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Survir Enterprises (P.) Ltd. Vs. Maharashtra State Co-operative Marketing Federation Ltd. and anr. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberSuit No. 550A of 1983
Judge
Reported inILR1988Delhi193
ActsArbitration Act, 1940 - Sections 20
AppellantSurvir Enterprises (P.) Ltd.
RespondentMaharashtra State Co-operative Marketing Federation Ltd. and anr.
Advocates: G.A. Shah,; B.V. Desai,; M.N. Phadke and;
Cases Referred(Shalagram Fhajharia v. National Coy. Ltd.
Excerpt:
it was adjudged under section 20 read with indian contract, 1872, that in a contract between the buyer and the nominee of association, only the nominee would have the locus standi to bring the petition - so, where there would a distinction between the agent and the independent contractor, the facts constituting fraud and misrepresentation would have nothing to do with the contents of the agreement irrespective of the ones surrounding the said agreementin the instant case, a claim was made on account of non-performance of contract - the contract was entered into on behalf of an agent who acted as a principal - it was held that the petition for reference of the claim to arbitration was maintainable only on behalf of the agent. - - petitioner's representative surinder gupta also spoke to.....jagdish chandra, j.(1) by means of this petition under section 20 of the arbitration act, 1940 (hereinafter to be referred to as the act) .the petitioner m/s. survir enterprises (p) limited having its registered office at chandigarh and head office at osian building. nehru place, new delhi wants the respondent maharashtra state co-operative marketing federation ltd., co-operative marketing federation ltd., and another bombay and state of maharastra to file the arbitration agreement in court and for the direction of the court to refer the disputes and differences between the parties to arbitration.(2) an agreement dated 19-1-1983 was entered into between the petitioner and respondent no. 1 maharashtra state co-operative marketing federation ltd. whereby the former agreed to sell to the.....
Judgment:

Jagdish Chandra, J.

(1) By means of this petition under Section 20 of the Arbitration Act, 1940 (hereinafter to be referred to as the Act) .the petitioner M/s. Survir Enterprises (P) Limited having its registered office at Chandigarh and Head Office at Osian Building. Nehru Place, New Delhi wants the respondent Maharashtra State Co-operative Marketing Federation Ltd., Co-operative Marketing Federation Ltd., and another Bombay and State of Maharastra to file the arbitration agreement in Court and for the direction of the Court to refer the disputes and differences between the parties to arbitration.

(2) An agreement dated 19-1-1983 was entered into between the petitioner and respondent No. 1 Maharashtra State Co-operative Marketing Federation Ltd. whereby the former agreed to sell to the latter 50,000 M.T. of Parimal raw rice on terms and conditions set out therein. This transaction was entered into by respondent no. 1 as agent of' and at the direction of and with the specific approval of respondent No. 2 State of Maharashtra. This agreement was entered into by the petitioner as the exclusive nominee of the Punjab Rice Millers Association (in short PRMA), Chandigarh.

(3) In or about the middle of February 1983 the Ministry of Agriculture, Government of India granted permission to the State of Maharashtra to purchase 40,000 M.T. of levy free lice. On coming to know of this permission having been granted by the Government of India the petitioner, by a telegram dated 18-2-1983 offered to furnish performance guarantee of demand draft of Rs. 2 lacs as per the terms and conditions of the aforesaid agreement and requested the respondent to intimate the time and place where the security deposit was to be furnished. Petitioner's Representative Surinder Gupta also spoke to the Secretary, Department of Food and Civil Supplies, Government of Maharashtra and other officers of the respondent and urged them to expedite the necessary steps in the matter of acceptance of security deposit and opening of the letter of credit as contemplated in the agreement but it is alleged that all of them gave evasive replies and refused to make any fir r commitment in respect of the aforesaid matters and even the request in writing dated 2-3-1983 in that regard remained unsatisfied and from all that, it is asserted, it appears that the respondents are unwilling and reluctant to fulfilll their part of the contract and are planning to purchase the levy free rice from other sources by utilising the entire sanctioned permission granted by the Government of India. In view of the huge loss to be suffered by the petitioner in case the respondents failed to comply with the agreement in question, the petitioner called upon the respondents vide letter dated 21-3-1983 to refer the matter to arbitration in terms of Clause 12 of the aforesaid agreement which . reads as follows :-

