Skip to content


Municipal Corporation of Delhi Vs. Fruit and Vegetable Merchants Union (Regd.), Delhi and anr. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberSuit Appeal No. 218A of 70
Judge
Reported inILR1975Delhi429
ActsArbitration Act, 1940 - Sections 14 and 30; Stamp Act, 1899
AppellantMunicipal Corporation of Delhi
RespondentFruit and Vegetable Merchants Union (Regd.), Delhi and anr.
Advocates: D.D. Chawla,; C.L. Choudhry,; R.L. Aggarwal and;
Cases Referred(Ashok Const. Co. v. U.O.I.
Excerpt:
a) it was stated that under section 14 of the arbitration act, 1940, there was no precise form of words that would be necessary to constitute an awardb) it was adjudged under sections 14 and 17 of the arbitration act, 1940, that in order to refer the dispute to the arbitrator, two conditions needs to be fulfillled; that is, all the interested parties should agree to make the reference and the subject matter of the reference must differ on the basis of which the contention was raised between the partiesc) it was adjudged that where the parties were not given an opportunity to lead the evidence in support of their contentions, then said act would constitute a legal misconduct on the part of the arbitrator under sections 30 and 33 of the arbitration act, 1940 - section 13: [altamas kabir &.....prithvi raj, j.(1) by this application, registered as a suit, under sections 14 and 17 of the arbitration act, 1940, (herein called 'the act') the petitioners, municipal corporation of delhi (herein called'the corporation') ever that disputes having arisen between it and the fruit and vegetable merchants union (herein called 'the union') were referred to the arbitration of the lt. governor, delhi, respondent no. 2, who made his award dated 23rd may, 1970; that the lt. governor, delhi, be directed to file his award or a signed copy of it and after giving notice of filing of the award, the award be made a rule of the court and a decree be passed inaccordance therewith in its favor and against the union. the lt. governor, shri a, n. jha, respondent no. 2, was requested to file the award......
Judgment:

Prithvi Raj, J.

(1) By this application, registered as a suit, under sections 14 and 17 of the Arbitration Act, 1940, (herein called 'the Act') the petitioners, Municipal Corporation of Delhi (herein called'the Corporation') ever that disputes having arisen between it and the Fruit and Vegetable Merchants Union (herein called 'the Union') were referred to the arbitration of the Lt. Governor, Delhi, respondent No. 2, who made his award dated 23rd May, 1970; that the Lt. Governor, Delhi, be directed to file his award or a signed copy of it and after giving notice of filing of the award, the award be made a rule of the Court and a decree be passed inaccordance therewith in its favor and against the Union. The Lt. Governor, Shri A, N. Jha, respondent No. 2, was requested to file the award. Shri S. C. Vajpeyi. Secretary to the Lt. Governor wrote letter, Exhibit C. W. I/I, to the address of the Registrar of this Court informing that there was no arbitration; that there were no regular proceedings and it was explained to the pardes that there would be no award and only an advice would be given; and that when the notice was received the position was informally explained to the Corporation. The Lieutenant Governor in his letter. Exhibit C. W. 1/3, forwarded the proceedings taken before him by the parties together with the advice given by him and stated that he did not act as an Arbitrator but merely advised the E parties how they should settle the dispute.

(2) Notice of the proceedings and the award having been filed in Court was given to the Union who filed objections under sections 30 and 33 of the Act, inter alia, on the grounds that there was no arbitration agreement between the parties; that the parties did not intend that the Lt. Governor respondent No. 2 should act as an Arbitrator and determine the disputes in a judicial manner; that no reference was made to respondent No. 2 to adjudicate upon the question of interest claimed by the petitioner-corporation; that the reference, if any, was invalid ; that the respondent No. 2 never agreed to adjudicate upon the dispute nor did he adjudicate upon the dispute judicially between the parties ; that he merely acted as an Adviser and gave his advice only and did not make any award; that there is no legal and valid award which could be made a rule of the Court; that the purported award is no stamped as required under the law, that the respondent No. 2 has misconducted the proceedings and that he had no power to grant interest for which there was neither any agreement between the parties nor the Corporation ever claimed it by any notice. The Union further avers that the purported award of interest was illegal, time-barred and erroneous ; that the alleged award is not based on any evidence but is based on conjectures and surmises; that the respondent No. 2 had acted on the report of the Secretary, Law & Judicial, and had given his advice only in consultation with the Secretary, Law and Judicial, on the basis of the report submitted by him to respondent No. 2; that the word 'award' on the top of the advice tendered by the Lt. Governor, Delhi, had been interpolated; that the purported award is a declaratory one and that the proceedings under the Arbitration Act could not be taken.

(3) The Corporation traversing the allegations made by the Union, stated that the respondent No. 2 was appointed as the Arbitrator under a regular and legal agreement of reference under the Act; that it is wrong to contend that the respondent No. 2 did not adjudicate upon the dispute in a judicial manner; that the judicial secretary acted in a ministerial manner and got the written statement and documents of the parties; that the Judicial Secretary heard the counsel for the parties on the facts of the case and sent the file with the statement of facts to respondent No. 2: that the award is perfectly legal and valid; that the allegations regarding respondent No. 2 having misconducted the proceedings are vague and general and could not be inquired into: that specific dispute was referred to arbitration, the real claim being by way of compensation for use and occupation at double the rent as provided in the lease-deeds for holding over and not handing over possession as stipulated; and that the existence of dispute implied the admission of the liability to pay if the same was found payable.

(4) On the pleadings of the parties, the following issues were framed : (1) Whether there was no arbitration agreement between the petitioner and respondent No. 1 OPR. (2) if issue No. 1 is not proved, whether the arbitration agreement was not valid and subsisting OPR. (3) Whether any reference was made to respondent No. 2 to adjudicate upon the matter in dispute between the parties OPR. (4) If issue No. 3 is proved, whether the reference was invalid (5) Whether respondent No. 2 gave his decision on the dispute referred by the parties to him as an award under the Arbitration Act (6) If issue No. 5 is proved, is the award not valid and legal (7) Docs the award require stamp (8) Whether the Arbitrator misconducted the proceedings, as alleged by respondent No. 1 (9) Whether the petitioner's application is within time (10) Whether the award is declaratory one, and. if so, 13 what effect Issue No. 1 :

(5) Before proceeding to decide this issue it would be relevant and proper to record a few facts of the case.

