Skip to content


Delhi Iron and Si Eel Co. (P) Ltd. Vs. Union of India - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 71D of 1958
Judge
Reported in4(1968)DLT15
ActsArbitration Act, 1940 - Sections 2
AppellantDelhi Iron and Si Eel Co. (P) Ltd.
RespondentUnion of India
Advocates: S.P. Aggarwal and; R.B. Nanak Chand, Advs
Cases ReferredShriram Hanutram v. Mohanlal
Excerpt:
.....the agreement - with reference to the said matter, it was questioned whether printed term of the auction sale fell within the definition of the expression 'arbitration agreement' as per section 2(a) of the arbitration act, 1940 - it was held that according to the definition the 'arbitration agreement means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or nto' - thereforee, it could be said that the printed term of the auction sale fell within the definition of the said expression - - in the absence, of any documentary proof, the oral assertion by shri dey in the end of 1957m regard to the acution heki in january, 1955, could nto firm a safe basis for the contusion that these terms were announced and the plaintiff..........section 34 of the arbitration act pleading that. according to the terms and conditions of the auction-sale, any dispute arising between the parties had to be referred to the controller of stores, northern railway, new delhi, whose decision was to be final and binding and that the dispute involved in the suit in hand arose in connection with the auction sale. stay of proceeding was prayed on this ground. the defendant expressed his willingness and readiness to do all that is necessary for arbitration. (4) the plaintiff controverter the defendant's plea, and, among toher pleas, averred that they had never agreed to any arbitration clause. three issues were framed on this application. the court below observed that agreement between the parties may be either express or implied and in.....
Judgment:

I.D. Dua, C.J.

(1) This appeal is directed against the order of a learned Subordinate Judge 1st Class, Delhi, made on 9th January, 1958. By means of the impugned order, an application by the Union of India under section 34 of the Arbitration Act was allowed and proceedings in the suit directed to be adjourned sine die. It is unfortunate that appeals of this type are nto given priority and the suit should have remained stayed for nearly 10 yearly because of the. pendency of this appeal in this Court.

(2) It appears that on 8th January, 1955, the plaintiff (appellant in this Court) purchased 569 tons of scrap dog spikes brooken from the Ghaziabad depto of the defendant which was auctioned by M/s. Mackenzie Lyall & Co., at the rate of Rs. 76.00 per ton subject to the confirmation of the price by the Iron and Steel Controller, Calcutta. A sum of Rs. 10.850.00 was deposited by the plaintiff with the auctioneers on account of 25 per cent of the purchase money. The Iron and Steel Controller, Calcutta, on a reference, fixed the price at the rate of Rs. 60.00 per ton and directed the Controller of Stores, Northern Railway, New Delhi, to receive the price at that rate. Instructions were issued by the Controller of Stores, Northern Railway, to their auctioners to recover the price at the rate of Rs. 60.00 per ton. The plaintiff accordingly deposited Rs. 23.290.00 with the Chief Cashier and Paymaster, Northern Railway, Delhi, on 11th May, 1955. The Controller of Stores, it appears, made a further demand of Rs 9,!04.00in respect of the price over and above the maximum rate of Rs 60.00 per ton as ntoiced earlier. The plaintiff was also nto delivered 188 tons of the material purchased and and for this damages were claimed to the tune of Rs 7,500/ . It was in these circumstances that the suit in the Court below was instituted by the plaintiff for the recovery of Rs. 17,956/2.00.

(3) An application was made by the defendant under section 34 of the Arbitration Act pleading that. according to the terms and conditions of the auction-sale, any dispute arising between the parties had to be referred to the Controller of Stores, Northern Railway, New Delhi, whose decision was to be final and binding and that the dispute involved in the suit in hand arose in connection with the auction sale. Stay of proceeding was prayed on this ground. The defendant expressed his willingness and readiness to do all that is necessary for arbitration.

(4) The plaintiff controverter the defendant's plea, and, among toher pleas, averred that they had never agreed to any arbitration clause. Three issues were framed on this application. The Court below observed that agreement between the parties may be either express or implied and in the case in hand, the conditions of sale were contained in a printed pamphlet marked ''A' by the Local Commissioner recording the statement of the defendant's witness Dayal Chand Dey, a representative of M/s. Mackenzie Lyall & Co. In this pamphlet, condition, No. 2 reads as under :--

'INthe event of any dispute arising in connection with sale, the decision of Controller of Stores, Northem Railway. New Delhi, will be] final and binding,'

