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Rai Bahadur Basakha Singh and Sons (Contractors) Pvt. Ltd. Vs. Indian Drugs and Pharmaceutical Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberSuit No. 54-A of 1976
Judge
Reported inAIR1979Delhi220
ActsArbitration Act, 1940 - Sections 20 and 20(4)
AppellantRai Bahadur Basakha Singh and Sons (Contractors) Pvt. Ltd.
RespondentIndian Drugs and Pharmaceutical Ltd.
Appellant Advocate Bk. Shivcharan Singh and; Amarjit Singh, Advs
Respondent Advocate R.K. Makhija and ; Alakh Kumar, Advs.
Cases ReferredKishan Chand v. Union of India
Excerpt:
.....the works or the execution or failure to execute the works, or the execution or failure to execute the same, whether arising during the progress of work or after the completion or abandonment thereof, shall be referred to the sole arbitration of an arbitrator appointed by the chairman and managing director of the company. 1. 4. it is well settled that parties by agreement cannot confer jurisdiction on any court which it did not otherwise possess......or after the completion or abandonment thereof, shall be referred to the sole arbitration of an arbitrator appointed by the chairman and managing director of the company. it will be no objection to any such appointment that the arbitrator so appointed as an employee of the company, that he had to deal with the matters to which the contract relates and that in the course of his duties as the company's employees, he -had expressed views on all or any of the matters in dispute or difference. the arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, the chairman and managing director, as aforesaid at the time of such transfer, vacation of office or inability to act shall appoint another person to act as.....
Judgment:
ORDER

1. This is a petition under S. 20 of the Arbitration Act requiring the respondent to file the agreement and to refer the disputes to an arbitrator. The respondent accepted the tender of the petitioner for the construction of 232 quarters at Antibiotics Plant Township, Virbhadra, Rishikesh (Uttar Pradesh) and formal contract was executed on 22nd May, 1972, which contains the following arbitration clause:-

'Decision of the 'Project Authorities to be final:

Clause 25:- Except where otherwise provided in the contract, all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the execution or failure to execute the works, or the execution or failure to execute the same, whether arising during the progress of work or after the completion or abandonment thereof, shall be referred to the sole arbitration of an arbitrator appointed by the Chairman and Managing Director of the Company. It will be no objection to any such appointment that the Arbitrator so appointed as an employee of the Company, that he had to deal with the matters to which the contract relates and that in the course of his duties as the Company's employees, he -had expressed views on all or any of the matters in dispute or difference. The Arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, the Chairman and Managing Director, 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 the contract. Such person shall proceed with the reference from a 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 Chairman and Managing Director, as aforesaid, shall act as Arbitrator, and, if for any reason, that is not possible, the matter is not to be referred to arbitration at all.

Subject, as aforesaid, the provisions of the Arbitration Act, 1940, or any statutory modification or re-enactment thereof and the rules made there under and for time being in force, shall apply to the arbitration proceedings under this clause,

The arbitrator may from time to time with the consent of the parties enlarge the time for making or publishing the award.'

2. It is admitted by the parties that on 7th Aug., 1975, a supplementary deed was executed between them, whereby it was agreed to substitute the words 'Managing Director' for the words 'Chairman and Managing Director' in the original agreement.

The petitioner alleges that the work under the contract was completed, that it submitted several claims for rupees 1,25,763.81 detailed in its letter dated 22nd April, 1975, to the respondent and requested the respondent to appoint an arbitrator; that the respondent by letter dated 14th Nov., 1975, informed the petitioner that no arbitrator could be appointed in this regard.

3. The respondent in its written statement has submitted that this court has no jurisdiction as courts at Dehradun alone have jurisdiction to try the matter in question; that no arbitrator can be appointed as the Managing Director of the respondent-company has refused to appoint an arbitrator; that under clause 25 of the Contract, court cannot force its own arbitrator upon the parties; that there is no ground for filing the arbitration agreement and referring the disputes to arbitration; and that the petition under S. 20 of the Arbitration Act has not been instituted by a duly authorised person.