(6) The management of the Fruit and Vegetable Market Subzi Mandi, Delhi, (herein called 'the Market') which belongs to the Central Government was initially vested in the erstwhile Delhi Improvement Trust (hereinafter called 'the Trust') which leased it out from time to time to the union on varying terms of rent. The last lease of the Market expired on 31st March, 1957, when the rent was Rupees two lacs per annum. The Union, however, continued in possession and paid rent/compensation for use and occupation at the rate of Rs. 2' lacs. The Trust was succeeded by the Delhi Development Authority (herein called 'the Authority') which treated the Union as in permissive possession but without a valid lease.

(7) The Secretary of the Authority served a notice dated 16th March, 1959, on the Union to vacate the Market on the evening of 31st March, 1959.

(8) The management and control of the Market was subsequently made over by Government to the Corporation in place of the Authority with effect from 1st April, 1959. The Corporation did not agree to the Union continuing in possession and started collecting teh bazart besides taking other steps under section 405 of the Delhi Municipal Corporation Act, 1957 (herein called 'the Corporation Act'), in exercise of its powers of management of the Market. The Union feeling aggrieved by the aforesaid acts, filed a suit for injunction on the ground that it was a tenant under the Corporation. The suit was dismissed by the trial Court on 31st March, 1967, holding that the Union was in unauthorised occupation as a trespasser. The Union filed aa appeal in the Court of the District Judge, Delhi. The appeal was heard by Shri J. D. Jain, Additional District Judge, Delhi, who by his judgment dated 15th March, 1969, found all the issues against the Union but held that the Corporation could not disposess the Union by proceedings under section 405 of the Corporation Act but decreed that it could disposess the Union according to law. The Corporation and the Union thereafter started compromise talks. According to the Corporation, the Rent Committee of the Authority, during the period the Authority was in management of the Market, went into the question of its rental value and determined its rent at Rs. 3,70,000.00 . The Cor- 'poration accordingly insisted on payment of arrears of rent at that: rate and that the Union should also pay a sum of Rs. 1,07,000.00 on account of sanitation, maintenance charges and house tax. After much discussion, the Corporation contends it was ultimately decided between the parties that the Union would pay rupees 25 lacs in lump sum and the question regarding damages over and above Rs. 25 lacs for the alleged unauthorised occupation of the Union from 1st April, 1959, was referred to the Lt. Governor Shri A. N. Jha for arbitration while the Union's stand is that the said question was submitted to the Lt. Governor for his advice only.

(9) It may bear mention here that the market was leased out in September 1943 to the Union which lease agreement expired on 31st March, 1957. The Improvement Trust did not execute any formal lease in favor of the Union but permitted it to remain in occupation.

(10) The case of the Corporation is that on the basis of the standard rent and charges recommended by the Committee .the Union owed to the Corporation Rs. 42.93 lacs from 1st April, 1959 to 31st March, 1968. The Union in its letter dated 2nd June, 1968, offered to pay to the Corporation the arrears of rent of the market amounting to Rs. 22.50 lacs representing nine years rent at the rate paid by it to the Authority less the amount of certain items claimed by them. Alternatively, the Union offered to refer the issue of payment to arbitration of the Lt. Governor as provided in the lease deed executed between the Union and the Trust.

(11) The Commissioner of the Corporation in his letter dated 3rd June, 1968, (pages 15 to 19 of A.W. 1/1) recommended to the Corporation that the Union should first pay Rs. 22.5 lacs less rebate, if due to the Union and that the remaining dispute between the parties be referred for arbitration by Lt. Governor whose award should be accepted as final by the parties. This letter was considered by the Standing Committee of the Corporation who by its resolution No. 202 dated 5th , June, 1968 (at page 20 of A.W. I/I) referred back the case to the Commissioner for obtaining legal opinion. The Commissioner in his subsequent letter dated 18th June, 1969, (pages 23 to 25 of A.W. 1/1) informed that on a request from the Union, the Minister for Health, Family Planning and Works, Housing and Urban Development met the representatives of the Union on 17th April, 1969 and apprised the representatives of the Union that up to-date arrears had piled up to the extent of Rs. 25 lacs and asked the Union to deposit a sum of Rs. 25 lacs with the Government immediately and to give a written undertak- ing that they agree to the question as to whether or not any additional recoveries towards interest charges and rent etc. are due from them for the period 1st April, 1959, onwards being referred to the Lt. Governor of Delhi for arbitration. A copy of the minutes of meeting was forwarded to the Delhi Administration with instructions that the conclusions arrived at above be communicated to the Union. The Union in its communication dated 5th June, 1969 (extract reproduced at page 26 of A. W. 1/1) intimated that they stood by their offer contained in their letter dated 2nd June '68 that they shall agree to pay 9 years' rent (from 1st April 1959 to 31st March, 1969) at the rate of Rs. 2' lacs per annum subject to the deductions claimed by them or as an alternative they shall agree to refer the issue to arbitration by the Lieutenant Governor as provided for in the lease deed executed between the Union and the Improvement Trust.

(12) The Commissioner in his letter dated 17th July, 1969, (at page 28 of A. W. I/I) reported that the Union in its letter dated 28th June, 1969 (at page 29 of A. W. I/I) had forwarded a cheque for Rs. 25 lacs representing payment of arrears of rent, municipal taxes etc. up to 31st March, 1969, and that the Union agree that the Corporation's claim for interest on arrears of rent, which according to it was not maintainable, will be referred to the Lt. Governor for arbitration. The standing committee by ii-s resolution dated 17th July, 1969 (page 30 of A. W. 1/1) recommended to the Corporation that offer of the Union be accepted and the case regarding interest on arrears of rent of the market be referred to the Lt. Governor for arbitration. The Corporation by resolution No. 207 dated 17th July, 1969 (at page 40 of A. W.1/1) accepted the recommendation and resolved that the case regarding interest on arrears of rent of the Market be referred to the Lt. Governor for arbitration.