After referring to section 5 of the Indian Contract Act and section 64(2) of the Sale of Goods Art, the Court observed that admittedlv M/s. Mackenzie Lyall and Co. had accepted the plaintiff's hid and the contract of sale completed when the bid was accepted. This auction, accrding to the Court below, was conducted subject to the conditions of sale contained in the printed Pamphlet The Court then referred In the statement of Shri Dayal Chand Dey, C. D. W. 1, who had deposed that the terms and conditions of sale Exhibit 'A' were published by them in and announced before the con mencement of the auction on 8th January, 1955. The plaintiff-company, according to this evidence, accepted these terms Clause 21 of the terms was also read out and publicly announced before commencing the auction, the plaintiff agreeing to it. Admission of this witness that no copy of these terms and conditions were sent to the plaintiff, was held by the Court to be immaterial because it felt that it was nto possible to send printed terms and conditions of sale to intending buyers, because it could nto be known as to who would bid at the auction. The statement of Rajinder Nath, P W. 1. Director and Secretary of the plaintiffcompany, was held to be interested and self-serving and, thereforee, nto as credible as that of C. D. W. I, who had also produced the document Exhibit 'A'. On these grounds the Court came to the conclusion that the sale was held subject to the terms and conditions contained in Exhibit' A' which include clause 21. The Court below also held that whichever gentleman happens to hold the office of the Controller at the time of the. reference, would act as an arbitrator under the agreement because the nomination of the arbitrator was nto by name but by virtue of the office. The contention raised that the agreement was ambiguous was, for these reasons, repelled. The contention that in Exhibit 'D.1' the reply to the plaintiff's ntoice under section 80, Code of Civil Procedure, contains an assertion that the rate of Rs' 76.00per ton was correct and was accepted by the plaintiff, who was nto entitled to any refund, and, thereforee, the arbitrator should be held to have expressed his opinion on the controversy also did nto appeal to the Court below on the ground that the Controller of Stores had been appointed as an arbitrator by virtue of his office and nto by name and that on the transfer or retirement of one Controller of Stores, his successor could take up the job. In regard to the individual Controller of Stores who is to actually arbitrate, according to the Court below, there was no allegation nto partiality or interestedness. Mere appointment by the Government could nto by itself serve as a disqualification for the individual holding the said office at the relevant point of time from acting as an arbitrator.

(5) On appeal, the learned counsel for the appellant has, at the outset challenged the conclusion of the Court below that clause 21 in Exhibit 'A' constituted a binding agreement of reference in writing to which the plaintiff had agreed. He has taken me through the relevant . . evidence on the record. According to the statement of Shri Dayal Chand Dey, who was examined on commission, the actual sale at Gaziabad was conducted by Mr. J. B. Wilks, who had left the service of M/S Mackenzi Lyall and Co. The witness was, however, with Mr. Wilks to collect the sale proceeds. The witness was, however, nto prepared to answer all the questions and the interrogatories on 15th, November, 1957 and he was directed to come prepared on the next date with the records which he had nto brought on 15th, November, 1957. This witness was next examined on 21th November, 1957 when nobody was present on behalf of the parties. The witness, after going through the record, answered the interogatories. It is desirable to reproduce buth the questions and answers which are relevant to the point: - 'Q. 3. Please see the conditions and terms of auction. .Did you publish these terms and conditions and annoucne these before commencing the auction Did the plaintiff company accept these conditions Ans.-Yes, we published the terms and condition of auctions and announced these before commencing the auction. Exhibit 'A' shows the details of materials and terms and conditions of the sale at Wagon Repair Shop, Ghaziabad held on 8th January 1955 at 2 p.m. The plaintiff company accepted similar terms and conditions at the sale at Track Depto, Ghaziabad which took place on the same day at 11 A. M. Q. 4. Did you read out clause No. 20, 21 of the conditions and terms of auction Ans.-Yes, we read out and publicly announced clause No. 21 of the said terms and conditions of auction before commencing the auctions which took place on 8th January, 1955. Q. 5. Did the plaintiff agree to it Ans. Yes. Q. 6. Please produce the bids sheet and say if the plaintiff has signed it and agreed to the terms. Ans. We have gto the bids sheet, but I have nto brought the same today. The same cannto be produced before the Commissioner unless the Commissioner ask for the same from the authority concerned. The plaintiff has nto signed the bids sheet so far as I remember.