The petitioner filed its rejoinder and the following issues were framed on 12th Aug. 1977:

'l. Whether this court has no jurisdiction to entertain the petition?

2. Whether in view of the refusal by the Managing Director of the respondent to appoint an arbitrator, the court cannot appoint an arbitrator?

3. Whether there is any ground for refusing to file the arbitration agreement and referring the disputes to arbitration?

4. Whether the petition has been instituted by a properly authorised person?

5. Relief.' Issue No. 1.

4. It is well settled that parties by agreement cannot confer jurisdiction on any court which it did not otherwise possess. But where two courts have Jurisdiction to try a proceeding or suit the parties may agree that the disputes between them shall be tried in one of such courts. It is admitted that the courts at Dehradun have jurisdiction in the matter under S. 20 of the Code of Civil Procedure as the construction of the building in question was done within the jurisdiction of that court. Clause 3 of the Special Conditions of the Contract is as under :-

'3. Jurisdiction of Court:

Except as provided in Clause 25 of the bond, all the disputes arising out of the contract bond, Dehradun Courts alone will have the jurisdiction.'

5. The case, Hakam Singh v. Gammon (India) Ltd., : [1971]3SCR314 , before the Supreme Court relates to a petition under S. 20 of the Arbitration Act; wherein the contract provided that the court of law in the city of Bombay alone shall have jurisdiction to adjudicate upon the disputes between the parties. It was held that since courts at Bombay had jurisdiction under S. 20 of the Civil P. C. the agreement between the parties that the Courts in Bombay alone shall have jurisdiction to try the proceedings was binding between them and that such agreement does contravene S. 28 of the Contract Act. The next contention of the petitioner is that Clause 3 of Special Conditions of the Contract applies to those disputes only which are not covered by C1, 25. 1 do not agree. Clause 3 of Special Conditions relates to jurisdiction of Court while Clause 25 of the Contract has no reference to jurisdiction of Court. Moreover, trial of a petition under S. 20 of the Arbitration Act is not a dispute and is not mentioned in Clause 25. Thus Clause 3 of Special Conditions excludes jurisdiction of all courts except arising between the petitioner and the respondent. I, thereforee, hold that Dehradun Courts alone have jurisdiction in this matter and this Court has no jurisdiction.

Issue No. 2

6. For the decision of this issue the following words in Clause 25 of the Contract are important:-

'It is also a term of this contract that no person other than a person appointed by the Chairman and Managing Director, as aforesaid, shall act as Arbitrator; and if for any reason, that is not possible, the matter is not to be referred to arbitration at all.'

7. The respondent by letter date 22nd April, 1975, required the Chairman and Managing Director of the respondent to appoint an arbitrator to decide the disputes mentioned in letter dated 22nd April, 1975. The Managing Director of the respondent by his letter dated 14th Nov. 1975 informed the petitioner that no arbitration could be appointed in this regard. Thus on the refusal of the Managing Director to appoint an arbitrator, no other person can be appointed as an arbitrator in view of Clause 25.

8. The learned counsel for the petitioner contends that this court has jurisdiction to appoint an arbitrator under S. 20(4) of the Arbitration Act, which reads as under :-

'Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court.'

Under this provision reference can be made to an arbitrator, appointed by the Parties and in the alternative to an arbitrator appointed by Court in cases where parties cannot agree upon an arbitrator. In the present case only the Managing Director of the respondent is authorised to appoint an arbitrator and the petitioner has no choice in selecting an arbitrator. The arbitrator is appointed by one of the parties only. Exclusive discretion is given to the Managing Director of the respondent to appoint an arbitrator, and if he refuses to appoint, there cannot be any arbitrator. Thus under Clause 25 if it is not possible to appoint an arbitrator, the matter is not to be referred at all to arbitration, i.e., the court cannot impose its own arbitrator upon the parties. In other words the jurisdiction of the Court to appoint an arbitrator under S. 20(4) of the Arbitration Act has been excluded by agreement between the parties. Reference is invited to Kishan Chand v. Union of India, 1974 Raj Lr 553. The Division Bench of this Court has held that the Court cannot appoint an arbitrator if the agreement excludes such a power of the Court. According to the above phrase in Clause 25 of Contract, the power of the court to appoint an arbitrator has been excluded. I, thereforee, hold that in view of the refusal by the Managing Director of the respondent to appoint an arbitrator, this Court cannot appoint an arbitrator and refer the matter as claimed by the petitioner.