(13) The learned counsel for the petitioner-corporation vehemently contended that from the resume of events given above there could be no manner of doubt that reference to arbitration of the Lt. Governor was made by the parties. Relying upon commentaries on Evidence Act by Raju, Volume I at page 888 it was submitted that when a compromise is arrived at by means of correspondence the final document executed is. the result of negotiations which preceded it and the whole must be considered to determine what the compromise is as in such a case there is no question of verying the terms of a document but only of determining the circumstances under which it come into existence. It was contended that what is required to be determined is what was the intention of the parties in submitting the dispute to the Lt. Governor. Could it be said that the parties never intended the proceedings before the Lt. Governor to be arbitration proceedings or whether the context and the attending circumstances show that there was an arbitration agreement and the reference was made to the Lt. Governor. The nature of the proceedings, goes the agreement, is for the Court to determine and is not dependent on the ipse dixit of the Lt. Governor by saying that he did not act as an Arbitrator but merely advised the parties how they should settle the dispute.

(14) It was contended that parleys between the parties were going on on the basis of referring the disputes to arbitration. It was in that background to refer the disputes to arbitration that the offer was made by the Union in its letter dated 28th June, 1969 (Annexure 'D') at page 13 of the Arbitrator's file and reproduced at page 29 of Exhibit A. W. 1 /l. Having made the offer nothing further was required to be done by the Union it was for the Corporation to either reject or accept the offer so made. The Corporation accepted the offer by its resolution No. 207 dated 17th July, 1969, giving rise to not only a completed agreement as contemplated by sub-clause (a) of section 2 of the Act coming into existence but the parties in fact referred the dispute to the arbitration of the Lt. Governor, Delhi, within the ambit of clause (e) of the section. The Union's letter (Annexure D) and its acceptance by the Corporation in its resolution No. 207, goes the argument, postulates a composite agreement not only to refer the matter to arbitration but the reference as well. The words 'will be referred' to the arbitration of Lt. Governor in Union's letter without doubt, meant that the Union had, in fact, made reference of the dispute to the Lt. Governor, a second letter was not postulated from them. It was for the Corporation to accept the offer. In case the Corporation chose to concur in the reference, nothing further was required to be done on the part of the Union in implying the words 'will be referred'. The Union gave its consent passing the ball on to the Corporation.On its own reading, resolution No. 207 (at page 40 of Exhibit A.W.I/I) amounts to reference. Proceeding started as arbitration proceedings on the basis of Union's letter dated 28th June, 1969, culminating in the reference by Corporation's resolution No. 207 dated 22nd July, 1969. The Corporation in its letter dated 4th August, 1969, (Annexure 'E') intimated the honorary Secretary of the Union that the Corporation had accepted the offer of the Union contained in its letter, Annexure 'D', and that the Corporation had resolved that the case regarding interest on the arrears of dues of the Corporation in respect of the market be referred to the Lt. Governor for arbitration. In other words, goes the argument, the Corporation informed the Union that it had accepted their offer referring the dispute to arbitration and that the dispute was referred to arbitration by the Corporation. Union on the contrary participated in the proceeding. The whole history of the case including the claim regarding interest was placed belore the Lt. Governor to appreciate the controversy to enable him to decide the matter properly. Now that the award has gone against the Union, it cannot be heard to say that no reference was made. Letter dated 12th August, 1969, addressed by the Secretary, Law and Judicial, Delhi Administration, to the parries (at page 49 of the arbitrator's file) it was submitted was a clincher that the matter was referred to the Lt. Governor as Arbitrator and not as a mediator. The Lt. Governor in the aforesaid letter desired the parties that a note be prepared for his perusal to enable him to arbitrate in the dispute. In the circumstances, the parties were required to file a written statement by 28th August, 1969, and were further asked to appear for a hearing on 8th September, 1969. By this letter the parties reached the apex of the arbitration, parties had already become arbitrable. The honorary Secretary of the Union in his reply dated 25th August, 1969 (at page 48 of the Arbitrator's file) instead of demurring to the arbitration thankfully acknowledged the receipt of letter dated 12th August, 1969, staling that the Union could file its statement only after the statement of claim had been submitted by the Corporation. The Union in its letter dated 22nd September, 1969 (at page 34 of the Arbitrator's file) described the subject as 'in the matter of Arbitration between Municipal Corporation of Delhi and the Fruit and Vegetable Merchants Union (Regd.), Sabzi Mandi, Delhi,' and submitted its statement of claim. Not only that it was contended that Shri Radhey Lal Aggarwal, the learned counsel for the Union in his letter dated 17th December, 1969, while seeking adjournment in the case described the case as 'Arbitration between Municipal Corporation and the Fruit and Vegetable Merchants Union'. It was strenuously contended that a counsel of the standing and status of Shri Radhey Lal Aggarwal could well distinguish between arbitration and mediation. The counsel having chosen to describe the proceedings before the Lt. Governor as arbitration proceedings was conclusive of the fact that the parties had participated in the proceedings taking them to be the arbitration proceedings. Not only that, in his other letter dated 17th February, 1970, (at page 50) the counsel Shri Radhey Lal Aggarwal while seeking adjournment described the matter 'as arbitration case'. All this, it was submitted, shows that the parties started proceedings as arbitration proceedings and participated in the proceedings as arbitration proceedings culminating in the award Exhibit R.W.1/2. The statement of Shri Lattu Mal Jain, Honorary Secretary, R.W.3, and of Kishan Lal, R.W.2, it was claimed, had no probative value in face of the unimpeachable documentary evidence referred to above. Assailing the statement of Lattu Mal Jain it was contended that the Lt. Governor would not have called him alone. The Delhi Development Authority would certainly have been called. There was no occasion for the Lt. Governor to call for Lattu Mal Jain as at that stage he had not to act in the matter. Lattu Mal Jain's statement at best is a self-serving statement which is opposite to his statement made in Annexure 'D'. It is unbelievable that Lattu Mal Jain would have gone to see the Lt. Governor alone, K. L. Gupta should have accompanied him. Not producing K. L. Gupta by itself was enough to discredit the testimony of Lattu Mall Jain.