'CLAUSE12.-Any dispute other than under Clause 6 arising under this agreement or in relation thereof including the interpretation of this Agreement either during the continuance thereof or thereafter shall be referred to the sole arbitrator or to two joint arbitrators duly approved by both the Federation and the Supplier for Arbitration in writing within 3 months of the expiry of the Agreement and every such reference shall be governed by the provisions of the Arbitration Act, 1940 or any modification thereof for the time being in force. The decision of such arbitrator/s shall be final and binding on the parties to this agreement.'

(4) The respondents failed to reply to the said letter nor they took any steps to refer the disputes to arbitration and hence this petition.

(5) In the written statement the respondents have challenged the territorial jurisdiction of Delhi High Court to entertain and try this petition by asserting to the contrary that Bombay High Court was the court competent to entertain and try the same inasmuch as the cause of auction, if any. arose only in Maharashtr. The locus standi of the petitioner-company was also assailed alleging that the agreement in question dated 19-1-1983 had been entered into by the petitioner in its capacity as the exclusive nominee of Prma, Chandigarh and that nomination came to end on 31-1-1983 but which fact was never disclosed by the petitioner to the respondents. The agreement in question dated 19-1-198:3 which also contains the arbitration clause, is asserted as vitiated by fraud and misrepresentation on the part of the petitioner. The facts leading to the allegations of fraud and misrepresentation on the part of the petitioner and as stated in the written statement, in nut-shell are that after entering into the agreement in question it was discovered that the petitioner was not the sole nominee of Prma, Chandigarh and further that there was not one rice sellers association in Punjab but two such associations one at Chandigarh and the other at Ferozepur each purporting to be the only recognised association to the exclusion of the other and the respondents were alarmed to receive correspondence from both the associations disclaiming each other. It was also found that there were serious rifts or splits in the association at Chandigarh and the letter received from Prma, Chandigarh established that there was something basically wrong with the petitioner with whom the agreement was entered into. A letter dated 21-1-1983 was received by the respondents from Co-operative Marketing Federation Ltd. and another Shri Shanti Parkash as President of Prma, Ferozepur City wherein he stated as follows :- 'We are surprised that some other Association from Punjab has tried to represent their case in the similar manner and the fashion of our name (Punjab Rice Millers Association) to secure orders. Under such circumstances would like to draw your attention that our Association has nothing to do with that name and the Association.' Shanti Parkash also asserted that theirs was the only recognised association of which he was a President and he was not connected in any manner with Prma having its head office at Chandigarh. Respondent No. I also received a telegram from Shanti Parkash stating, inter alia, that the use of his name as Chairman of the Prma by Julka was fraud and that the representations made by Julka were also fraudulent and Shanti Parkash was the elected President of the PRMA.

(6) A certificate dated 2-11-1932 had been presented by the petitioner to respondent no. 1 in support of its assertion to be the exclusive nominee of Prma, Chandigarh but there is a letter dated 14-12-1982 from the petitioner addressed to the Prma, Chandigarh showing that the terms and conditions governing appointment of petitioner as exclusive nominee by Prma, Chandigarh were accepted by Brij Mohan Julka on behalf of the said Association on 18-12-1982 only, i.e. nearly 1 1/2 months after the date of the aforesaid certificate dated 2-11-1982 meaning thereby that on 2-11-1982 the petitioner was not the nominee by Prma, Chandigarh though a certificate to that effect had been issued by Brij Mohan Julka. It is alleged that respondent no. 1 Federation had entered into the aforesaid agreement with the petitioner on the aforesaid representation under the bona fide belief that the petitioner was the sole nominee of the rice millers association.

