Skip to content


Phoenix Cotton Tape Factory, Delhi and anr. Vs. Union of India and anr. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberOriginal Miscellaneous Petition No. 204 of 1971
Judge
Reported in10(1974)DLT340; 1974RLR646
ActsCode of Civil Procedure (CPC), 1908 - Sections 20; Arbitration Act, 1940 - Sections 2 and 12(2)
AppellantPhoenix Cotton Tape Factory, Delhi and anr.
RespondentUnion of India and anr.
Advocates: P.N. Sethi and; S.Deshpande, Advs
Cases ReferredRadial M. Parikh v. Dalmiadement
Excerpt:
.....new delhi'--the place of delivery must be taken to be delhi, and in consequence, the court at delhi had jurisdiction.; further, that a part of the cause of action in respect of a contract for sale of goods arises where the goods are to be delivered. that this principle holds in regard to proceedings occurring in court under the arbitration act is manifest from a conjoint reading of section 2(c) of that act and section 20 of the code of civil procedure.; (iii) arbitration act (1940) - section 5--leave to revoke authority of arbitrator granted, where the arbitrator had misconducted himself.; where the arbitrator dismissed the claimant's claim for non-prosecution of his case : held, that the order dismissing the claim for non-prosecution was illegal and without jurisdiction. the only..........tender' itself. yet another document is entitled 'special instructions attached to invitation to tender'. paragraph 4 of these instructions is most important. it reads : '4.jurisdiction : all questions, disputes or differences arisingunder, out of or in connection with the contract, if concluded, shallbe subject to the exclusive jurisdiction of the court within the locallimits of whose jurisdiction the place from which the acceptanceof tender is issued is situated'.just where this paragraph ends, the words 'at delhi' have beenwritten in iak. the petitioner maintains they were written before thetender was submitted. no suggestion has been made on behalf of theunion that the petitioner's allegation is false. nor has any evidencebeen led or sought to be led to falsify that allegation. i.....
Judgment:

T.P.S. Chawla, J.

(1) Phoenix Cotton Tape Factory,Delhi, is the name and style in which, at all material times, a Mr. S.Aggarwal carried on business as sole proprietor. He is the petitionerin this case. In 1963 he submitted a tender to the Director Generalof Supplies and Disposals at the later's office in Bombay for certaingoods required by the Union of India. The tender was accepted and alatter of acceptance was issued. In the contract operative betweenthe parties there was an arbitration clause which provided that disputes arising under the contract would be 'referred to the sole arbitration of the Director General of Supplies and Disposals or of someother person appointed by him.'

(2) Disputes did arise, and in 1967 an arbitrator was appointed.It appears that the Arbitrator originally appointed was replaced byothers, but nothing turns on that. All of them wished to hold theproceedings in Bombay. The petitioner wanted the proceedings to beheld in Delhi. Consequently, he applied a number of times to the arbitrators for change of the venue from Bombay to Delhi. His applicationswere invariably rejected.

(3) Mr. P.H. Ramchandani was the Arbitrator in 1970. He iss-ued notices requiring the parties to appear before him in Bombay on 4/05/1970. On that day no one appeared before him on behalf ofthe petitioner. Previously, Mr. Ramchandani, also, had rejected anapplication by the petitioner for change of the venue. An applicationdated 3/02/1970, filed by the petitioner, for review of theearlier order, was pending on 4/05/1970. Mr. Ramchandanifound that there were no grounds for reviewing his earlier order, andconsidered the application for review merely 'another instance oftheir (the petitioner's) dilatory teactics'. In the last paragraph of hisorder recorded on 4th May he said :

'THISis an old case which was initiated in July 1967. Thusthe case has been hanging on for the last about 3 years. thereforee,having due regard to all aspects of the matter, I am of the viewthat it is apparent that the claimant is not interested in going onwith this matter. In view of this the claimants claims are dismissedfor non-prosecution.'

A copy of this order was sent to the petitioner by the Arbitrator undercover of a letter dated 7/05/1970. No. award was made by theArbitrator.

(4) Soon afterwards the petitioner moved an application under Sections 14 and 17 of the Arbitration Act 1940 (Suit No. 191-A of 1970)praying that the Arbitrator be directed to file his award. The Unionof India opposed the application on two main grounds : (i) that thiscourt had no territorial jurisdiction to try the application, and (ii)that the application was not maintainable as the Arbitrator had notmade any award. At the hearing it was conceded on behalf of the petitioner that the order dismissing his claim for non-prosecution madeby the Arbitrator was not an award. So by an order made on 1 3/01/1972, the application was dismissed on that ground, and theobjection as to territorial jurisdiction was not decided.

