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Western Manufacturing Co. Ltd Vs. Deepak Industries Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberSuit Appeal No. 41A of 1970
Judge
Reported inILR1981Delhi156
ActsArbitration Act, 1940 - Sections 14
AppellantWestern Manufacturing Co. Ltd
RespondentDeepak Industries Ltd. and ors.
Advocates: M. Wadhwani and ; B. Mohan, Advs
Cases ReferredNathumull Tolaram v. Killa and Co.
Excerpt:
.....had unilaterally cancelled the selling agency agreement and, thereforee, on its cancellation, the arbitration agreement which was part of it was rendered inoperative. it was also contended that there was no disputes and differences between the parties and in any case references to the indian chamber of commerce was not warranted. further the contention of the petitioner was that the arbitrators misconducted themselves by omitting to decide important issues referred to them. the grievence was also to the effect that the petitioner was not allowed to file a rejoinder to the reply which the respondent had filed to its counterclaim nor allowed inspection of the account books of the respondent and was denied permission to be represented through a counsel. lastly the petitioner argued that..........the prayer of the objector to be represented by a legal adviser as envisaged under rule 14 of the rules of arbitration ?issues no. 1 and 3 : thecase sought to be set up under these issues is that the respondent had unilaterally cancelled the selling agency agreement, and on its cancellation, the arbitration clause which was part of it was rendered inoperative, it has also been asserted that there were no disputes and differences between the parties surviving under the agreement and that in any case reference to the indian chamber of commerce, calcutta was not warranted.i in this regard find that in paras 3 and 4 of its petition under sections 14 and 17 of the arbitration act, the petitioner had itself stated as under : '(3)that there had arisen certain disputes between the petitioners.....
Judgment:

D.R. Khanna, J.

(1) On an application moved under Sections 14 and 17 of the Arbitration Act by the Western . Delhi, the award delivered by two Arbitrators appointed by the Indian Chamber of Commerce, Calcutta was filed in Court. It pertained to disputes and differences between the petitioner and the respondent namely the Deepak Industries Ltd. arising under an agreement of agency inter-se them of the date 22nd December 1963 by which the petitioner had become the sole selling agent of the respondent for the gear-boxes manufactured by the latter's engineering unit 'New Allenbery Works' for the territories of Delhi, U.P. Pepsu, Himachal Pradesh, Rajasthan and Punjab.

(2) This award was initially filed by the Arbitrators in a civil court at Calcutta but an objection was raised by the present petitioner there that since the present pro- ceedings under Sections 14 and 17 of the Arbitration Act had commenced earlier in the Delhi Court, the award could be filed here. This contention was accepted by the Calcutta court and thereforee the Arbitrators after withdrawing the award and the arbitration proceedings from that court filed them in this Court.

(3) Notices of the filing of the award were given to the parties. The petitioner has now filed objections under Sections 30 and 33 of the Arbitration Act. These objections inter-alia are to the effect that the reference was invalid as there were no disputes and differences between the parties, that the award was made after the statutory period of limitation and was thereforee null and void that the Arbitrators misconducted themselves and were not properly appointed, that they did not afford opportunity of proper hearing and that they omitted to decide important issues referred to them.

(4) The objections were controverter from the side of the respondent and thereforee the following issues were framed:

1. Whether the arbitrators had no jurisdiction to entertain and try the reference ?

2.Whether the award has been made after the statutory period and as such the arbitrators had become functus officio and thus were not competent to make the award ?

3.Whether the court of arbitration was not validly constituted ?

4.Whether the arbitrators are guilty of having not afforded an opportunity of proper hearing to the objectors ?

5.Whether the arbitrators misconducted themselves and proceedings by not taking evidence of the parties ?

6.Whether the arbitrators misconducted themselves by omitting to decide important issues referred to them If so, what arc those issues and what is the effect of not deciding the said issues ?

7.Whether the arbitrators are guilty of having committed legal misconduct in that they conducted the proceedings having an interest in Shri Daga of the respondents ?

8.Whether the arbitrators misconducted the proceedings in rejecting the prayer of the objector to be represented by a legal adviser as envisaged under rule 14 of the Rules of Arbitration ?

Issues No. 1 and 3 :

THEcase sought to be set up under these issues is that the respondent had unilaterally cancelled the selling agency agreement, and on its cancellation, the arbitration clause which was part of it was rendered inoperative, It has also been asserted that there were no disputes and differences between the parties surviving under the agreement and that in any case reference to the Indian Chamber of Commerce, Calcutta was not warranted.

I in this regard find that in paras 3 and 4 of its petition under Sections 14 and 17 of the Arbitration Act, the petitioner had itself stated as under :

'(3)That there had arisen certain disputes between the petitioners and respondent No. 1 which disputes as per agreement were to be referred to the arbitration of Indian Chamber of Commerce, Calcutta.