(7) Respondent no. 1 received a telegram dated 29-1-83 and a letter dated 3-2-1983 from Brij Mohan Julka on behalf of Prma, Chandigarh wherein he confirmed his telegram on 1st February 1983 intimating the withdrawal of nomination given by it to the petitioner for the supply of rice to respondent no. 1 and it was also stated in the said letter that his Association would like to deal with the Federation respondent no. I directly without any middle man as far as supply of rice was concerned. Another letter dated 12-4-1983 was received from Prma, Chandigarh sent by Rajinder Garg, Senior vice-President of the said Association saying that nomination of the petitioner did not subsist beyond 31-1-1983 and that Prma, Chandigarh was free to deal with the Government of Maharashtra directly for the supply of rice. By the time the telegraphic sanction was received from the Government of' India by the State Government of Maharashtra on 4-2-83, granting the permission for the purchase of 40,000 MT. on levy free open market rice from the State of Punjab and Haryana, the nomination of the petitioner as the sole nominee of Prma was no longer in existence.

(8) On account of the discovery of the aforesaid facts the respondents alleged that genuine doubts arose with regard to the capability and bona fides of the petitioner. Notwithstanding a subsequent telegram of 8-2-1983 from Shri Julka saying that the withdrawal of nomination of the petitioner was based on wrong and misleading information given by some undesirable elements the respondents were driven to inevitable conclusion that all was not well with the Association and that the above actions of conferment and withdrawal of nomination were mala fide and the result of unholy alliance. So, it is alleged that as the contract dated 19-1-1983 is itself void the arbitration clause which is integral part thereof, also becomes void and cannot be enforced. The remaining pleadings in the written statement are in the shape of disputes under the contract and are not relevant for the purpose of deciding this petition. The respondents pray for the dismissal of the petition with costs.

(9) From the pleadings of the parties, the following issues were framed on 15-3-1984 :- 1. Whether the petitioner has a locus standi to file the present suit 2. Whether this Court has territorial jurisdiction to entertain the present suit 3. Whether the agreement dated 19-1-1983 is vitiated by fraud and misrepresentation as alleged in the written statement 4. Whether the disputes set out in the petition should be referred to arbitration in terms of Clause 12 of that agreement The petition under Section 20 of the Act has been filed by the petitioner M/s. Survir Enterprises (P) Ltd., a Company registered under the Indian Companies Act, 1956, through its director Surinder Gupta duly authorised to institute the same. In the agreement in question dated 19-1-1983 entered into between the parties the petitioner has been mentioned in its opening para as the exclusive nominee of the PRMA. The contention raised by the respondents is that the petitioner being only the nominee of Prma, Chandigarh has no locus standi of its own to file this petition. This petition could be filed on the basis of the arbitration agreement contained in Clause 12 of the agreement in question dated 19-1-1983 as also on the basis of the agreement in question and the perusal of the latter shows that the privity of contract was only between the parties and not with the Prma, Chandigarh and this intention is fully clarified and made out from the various terms of this agreement wherein the petitioner has been described as 'SUPPLIER' and it is the petitioner which in its capacity as supplier is enjoined with the duties of dealing directly with the respondents for the purpose of the supply of rice agreed upon to the respondents and for receiving the price thereof on presentation of necessary documents and is also to deposit Rs. 2 lacs with the respondents as performance guarantee for the due performance of the terms and conditions of this agreement and whereupon the irrevocable letter of credit for payment of the price of the rice supplied is also to be opened by the respondents in the bank in favor of the petitioner. So, even though the petitioner happens to be only the exclusive nominee Prma, Chandigarh for executing such contracts it is the petitioner alone and not the Association with which the privity of contract has come into existence. Even under the arbitration clause contained in this agreement there is mention only of the petitioner as 'Supplier' and the Federation respondent no. 1 who are to appointthe arbitrator/arbitrators for the purpose of referring their disputes for adjudication and Association does not figure there. Under these circumstances, the contracting party being the petitioner and not the Association, it is the petitioner alone who has got locus standi to bring this petition and this issue is decided accordingly in favor of the petitioner.