(5) Whilst that application was still pending, the petitioner moveda petition under sections 5 and 12(2)(B) of the Arbitration Act. Thatis the petition now before me. The respondents are the Union ofIndia and Mr. P. H. Ramchandani, the Arbitrator. In this petitionit is alleged that the Arbitrator has misconducted himself and the proceedings in that he has failed to deliver an award as he was boundto do, and has instead dismissed the claim or the petitioner for nonprosecution which he had no power to do. Leave to revoke the authority of the arbitrator is prayed for, and also an order that the arbitration agreement shall cease to have effect with respect to the differences referred. Apart from joining issue on the merits, the Union hasonce again raised the point that this court has no territorial jurisdiction to try the petition. Accordingly, the following issues were framed :

1. Whether the Delhi Court has jurisdiction to try the application?2. Whether the arbitrator was empowered to dismiss the claim ofthe petitioner for non-prosecution ?3. Whether the arbitrator was bound to make the award in thecase ?4. Whether the arbitrator has misconducted himself and the proceedings ?5. Whether the petitioner has a cause of action ?6. Whether the authority of the arbitrator is liable to be revokedon the facts and circumstances of the case ?7. Relief.

(6) Territorial jurisdiction .is sought to befounded in this courton the basis of an alleged term in the contract that only the courts atDelhi would have jurisdiction ; and alternatively, on a term that thegoods would be delivered in Delhi. As to the first limb of the argument, it is not without significance that in its reply to the petition theUnion has not specifically controverter the allegation of the petitionerthat the contract contained a term vesting exclusive territorial jurisdiction in the courts at Delhi. There is, of course, a general denialin the form of an objection as to territorial jurisdiction. In amplication of this plea the Union has said that the contract was concludedin Bombay as the tender was submitted to and the acceptance issuedfrom the office of the Director General of Supplies & Disposals, Bombay; and, also that the arbitration proceedings were held in Bom bay.Thus it is contended, that only the courts at Bombay have jurisdiction. But, the allegation in the petition that there was a term in thecontract that the courts in Delhi alone would have jurisdiction elicited no reply. I make that observation as of relevance to the inquirywhether there was in fact such a term or not.

(7) The tender comprised a whole set of documents variouslyentitled. These very documents coupled with the acceptance ultimately became the contract between the parties. Some preliminary matters need to be noticed. Clause 7 of the 'Schedule to Acceptance ofTender' provides that the general conditions of contract D.G.S.&D-68;, as amended up to-date, shall apply. Clause I l(a) reads .''Termsof Delivery -F.O.R. Delhi.' That accords entirely with what was written in hand by or on behalf of petitioner in another document entitled 'Schedule to Tender', not to be confused with the 'Schedule toAcceptance of tender.' From which it is reasonable to infer that whatwas written by or on behalf of the Petitioner the tender documentswas taken note of by the officers of the Union and incorporated in thecontract.

(8) After the specification of goods in the 'Schedule to Tender' there are three notes marked N.B. The third of these enjoins :

'TENDERERSare requested to complete in full the questionaire1 to 14 on the reverse ofD.G.S. &D-IOOB; with particular reference to Q. No. 1 failing which their- quotation is likely to be ignored. Deviation, if any, should be clearly indicated.'

The form D.G.S. & D-100-B referred to in this note is the 'Schedule,to Tender' itself. Yet another document is entitled 'Special Instructions attached to Invitation to Tender'. Paragraph 4 of these instructions is most important. It reads :

'4.Jurisdiction : All questions, disputes or differences arisingunder, out of or in connection with the contract, if concluded, shallbe subject to the exclusive Jurisdiction of the court within the locallimits of whose Jurisdiction the place from which the acceptanceof tender is issued is situated'.

Just where this paragraph ends, the words 'At Delhi' have beenwritten in iak. The petitioner maintains they were written before thetender was submitted. No suggestion has been made on behalf of theUnion that the petitioner's allegation is false. Nor has any evidencebeen led or sought to be led to falsify that allegation. I must, thereforee, proceed on the assumption the words 'At Delhi' existed in thetender at the time that it was submitted.It was argued for the petitioner that by insorting those words hehad indicated that the courts at Delhi would have exclusive jurisdictionin matters arising under, out of or in connection with the contract.Since the deviation which he had thus proposed was not rejected bythe Union, he contends, it became a term of the contract. In supportof this argument I was referred to the definition of 'the contract' inclause l(i)(c) of D.G.S. & D.-68, which expressly includes 'the instructions to tenderers'. On this reasoning I was invited to hold that theparties were ad idem that the courts in Delhi should have exclusivejurisdiction.

