted stores the petitioner submitted the bills for payment to be respondent. The pay and Accounts Officer Ministry of Food Agriculture, under the direction of the Chief Director of Purchases, deducted a sum of Rs. 1,04,819-37 paise from the amount due to the petitioner. The petitioner pleaded that it is entitled to the payment of Rs. 1,04,819-37 paise which has been wrongly with held by the respondent as amounts recoverable from the petitioner under other contracts. The petitioner pleaded that it had called upon the respondent to release the amount of Rs.1,04,819-37p. and the security deposit of Rupees 34,173.00 but the Government had refused to pay the same and disputes had arisen between the parties to the contract which are liable to be referred to arbitration under clause 21 of the agreement.
2. The respondent in its reply pleaded that a sum of Rs.18,265-48 p. was deducted with respect of its claim arising our of the breach of the warranty clause of the argument committed by the partition and the balance of the amount deducted by the respondent is on account of the sums due to the respondent from the other contract between the parties, and the disputes concerning those contracts cannot form subject matter of the present proceeding, nor could such claims in respect of the other agreement be referred for arbitration in the present proceedings. The respondent pleaded that it could have validly retained the sum of Rs.18,265-48 by virtue of the power under clause 8 (3) (C) of the agreement. The respondent also pleaded that in terms of the clause 21 of the agreement, the petitioner was to apply in writing for arbitration within a period of one year from the date of completion of the contract and since the petitioner did not make an application for arbitration on within one year the petitioner is debarred from making the present application.
3. The respondent in addition to the pleas on merits raised a few preliminary objections, namely, (a) that under clause 21 of the agreement dated 20th December, 1968, all questions, disputes or differences arising under or out of or in connection with the conditions mentioned in the contract were to be referred to the sole arbitration of any person appointed by the Secretary of the Ministry or the Department of the Government of India administratively dealing with the contract and the petitioner should have applied for the appointment of an arbitrator to adjudicate the disputes and the petitioner having failed to make an application to the Secretary of the Ministry for referring the disputes to arbitration, the present application is liable to be rejected as premature, (b) that under clause 21 of the agreement the petitioner was to make a request in writing for arbitration within one year from the date of the completion of the contract and the petitioner having failed to do so, his claims under the contract are to be deemed to have been waived and the respondent discharged and released of all its liabilities under the contract. The respondent pleaded that the supply of the contracted stores having been completed on May 25, 1969, the present application which was filed on April 6, 1971, is clearly beyond the period of one year prescribed in clause 21 and, thereforee, the application is not maintainable, and (c) that the disputes concerning the amount in excess of Rs. 18,265-48 p. are referable to various other contracts between the parties and are not covered by the arbitration clause and cannot from the subject-matter of arbitration.
4. The petitioner in his rejoinder denied that it was obligatory on his part to apply to the Secretary, Ministry of Food and Agriculture, Department of Food, for the appointment of the arbitrator to adjudicate the disputes. The petitioner, further pleaded that the interpretation placed by the respondent on the arbitration clause is wrong, misconceived and not maintainable. The petitioner maintained that the application is for the reference of the disputes regarding the claims of the Government for Rs. 18,265-48 arising out of the alleged breach of the warranty clause of the agreement and for Rs. 62,441-98 claimed by the respondent as recoverable against other contracts with the petitioner and that adjudication of the aforesaid claims of the respondent by the arbitrator is not barred under the arbitration clause. The petitioner further stated that the cause of action arose to the petitioner after the expiry of one year of the completion of contract, that is, in the month of March 1971 when the Chief Director of Purchases claimed the aforesaid amounts from the petitioner, vide letter dated the 26th March, 1971. The petitioner denied the right of the respondent to recover the amounts of RS. 18,265-48 and Rupees 62,441,-98. The petitioner maintained that the disputes raised are covered by the arbitration clause.
5. On the pleadings of the parties, the following issues were framed :--
(1) Whether not making a request in writing to the Secretary to the Government of India of the Administrative Ministry/Department concerned to refer the matter to arbitration precludes the filing of the present petition?
(2) Whether in terms of clause 21 of the agreement there does not subsist any dispute which is referable to arbitration?
6. In order to appreciate the contentions raised by Mr. C. R. Somesekahran, the learned counsel for the respondent it will be useful to reproduce the relevant clauses of the agreement, Clause 8 (3) (c) reads as-
'In the event of the Government having any claim or claims, ascertained or otherwise, against the suppliers, under any of the a conditions of this contract or arising from or out of this contract, or under the condition of any other contract, or from or out of any other contract, the Government shall be entitled to retain to the extent of such claim or claims any moneys which may be due (including security deposit returnable) by the Government to the suppliers, under this or any other contract and shall be entitled to appropriate such moneys (including security deposit returnable) in or towards satisfaction of such claim or claims.'