(10) Issue NO. 2It is urged by the learned counsel for the petitioner that in view of Section 41(a) of the Act the provisions of the Code of Civil Procedure have been made applicable to all the proceedings before the Court under the Act as a result of which the matter of jurisdiction is also necessarily governed by Section 20 of the Code, of Civil Procedure which in its sub-section (c) bestows jurisdiction upon a court within the local limits of whose jurisdiction the cause of action, whole or in part, arises, and as a part of the cause of action, that is the price of the rice to be supplied by the petitioner to the respondents was, under the agreement in question, payable at Delhi, had arisen at Delhi, this Court at Delhi has jurisdiction to entertain and try this case. Sec. 41(a) of the Act reads as follows :-

'S. 41(A): the provisions of the Code of Civil Procedure, 1908, shall apply to all proceedings before the Court and to all appeals, under this Act : and (b).....................'.

Section 20(c) of the Code of Civil Procedure reads thus :- 'Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction- (a) ........................ (b) ............................. (c) the cause of action, wholly or in part, arises.' The authority reported as Hakam Singh v. M/s Gammon (India) Ltd. : [1971]3SCR314 after setting out the E provisions of law contained in Section 41(a) of the Act, proceeded to hold as follows :-

'THE Court of Civil Procedure in its entirety applies to proceedings under the Arbitration Act. The jurisdiction of the Courts under the Arbitration Act to entertain a proceeding for filing an award is accordingly governed by the provisions of the Code of Civil Procedure............'

(11) The law is well settled on the point that a part of the cause of action arises at the place where the price of goods to be supplied is payable. S. P. Consolidated Engineering Co. (P) Ltd. v. Union of India and another : AIR1966Cal259 dealt with a case where a petition under Section 20 of the Act for filing the arbitration agreement had been made. The question regarding the territorial jurisdiction of the court in that case fell for determination. The agreement between the parties in that case. did not specify, either expressly or by necessary implication, the place where payment for the work done was to be made. It was held that the general rule that the debtor must find the creditor would apply, and the payment would be liable to be made at the place where the head office of the party concerned was situated and that being so, the petition under Section 20 of the Act could be filed in the court having jurisdiction at such place. If a place is specified in the contract itself or the place can be inferred by necessary implication from the contract, there is no necessity of the application of the aforesaid English Common Law Rule that a debtor must seek the creditor' as the court within whose territorial limits the place where the price is payable, shall have jurisdiction. In the case in hand the agreement in question dated 19-1-1983 shows that an in evocable letter of credit was to be opened by the Federation respondent no. 1 in favor of the petitioner-supplier for 100 per cent of the cost of rice at the rate of Rs. 4,334.00 per qntl. net payable at site at Delhi to be advised to the petitioner through Stale Bank of India, Nehru Place branch. New Delhi. It, thus, unmistakably shows that the price of the rice to be sold by the petitioner to the respondents was payable at Delhi and the contention advanced for the respondents that no jurisdiction would be conferred on this Court to entertain the petition under Section 20 of the Act merely because the agreement in question provides for the opening of the letter of credit in favor of the petitioner payable at New Delhi, because in fact the letter of credit had not been actually opened as the petitioner had not deposited Rs. 2 lacs as per the contract which was. the condition precedent for the opening of the letter of credit by the respondents in favor of the petitioner, is not tenable at law because the criterian for conferring jurisdiction is not the actual payment of the price at a particular place but the liability of the price to be paid at a particular place. In Singhal Transport v. Jesaram Jamumal it was held that 'A' being one of the places where money due could be paid, cause of action arose at 'A' also and hence the suit was triable by the competent court at 'A' also. The contention of the learned counsel for the respondents that under Section 20 of the Act such a petition could lie to a court having jurisdiction in the matter to which the agreement relates and that such a court could only be the Bombay High Court as the agreement in question dated 19-1-1983 was made and signed at Bombay, and that the question of jurisdiction did not depend upon the arising of a part of the cause of action at a particular place in view of Section 20(c) of the Code of Civil Procedure, appears to have been negatived in the Supreme Court authority in Hakim Singh's case (supra). Under the circumstances, it is held that this Court has ^ territorial jurisdiction to entertain the petition under Section 20 of the Act and this issue is found in favor of the petitioner. Issue No. 3