(6) In the answers to the cross-inteirogatories, the witness denied having sent any copy of the auction ntoice containing the terms and conditions of the auction to the plaintiff, though, according to him. before the auction, the auctioneer distributes the sale catalogues containing terms and conditions of the sale among the attending buyees. The witness could nto remember any talk with any representative of the plaintiff, as inded he saw the plaintiff's representative for the first time at the auction whom he did nto know before Admittedly also, there was no writing by the plaintiff's representative agreeing to the terms and conditions of the auction, Mr. J. B. Wilks the witness has repeated. announced the terms and conditions of the auction his presence. |The witness was stated to have urgent duties elsewhere and it was interrupted on 21st November, 1957. On the next day (22nd November, 1957), the witness gave replies to the re-examination. He admitted that no one on behalf of the plaintiff had signed the, bids-sheet, adding that the procedure of the auctioneers did nto require such signatures. The plaintiffcompany's representative was, however, present at the time of the announcement of the terms of auction and in fact these terms were accepted by the said representative. My attention has next been invited to the statement of Rajinder Nath Public Witness . 1, who has controverter the defendant's allegations. The learned counsel ha.s contended that the Court below ignored the fact that C.D.W. 1 being an employee of the actioncers, was vitally interested in securing a finding that the printed terms and conditions were actually announced to the intending bidders and were accepted by the plaintiff. In the absence, of any documentary proof, the oral assertion by Shri Dey in the end of 1957m regard to the acution heki in January, 1955, could nto firm a safe basis for the contusion that these terms were announced and the plaintiff had accepted it. In cases of this type, it is argued that every responsible auctioneer is expected to make a ntoe of the steps taken by him at the time of auction, particularly when the steps relate to the announcement of the vital terms of the action. In my opinion, there is lto to be said for this view. The fact that the bids-sheet has also nto been signed by the plaintiff, tends to show the laxity on the part of the auctioneers and the casual manner in which the auction was held. It would, thereforee, seem to me to be somewhat risky to depend on the sole oral testimony of Shri Dayal Chand Dey for the conclusion that the parties had agreed to have their own private forum for the adjudication of their disputes in place of the ordinary Courts of Justice. An arbitration it must always be kept in view. in the absence of a statutory reference, rests on mutual voluntary agreement of the parties to submit their matters in difference to selected persons whose adjudication in to be accepted as a substitute f^r the Judgment of a competent Court The relationship of the parties is considered to be contractual and the matter is controlled by the law of contract. It was so observed in Messrs Ram Lal Jagan Nath v. Punjab State. The contract must, thereforee be clearly established.

(7) The matter does nto end here Exhibit P. 1 is the lawyer's ntoice ?cnt on behalf of the plaintiff to the General Manager. Northern Railway, Baroda House. New Delhi, under section 80, Code of Civil Procedure. In this ntoice, it was express stayed that in the absence of payment being made of the amount due, the Advocate had definite instructions to take the matter to the Court of law at the defendant's costs and risk To this, a reply was sent in April, 1956 by the Controller of Stores as per Exhibit D. 1, merely denying the plaintiff's claim describing it to be untenable and adding that if the threatened suit was filed, the same would be contested. No reference in this document was made to any arbitration agreement and quite obviously, on this premise, there could nto be any expression of willingness on the part of the defendant to abide by any such agreement. If there was a term of contract binding on the parties, providing for reference to an arbitrator, one would have reasonably expected mention of it in the reply Exhibit D. 1. R B.Nanak Chand, has with his usual ingenuity, submitted that this reply was sent by the Controller of Stores who was nto authorised to speak on behalf of the Railway Authorities which could only be authoritatively represented by the General Manager. what the learned counsel says is technically and in the abstract act quite correct, but it must nto be forgtoten that the ntoice Exhibit P 1 was addressed to the General Manager, who presumably forwarded it to the Controller of Stores, the officer directly connected with the controversy and, incidentally, who was to be the arbitrator, according to the defendant's case. Exhibit D.1 it is interesting to ntoe, expressly refers to the ntoice under section 80, Civil Procedure Code, and purports to be a reply to the registered letter dated 24th March 1956 and is actually addressed to the Advocate who had sent the ntoice. What is more, it was produced on behalf of the defendant in proof of his case and the ntoe thereon shows that it was drafted by the law-officer of the department and issued from Head Quarters office. It is futile for the defendant respondant in these circumstances to disown this reply and I am somewhat surprised that the Government departments should put forth such pleas. I am, thereforee, inclined, in disagreement with the conclusion of the Court below, to hold that there is no sufficiently credible material on the record to establish that clause 2 i reproduced above was actually announced before the commencement of the auction as one of the binding terms of the auction sale on the successful bidders.

(8) The power enunciated by section .34 of the Arbitration Act has been described by the Supreme Court in Michael Golodetz v. Serajuddin & Co., to be inherent in the Court and the Court insists, unless sufficient reason to the contrary is made out, upon compelling the parties to abide by the entire bargain, for, nto to do so would be to allow a party to the contract to approbate and reprobate. Of course, it is true as observed by the Supreme Court in The Uttar Pradesh Co operative Fedaration Ltd v. M/s Sunder Brtohers., Delhi, that strict principles of sanctity of contract is subject to the discretion of the Court under section 34 of the Indian Arbitration Act, for, there must be read in every such agreement an implied term or condition that it would be enforceable only if the Court, having due regard to the toher surrounding circumstances, thinks fit in its discretion to enforce it.