(15) Shri D. D. Chawla, the learned counsel for the Corporation with his characteristic eloquence further contended that the respondent was not able to prove on the record any evidence to modify the apparent tenor of the letter dt. 28th June, 1969 (Annexure 'D'). This letter, he submitted, was an offer to the Corporation and consists of two parts. The first part deals with the payment of 25 lacs in full and final settlement of the arrears of rent. The second part provides retcrenco of the question of interest to the arbitration of Lt. Governor, Delhi. The language, he contended admits of no ambiguity. The parties had clearly stipulated reference on the question of interest to the arbitration of the named arbitrator. It was submitted that reference was made by the counsel for the Union to the words 'as desired' and 'as advised' in letter of 28th June, 1969. According to Shri Chawla these words pertain to the first part of the letter. Rupees 25 lacs were paid according to the said letter 'as desired' by Lt. Governor conveyed to the Union by Shri Kanwar Lal Gupta, M. P. The expression 'as advised' it was urged, related to the claim for deductions given up by the Union is consideration of the Corporation waiving their demands on account of taxes etc. except interest. The second part of the letter relating to arbitration, it was contended, unequivocally states that 'the claim of interest, which is denied, will be referred to the arbitration of the Hon'ble Lt. Governor as already mutually agreed.' This, it was urged, cicarly shows that the arbitration was agreed upon between, the parties already before the letter of 28th June, 1969, was written. The letter only put the agreement in writing. This offer of the Union was accepted by the Corporation vide resolution No. 207 dated 22nd July, 1969 (at page 40 of Exhibit A.W.I/I). The resolution also falls into two parts. In the first part it resolves to accept the payment of rupees 25 lacs representing arrears of rent. The second part deals with the case regarding interest on arrears of rent. The reference to arbitration Shri Chawla claimed was unconditional and unequivocal. 'The Union having stated that the dispute in respect of interest 'will be referred', Shri Chawla submitted, the Corporation by its above said resolution bound the Union by saying 'be referred'. The question of making a separate reference in the circumstances did not arise as the dispute in respect of interest had already arisen and was referred to the Lt. Governor in the offer made by the Union in its letter Annexure 'D'. This arbitration agreement, goes the argument, was preceded by and was the result of series of negotiations including meetings at high level between the Minister of Health, the Officers of the Corporation and the office-bearers of the Union. The full report of which is contained in Exhibit A.W.I/I, correctness of which was vouchsafed by Shri C. D. Bahri, Deputy Commissioner, Mcd (A.W.1) and was not challenged by the respondent. The facts and circumstances, it was argued, clearly establish that all along the intention of the parties was to refer the question of interest to the arbitration of the Lt. Governor.

(16) In support of the contention that Union's letter (Annexure 'D') and its acceptance by Corporation in its resolution No. 207 postulates a composite agreement not only to refer the matter to arbitration but the reference as well, strong reliances was placed on the Division Bench decision of this Court in case P. C. Aggarwal v. K. N. Khosia and others, 1974 RLR 596 now reported in A.I.R. 1975 Del 540 in which it was observed that 'The definition of 'arbitration agreement' is comprehensive enough to include two types of arbitration agreements. On the one hand, it includes merely an agreement between the parties that disputes arising between them should be decided by arbitration.' Such an agreement the Bench observed is a bare arbitration agreement, not providing for a reference of the dispute to arbitration. The Bench further observed that on the other hand, the definition also includes arbitration agreement which combine an agreement that disputes shall be decided by resort to arbitration with a reference of the disputes between the parties to arbitration. In the opinion of the Bench because section 2(a) is comprehensive enough to include the latter type of arbitration, agreement which combines both the arbitration agreement and the reference that only the 'arbitration agreement' is defined to include both the types of agreements while 'reference' is not defined at all except to mean that it is a reference to arbitration.

(17) Further that in a bare arbitration agreement the consent of the parties is restricted to the fact that dispute between them would have to be decided by resort to arbitration. But when arbitration agreement includes also reference to arbitration, the consent of the parties would cover not only the fact that the disputes will have to be referred to arbitration but also the fact that they are referred to arbitrators for decision. It was observed that disputes may be of the two types : (a) present disputes; and (b) future disputes. When the disputes have already arisen, then there is no difficulty in understanding that the consent of the parties that the disputes should be decided by resort to arbitration would automatically include a reference of these disputes to arbitration.

(18) Shri Chawla contended that dispute regarding interest already existed between the parties. The consent of the parties having been given by letter of ihe Union, Annexure 'D', and Corporation's resolution No. 207 that the dispute be decided by resort to arbitration would automatically include a reference of the dispute to arbitration. If that be so, the Lt. Governor's letter dated 20th May, 1971, after one year of the award using the words 'the proceedings taken before me' and his assertion that the words 'Arbitrator' and 'arbitration' had been loosely used at places by the parties would not have the effect of obliterating the consequence of the reference in the context of the circumstances of the case.

(19) It is well-established that for reference two conditions must be satisfied. Firstly, all the interested parties must agree to the reference. Secondly, the subject matter of the reference must be any matter in difference between the parties. (Ct. A. Ct. Machiappa Chettiar and others v. Ct. A. Ct. Subramaniam Chettiar, : [1960]2SCR209 ) A writing incorporating a valid agreement to submit differences to arbitration is requisite though it is not a condition of an effective agreement that it must be incorporated in a formal agreement executed by both the parties thereto nor it is required to be signed by them. (Union of India v. A. L. Rallia Ram, : [1964]3SCR164 ).

