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R.B. Seth Jessa Ram Fateh Chand, Nayabazar, Delhi Vs. Union of India - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberSuit No. 324-A of 1970
Judge
Reported in11(1975)DLT74; 1975RLR57
ActsArbitration Act, 1940 - Sections 19 and 37(5)
AppellantR.B. Seth Jessa Ram Fateh Chand, Nayabazar, Delhi
RespondentUnion of India
Advocates: B.D. Dhawan,; D.D. Chaudhary and; A.K. Marwaha, Advs
Cases ReferredSee Barangagore Jute Factory v. Hulas Chand
Excerpt:
.....of first arbitrator set aside - whether second reference for arbitration justified - terms of arbitration agreement very wide and contemplates reference of of disputes as and when disputes arise - nothing in arbitration agreement prohibits for reference to appointment of arbitrator. - section 13: [altamas kabir & cyriac joseph,jj] custody of child - welfare of child vis--vis comity of courts - the minor girl child of 3 1/2 years was brought to india by her mother. the minor girl was a citizen of u.k. being born in u.k. her parents had set up their matrimonial home in u.k. and had acquired status of permanent residents of u.k. the child with her mother was supposed to return to u.k. but the mother cancelled her tickets and remained behind in india. the husband thereupon started..........by this clause. the governirent can say: 'that although under the clause of the original contract areference cannot now be made by the reason of the expiry of one year after the cancellation of the contract yet we are prepared to refer the dispute to arbitration in the manner laid down in the aforesaid clause.' there can always be a waiver of such a term by the party in whose favor the term operates: see union of india v. sita ram bindraban, c. r. no. 157 d of 1962 decided on 18th august, 1969.(12) in my opinion the limitation prescribed in the clause cannot now be availed of by the resrondent and no argument can be built on it. the only question is whether the clause contemplates the continuation of the arbitration further and whether i should direct the appointment of an.....
Judgment:

Avadh Behari Rohitgi, J.

(1) By acontract dated October 6, 1953, Messrs R B Seth Jessa Ram Fateh Chand, petitioners, agreed to supply 500 tons or wheat bran to the respondent. Union of India. Disputes arose between the parties. The Union of India cancelled the contract and claimed damages from the petitioners for the breach of contract. The petitioners, on the other hand, charged the Union of India with breach. They made their own claim against the Union of India.

(2) The contract dated Octobar 6, 1953, contained an arbitration clause which is as under :-

'INthe event of any question or dispute arising under the conditions mentioned in this schedule or in annexure thereto or in General Condtitions of the Contract (Supply Deptt. Form No WSB/133) except as to any matter the decision of which is specially provided for by these conditions, the same shail be referred to the sole arbitration or any parson nominated by the Secretary of the Ministry of the Government of India Administratively dealing with the contract at the time of such nomination, or if there be no. Stcretary, the Administrative. Head of such Ministry at the time of such nomination within a year from the date of completion of contract. There will be no objection to any such appointment that the person appointed is Government servant, 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 he has expressed views on all or any of the matters in dispute or difference. The award of the arbitrator so appointed shall be final and binding on the said parties. It is a term of this contract that in the event of such arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reasons, 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 nominated by the Secretary or Administrative Head of the Ministry as aforesaid should act as arbitrator and, if for any reason that is not possible, the matter is not to be referred to arbitration at all.' .

On 15th January, 1955 the petitioners wrote to the Secretary, Government of India, Ministry of Food and Agriculture asking for a reference of the disputes between the parties to an arbitrator to be appointed in terms of the above clause. The Secretary to the Government of India appointed Mr. H.S. Tyagi, Advocote as the sole arbitrator on 25th February, 1955. The sole arbitrator made his award on 30th January, 1957. He rejected the claim of the petitioners .and made an award in favor of the respondent holding the petitioners to be guilty of breach of contract. The award was made a rule of the court by the Subordinate Judge on 20th March, 1959. The petitioners preferred an appeal against the order of the Subordinate Judge. On 20th February, 1970, the petitioners' appeal was accepted and the award of the sole arbitrator was set aside by P. S. Safeer J The learned Judge took the view that the award disclosed an error on its face. The respondent had extended the time for the delivery of the contracted goods uptil 21st January, 1954. The Chief Director of Purchase however by his letter dated 19th January, 1954 cancelled the contract. The learned Judge held that the arbitrator came to an erroneous conclusion regarding the breach of contract and the award was made on an erroneous view of the law. He, thereforee, set aside the award. After the award had been set aside the petitioners again wrote to the Secretary, Government of India, Ministry of Food and Agriculture on 29th September, 1970, calling upon him to appoint an arbitrator in terms of the arbiration clause and refer the dispute between the parties to him The respondent did not respond to this request. On 20th October, 1970, the petitioners made the present application under Ss. 20 and 8 of the Arbitration Act. They pray for a reference of their disputes wtih the respondent to an arbirator in terms of the arbitration agreement reproduoed above.