(12) The learned counsel for the petitioner contended that the subject matter of this issue is a dispute between the parties which cannot be decided by the Court but can be decided only by the arbitrator when its is referred to him. But this contention is not correct inasmuch as the facts constituting fraud and misrepresentation have nothing to do with the body contents of the agreement in question dated 19-1-1983 but rather instead the ones surrounding the said agreement and no recourse is to be had to the contents thereof. It was held in Ruby General Insurance Co. Ltd. v. Pearey La] Kumar and Another : [1952]1SCR501 (at page 507) (4) as follows :-

'THE test is whether recourse to the contract by which the parties are bound is necessary for the purpose of determining the matter in dispute between them. If such recourse to the contract is necessary, then the matter must come within the scope of the arbitrator's jurisdiction.....'

To the same effect is also the dictum in Union of India v. Salween Timber and Construction Co., (India) and others : [1969]2SCR224 .

(13) A number of documents have been referred to in the written statement by the respondents which according to them spell out fraud and misrepresentation on the part of the petitioner in regard to the agreement in question. It is necessary to refer to those documents and some others in order to determine the question of fraud and misrepresentation on the part of the petitioner. Annexure 'A' dated 2-11-1982 is the document whereby the petitioner was appointed by Prma, Chandigarh as its exclusive nominee to enter into contracts under its name (petitioner's name) with various State Governments for supply of rice and that such contract shall be executed by the petitioner on the association's behalf. Annexure 'D' dated 14-12-1982 is the letter from the petitioner to the President of Prma, Chandigarh which was the final letter containing terms and conditions of the contract of exclusive nomination by Prma, Chandigarh in favor of the petitioner and which proposal was accepted by Brij Mohan Julka, President of Prma, Chandigarh who further certified there under that he had the necessary authorisation to put his signatures on this document signifying acceptance to his aforesaid association. It was contended for the respondents that whereas Annexure 'A' appointing the petitioner as the exclusive nominee of Prma, Chandigarh had been executed earlier on 2-11-1982, the proposal in that regard was accepted by the said association subsequently only on 18-12-1982 as the letter containing the proposal in that regard was sent on 14-12-1982. This contention has hardly any meaning because in any case the appointment of the petitioner has exclusive nominee by this association had taken place prior to the execution of the agreement in question dated 19-1-1983 entered into between the parties to the present proceedings and at that time the petitioner was the exclusive nominee of this association for entering into the aforesaid contract between the parties. The emphasis of the respondents is then on Annexure 'E' dated 3-2-1983 which is a letter from Brij Mohan Julka, President of the said association addressed to respondent no. 1 wherein it was mentioned as follows :- 'We confirm having sent a telegram on 1-2-1983 withdrawing our nomination given to M/s. Survin Enterprises (P) Ltd. for the supply of Rice to your Government.' Our Association would like to deal with your department directly without any middleman as for supply of Rice is concerned.......'.