(20) There can be no dispute that the words used in an agreement to submit differences to arbitration must be words 'of choice and determination' to go to arbitration. The question accordingly would be whether on a consideration of the letter Annexure 'D' and resolution No. 207 coupled with the background of all the attending circumstances recapitulated in Ex. A.W.1/1 'choice and determination' of the parties to the 'reference' having been made can be spelled out.

(21) Offer of the Union in its letter dated 28th June, 1969, Annexure 'D', clearly envisages that the dispute 'will be referred' which shows no animus on the part of the parties at that particular time 'of the reference of the dispute' to the Lt. Governor despite the fact that the dispute regarding interest had arisen, Annexure 'B', dated 4th August, 1969, was a reply to the Union's above said letter in which the Corporation had intimated its resolution that the case regarding interest on the arrears of dues of the Corporation in respect of Sabzi Mandi Market 'be referred to the Lt. Governor for arbitration'. The two letters read together do not say that the dispute 'is hereby referred', but only contemplate that the dispute 'will be referred'. The two letters read together do not spell out that 'reference' was made within the ambit of section 2(E) of the Act. Even subsequent proceedings held by the Lt. Governor do not envisage that there were any arbitration proceedings as such but were at best parleys conducted between the parties with a view to explore the possibility of a settlement. It was in that background that Shri Desh Deepak invited the parties to file their claim and reply. The tenor of his letter dated 12th August, 1969, reveals that it was not an arbitration. Besides, Shri Desh Deepak in his note had categorically stated that the Lt. Governor had agreed to give his advice.

(22) Despite the fact that the dispute had arisen between the parties regarding payment of interest all that was done by the Union was to agree to refer the said dispute to the arbitration of Lt. Governor but there was no reference. The words used were 'that the dispute will be referred' and not that 'the dispute is hereby referred'. Union's letter, Annexure 'D', agreeing that dispute regarding interest 'will be referred' and the Corporation's letter, Annexure 'E', that the case regarding interest on the arrears of dues of the Corporation 'be referred to the Lt. Governor for arbitration' do not constitute 'reference' clothing the Lt. Governor with the functions of an Arbitrator. The parties never wrote to the Lt. Governor that they had constituted him Arbitrator. The parties must approach the proposed Arbitrator to ascertain if he is willing to act in the dispute as an Arbitrator. It is only when the proposed Arbitrator expresses his willingness and be clothed with authority to act as an Arbitrator that the parties authorise him to act in the dispute as an Arbitrator. Russel on Arbitration (18th Edition) at page 212 states that 'Acceptance of the office by the Arbitrator appears to be necessary to perfect his appointment'. Further, 'an appointment should not be considered effective until the person appointed has agreed expressly or tacitly to exercise the functions of the office'. This is not a ceremonial ritual only as observed in Tradox Export S.A. v. Volkswagonwerk A. G. 1970 (1) All ER 420.

(23) In the instant case the Lt. Governor far from 'agreeing expressly or tacitly to exercise the functions of the office' of an Arbitrator has categorically asserted in his letter Exhibit C.W. 1/3 that he did not act as an Arbitrator but merely advised the parties how they should settle the dispute.

(24) Shri S. C. Pandey, Secretary to the Lt. Governor, (R.W. 1) in his letter dated 25th May, 1970, Exhibit R.W. I/I had styled the alleged award Exhibit R.W. 1/2 as a note from the Lt. Governor. This letter he stated was issued under the instructions of the Lt. Governor. If Exhibit R.W. 1/2 was an award the Lt. Governor would certainly have desired Shri Pandey to State so instead of styling Exhibit R.W. 1/2 as a note from the Lt. Governor for further necessary action. The Lt. Governor in the so called award Exhibit Rw 1/2 had not stated that he awards the amount of Rupees eight lacs in favor of the Corporation but on the contrary had chosen to state that the ends of justice and equity would be served if the Union paid interest. This he h,ad styled as a suggestion and not an award. The Lt. Governor himself had said that Exhibit Rw 1/2 is not an award but is a suggestion only. Taking into consideration the high status of Shri A. N. Jha as Lt. Governor it would not be possible to ascribe a vacillating mind to him. Had he heard the dispute as an Arbitrator , made an award it is not possible that he v,'ould shy away from describing it as such and choose to say that he was making a suggestion. This position is borne out from Shri Vajpei's letter dated 29th September, 1970, Exhibit C.W. 1/1 which he states was written under instructions of the Lt. Governor to the Registrar of this Court pointing out that there was no arbitration a,nd that the parties had approached the Lt. Governor for advice which was given; that no regular proceedings were held; that it was explained to the parties that there would be no award; and that only an advice would be given. Shri Vajpei further pointed out that on receipt of notice from this Court the above position was informally explained to the Corporation and it was hoped that the present application filed by the Corporation would not be pressed.