(4)That the Indian Chamber of Commerce had appointed two arbitrators whose names were not disclosed to the petitioners despite requests from them.'

'THEexistence of disputes as also the arbitration agreement was thus clearly admitted. It was also conceded that the disputes were referable to the arbitration of Indian Chamber of Commerce. The circumstance that both the sides put up their claims before the Arbitrators further showed the existence of disputes. The cancellation of an agreement may itself give rise to disputes under the agreement as such cancellation may open up certain rights and liabilities qua each other. They had to be referred to adjudication by arbitration. The arbitration clause thus is not rendered infructuous or inoperative. In fact that is the primary mode by which the parties must get those rights and liabilities settled.

(5) When the arbitration agreement stipulated reference of disputes to the sole arbitration of the Indian Chamber 6f Commerce. Calcutta, that chamber could have acted only through an appointee made by it as Arbitrator. The chamber though a juristic person could not have itself acted as it was not capable of acting so. The appointment of two Arbitrators by it in terms of the arbitration rules framed by it must be held to be proper and valid. In this respect it must be said that when the petitioner had agreed to arbitration by that chamber, it had also accepted to abide by the rules and bye-laws framed by the chamber for such arbitrations. At no stage during the arbitration proceedings, the petitioner objected to the appointment of two arbitrators or that the arbitration proceedings were not governed by those rules.

(6) The issues are decided against the petitioner. Issue No. 6:

Aperusal of the award shows that it is a non-speaking one, and after referring to the respective claims of the parties allows an amount of Rs. 39847.73 in favor of the respondent in full and final settlement of the claim and counter-claim of the parties. No reasons for arriving at this conclusion are given nor any document or evidence made part of the award. This Court is thereforee precluded from referring to any such evidence or document or probe into the merits of the controversies referred to the Arbitrators. It can also not look into or question the mental process by which the Arbitrators arrived at their conclusions. It can be taken that when they have given their over all award they have duly considered the various claims setup by the-parties before them. The award thus does not suffer from any infirmity or error of law on the face of it, nor is there anything to deduce that the Arbitrators omitted to decide any issues referred to them.

(7) The issue is decided against the petitioner. Issue No. 7:

the petitioner's case is that the Arbitrators conducted the proceedings in a manner as to show that they were quite intimate with Mr. Daga of the respondent. That Mr. Daga has however denied in his affidavit that the Arbitrators were so known to him. There is no independent evidence to sustain the contention of the petitioner that the Arbitrators had an interest in Shri Daga of the respondent. The issue is decided against the petitioner. The averments in this regard are surmiseful and vague, and it is not possible on their basis to hold that the Arbitrators were under the influencs of Mr. Daga.

Issue No. 2:

THEArbitrators held in all three proceedings. One was on 15th November, 1969 when it was taken note that the dispute between the parties was for settlement of accounts. They were thereforee directed to furnish clear statements of accounts on which they had based their respective claims. The next hearing was on 7th January, 1970 on which date the claims were checked in the light of the statements filed. The third hearing was on 9th January, 1970 and the proceedings were finalised. The parties then stated that they did not like to add anything further to what they had already stated. The award was finally given on 16th January, 1970. It thereforee cannot be said that the award was made after the statutory period or that the Arbitrators had become fanctus officio In fact the proceedings were over in about two months. The issue is decided against the petitioner.

Issues No. 4, 5 and 8:

THESEare inter-connected issues and are thereforee taken together. The main grievance of the petitioner is that it was not allowed to file a rejoiner to the reply which the respondent had filed to its counter-claim. Secondly it is urged that inspection of the account books of the respondent was not allowed to the petitioner although a number of requests in that direction were made. Thirdly, the petitioner was not permitted to be represented by its counsel who would have properly put up their case before the Arbitrators. It has also been urged that before the two Arbitrators entered upon the reference they ought to have appointed an umpire and in its absence the entire proceedings and the award were vitiated-

(8) The claim which the respondent had submitted before the Arbitrators was for a sum of Rs. 52,974 the petitioner on its part raised a claim of Rs. 87,820 against the respondent. It was required to pay separate cost of the proceedings amounting to Rs. 200.00 by the Registrar of the Indian Chamber of Commerce for raising the counterclaim. The petitioner's case was that it even as an agent was entitled to accounts from its principal, the respondent as the transactions on which commission was payable to it were recorded in the account books of the respondent. Even otherwise it has been contended that the petitioner was entitled to commission on the sales which the respondent independently effected within the territories of its agency. Those transactions could have only been known after inspection of the account books of the respondent. By not allowing their inspection, it has been urged that a grave prejudice was caused.