(3) The application is opposed by the respondent. Mr. D. D. Chaudhary, counsel for the respondent has argued that the matter cannot be referred again to the arbitrator as the clause contemplates only one reference which must be made, he says, 'within a year from the date of the completion of contract.' The term 'completion of the contract' is itself defined in the contract as meaning and including : 'In case where the contract is cancelled wholly or partly the date when the letter of corp cancellation is issued.'

(4) The counsel argues that in this case the contract was cancelled by a letter dated 19th January, 1954 and the reference could have been made within a year from the date of the letter of cancellation and not afterwards. He says that now many years have passed since the letter of cancellation was issued and, thereforee, no reference can now be made to the arbitrator in terms of the arbitration clause. It is also urged that the remedy of the petitioners, if any, is to file a suit against the respondent and reliance in this respect has been placed on the provisions of Section 37(5) of the Arbitration Act.

(5) The question to be decided on this application is whether the matter can be referred to arbitration again now that the award has been set aside. It is not disputed that P.S. Safeer J. who set aside the award did not supersede the reference.

(6) Section 19 of the Arbtration Act reads as follows :-

'WHEREan award has become void under sub-section (3) of section 16 or has been set aside, the Court may by order supersede the reference and shall there upon order that the arbitation agreement shall cease to have effecr with respect to the difference referred'. This section leaves it to the discretion of the court when it decides to set aside an award whether to supersede the reference or not. It may not supersede the reference at all in which case though the award may be set aside the reference will continue. But if it supersedes the reference it has also in consequence to order .that the arbitration agreement on the. basis of which the reference was made would cease to have effect with respect to the difference referred. It is only, thereforee, when the court orders supcrsesuon of the reference that the consequence follows that the arbitration agreement ceases to have effect with respect to the subject matter of the reference. The word 'may' in section 19 is a word of permission rather thin of command. As the Supreme Court has said in Juggilal v. General Fibre Dealers-.

'THElegislature has thereforee given discretion to the Court under Section 19 to decide when it sets aside an award what the consequences of its order setting aside the award will be. If the Court finds that the arbitration agreement is of the kind which exhausts itself after the first reference is made or if it finds on account of the reason which have impelled it to set aside the award that there should be no further refetence of the dispute to arbitration the Court has the power to supersede the reference and thereupon Older that the arbitration agreement shall cease to have effect with respect to the d ffernce referred. On the other hand if the Court finds that the arbitration agreement is of a general nature and contemplates continuation of the reference with respect to the same dispute or successive references with respect to different disputes arising under the terms of the arbitration agreement it may not supersede the reference with the result that the reference as well as the arbitration agreement on which it is based survives. In such a case there can in our opinion be no doubt that where the reference and the arbitration agreement survive the same dispule may go before the arbitrators again provided there is machinery provided in the arbitration agreement which makes this possible.'

Safeer J., decided not to supersede the reference and did not order that the arbitration agreement shall cease to have effect with respect to the difference refeired. The result is that the reference aid the arbitration agreement both subsist and further arbitration can take place.

(7) Keeping in view the principles laid down by their Lordships of the Supreme Court the question that I have to answer is whether there is anything in the terms of this particular arbitration agreement which preculdes a further arbilration. Mr.Chaudhary has laid great tress on the words 'within a year from the date of the completion of contract' used in the clause and he says that the clause does not contem plate a continuation of the same reference or a further reference and the clause has exhausted itself. I do not agree. I have already set out the term of the contract relating to arbitration. The term is very wide in its amplitude and contemplates reference of disputes as and when they arise between the parties. The opening words of the clause 'in the event of any question or dispute' clearly show that the arbitration agreement is of a general nature and provides for miking a further reference or for cotinuing the same reference.