(25) Vajpei in his letter of 19th October, 1970, Exhibit C.W. 1/2 to the address of Shri Lattu Mal Jain, Hon. Secretary of the Union pointed out that the note, Exhibit Rw 1/2, of the Lt. Governor wasnot an outcome of regular proceedings and had no legal sanctity. The Lt. Governor had advised both the parties after having been assured by them that they would abide by his advice and in view of that the advice of the Lt. Governor was merely binding on the parties. The last portion of the letter encircled in red pencil and marked as Exhibit C.W. 1/2A, Shri Vajpei stated, was in the hand of the Lt. Governor. This in my view is a clincher. The Lt. Governor in the concluding part of the letter, portion marked C.W. 1/2-A, asked Shri Lattu Mal Jain to 'see that the Union honour its commitment otherwise the Delhi Administration may have to take recourse to other steps to ensure the implementation of a gentleman's agreement'. Had the Lt. Governor, Shri Jha, held arbitration proceedings and made an award as is now sought to be claimed and urged by the Corporation he would not have written portion marked Exhibit C.W. 1/2-A in an imploring manner asking to implement a gentleman's agreement. According to the Lt. Governor he was to tender the advice and the parties had entered into a gentleman's agreement to honour the same. The above-said two letters, Shri Vajpei, stated, were written under the instructions of the Lt. Governor. That proceedings held by the Lt. Governor were conciliatory and not by way of arbirtration finds support from letter Exhibit C.W. 1/3 in which the Lt. Governor states that he did not act as an Arbitrator but merely advised the parties how they should settle the dispute and that the words 'arbitrator' and 'arbitration' had been loosely used at places by the parties. Shiri Jha belonged to the I.C.S. and had varied and rich administrative experience. It cannot be urged that he did not understand the difference between arbitration and advice that he had undertaken to tender in the dispute between the parties. In face of categorical statement made by Shri Jha it futile for the Corporation to contend that there was a reference. Shri Desh Deepak at internal page 4 of his report had stated that the parties had agreed to abide by the advice of the Lt. Governor who had directed him to hear the parties and summarise their contentions with his (Shri Desh Deepak's) comments for a hearing before the Lt. Governor. This report was within the knowledge of the petitioner. The Corporation did not demur and write to the Lt. Governor that it wanted an , from him and not his advice. This conduct of the Corporation in not protesting against the giving of advice by the Lt. Governor is a telling circumstance and unmistakably indicates that the Corporation also was of the view that no arbitration was intended. This circumstance is enough to negative their contention that the respondent did not demur that the proceedings which were described as arbitration proceedings in Desh Deepak's letter dated 12th August, 1969 and in letters Exhibits C.W. 1/4P and C.W. 1/5P were not arbitration proceedings and now that the verdict has gone against them they cannot be permitted to challenge the same on the principle of 'laying by' having willingly participated in the proceedings and taken their chance of a favorable verdict. Capital importance cannot be attached to the use of the words 'arbitrate' in Desh Deepak's letter of 12th August, 1969, or the Secretary to the Lt. Governor (S. C. Vajpei) describing the subject-matter of the letters Exhibits C.W. 1/4P and C.W. 1/5P as 'arbitration case between the Municipal Corporation of Delhi and the Fruit .and Vegetable Merchants Union Sabzimandi, Delhi' as the essential requirement of an arbitration agreement is that the parties should be ad idem in their intention to make a reference which in the instant case was lacking. In M/s. Ram Lal Jagan Nath v. The Punjab State through Collector, Hissar, and another, , a Full Bench of the Court observed that 'it seems indisputable that mere use of the terms 'arbitrator' or 'arbitration' in an agreement did not necessarily make it an agreement of arbitration', and that the Court is to give effect to the intention of the parties as evidenced by the agreement itself.

(26) The Union in its letter dated 22nd September, 1969, and its counsel in his letter dated 17th December, 1969, copied the description of the subject-matter as given in Exhibit C.W. 1/4P and Exhibit C.W. 1/5P which is not fatal to their stand that there was 'no reference' nor does it give rise to any admission of a 'reference' having been made.

(27) There are other indications in the case which belie the petitioner's stand. Shri Jha with his erudite knowledge and great experience would not have assigned the matter to his Law Secretary to hear the parties and send a summary of the parties' contentions with his comments if he was functioning as an Arbitrator as such a course is contrary to the very concept of arbitration. No proceedings were recorded by the Lt. Governor. The matter was discussed by the Lt. Governor for a short while on Monday. The roughshed manner in which proceedings were held is a telling circumstance that the parties never intended to have the matter decided in a judicial manner by arbitration. The whole tenor of Exhibit R.W. 1/2 (so-called award) is enough to repel the contention of the Corporation. The Lt. Governor in Exhibit R.W. 1/2 has made his suggestion thinking that ends of justice and equity would be served if the Union paid interest on every annual Installment withheld at the rate of 6 per cent in the spirit of section 34 Civil Procedure Code But for the great ingenuity and industry with which the learned counsel for the Corporation presented the case the proposition for which he contends is unarguable on the facts and circumstances of the case.

(28) Great emphasis was laid on the statement of Shri S. C. Vajpei that whatever instructions were given to him by the Lt. Governor must have been reflected correctly in these letters and 'whether it is correct or not is a matter of opinion' to contend that it is for the Court to determine the correct impact of the said letters which should not be taken on their face value. There is no force in this submis sion in view of my discussion above.

(29) I am unable to sustain the submission of the counsel for the petitioner that the words, 'as desired' and 'as advised' used in letter Annexure 'D' pertain to the first part of the letter while the second part of the letter unequivocally committed the Union. Case P. S. Aggarwal v. K. N. Khosla (supra) is of no assistance to the petitioner. In that case the contract notes exchanged between the parties provided that 'in the event of any claim (whether admitted or not),difference or disputes arising between the parties out of those transactions the matter shall be referred to arbitration in Delhi as provided in the Rules, Bye-laws and Regulations of Delhi Stock Exchange Association Lt. Delhi. The question that arose for consideration was whether a fresh consent had again to be given to the reference after the disputes had actually arisen In that connection it was observed that when both the parties had consented that the reference to arbitration should be made in a particular manner and had given their consent in advance, the actual reference to arbitration according to the procedure agreed by both the parties in the comprehensive arbitration agreement lias to be regarded as a bilateral reference inasmuch as it was based on the agreement of parties which included not only the bare arbitration agreement but also the reference of future disputes to arbitration. The agreement in the above case was held to be a bilateral agreement. In the instant case the dispute regarding the interest had actually arisen between the parties. There is no comprehensible reason as to why the parties refrained from making the reference and leave it to the skill and ingenuity of the Corporation's counsel to contend that there was a 'reference' when reading together of Annexures 'D' and 'E' does not support him. If the dispute had not arisen it is only then that the words 'will be referred' would be a proper connotation to describe the prevailing position between the parties but when the dispute had actually arisen the phraseology used should have been 'are hereby referred'.

(30) There is another reason for negativing the petitioner's contention. The reference to arbitration by the Corporation had to be in the terms of the Municipal Corporation Act as provided under sections 201 to 203 thereof. Sub-section (2) of section 203 con- templates that no contract which is not made in accordance with the provisions of the Act and the bye-laws made there under shall be I binding on the Corporation.