(14) But this letter was sent to respondent no. I only after the agreement in question dated 19-1-1983 had been entered into between the petitioner and the respondents. This letter was, however, superseded by an express telegram Annexure 'N' dt. 7-2-83 by Brij Mohan Julka, President of the Association to the respondents as also to the petitioner (confirmation by post sent on the same day) wherein it was stated that the documents withdrawing the nomination of the petitioner had been wrongly submitted by them and that action had been taken in haste and was based on wrong and misleading information given to them by certain undesirable elements. It was further stated therein that on behalf of the said Association the nomination issued by the said Association in favor of the petitioner was authenticated and valid and further that the contract in question dated 19-1-1983 signed by the petitioner as their nominee for the supply of rice would be duly honoured and exec uted by this Association in collaboration with the petitioner nominee. In this telegram it was further made clear that this communication may be treated as final and binding on the Association and the inconvenience caused to the respondents was deeply regretted. This letter bears the signatures of B. M. Julka, President, Rajender Garg, Senior Vice President and Partap Adya, General Secretary and also by Chhaju Ram, Vice Chairman of Prma, Chandigarh.

(15) Annexure 'F' dated 12-4-1983 is yet another letter so far as the agreements for supply of rice to Maharashtra State before 31-1-1983 were concerned and so far as the agreement in question dated 19-1-1983 was concerned the same was saved by this letter from the withdraw of the nomination of the petitioner by this Association. The relevant lines from this letter are reproduced below :-

'We write to confirm that we had appointed M/s. Survir Enterprises (P) Ltd., New Delhi as our nominee vide agreement dated 14-12-82 and the nomination was valid up to 31-1-1983 (copy of the agreement enclosed). In case M/s. Survir Enterprises (P) Ltd., New Delhi had entered into any agreement for supply of rice to Maharashtra State before 31-1-83, the same is still binding upon the Association......'

(16) Thus, the withdrawal of nomination did not affect the agreement in question dated 19-1-1983. This letter Annexure 'F' was signed by Rajender Garg, Senior Vice President for the President of this Association.

(17) From the side of the respondents reference was also made to a letter dated 21-1-1983 (Annexure 'B') and a telegram (Annexure 'C') both from Shri Shanti Parkash. In the letter Annexure 'B' Shri Shanti Parkash alleging himself to be the President of another Prma, Ferozepur City wrote as follows to the Government of Maharashtra :-

' ....We are surprised that some other Association from Punjab has tried to represent their case in the similar manner and the fashion of our name (Punjab Rice Millers Association) to secure orders. Under such circumstances I would like to draw your attention that our Association has nothing to do with that name and the Association......'

(18) In the telegram Annexure 'C' which is undated Shanti Parkash stated that the use of his name as Chairman of the Punjab Rice Millers Association by Julka was fraud and that the representation made by Julka was also fraud as Shanti Parkash was elected President of the PRMA. Annexure 'L' dated 21-1-1983 is a telegram given by Brij Mohan Julka to Mr. B. K. Halve, Secretary Food and Supplies Deptt. of the State of Maharashtra wherein the certificate-cum-letter dated 2-11-1982 issued under the signatures of Brij Mohan Julka President of Prma, Chandigarh was confirmed stating further that they had appointed the petitioner as their exclusive nominee to enter into contracts under their name on their behalf for supply of rice required by Maharashtra and other State Governments in India. This telegram further mentions that Shanti Parkash is not the spokesman of the Punjab Rice Millers Association and has no powers and locus standi to say, decide, raise or represent any issues in regard to the affairs of the said Association. But this confusion stood removed in the letter annexure 'I' dated 9-3-1983 from Mrs. G. Chahal, I.A.S., Director Food and Supplies and Joint Secretary to Government Punjab, Chandigarh addressed to Shri B. K. Halve in which it was stated categorically that Shanti Parkash was previously President of the Prma, but in the recent election B. M. Julka was elected President of the said Association.