(8) The other question which has to be answered is whether there is machinery provided in the arbitration agreement which makes further arbitration possible. I think the clause provides such a machinery. The disputes have to be referred to the 'sole arbitration of any person nominated by the Secretary of Ministry of the Government of India administratively dealing with the contract at Ihe time of such nomination, or if there be no Secretary the Administrative Head of such Ministry at the time such of nomination.' There is ample provision for the appointment of an arbirator by the Secretary and if there is no Secretary then by the Administrative head of the department.

(9) Mr. Chaudhary then argued that this will amount to a second reference and the clause does not admit of a second reference. Their lordships of the Supreme Court in Jupgi Lal's case supra considered this argument and rejected it. They said that it is not a reference denove. 'It is a continuation of the reference' or 'a further reference'. In other words it was 'to continue the arbitration proceedings further'. In this context the petitioners desire that the Secretary should appoint an arbitrator in terms of the clause who may take up the reference again as the reference had not been superseded and arrange to continue the arbitration proceedings further. This is all that is asked for by the petitioners.

(10) Mr. Chaudhry then argued that the reference which was made on February 25, 1955 by the appointment of Mr. H. S. Tyagi as the sole arbitrator was not a valid reference as that appointment was not made 'within a year from the completion of the contract.' I think this argument is equally untenable. It is entirely irrelevant to consider at this stage as to whether the initial appointment was within a year or not. That relates to the events that happened in 1955. Those events have no relevance to what the court is now called upon to do Otherwise too what I find is that the letter of cancellation was issued on January 19, 1954 and request for the appointment of an arbitrator was made within a year, that is, on January 15, 1955. The sole arbitrator, it is true, was appointed on February 25, 19:5. The appointment by the Secretary may be after a year from the date of the cancellation letter.

(11) There is anorher short answer to this argument and it is this. It is open to the resprndent to waive the question of limitation of one year which is prescribed by this clause. The Governirent can say: 'that although under the clause of the original contract areference cannot now be made by the reason of the expiry of one year after the cancellation of the contract yet we are prepared to refer the dispute to arbitration in the manner laid down in the aforesaid clause.' There can always be a waiver of such a term by the party in whose favor the term operates: See Union of India v. Sita Ram Bindraban, C. R. No. 157 D of 1962 decided on 18th August, 1969.

(12) In my opinion the limitation prescribed in the clause cannot now be availed of by the resrondent and no argument can be built on it. The only question is whether the clause contemplates the continuation of the arbitration further and whether I should direct the appointment of an arbitrator in torms of the arbitration clause.

(13) In my opinion there is nothing in the terms of this arbitration clause which precludes the petitioners from asking the Secretary to appoint an arbitrator in terms of the clause to decide the dispute between the parties. The Supreme Court decision I think, is a complete answer to the respondent's opposition.

(14) Nor am I impressed by the argument that the petitioners must be asked to file a suit and that they cannot ask for a reference under the clause. All that Section 37(5). Arbitration Act says is that the period of lime spent by a litigant may be excluded under the Indian Limitation Act under certain circumstances. Section 37(5) can be availed of by a litigant who wishes to bring a proceeding e.g. a suit in court after the award has been set aside and claims that the period between the commencement of the arbitration and the date of order of the court be excluded in computing limitation. S. 37(5) does not help the respondent's counsel. It rather goes against his contention. S. 37(5) undoubtedly suggests that there can be cases where, after the award has been set aside, a second reference can be validly made. See Barangagore Jute Factory v. Hulas Chand, (approved by Supreme Court in Juggilal's case (supra).

(15) I, thereforee, hold that the reference and the arbitration agreement subsist and there is a machinery provided in the arbitration agreement for making an further referenee or for continuing the same reference and that further arbitration can take place.

(16) In the resu't the application is allowed/with costs. The respondent will appoint an arbitrator in terms of the arbitration clause reproduced in an earlier part of the judgment within six weeks from today. Counsel's fee Rs. 200/.


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