(31) In the instant case the provisions of the Execution of Contracts Bye-Laws, 1958, had not been complied with. That being so, it cannot be urged that resolution No. 207 amounted to .a, contract.

(32) On behalf of the Corporation it was contended that section 476(1)(h) of the Corporation Act empowers the Commissioner to institute or prosecute any suit or other legal proceedings. The arbitration was covered by the term 'other legal proceedings'. The Commissioner was, thereforee, fully competent to accept the offer of the Union made in its letter Annexure 'D' and could institute and prosecute the legal proceedings by way of arbitration before the Lt. Governor.

(33) Section 2(a) of the Act, it was submitted, does not require compliance with section 203 of the Corporation Act. Even if section 476 of the Corporation Act was not there the requirement of section 2(a) of the Act only had to be complied with. Power to make the reference was sought to be found in clause (K) of section 42 of the Corporation Act. It was urged that the maintenance of municipal market being an obligatory function it was competent to the Corporation by resolution No. 207 accepting the offer of the Union to refer the dispute regarding interest to arbitration.

(34) It is not possible to sustain the contention. The power envisaged by section 476(1) is a power conferred upon the Commissioner to institute legal proceedings and obtain legal advice but is not a power to enter into contracts on behalf of the Corporation. A contract required to be executed in pursuance of a statute has to conform to the requirements of the statute. (See Union of India v. A. L. Rallia Ram (supra) and M/s. Hanuman Oil Mills Bombay and others v. Union of India, 1973 Plr (Delhi) 1.

(35) In Dr. H. S. Rikhy and others v. The N.D.M.C. : [1962]3SCR604 , it was observed at page 560 that where the statute made it obligatory that there should be a contract under seal, the absence of such a contract could not be cured by mere receipt of rent.

(36) It was next contended on behalf of the Corporation that the objection that agreement of reference had not been entered under the Corporation Act was not raised in the grounds. It was not open to the Union now to contend that the reference made was not in consonance with the provisions of the Corporation Act. The Union could have very well objected before the Lt. Governor that he had no jurisdiction to arbitrate in the matter, the reference to him having not been made in compliance with the provisions of Execution of Contracts Bye-laws, 1958. Not a whisper was raised before the Lt. Governor challenging his jurisdiction to arbitrate. The Union cannot be permitted to set up this plea at this late stage on the principle of laying by, the Union having slept over the matter during the proceedings. Now that the award has gone against them they cannot contend that the reference made was not proper. In the instant case an authority higher than the Commissioner, namely, the Corporation itself had accepted the offer of the Union to refer by its resolution No. 207 and by the said resolution agreement to refer came into being. The arbitration proceedings as envisaged by the Arbitration Act, goes the argument, were the proceedings de hors the Corporation Act. As such strict compliance with the Corporation Act was not required. Contracts that are required to be executed in accordance with Execution of Contracts Bye-Laws, 1958, it was submitted were contracts as envisaged in Bye-Law 3(1)(b) which specifically refers to contract for the execution of any work or supply of a,ny material or goods. Only such contracts, it was contended, shall be in writing. It was urged that at best the omission to execute a contract of reference in accordance with the Execution of Contracts Bye-Laws 1958 was a procedural defect amounting to irregularity which could be waived and which in fact had been waived by the Union by their participation in the proceedings without raising an objection to the validity of reference.

(37) There is no force in this contention. It having been settled on high authority that when a statute makes it obligatory that there should be contract under seal, the contract has to conform to the requirements of the statute. The failure of the respondents not to raise this question as one of the grounds of their attack would not be fatal as it is a legal objection and can be permitted to be raised even subsequently.

(38) Case Assadultah Makhdoomi and ohers v. Lassa Baba and others, A.I.R. 1966 J&K; 1 is consequently of no assistance to the petitioner while cases Narpat Raj v, Babu Lal and others, and G. L. Kapur v. Ramesh Chand Nijhawan, : AIR1973Delhi129 , have no bearing on the point.

(39) Issue No. 1 is accordingly decided against the Corporation. issue Nos. : 2 to 6 :

(40) In view of my discussion on issue No. 1 these issues are decided in favor of the respondent and against the petitioner. Issue No. 7:

(41) It was conceded that the award was liable to be stamped. Placing strong reliance on case Hindustan Steel v. M/s. Dilip Construction Co. Ltd., A.I.R. 1969 SC 1238, it was contended that the stamp duty could be charged even at a late stage as the Stamp Act was enacted to secure revenue for the State and not to arm a litigant with a weapon of technically to meet the case of the opponent. Besides, it was contended that the award (Exhibit R.W. 1/2) having already been admitted in evidence such admission could not be called in question at any stage of the proceedings on the ground that it has not been duly stamped as held in V.E.A. Annamalai Chettiar and another v S.V.V.S. Veerappa Chettiar and others : AIR1956SC12 . The submission of the learned counsel for the Corporation is well-founded. Exi. RWI/2 it be held to be an award was required to be stamped, having been admitted in evidence as Exhibit RWI/2, exception to its having been admitted cannot be taken now. The issue is decided accordingly. Issue No. 8:

(42) Although in vie(r)w of my findings on issue No. 1 the discussion of issue No. 8 assumes academic interest only yet in fairness to the learned counsel for the parties it would be proper and in the fitness of things to note their arguments on this issue.

(43) The alleged Arbitrator (Lt. Governor) was stated to have committed legal misconduct in conducting the alleged proceedings, namely (i) that he procured the services of extraneous agency in arriving at his decision and (ii) that he gave no opportunity to the parties to lead evidence. It was contended that the Lt. Governor instead of determining the dispute by application of his mind entrusted the enquiry to Shri Desh Deepak directing him to bear the parties and submit a report of his findings. In pursuance of the said direction Shri Desh Deepak submitted his note dated 28th January, 1970 (R/2) to the Lt. Governor. A careful perusal of this note together with the alleged award given by the Lt. Governor without doubt shows that the Lt. Governor in toto had accepted the recommendation of Shri Desh Deepak except for making slight alterations here and there in the language used by Shri Desh Deepak. In the circumstances the allegation of the respondent that the Lt. Governor abdicated his function in favor of Shri Desh Deepak is irrefutable. In the circumstances it cannot be held that the work done by Shri Desh Deepak was by way of ministerial spade work in collecting the data and submitting it for the adjudication of the Lt. Governor.