The relevant portion of Clause 21 reads as -
'21. Arbitration Clause: In the event of any question, dispute or difference arising under or out of or in connection with the conditions mentioned in this schedule or in annexure thereto or in General Condition of Contract (Form No. Dgs & D-68 Revised) or touching or concerning the constructions, meaning, operation, or effect thereof or of any matter contained therein or as the rights, duties or liabilities of the parties here to respectively or otherwise how so ever in connection with this contract except as to any matter the decision of which is specially provided for in condition mentioned in the schedule or in annexure thereto or in General Conditions of Contract (Form Dgs & D-Revised) the same shall be referred to the sole arbitration of any person appointed by the Secretary of the Ministry or Department of the Government of India administratively dealing with the contract, at the time of such appointment, or administrative Head of such Ministry or Department at the time such appointment. It will be no objection to any such appointment that the person appointed is a Government servant, and that he had to deal with the matter to which the contract relates and that in the course of his duties as such Government servant has expressed views on all or any of such matters in dispute or difference. The award of the arbitrator so appointed shall be final and binding on the parties to this contract. It is a term of this contract that in the event of such arbitrator to whom the matter is originally referred being transferred or vacates his office or is unable to act for any reason, such Secretary or administrative head as aforesaid at the time of such transfer, vacation of office or inability to act, shall appoint another person to act as arbitrator in accordance with the terms of this contract. Such person will be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by the Secretary or administrative head of the Ministry or Department as aforesaid should act as arbitrator and, if for any reason that is not possible, the matter is not to be referred to Arbitrator at all. This clause does not apply to any matter the decision of which is specially provided for by any conditions applicable to this contract and it shall not be open to either party to refer any such question or dispute to arbitration unless a specific reference to arbitration is jointly signed by the contractor and purchaser.
If no request in writing for such arbitration is made by the contractor within a period of one year from the date of completion of contract all claims of the contractor under the contract shall be deemed to be waived and absolutely barred and the purchaser, i.e. President of India shall be discharged and released of all his liabilities under the contract.
The date of completion of the contract shall mean and include:
(1) The date when the goods are delivered according to the terms of delivery'
7. Shri Somasekharan relying upon the second part of clause 21 contended that as the petitioner had made no request in writing for reference to arbitration within a period of one year form the date of completion of the contract as provided in clause 21 of the agreement, the petitioner must be taken to have waived all his claims under the contract and he is barred from making the present application.
8. In my view this argument is without merit. The second part of clause 21 of the agreement only has reference to the claims made by the contractor. In the case in hand, the contractor (petitioner) has made no claim under the contract. The contracted stores were supplied by the petitioner and they were accepted by the respondent. The respondent has out of the bills submitted by the petitioner deducted Rs. 1,04,891-37 p. on account of the amounts dues to it under other contracts between the parties. The disputes have arisen out of the claims made by the Government. Clause 21 does not place any bar on the claims made by the Government for reference to arbitration it made beyond the period of one year from the date of completion of the contract. The bar of one year is only placed on the claims of the contractor under the contract. In para 14 of the application, the petitioner has averred that the respondent had intimated the petitioner of the deductions of the amount of Rs. 1,04,891-37 p. on 9-9-1970, 22-3-1971 and 23-3-1971. The petitioner had completed the contract on 25th May, 1969. The present application is within one year of the claims made by the Government. It is clear from a reading of clause 21 of the agreement that the second part of the clause only bars the contractor for making a request of reference to arbitration is placed on the claims made by the Government against the contractor. The claims which are the subject of dispute were raised by the Government and in my view, the second part of clause 21 will not be applicable to the case.
9. Shri Somasekharan next contended that the disputes raised by the petitioner do not relate to the agreement in question and, thereforee, will not be covered by clause 21 of the arbitration agreement. this argument of the learned counsel is also without substance. The Government ahd deducted a sum of Rs. 1,04,891-37 out of the bills submitted by the petitioner under clause 8 (3) (c) of the contract. The Government has claimed the sum of Rs. 8,265-48 p. for the breach of the warranty clause of the agreement committed by the petitioner and the balance of the amount is being claimed by the Government as the amount due to it under other contracts with the petitioner. The petitioner has contended that the amounts payable to it under the contract in question cannot be withheld for set-off against the alleged claims of the respondent in respect of other contracts that were completed by the petitioner. The petitioner has further contended that the respondent has wrongly with held the amount of Rs. 1,04,891-37 p. and adjusted that amount against the alleged claims of the respondent under other contracts. The petitioner denied his liability to pay the sum of Rs. 1,04,891-37 p. to the respondent.
10. The disputes raised clearly relate to the terms of the contract and will fall within the arbitration clause.
11. Shri Somasekharan next contended that the petitioner had given no notice to the Secretary, Ministry of Food and Agriculture, for referring the disputes to arbitration and the present application is not competent. This contention has no merit in it. There was, to my mind, no need for the petitioner to have made an application to the respondent for referring the dispute to arbitration. The disputes having arisen between the parties, it was open to the petitioner to make an application under Section 20 of the Arbitration agreement and for appointment of an Arbitrator. The present application can be considered as an application to the respondent for appointment of the Arbitrator. For the foregoing reasons, the objections raised by the respondent to the application under Section 20 of the Arbitration Act are rejected.
12. I allow the application and direct the respondent to appoint an Arbitrator and refer the disputes to arbitration. The respondent will do so within one month. The petitioner will have the costs of the application. The counsel fee is fixed at Rs. 300.
13. Application allowed.