(9) It seems to me that the crucial question is what if any, meaning is to be attached to paragraph 4 of the 'Special Instructions' qualified by the words 'At Delhi' appended thereto in hand. It is a well-known principle of construction of documents that hand-written or typewritten matter is to be given preference over what is printed: see , Messrs Sha Moolchand Kesarimull by its partner Mita Lal v. Messrs Associated Agencies, Firm of Merchants', Radial M. Parikh v. Dalmiadement & Paper Marketing Co. Ltd* , Noorbhai Gulam Hussein Makaliand others v. M.Allabux& Co.'. Presumably that is for the reasonthat what is inserted in hand or type-written in a printed form may betaken to show a particular application of mind, whereas it Js not alwayssure that the printed matter was fully, read and understood by theParties more especially where, as here, the document is unwieldy andcomplicated. I perceive no reason why that principle should not applyhere.

(10) Although the two words 'At Delhi' written after paragraph 4 of the Instructions do not themselves make even a complete sentenceand are unmeaningful in isolation, I think, there is no real difficultyin comprehending what they were intended to convey justposed asthey are to that paragraph. Obviously, the person who wrote thosewords meant that paragraph 4 was to have effect subject to this thatexclusive jurisdiction was to vest in the courts at Delhi and not in thecourt determined in accordance with the printed words. Any personwith a modicum of intelligence reading that paragraph of the instructions Along with the hand written words would be led to that conclusion. 'At Delhi' is the elliptical answer to a supposed question, whichcourts would have jurisdiction? That is the question which wouldnaturally arise in the mind of a tenderer reading paragraph 4. Hencethat was the right place to indicate the deviation. Counsel for theUnion was unable to suggest a more appropriate place for doing so inthe tender documents. I think, the officers of the Union well understood what the handwritten words implied, notwithstanding the laconicstyle. That explains their inability to repudiate the allegation of the petitioner that the contract contained such a clause. If any doubtexisted in their minds, they would have questioned the petitioner.Nothing of that kind ever happened, ft was vaguely suggested in thediscussion that perhaps the officers of the Union had not noticed thehandwritten words and had allowed them to pass muster unwrittingly.Then is no plea to that effect, let alone evidence ; and, certainly, Ican make no such assumption. Reading paragraph 4 of the Instructionsin this way, I have reached the conclusion that on its true construction it embodies a term in the contract that the courts in Delhi wouldhave exclusive territorial jurisdiction.

(11) In the view that I have expressed be mistaken then the meaning of that paragraph of the Instructions has been rendered uncertainby the handwritten words. It is impossible to know what the partiesmeant. Thus, that printed paragraph, on the contents of which theUnion .itself relies for founding jurisdiction in Bombay, becomes voidfor uncertainty and of no effect. That puts it out of the way. So faras I am aware, there is no principle of law by which the handwrittenwords can be entirely ignored.

(12) On the possibility that paragraph 4 is void for uncertainty,territorial jurisdiction must be determined in accordance with the principles which prevail when there is no special term in the contract. Thatleads to the other limb of the argument of the petitioner. Counsel forthe petitioner urged that the courts in Delhi would still have jurisdictionbecause the term of delivery was 'F.O.R. Delhi', which signifies thatdelivery was to be given at Delhi. He cited Gappulal s/o Chandarlalv. Kanderwal Brothers, Metal Deptt., and G. Venkatesha Bhat and othersv. M/s.Kamlapet Motilal and others, in support of his proposition.Those cases do establish his contention. Recently, Mr. Justice V. D.Misra, in a case entitled Basheshar Nath & Co. v, Union of India', hastaken simlar view. In that case, too, anobjection to territorial jurisdition was raised, and it was held that inview of the term of delivery'F.O.R. New Delhi' the place of delivery must be taken to be Delhiand, in consequence, the court at Delhi had jurisdiction

(13) It is elementary that a part of the cause of action in respect of a contract for sale of goods arises where the goods are to be delivered. That this principle holds in regard to proceedings occurring in court under the Arbitration Act is manifest from a conjoint reading of section 2(c) of that Act and - section 20 of the Code of Civil Procedure. In my opinion, even if the first part of the petitioner's case on the question of jurisdiction were to fail, the second part would suceed. In either event this court would have jurisdiction. Having reached these conclusions, I think it is unnecessary for me to consider the furtheralternative submission on behalf of the petitioner that this courthas territorial jurisdiction because the headquarters of the DirectorGeneral of Supplies and Disposals are situate in Delhi. Besides, thesubmission, though made, was not developed. For these reasons Idecide issue No. 1 in favor of the petitioner.