(44) Cases, National Electric Supply and Trading Corporation Private Ltd v. Punjab State and another, ; and Buta v. Municipal Committe of Lahore, (1902) 29 Cal 854, are of no assistance to the petitioner. The course adopted by the Lt. Governor was certainly contrary to the well- established norms of holding arbitration proceedings and the same would amount to a legal misconduct.

(45) Before interest could be allowed on the facts and circumstances of the case recording of evidence was necessitated. Interest could be allowed a.s held by their Lordships of the Supreme Court in Thawaraas Phorumal and another v. Union of India. : [1955]2SCR48 , on the following, amongst others conditions being fulfillled, (i) there must be a debt or a sum certain; (ii) it must be payable at a certain time or otherwise; (iii) these debts or sums must be payable by virtue of some written contract at a certain time and (iv) there must have been a demand in writing staling that interest will be demanded from the date of the demand. Further, in order to invoke the rule of , equity it was necessary to establish the existence of a state of circumstance which could attract equitable jurisdiction. The contention of the Corporation that no evidence was required as the parties well knew the scope of the dispute cannot be sustained. An arbitrator performs judicial functions and he is expected to observe the fundamental rules which govern judicial proceedings. That being so, it was incumbent upon the Lt. Governor to record evidence with a view to find out whether interest was due from the Union to the Corporation and if so, on what basis. Merely because interest was demanded, which claim was strongly repudiated by the Union, by itself would not be sufficient to hold that recording of evidence was not necessitate. Evidence, in the circumstances, was required to be recorded to determine as to how interest could be claimed by the Corporation and was payable by the Union. Having not afforded an opportunity to the parties to lead evidence in support of their respective contentions would constitute a legal misconduct.

(46) The issue is accordingly held in favor of the respondent and against the petitioner-corporation. Issue NO. 9 :

(47) This is the too assumes academic interest in view of my decision of issue No. 1. The so-called award was made by the Lt. Governor on 23rd May, 1970. Limitation for filing the application under section 14 of the Act as prescribed under Article 119 of the Limitation Act, is 30 days. That period had expired by 22nd June, 1970 when the Courts were closed for long vacation. The present application was filed on 13th July, 1970, i.e., on the first opening day after the vacation. That being so, the issue is decided in favor of the petitioner and against the respondent. Issue No. 10:

(48) The Lt. Governor in his so-called award dated 23rd May, 1970, in allowing the amount of Rs. 8 lacs as interest had stated. 'This sum I would suggest the Union do pay to the Corporation within a month from to-day'. Obviously, it was a suggestion only that was made by the Lt. Governor asking the Union to pay to the Corporation the aforesaid amount within one month from the date of the suggestion. In the circumstances, it cannot be said that the Lt. Governor had given any formal decision which could be held to be his award. In Lock v. Vulliamy. 39 R.R. 577, it was observed that no precise form of words was necessary to constitute an award. It was sufficient if the language be as to show clearly that the arbitrator had come to a decision upon the points submitted to him. In case where an arbitrator had expressed a decisive opinion upon the matters submitted to him the award was good but where the arbitrator did not decide but merely suggested that one party should pay a certain amount to the other party, that would not constitute an expression of opinion that the party to whom the amount was allowed was entitled or had right to recover that amount.

(49) In the instant case it is a mere recommendation a,nd not a decisive opinion of the arbitrator. The issue is accordingly decided in favor of the respondent and against the petitioner.

(50) Before parting with this case in fairness to the learned counsel for the parties it may be noted that a good deal of argument centered round the contention whether on the facts and circumstances of the case interest could be allowed by the Arbitrator. According to the learned counsel for the respondent interest could not be allowed either in law or in equity. The contention was that there was no agreement between the parties requiring the respondent to pay interest. Equity, it was contended, was not in favor of the Corporation. The respondent it was submitted, forwarded a cheque on account of arrears of rent due in the sum of Rs. 45,417.00 which was returned by the petitioners with their letter dated 17th June, 1959. That being so, it was contended that the respondents were not required to repeatedly tender the amount of rent knowing full well that the same shall not be accepted by the Corporation; more so when the petitioner did not treat the respondent as their tenants. It was also contended that interest, if at all allowable, could be ' granted for three years preceding the date of the claim as the interest for the earlier period had become barred by time.

(51) The learned counsel for the petitioner on the contrary relying strenuously on the decision of their Lordships of the Supreme Court in Thawardass's case (supra) and U.J. (S.C.) 1970 at page 367 (Ashok Const. Co. v. U.O.I.) contended that the question of law in respect of interest having been specifically referred it was evident that the parties desired to have a decision from the Lt. Governor about that matter; rather than have a decision from the Courts. If that be so, the Court would not interfere, it was submitted, even if the Lt. Governor had decided the matter on principle of construction that the law did not countenance. It was also contended that the ownership of the market vests in the Central Government and that the Corporation was only managing it as agents in which event the question of interest in respect of the earlier years having become barred by time, did not arise.

(52) In view of my findings on the various issue above, this aspect of the matter is not required to be gone into.

(53) Another aspect on which arguments were addressed was that decision of the Lt. Governor was not given within the stipulated period of. four months and the time having not been extended by the Court under the provisions of the Act, the alleged award was invalid. It having been held that the proceedings held by the Lt. Governor were not arbitration proceedings and that he did not make an award this aspect of the matter also does not call for a decision.

(54) Because of my findings on the various issue, noted above, the objection petition (I.A. No. 1420 of 1971) is accepted and the application of the Corporation is dismissed leaving the parties to bear their respective costs.


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