Skip to content


Union of India (Uoi) Vs. S.N. Das and Brothers (Private) Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberSpecial Suit No. 7 of 1960
Judge
Reported inAIR1962Cal82
ActsArbitration Act, 1940 - Section 20; ;Evidence Act, 1872 - Section 115; ;Constitution of India - Article 299
AppellantUnion of India (Uoi)
RespondentS.N. Das and Brothers (Private) Ltd.
Appellant AdvocateSomnath Chatterjee, Adv.
Respondent AdvocateSen, Adv.
Cases ReferredUnion of India v. K.P. Mandal
Excerpt:
- .....mallick, j. 1. this is an application under section 20 of the arbitration act for filing an arbitration agreement. the arbitration clause in the contract between the parties is the usual arbitration clause. it is set out in extenso in paragraph 2 of the petition. the arbitration clause provides that the disputes shall be referred to the sole arbitration of the director-general of supplies and disposals or some other person appointed by him. disputes between the parties arose and by a notice under section 80 of the code of civil procedure dated december 14, 1959, the defendant intimated its intention to institute a suit for the recovery of the amount claimed in the notice, a copy of this draft plaint was annexed to the notice. the claim in dispute relates to three contracts. in.....
Judgment:
ORDER

P.C. Mallick, J.

1. This is an application under Section 20 of the Arbitration Act for filing an arbitration agreement. The arbitration clause in the contract between the parties is the usual arbitration clause. It is set out in extenso in paragraph 2 of the petition. The arbitration clause provides that the disputes shall be referred to the sole arbitration of the Director-General of Supplies and Disposals or some other person appointed by him. Disputes between the parties arose and by a notice under Section 80 of the Code of Civil Procedure dated December 14, 1959, the defendant intimated its intention to institute a suit for the recovery of the amount claimed in the notice, A copy of this draft plaint was annexed to the notice. The claim in dispute relates to three contracts. In answer to this letter, the Government reminded the defendant by its letter dated March 28, I960, that there was an .arbitration clause in the contract and the disputes were liable to be adjusted by arbitration, in terms of the said arbitration clause. Thereupon, by its letter dated June 28, 1960, the defendant appointed one J.B. Moulik, Chartered Accountant, as the arbitrator on its behalf. The Government by its letter dated July 13, 1960, in answer to the previous letter dated June 28, 1960, wrote as under:

'Please note that I have this day on behalf of the purchaser, the President of India, appointed Shri R.R. Desai, Deputy Legal Adviser, (arbn..) Ministry of Law, Room No. 49-B, second floor, National Insurance Building, Parliament Street, New Delhi, as arbitrator to hear and determine the said disputes and differences.

The appointment by the purchaser is, however, without prejudice to his right to contend that the said disputes and differences do not fall under arbitration, to raise all legal contentions open to him, to prefer his own counter claim in the said arbitration proceedings, to claim proof to the satisfaction of the arbitrator that the appointment of your arbitrator has been validly made and that reference is thus invalid.'

2. It appears that both the arbitrators sat together and appointed Mr. Dipankar Gupta, a member of the Bar, as Umpire. I understand that thereupon the arbitrators gave directions for filing statements by the parties and purported to proceed with the determination of the disputes. On September 22, 1960, Mr. S.D. Pyne, solicitor for the Government wrote a letter to R.R. Desai, who sent a copy of the minutes to Mr. S.D. Pyns, to the following effect:

'Kindly refer to your order dated 29th ultima The above two A/Ts are subject to the General Conditions of Contract in WSB 133 and Clause21 as amended at the date of the said A/Ts' provides for reference to arbitration to a single arbitrator. So the appointment of Shri J.B. Maulick by M/s. S. N. Das and Bros. (P) Ltd., was and is illegal, wrongful and unauthorised. In view of the wrongful attitude of the claimants the Government appointed you as the other arbitrator under protest and without prejudice. In these circumstances proceedings are being taken in Court under Section 20 of the Arbitration Act for filing the agreements and for reference to a single arbitrator as provided in the above A/Ts. The draft petition is before counsel for being finalised in the light of suggestions made by the department. The annual vacation of the Court has intervened. The Court is now closed and will reopen on 14th November next. Counsel engaged in this matter is also out of Calcutta during the vacation. After the Court reopens the application will be made.

In the circumstances aforesaid may I request you not to take any further steps and proceed with the arbitration till the disposal of the application. You will be good enough not to insist on any statement and Counter statement being filed by the parties pursuant to your said order dated 29th ultimo till after the disposal of the application, as otherwise there will be unnecessary complications.''

On December 6, 1960, this notice was taken out by the Union of India for an order that the arbitration agreement be filed under Section 20 of the Arbitration Act.

3. In the petition it is alleged that the Government is ready and willing to do all things necessary for the proper conduct of the arbitration, in terms of the agreement. It is submitted that the arbitration agreement be filed and an arbitrator appointed, in terms of the arbitration agreement.

4. The defendant has opposed this application, on the ground stated in paragraph 12 of the affidavit of Sachindra Nath Das. In the said paragraph a case of waiver and estoppel is pleaded. It is alleged that the irregularity in appointing two arbitrators have been waived and the Government is estopped from contending now that the appointment of two arbitrators is invalid. Mr. Sen appearing to oppose on behalf of the defendant submitted that the act and conduct of the Government as evidenced by the letters summarised before disentitles the Government to ask for an order prayed in this application.