(19) Annexure 'K' evidencing the minutes of the meeting dated 21-3-1983 between the representatives of the respondents on the one hand and Surinder Gupta, Director of the petitioner on the other is a very important document because the perusal thereof shows that in the meeting what was enquired by the respondents from Surinder Gupta, Director of the petitioner was if the petitioner could possibly reduce the price of the Parimal rice to be supplied whereupon Surinder Gupta told that he had already signed the contract and that was firm and there was absolutely no question of reconsidering the price that had already been contracted for. This document further shows that Surinder Gupta offered a deposit of Rs. 2 lacs by demand draft as performance guarantee to the respondents which was not accepted by the respondents. There was no question discussed in that meeting regarding any misrepresentation or fraud on the part of the petitioner as now being alleged in this case by the respondents and the omission thereof in that meeting which was confined to the question of the reduction in price of rice goes to show that the respondents were clear in their mind as to with whom they were contracting for the supply of rice and that it was the petitioner who was the real contracting party for the supply of the rice in question to the respondents and, thus, the question of any fraud or misrepresentation affecting the will of the respondents, falls to the ground.

(20) The contention urged on behalf of the respondents is that there was fraud or misrepresentation on the part of the petitioner by entering into the contract in question dated 19-1-1983 with the respondents, even though as exclusive nominee of Prma, Chandigarh, it had not been entered into on behalf of the Association, even though as per understanding between the petitioner on the one hand and the said Association on the other, the petitioner could enter into the contract in question not only as exclusive nominee thereof but it was also essential to specify in the contract that it was being entered into by the petitioner on behalf of the said Association. What is sought to be conveyed through this contention is that the plaintiff had no right to enter into the contract in question with the respondents without expressly staling that it was so doing on behalf of the said Association as its agent, as a matter of fact, the petitioner had no right to enter into a direct contract with the respondents. Attention of the Court was drawn in this regard to annexure 'A' dated 2-11-1982 the certificate issued by Prma in favor of the petitioner which reads as follows :-

'WE have appointed M/s. Survir Enterprises Delhi as our exclusive nominees to enter into contract under their name on our behalf with various State Govts. in India for supply of raw & par boiled varieties of Rice required by such State Govts. That such contracts entered into by M/s. Survir Enterprises Delhi under their name as our nominees shall be duly executed by them on our behalf and Rice dispatches shall also in addition be done from various stations in Punjab by us/our association.'

Similarly wording has also been used in some other documents already referred to above. Now it is to be seen whether under the circumstances the petitioner was an agent of Prma or was an independent contractor. It is the court's duty to examine whether the documents really creates an agency and mere description in the agreement is not conclusive. The court has necessarily to examine the true nature of the agreement and the subsequent dealings between the parties and then decide if an agency has been created. Section 182 of the Indian Contract Act defines an 'agent' as a person employed to do any act for another or to represent another in dealings with third persons. The real distinction between the two is that an agent is under the supervision and control of the principal and is liable to account to the latter. But an independent contractor is 'one who undertakes to produce an given result but so that in the actual execution of the work he is not under the order or control of the person for whom he does it and may use his own discretion in things not specified before hand', (Bowestead, on Agency, 12th Edn P2). If this distinction is kept present in mind there shall be no difficulty in holding that the petitioner was not an agent of Prma, Chandigarh but an independent contractor and thus could enter into the contract in question with the respondents in its own right, though ultimately the petitioner was responsible for the payment of commission only to the Prma as stated in paragraph 4 of Annexure 'D' dated 14-12-1982 which contains the terms and conditions of the petitioner to Prma and accepted by Prma on 18-12-1982. Paras 2 and 3 of Annexure 'D' make the matter fully clear beyond any manner of doubt in respect of any type of control or supervision by Prma over the petitioner in the matter of the discharge of the contractual obligations and the same are reproduced below :- '2. That you (PRMA) shall have no rights control, possession, and authorisation etc. of any kind over the contracts so entered into by M, Survir Enterprises (P) Ltd. on the strength of the nomination letter so issued by the association. 3. That M/s. Survir Enterprises (P) Ltd., are free to purchase the rice contracted for by them from any states including Punjab and from any source and at any price that Survir Enterprises (P) Ltd., may agree to in direct negotiations with such potential supplied. The association shall have no say so in the matter regarding the purchase, source, quantity and price of rice to be supplied by M/s. Survir Enterprises (P) Ltd.'