(9) The question whether such printed terms fall within the definition of the expression 'arbitration agreement' as contained in section 2(a) of the Arbitration Act has now to be considered. According to this definition, 'arbitration agreement' means a written agreement lo submit present or future differences to arbitration, whether an arbitration is named therein or nto. The appellant submits that there must be a contract before the agreement can answer this description and the contract, according to him, must be in writing. The counsel says that if nobody's signatures are borne on the printed terms, then it cannto con- form to this definition. Shri Aggarwal has on behalf of the appellant drawn my attention to a decision of Kania J. (as he then was) in Shriram Hanutram v. Mohanlal & Co., for the submission that merely sending contract ntoes by a party to antoher without any confirmation ntoe signed by the toher party, does nto amount to a submission in writing required by the Arbitration Act. No toher decision has been brough to my ntoice, according to which, terms like the present, unless agreement to by buth the parties, can be considered to be covered by the arbitration agreement as defined in section 2(a . R. B. Nanak Chandn placed reliance on a decision of the Supreme Court in Jugal Kishore . Goolbai', and has submitted that it is fettled law that to constitute : arbitration agreement in writing, it is nto necessary that it should signed by the parties and that it is sufficient if the terms are reduced to writing and the agreement of the parties thereto is established. This decision does nto run counter to the view expressed in the Bombay decision On the toher hand, it supports whit I have already observed that there must be an agreement between the parties and that agreement must be reduced to writing, though the writing may nto be signed by buth the parties. In the absence of the parties being agreeable to the arbitration clause, they cannto be bound by it, for there would then be no contract. The object seems to me to be obvious. The parties can, it they so choose, in a given case substitute a forum of their own choice in place of a public forum for adjudicating their disputes, but in order to avoid frivolous pleas of such agreements, the law insists that such agreements must be reduced to writing apparently for the purpose of facilitating their proof, even though they have nto signed it. In the present case, I am far from satisfied on the material on the record that the plaintiff was a party to the alleged arbitration agreement, with the result that the order of the Court below must, on this ground, be reversed.

(10) In view of the conclusion that I have just arrived at. do nto think it is necessary to express any opinion whether the arbitration agreement, if held proved, should be invalidated because of the expression of opinion by the Controller of Stores or because of his being vitally interested in the controversy. I would also refrain from saying anything on the plea whether merely because the individual Controller expressing the opinion having retired, his successor could be considered an impartial arbitrator for the purposes of the referance. I would further decline to express any opinion if the terminology of claase 21 does actuary constitute an arbitration agreement. On these points, though the counsel have addressed some arguments, bat they have nto been sufficiently elaborated or detailed to enable me to express a considered opinion thereon. Had these questions required adjudication for the disposal of this appeal, I would perhaps have referred the matter In a larger Bench because against my decision, it is agreed at the bar, no Letters Patent Appeal would lie. On the question of appraisal of evidence, however, I am definitely of the opinion that on the present record it has nto been shown that the parties were in regard to the arbitration agreement. I am of course nto unmindful of the fact that the Court of Appeal is nto expected, normally, to interfare with the exarcise of discretion by the Court below under section 34 of the Indian Arbitration Act But in the present case, I am disagreeing with that Court of the question of the existence of an agreement to reference binding on the parties.

(11) This appeal, thereforee, succeeds and allowing the same, I sat aside the impugned order and send the case back to the Court below for trial in accordance with law and in the light of the observations made above.

(12) My decision would merely mean that the case would now be decided by a competent civil Court. This would, in my view mean at least from now onwards a speedy trial. Reference to arbitration would perhaps have entailed much longer delay because after the award, the contioversy would have started almost afresh in finding fault with the award by the aggrieved party. In the case of The Uttar Pradesh Co-operative Federation Ltd., the Supreme Court considered it proper to decline stay of proceedings in the suit when the same had been pending without any progress for a lung period. This is what the Court said :- 'There is also antoher reason why there should nto be a stay of the proceedings under s. 34 of the Indian Arbitration Act. The suit was filed in 1954 and, though 12 years have lapsed, ntohing has been done in the suit and it will nto be in the interest of speedy disposal of the suit between the parties if the proceedings in the suit are further stayed and the parties are referred to arbitration.' Parties are directed to appear in the Court below on 18th December, 1967 when a short date would be given for further proceedings, The couut must give this suit priority and try to give as short adjounments as possible so that the controversy may finish within six months. The appellant is entitled to costs in this Court.


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