Issue No. 3.

9. The learned counsel for the respondent has contended that the petitioner in his petition under Section 20 of the Arbitration Act has not disclosed the disputes, which are to be referred to an arbitrator and in the absence of pleas no arbitrator can be appointed. The argument is that without disputes there cannot be any reference to arbitration. The learned counsel for the petitioner, on the other hand, has stated that a notice dated 22nd April, 197,5 was served upon the Chairman and Managing Director of the respondent together with the items of disputes requiring it to appoint an arbitrator and refer the same to him. His contention is that he has filed a copy of this notice dated 22nd April, 1975, along with other documents in this case and, as such, it is a part and parcel of the petition and, thereforee, it should be held that he has mentioned the disputes in the petition itself. I may mention that documents have been filed by the petitioner including the notice dated 22nd April, 1975, wherein the items of disputes are mentioned, but documents filed by a party are not part of the pleadings. Without pleadings the petitioner is not entitled to allege what are disputes which it seeks to refer to arbitrator. I thereforee, hold that absence of allegations of disputes in petition, no reference can be made the Arbitrator.

10. Section 20(1) of the Arbitration Act requires that when differences have arisen between the parties to the agreement then the same may be a subject matter of a petition under S. 20 of the Act. The Court has to determine whether the differences arising between the parties are covered by the agreement. I am, thus, of the view that pleading of disputes or differences is necessary in a Petition under S. 20 of the Arbitration Act. In the absence of such a pleading, the application cannot be said to be ml accordance with law. I, thereforee, hold that non-pleading of the disputes in the Petition under S. 20 of the Arbitration Act is a sufficient ground for dismissal of the application.

Issue No. 4.

11. This petition under Section 20 of the Arbitration Act was filed on 12th Jan. 1976. A copy of the resolution dated 26th Dec. 1975, alleged to have been passed by the Board of Directors of the petitioner company has been filed as Exhibit P. 2. In the petition under Section 20 of the Arbitration Act no specific resolution was Mentioned by the petitioner as no date of resolution was given therein. The petition is dated 17th Dec 1975. Exhibit P-1 a copy of the alleged resolution dated 26th Dec. 1975 was also filed by the petitioner, but the same was not a correct copy of the minutes recorded in the Minutes Book. In Exhibit P-1 the presence of Smt. Amarjit Kaur is not mentioned. It appears that Exhibit P-1 was drafted ))nor to the alleged holding of the meeting of the Board of Directors of the petitioner company on 26th Dec., .1975. Mr. Daya Singh, Governing Director of the petitioner company has appeared as P. W. and he has deposed that he and his wife Smt. Amarjit Kaur attended the meeting held on 26th Dec., 1975, and passed the resolution, copy of which is Exhibit P. 2. In view of his unrebutted statement resolution Exhibit P. 2 is held to be proved and proper. The present Petition thus has been signed and instituted by a duly authorised person. I hold accordingly,

Issue No. 5

12. If the contention of the learned Counsel for the petitioner as discussed above is accepted then this Court has Jurisdiction and Clause 3 of the Special Conditions of Contract will not be applicable. Assuming that this Court has jurisdiction, as contended by the learned counsel for the petitioner the present petition is liable to be dismissed in view of my finding on issue No. 2. 1 accordingly, dismiss this petition with costs. Counsel fee Rs.300/-.

13. Petition dismissed.


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