(9) An attempt was also made to plead that several of the rules framed by the Indian Chamber of Commerce, Calcutta were against law and were also not otherwise applicable. T however find that no such plea about illegality of the rules has been raised in the objection-petition. As regards the applicability of those rules it has already been noted above that the petitioner had admitted in its petition under Section 14 and 17 of the Arbitration Act that there was an agreement to refer the disputes to the arbitration of Indian Chamber of Commerce, Calcutta. When such was the position, the petitioner must be held to have agreed to be bound by all the rules of arbitration of the said body. The Supreme Court thus in the case of Union Textile Traders v. Shri Bhawani Cotton Mills : [1970]2SCR429 observed that it must be remembered that when a party agreed to submit to Arbitration of Indian Chamber of Commerce, it meant that it was bound by all the rules of arbitration of the said body. I am unable to hold that these observations were casual and were not in the context of the controversy agitated belore the Court.

(10) A persual of the rules of the Indian Chamber of Commerce Calcutta shows that no parly to a reference is entitled to appear by counsel without express permission of the court (arbitrators). It was thus within the discretion of the Arbitrators to allow permission to the parties to appear by counsel. I do not find anything which can show that the discretion was exercised in an arbitrary or capricious manner as to justify interference at this late stage. The controversy primarily related to going into accounts and the Arbitrators had directed the parties to file statements of accounts which they did.

(11) Rule 9 of those rules provided that normally respondent would be allowed to file one statement in answer to the original statement of the applicant and the applicant would file one more statement in reply to the statement of the respondent. The Court however has been lel.t with discretion to allow further statements to be filed on such terms as might be considered proper. In the present case of course the petitioner had raised a counter claim and it should have been allowed to file a rejoiner to the reply which the respondent filed to that counter claim. However the question arises whether on this score, the award can be held to be vitiated or that a grave prejudice resulted to the petitioner. Firstly it must be said that in discretionary matters which are left to be decided by the Arbitrators, the Courts should not readily interfere unless a miscarriage of justice has resulted or the discretion is exercised in an arbitrary or malafide manner. None of these can be held to have been established in the present case. During the course of the arbitration proceedings, it was not sought to be urged by the petitioner before the Arbitrators that their case was likely to be prejudiced in the absence of a rejoinder by 'them. Rather on the hearing which took place on the last date, the parties had stated before the Arbitrators that they did not like to add any thing more to what they had already stated. This shows that the petitioner did not require anything further to be done. This circumstances further answers the objection raised by the petitioner that inspection of the account books of the respondent was not allowed. Both the sides in this regard have filed affidavits. While the petitioner has stated that the inspection was not allowed, the respondent deposed that the account books were produced at the time of the hearings and they were duly inspected by the petitioner. Be that as it may, when on the last hearing before the Arbitrators, the petitioner clarified that nothing more remained to be done it cannot now be heard to plead that further inspection of the account books was necessary and in its absence, prejudice has been caused.

(12) RULE-5 of those rules further stipulates that the number of the Arbitrators has to be two unless the arbitration agreement provides expressly otherwise. There was no such stipulation in the present case. That rule further enjoins that the appointment of umpire has to be made by the Registrar and this has to take place in the event of and upon the Arbitrators disagreeing. Under the Arbitration Act itself such appointment must take place before the two Arbitrators enter upon the reference. A number of judicial decisions have held that in the absence of such appointment, the proceedings and the award are vitiated. See Vinayak Vishnu Sahasrabudhe v. B. G Gadre and others : AIR1959Bom39 , Jawala Prasad v. Amar Nath : AIR1951All474 . Firm Shriram Harcharan Dass v. The President, Cotton Seed Forward Delivery Managing Association Air 1954 Nag. 236(4) and Firm Jaidev Madanlal Sarrafs v. Kanhiyalal Heda. The Calcutta High Court has in the case of Nathumull Tolaram v. Killa and Co. : AIR1961Cal65 observed that if on the construction of a term contained in an arbitration agreement, the appointment of an umpire is a condition precedent then that condition should be fulfillled before the arbitrators can proceed with the reference. This decision thus lays more emphasis on the nature of the arbitration agreement itself. In the present case Rule-5 as brought out above and by which the parties were governed did not make the appointment of umpire a condition precedent to the two arbitrators entering upon the reference. Rather that appointment was to remain deferred till arbitrators had differed. That eventuality did not arise. In the circumstances, the parties having so agreed to abide by the rules, it cannot be said that the arbitration proceedings and the resultant award were vitiated for want of appointment of an umpire.

(13) The result thereforee is that I am unable to hold that the Arbitrators were guilty of having not provided opportunity of hearing to the petitioner or that they misconducted themselves of the proceedings or that they were not justified to refuse the petitioner to be represented by legal advisor. The issues are decided against the petitioner.

(14) As a result the objections to the award are dismissed The award is made a rule of the Court and a decree in terms thereof is passed. The award shall constitute part of the decree. The respondent will be entitled to interest on the amount awarded at the rate of 6 per cent per annum from the date of the filing of the award in this Court till realisation.


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