5. Under Section 20 of the Arbitration Act, a party to an arbitration agreement is entitled to apply to Court having jurisdiction in the matter for an order that the agreement be filed in Court. Thereupon notice will be issued to the other party. The notice will be to show cause within the specified time why the agreement should not be filed (Sub-section (3)). Sub-section (4) of Section 20 provides that where no sufficient cause is shown, the Court shall order the agreement to be filed and shall make an order of reference. In the instant case, it is not disputed that there is an arbitration agreement in existence;. Nor is it Mr. Sen's case that this arbitration agreement has been amended, modified or altered or completely given a go-by. Indeed, having regard to the provisions of the Constitution, such a modification cannot be effected without complying with the formalities of Article 299 of the Constitution. In the instant case, admittedly that has not been done. Therefore, it cannot be contended that the arbitration agreement has been altered or modified. If the arbitration agreement is there, a party is entitled to make the application and is entitled to the order, unless sufficient cause is shown. The sufficient cause, according to the submission of Mr. Sen, is that having regard to what has happened, the arbitration by the named arbitrator in the agreement cannot be given effect to. His contention, as summarised in paragraph 12 of the affidavit of Sachindra Nalh Das, is that there has been an estoppel or at least a waiver of that particular provision of the arbitration agreement, whereby the parties agreed to the adjudication by one named arbitrator. Having regard to the conduct of the parties, the provision in the arbitration clause for adjudication of the disputes by one arbitrator has been waived and given up and this is sufficient cause for not allowing the arbitration agreement to be filed and am appointment made of a single arbitrator, in terms of clause 21 of the contract.

6. Mr. Sen has relied on the decision of the Appeal Court in Union of India v. K.P. Mandal, reported in : AIR1958Cal415 , wherein Chakra-vartti, C. J., held that even if a different arbitrator from the one named in the arbitration agreement is allowed to proceed with the arbitration and make an award, the parties will be debarred from challenging the award, on the ground that he had no authority to arbitrate. Chakravartti, C. J., held that there would be an estoppel, even though both the parties knew that what was being done was contrary to the arbitration agreement. The fact that very much influenced the mind of the learned Chief Justice was that the parties took their chance before the arbitrator with full knowledge of the incompetence of the arbitrator to arbitrate and represented to each other that the award would be accepted even though the arbitrator had no competence to adjudicate under the arbitration agreement and hence the parties will be estopped from challenging the arbitrator's competence. The proposition laid down by the learned Chief Justice is that a representation in order to attract the rule of estoppel need not be a representation of a physical fact, but may as well be the representation of an attitude or a state of mind, inasmuch as the state of man's mind is as much a matter of fact as the state of his digestion. In the cited case, the learned Chief Justice held that there was a representation of an attitude or a state of mind that he will accept the award by an incompetent arbitrator. But the main reason that led the learned Chief Justice to apply the rule of estoppel was that the parties permitted the proceedings to go on, terminating in an award. In a case where the arbitration proceeding has just started and a party comes before the Court for an order that arbitration should be proceeded with in terms of the arbitration agreement, I do not think the same considerations and principle will hold good. In the instant case, arbitration proceedings have hardly begun. Only directions have been given for filing statements. In such an early state if a party comes to the Court for arbitration to be conducted according to the agreementsubsisting between the parties, is the Court entitled to turn down the prayer and allow disputes to be adjusted not in terms of the arbitration agreement? I do not think so. In, the facts of the instant case, there cannot be either waiver or estoppel. There is clear indication in the letter itself written by the Government dated July 13, 1960 relied on by the defendant that the appointment of K.P. Moulik by the other side was invalid. Appointment of its own arbitrator in a hurried manner has been explained in the affidavit in reply filed on, behalf of the Government. The reason stated is that it was done to prevent the arbitrator appointed by the defendant to proceed ex purte. This is not certainly a satisfactory explanation, Government need not have been so nervy. But, nevertheless, from the letters as stated above and the conduct of the Government it cannot be said that the Government has given up its right to have the adjudication of the disputes in terms of the arbitration agreement. The second reason why I do not think that I should give effect to the contention, of Mr. Sen is that it would in substance amount to a modification of the arbitration agreement itself which cannot be done in the instant case having regard to Article 299 of the Constitution. What is contrary to the provisions of the Constitution and hence cannot be done directly, cannot be done indirectly by applying the rule of estoppel and waiver. Under Section 20 a party is entitled to an order to file the agreement, unless there is sufficient cause. The Sufficient cause must amount to either the complete abrogation of the arbitration agreement or perhaps a competent reference already made under the arbitration clause. If the reference that has been made to the two arbitrators could be held to be a reference under Clause 21 of the arbitration agreement, then it may perhaps be argued that the agreement cannot be filed. There being already a reference, the application under Section 20 has become unnecessary, In the instant case however there is no valid reference. The arbitration agreement requires the reference of the dispute to the Director-General of Supplies and Disposals Or his nominee. The reference in the instant case is not to the arbitrator named in the agreement. An invalid reference not in terms of the arbitration agreement in my judgment does not amount to sufficient cause for not filing the arbitration agreement under Section 20 so that a reference can be made in terms of the agreement.

7. For the reasons, given above, I must make an order tinder Section 20 directing the arbitration agreement to be filed.

8. The next point is the appointment of the arbitrator under Sub-section (4) the Court is requiredto make an order of reference to the arbitratorappointed by the parties. The arbitrator to beappointed is the Director-General of Supplies and Disposals or his nominee. I direct the disputesbetween the parties to be adjudicated by the Director-General of Supplies and Disposals or hisnominee, if the Director-General is unable to adjudicate the disputes himself. The costs of the defendant will he costs in the reference. TheGovernment will bear its own costs.


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