(14) All the other issues are closely interlinked. It is convenientto consider them together. The primary point is whether the Arbitrator had power to dismiss the petitioner's claim for non-prosecutionas he did. It was urged that an arbitrator had no such power and thatthe only course open to an arbitrator to enforce compliance with hisorders was to deliver an ex-parte award. Only one case dealing withthe point was discovered by counsel, and that by counsel for the Union.It is reported as Crawford and another v. A E R Prowling Ltd.'. Therethe question whether an arbitrator could dismiss a claim for nonprosecution arose on a sp.:cial case stated for the decision of the Court.One conclusion reached after examining the pros and cons was that-

'ITwas not within the arbitrator's jurisdiction for a mere delayon the part of the claimants independently of any failure to complywith an order made by the arbitrator to order that the claimant'sclaim be dismissed.'

This was sufficient to decide that case as dismissal was sought only onthe ground of delay. However, the other aspect, whether an arbitrator could dismiss a claim for non-prosecution in the event of a defaultin compliance with an interlocutory order made by him, was alsobriefly considered in the ensuing paragraph. The anomalies resultingfrom either view were noticed, and Mr. Justice Bridge tentatively saidobiter that-'an arbitrator can require that some interlocutory steps-thedelivery of a pleading, for example-shall be taken by a certain date,intimating that failure on the claimant's 'part to take the step bythat date will result in an ex-parte hearing on that date, which inthe absence of proper particularisation of the claimant's claim,would necessarily result in an award in favor of the respondent.That may be rather a cumbrous way of achieving the same effectas the courts achieve more directly by the exercise of their powerto dismiss for want of prosecution.'

(15) I am persuaded that these observations are? right. The present case is a complete illustration of the untenability of a differentview. Here, because the Arbitrator did not make an award, the petitioner is left wholly without remedy. When he moved the earlierapplication for having the award filed so that she could have it set aside,he was defeated on the ground that no award existed as none wasmade by the Arbitrator. If the present petition were also refused,his claim would remain undertermined on merits with not way insight out of the impasse. Such a result seems contrary to the assumptions underlying the procedures established by the Arbitration Act1940, which contemplate the bringing up of arbitration proceedingsand the award to the court in every case for scrutiny. A dismissal fornon-prosecution entails rejection of the claim. The consequences maybe of equal gravity as those of an award. It is difficult to find anyreason or principle for excluding scrutiny by the court when there isa dismissal by the arbitrator for non-prosecution. Yet, the Arbitration Act furnishes no relief in such a case. To my mind that is strongproof that it was never imagined that anarbitration could ever end in;anything other than an award-albeit an ex-parte award. I do notknow and am not presently concerned with the question whether thepower to dismiss for non-prosecution could be conferred on an arbitrator by the terms of the an arbitration agreement. The agreementhere admittedly confers no such power. So, I would conclude, thatthe only way in which the arbitrator could close the reference was bymaking an award.

(16) The course adopted by the Arbitrator was sought to be explained and justified on the ground that time for the making of an award had already expired before the 4th of May 1970. Assuming timehad expired, I should have thought the proper course for the Arbitrator was to abstain from doing anything at all or at most merely tosuggest to the parties that they move the court for extension of timeOr, he might himself have applied to the court for an extension. under section 28 of the Arbitration Act time for the making of an awardcan be extended retrospectively. That gave the Arbitrator an option he could either proceed on the presumption that time would be extended retrospictively and deliver an award or hold his hand till an extension of time was obtained. Neither way could he make an order which he had no jurisdiction to make simply because time for the making of award had expired. I think, the order dismissing the claim for non-prosecution was illegal and without jurisdiction. That answers Issues Nos. 2 and 3.