(21) A commission agent sells goods in his own right and he is responsible to the principal only for the sale proceeds, but the sale is not by him as agent of the principal (Satyanarayana v. State of Madras, 1955 Andh. W.P. 83) (6) in Balthzar and Sons v. E. M. Abowath (1921) 63 I. C. 521 (PC)(7) the Privy Council considered a case where A offered to buy sugar from B, who was not a producer. B contracted with C for purchase and delivery of sugar in six Installments. A was to pay commission to B. C failed to deliver after a few Installments. A sued B for damages for non-delivery. B pleaded he was merely an agent. It was held that B was not the agent of A or C. A and B acted as principals between themselves. Mere mention of 'commission' was not inconsistent with this position. In another case A contracted to purchase from B on behalf of C. A undertakes to pay to B a definite sum of money in case of default on the specified date. A default. It was held A was not the Agent of C in this regard and he was personally liable to B. (Lakshmanan v. Subramanyan Air 1919 Mad 411) (8). A person working on his own account and not liable to any other for profit or toss is not an agent. (Kuchwar Limestone Coy. v. Secretary of State Air 1936 Pat 372 Annexure 'D' referred to above does not talk of the liability of the petitioner towards Prma for profit or loss. An agent must represent or act for the principal on the latter's authorisation. He must aid the principal in bringing him in contractual relation with the named third person (Mahesh Chandra Bose v. Radhakrishna Bhattacharya (1908) 12CWN (28) Where Govt. appointed defendant as agent for purchase of paddy and allowed defendant to have full responsibility as to milling of paddy and the defendant entered into a contract with a mill owner, he could not be deemed to be an agent of the Government for milling and that the defendant was but a contractor (Govt. of India v. Fumnadhar Rangta : AIR1960Pat19 ). Agency is not spelt out by mere name as 'sole selling agent'. It is determined by conduct of parties and the purport of their dealings. Thus facts may demonstrably show that a sole selling agent is not in fact an agent, but a buyer with the sole right to sell the goods of a manufacturer. (Shalagram Fhajharia v. National Coy. Ltd. 69(CWN 369) (12) Thus when Prma had no rights, control possession and authorisation of any kind over the contracts entered into by the petitioner on the strength of the nomination letter issued by Prma in its favor and the petitioner was also free to purchase rice contracted for by it from any States including Punjab and from any source and at any price, and the liability of the petitioner towards Prma being only for payment of commission to Prma on the price, as clearly stated in Annexure 'D' already referred to above and which spelt out the terms of the agreement between the petitioner on the one hand and Prma on the other, the position of the petitioner is only of an independent contractor and not of an agent. No instructions were to be given by Prma to the petitioner as to the sale of of rice or its price to be contracted for with the respondents and petitioner could deal on his own with the respondents.

(22) For the aforesaid reasons there was no fraud or misrepresentation on the part of the petitioner and consequently the agreement in question dated 19-1-1983 is not vitiated and this issue is found against the respondents. Issue No. 4

(23) In view of my findings on the preceding issues and there being nothing against the referring of the disputes between the parties, as set out in the petition, to arbitration and in view of the existence of the arbitration agreement as set ou in Clause 12 of the main agreement in question dated 19-1-1983, I hold that the disputes set out in the petition should be referred to arbitration in terms of the arbitration agreement and this issue is held in favor of the petitioner. Relief :

(24) As a result of the above findings, I accept this petition with costs and order that the arbitration agreement be filed in Court and the disputes between he parties, as set out in the petition, shall be referred for decision to the arbitrator/arbitrators by the parties as per the arbitration agreement contained in Clause 12 of the agreement in question dated 19-1-1983. The arbitrator/arbitrators are appointed by the parties as per the arbitration agreement within two months and on the failure in this regard the suit be listed before the Court on 16-7-1985.


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