(17) Next, I have to consider what is the legal effect of what the Arbitrator has done. It seems plain to me that in the legal sense be had misconducted himself and the proceedings. He has brought about a stalemate not envisaged by the law. This he did by making an order which he had no power or jurisdiction to make. It was a serious error of law and procedure which has rendered the reference abortive and caused a miscarriage of justice. On behalf of the Union it wasasserted that the petitioner was solely responsible for the delay whichhad occurred as, being unwilling that proceedings should continue inBombay, he had made futile applications and motions for review withthe intent that proceedings be held in Delhi. I d3 not know whether,and, if so, how far that is true. Howsoever true it may be, it cannotjustify illegal closure of the proceedings by the arbitrator.

(18) What taken is the remedy of the petitioner So far as I can see the only section in the Arbitration Act able to rescue the petitioner is section 5 which is the one he has revoked. Removal of the Arbitrator, even though feasible, would be purposeless as by his own order he has coased to act and does not need to act further. Apart from leave torevoke the arbitrator's authority no other relief seems appropriate oradequate to the need of petitioner. It is settled law that one of thegrounds on which leave to revoke may be granted is themisconduct of the arbitrator : see Russell on Arbitration (18th ed.)page 129. Leave is also granted in any case in which injustice is beingdone and no other remedy is available to prevent it : see ibid. page 1.30.To my mind this is an exceptional case, as would appear from the paucity of authority on the point, and I have no doubt that the course adopted by the arbitrator has caused substantial injustice. Both on theground of miaconduct and also on the ground that there has been miscarriage of justice for which no other remedy is available, I think, the petitioner is entitled to leave to revoke the authority of the arbitrator.Accordingly, I decide issues Nos. 4, 5 and 6 in favor of the petitioner.

(19) The petitioner has also prayed for the further relief that anorder bs made that the arbitration agreement shall case to have effectwith respect to the differences referred. Section 12(2)(b) of the arbitration Act authorises the Court, in its discretion, to make such an order when the authority of an arbitrator is revoked byleave of the court.Alternatively, under section 12(2)(a) the court may appoint a personto act as sole arbitrator in place of the person displaced. At one timeduring the hearing, counsel for the petitioner was willing that anotherarbitrator be appointed by the court. However, in clause 21 of D. G.S. & D. Form-68 (wnich is the arbitration agreement) it is stipulated :

'THATno person other than the Director General of Supplies& Disposals or the person appointed by him should act as arbitrator and that, if for any reason, that is not possible, the matter isnot to be referred to arbtration at all.'

No case was shown to me which considers the effect of such a termon the statutory powers of the court to appoint an arbitrator. Without a full argument I prefer to refrain from expressing any opinion onthe point. Nor does it actually arise for decision. But the fact thatthere is such a tern can conceivaby give rise to the contention thatthe power to appoint conferred on the court by the Arbitration Acthas been expressly negatived by the parties. If. in the teeth of thatterm I were to appoint an arbitrator, undoubtedly I would be providing fertile ground on which future litigation could germinate. Realizing these dangers, counsel for the petitioner abandoned hissuggestion, and finally prayed only tliit the arbitration agreement be superseded.

(20) I was referred to Juggilal Kamlapat and others v. General Fibre Dealers and another', for the principles relevant to deeding whether an order superseding the arbitration agreement should be madeor not. Strictly that case does not apply as there the court was concerned, with the situation resulting from the setting aside of an awardand the meaning and effect of section 19 of the Arbitration Act; but,there is a useful passage occurring in paragraph 8 of the judgmentwhich reads:

'If the Court finds that the arbitration agreement is of thekind which exhausts itself after the first reference is made or if itfinds on account of the reasons which have impelled it to set asidethe award that there should be no further reference of the disputeto arbitration, the Court has the power to supersede the referenceand thereupon order that the arbitration agreement shall cease tohave effect with respect to the difference referred'.

By analogy that passage equally affords guidance as to the circumstances in which an order ought to be made under section 12(2)(b), remembering, of course, that there is no award to be set aside. On thebasis of that authority the very reasons which impel leave to revokemay be taken into account for deciding whether the arbitration agreement should be superseded or not. Considering that there has been amiscarriage of justice, that the petitioner has been left without remedy,that this reference has remained undetermined on merits for over 6years and that a new reference to another arbitrator appointed by thecourt would be fraught with technical difficulties and doubts, I think,that it is in the wider interest of both the parties that the arbitrationagreement be superseded.

(21) For these reasons I grant the petitioner leave to revoke theauthority of the appointment of arbitrator and make an order that thearbitration agreement shall cease to have effect with respect to thedifferences referred. As the Union cannot be blamed for the ordermade by the arbitration, which has led to these proceedings, I make noorder as to costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //