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Union of India (Uoi) Vs. Himco (India) Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberSpecial Suit No. 6 of 1960
Judge
Reported inAIR1962Cal254
ActsArbitration Act, 1940 - Section 20 and 20(4)
AppellantUnion of India (Uoi)
RespondentHimco (India) Ltd.
Appellant AdvocateShomnath Chatterjee, Adv.
Respondent AdvocateS.K. Acharyya and ;M.P. Choudhary, Advs.
DispositionApplication allowed
Cases ReferredDamodar Shah v. Union of India
Excerpt:
- .....by one s.k. dutt for and on behalf of the president of india from the calcutta office of the director general of supplies and disposals. the defendant is a company having its registered office at bombay and the tender was sent by post from bombay, the contract is for the supply of certain goods. the plaintiff is the buyer and the defendant the seller. it appears that the plaintiff paid and the defendant received the price of the goods sold and delivered. the defendant, however, claims that it is entitled to recover the sales tax of 5 per cent of the price paid as also interest and overhead charges. the defendant served on the plaintiff a notice of suit intended to be instituted against the plaintiff for the recovery of the said claim under section 80 of the code of civil procedure......
Judgment:
ORDER

1. This is an application for filing an arbitration agreement and for an order of reference under Section 20 of the Arbitration Act. The arbitration agreement is a clause in the contract subsisting between the parties evidenced by the acceptance by the plaintiff of a tender submitted by the defendant. A copy of the letter of acceptance of the tender is annexed to the petition. The letter of acceptance is dated November 30, 1956 and is signed by one S.K. Dutt for and on behalf of the President of India from the Calcutta office of the Director General of Supplies and Disposals. The defendant is a company having its registered office at Bombay and the tender was sent by post from Bombay, The contract is for the supply of certain goods. The plaintiff is the buyer and the defendant the seller. It appears that the plaintiff paid and the defendant received the price of the goods sold and delivered. The defendant, however, claims that it is entitled to recover the sales tax of 5 per cent of the price paid as also interest and overhead charges. The defendant served on the plaintiff a notice of suit intended to be instituted against the plaintiff for the recovery of the said claim under Section 80 of the Code of Civil Procedure. In his reply dated June 9, 1960,, the Deputy Director, Litigation, for and on behalf of the Director General of Supplies and Disposals contended that the dispute raised is covered by the arbitration clause in the agreement and the Government was ready and willing to have the dispute adjusted by arbitration as provided in the contract. By the letter dated July 21, 1960 the defendant's Advocate Shri G.N. Lukdawalla contended, inter alia, than the defendant had agreed to arbitration by an 'unattached arbitrator' and not by the Director General of Supplies and Disposals or his nominee. The plaintiff's case is that the contract is in form No. WSB 133 and the arbitration clause in such contract provides for the arbitration by the Director General of Supplies and Disposals Or his nominee. The defendant persisted in its contention that it agreed to arbitration by an 'unattached arbitrator' and demanded a reference to an independent person from trade and commerce. Thereupon, the Government has taken out the present notice.

2. The Government in inviting tenders stated that the conditions of contract as contained in form No. WSB 133, as amended up to date, will govern the intended contract. The tenderers were required to answer certain questions. Question No. 3 which the tenderer was required to answer is in the following terms :

Q. 3. Do you agree to sole arbitration of Director General of Supplies and Disposals or his nominee as provided in clause 21 of the general conditions of the contract form No. WSB 133?

(Your acceptance or non-acceptance of this clause will not influence the decision of the tender. It should however be noted that an omission to answer the above questions will be deemed as an acceptance of this clause.)

In the tender submitted by the defendant the above question has been answered as under :

'We feel that there should be an unattached arbitrator.'

3. Mr. S.K. Acharya, learned counsel appearing for the defendant submitted that the above answer clearly indicated that the defendant was not agreeable to the arbitration by the Director General of Supplies and Disposals or his nominee. The parties did not, therefore, agree to the arbitration clause in the contract. In any event, the defendant did not agree to the arbitrator named in the contact in form No. WSB 133. Mr. Somnath Chatterjee, learned counsel appearing for the plaintiff, submitted that the letter of acceptance issued by the Government dated November 30, 1956 clearly dates in the opening paragraph that the, arbitration clause in form No. WSB 133 will apply. The opening paragraph of the letter reads as follows:

'I beg to inform you that your tender No. Nil dated 3-10-1956 for stores specified in the schedule annexed hereto has this day been accepted on the terms and conditions specified in the said schedule. The acceptance of tender and the schedule annexed shall be the sole repository of the transaction.''

In the annexed schedule of acceptance item No. (7) reads as follows :

'Conditions of the contract as contained inform No. WSB 133 as amended to date.'

It must, therefore, be held, according to Mr. Chatterjee, that the contract is evidenced by the acceptance of tender which contains the arbitration clause in the standard form and this standard form provide, for arbitration by the Director General of Supplies and Disposals or his nominee. The answer to the question in the contract relied on by Mr. Acharya is nothing more than a mere request to name an unattached arbitrator instead of the arbitrator named in Clause 21 of the conditions of contract in form No. WSB 133. The request was not accepted by the Government as the letter of acceptance stated above clearly indicates. If_ however, it is contended that the letter of acceptance dated November 30, 1956 does not amount to the acceptance of the defendant's offer, as contained in the tender, inasmuch as the defendant in its tender asked for an unattached arbitrator, then the acceptance of the tender dated November 30, 1956 must be deemed in law to be a counter offer and the defendant accepted this counter offer by supplying goods. In the result, there was a concluded contract in the standard form. As stated before, standard form of arbitration provides for arbitration by the Director General of Supplies and Disposals.

4. Arbitration clause in a contract though nothing more than a term in the contract, is different from the contract, so that even if the main contract is gone, the arbitration agreement may still remain effective. When there is an arbitration clause in a contract, there are really two agreements rolled into one--the main contract, as in the instant case, the contract for sale of goods and the arbitration agreement whereby the dispute in respect to the main contract is to be adjusted. Ordinarily the arbitration agreement being only a clause in the main contract, the conclusion of the main contract concludes the arbitration agreement as well. But the parties may very well choose to keep them apart. In the instant case, the invitation to tender issued by the Government required the tenderer to indicate whether he agrees to the sole arbitration by the Director General of Supplies and Disposals or his nominee, as contained in the arbitration clause. The note clearly indicates that the tenderer had the option to accept or not to accept it and this acceptance or non-acceptance will not influence the decision on the tender. It is clear, therefore, that the Government wanted the arbitration agreement in the standard form be kept apart from the main contract and people submitting their tender were at liberty not to accept the Director General of Supplies and Disposals or his nominee as the sole arbitrator. It is, however, stated that that an omission to answer the question in the tender submitted will mean acceptance of this clause in the standard form. In the instant case, the defendant while submitting the tender answered the question indicating that the arbitrator should be 'unattached arbitrator'. This amounts to a non-acceptance of the arbitration clause as in the standard form. Mr. Acharya contended that there are two ways of indicating acceptance of the clause and no other, namely, (1) intimation of acceptance in express terms by answering question No. 3 in the affirmative or (2) omitting to answer question No. 3. If the question is answered and the answer is not in the affirmative, as in the instant case, it cannot be said that the arbitration clause is accepted. This argument has force. I am unable to accept the argument of Mr. Chatterjee that the answer was not intended to be a non-acceptance of the clause but an acceptance, subject to a request that a non-attached person should act as an arbitrator. The defendant has not accepted the arbitration clause in express term, nor has it indicated its acceptance in the only other way indicated in the note, namely, by omitting to answer question No. 3. In my judgment, the defendant submitted the tender on the footing that it was only agreeable to the arbitration of the disputes in respect to the contract by 'an unattached arbitrator.'

5. It is necessary here to note an argument strongly urged by Mr. Acharya. He contended that inasmuch as the parties wanted arbitration not by the same arbitrator, as appearing from the tender submitted by the defendant and the acceptance of the tender by the Government, the parties were not ad idem and, therefore, there could not be in law a concluded arbitration agreement. There is, however, a confusion in this argument. Both the parties proceeded on the footing that there should be an arbitration clause in terms of Clause 21. This is the standard arbitration clause in Government contracts. The defendant also submitted its tender on the footing that there should be an arbitration clause. Therefore, the parties were ad idem as to having in the contract an arbitration clause in terms of Clause 21. The defendant however was given the option not to agree to the arbitrator named and it exercised its option against arbitration by the named arbitrator. In respect to the arbitration agreement that is the only point on which the parties did not agree. The arbitration clause in the contract provides (1) that all disputes arising out of the contract should be adjusted by arbitration and (2) the arbitrator would be the Director General of Supplies and Disposals or his nominee. The defendant did not raise any objection as to the disputes being adjusted by arbitration but it did not agree to the arbitrator named in the clause; in other words, it must be held that the parties agreed to have the arbitration clause in the contract, but did not agree to an arbitrator.

6. The other way of looking at the question is this. The parties accepted arbitration clause as in WSB Contract form No. 133 subject to this modification, that the arbitrator must be 'an unattached arbitrator' to be nominated by the Director General of Supply and Disposal. The Government Ml accepting the tender submitted by the defendant no doubt indicated that WSB Contract form No. 133 will govern instant case. But the contract in such form does not provide for compulsory arbitration by the Director General of Supply and Disposal himself. It also provides that such arbitration may be by a person appointed by the Director General. The defendant by his tender indicated that it would be agreeable to arbitration not by the Director General himself or by any one connected with his office but by one 'unattached person', to be appointed by the Director General. This offer of the defendant has been accepted and the arbitration agreement agreed to by the parties is arbitration by an unattached person to be appointed by the Director General of Supply and Disposal.

7. Mr. Chatterjee contended that even though the defendant in its tender expressed its intention against arbitration by the Director General of Supplies and Disposals or his nominee, the Government in its acceptance letter of November 30, 1956, first paragraph, accepted the tender on the terms and conditions in the schedule. In the schedule of acceptance it is expressly indicated that the contract is subject to the conditions in form No. WSB 133. It may not be an acceptance of the tender submitted by the defendant and as such it may well be contended that there was no concluded contract by this acceptance. The letter of acceptance dated November 30, 1956 in law, therefore, is a counter offer. Admittedly the contract has been 'performed and the defendant supplied goods in terms of the tender. It must, therefore, be held that the counter offer has been accepted. The result is that there is a concluded contract on terms set out in the acceptance of tender dated November 30, 1956. I have however indicated before that the letter of acceptance of the tender dated November 30, 1956 cannot be considered to be a counter offer. It is an acceptance of an offer that concluded the contract. The arbitration clause in the contract is modified. The modification is to this effect, either that the name of the arbitrator in the standard contract form is left out or that the arbitrator would be an unattached person to be appointed by the Director General of Supply and Disposal. Question No. 3 in the invitation to submit tender and the note thereto indicates that while the arbitration agreement as contained in Clause 21 was intended to be an essential clause in the contract for sale, the arbitrator named in the clause was not considered to be so essential. When, therefore, the plaintiff accepted the tender submitted by the defendant, wherein, the defendant indicated its disagreement to the named arbitrator, there is a concluded contract with the arbitration clause, except that the person who would arbitrate was left undetermined. Alternatively the Government accepted the plaintiff's offer to have an unattached arbitrator, though the unattached arbitrator is to be appointed by the Director General of Supply and Disposal. Mr. Chatterjee drew my attention to my judgment in Damodar Shah v. Union of India, : AIR1959Cal526 , in aid of his argument that the so called acceptance of tender may not evidence a concluded contract, but may be nothing more than a counter offer which can be subsequently accepted and such acceptance may be evidenced by performance of the contract That may be so. But in the instant case the acceptance of tender concludes the deal.

8. The position, therefore, is that the parties have accepted the arbitration clause in the agreement but have not agreed as to the name of the arbitrator. There is an effective arbitration agreement and this agreement covers the disputes between the parties. No cause has been shown as to why the agreement should not be filed under Section 20 of the Arbitration Act and there must be an order to file the agreement accordingly.

9. An order under Section 20 of the Arbitration Act must also direct a reference to an arbitrator. I have held that in the instant Case the parties have not agreed to an arbitrator either in the agreement or otherwise. I am left, therefore, with the responsibility of choosing an arbitrator without the concurrence of the parties.

10. One thing strikes me about the arbitration agreement in the present form. The agreement is that the disputes are to be referred 'to the arbitration of the Director General of Supplies and Disposals or a person appointed by him.' Section 20(4) of the Arbitration Act requires the court to 'make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise.' In the instant agreement the arbitrator named is the 'Director General of Supplies and Disposals or some other person appointed by him.' To whom shall I direct a reference to adjudicate the dispute? Mr. Chatterjee submitted that the order should be directing a reference to the Director General of Supplies and Disposals or a person appointed by him. It can perhaps be said that the Director General of Supplies and Disposals is the arbitrator agreed to by the parties. But the language used indicates that the parties intended that he need not act as arbitrator 'and the person named by him may also do the job. Unless, therefore, the Director General of Supplies and Disposals has expressed his willingness to act as an arbitrator or has appointed somebody to act as arbitrator, there is no agreed arbitrator to whom the order of reference can be made. It seems to me, therefore, in an application under Section 20 for filing an arbitration agreement of the present nature it is necessary for the petitioner to indicate in the petition the fact that the Director General of Supplies and Disposals has either agreed to act as arbitrator himself or has nominated an arbitrator in terms of the agreement, so that the reference may be made either to the Director General of Supplies and Disposals or to the person nominated by him. An order of reference to the Director General, of Supplies and Disposals or to his nominee does not seem to be a proper order, having regard to the terms of Section 20(4) of the Arbitration Act. Mr. Chatterjee has drawn my attention to some orders passed by me in other cases directing reference to the Director General of Supplies and Disposals or his nominee. These orders, however, were passed without proper, consideration of this aspect of the question. Having regard, however, to my finding that in the instant case no arbitrator was agreed to by the parties, the question does not arise in this case.

11. Another point was taken by Mr. Acharya to the effect that this court has no jurisdiction to entertain this application under Section 20. It is pleaded in paragraph 3 of the petition that the contract was entered into in Calcutta. In paragraph 6 of the affidavit in opposition this is denied. It is pleaded that the letter of acceptance of the tender was received by the defendant at Bombay and that the contract was to be performed at Bombay. In paragraph 8 of the affidavit in reply of Krishna Chandra Mitra filed on behalf of the plaintiff, it is stated that the acceptance of the tender was signed and executed at Calcutta and that the defendant submitted the tender at Calcutta. The plaintiff's case is that the tender having been submitted at Calcutta and accepted at Calcutta as well, the whole of the cause of action in the instant case arose within the jurisdiction of this court. The case of the defendant, on the other hand, as stated by learned counsel, is that the intimation of acceptance of the tender having taken place at Bombay, at least a part of the cause of action arose outside the jurisdiction of this court. The suit could not, therefore, be instituted in this court without first obtaining leave under clause 12 of the Letters Patent. No leave having been obtained in the instant case, this court has no jurisdiction to entertain this suit. If the instant contract can be said to be a contract by correspondence, then the argument of Mr. Acharya may have some plausibility. But I have serious doubts whether this class of Government contracts can be equated to contracts by correspondence. Mr. Acharya, however, did not press this point. His client would be glad to have the dispute adjusted by arbitration by an unattached arbitrator. He, therefore, did not press this point.

12. For reasons given above, there will bean order of filing the arbitration agreement andan order of reference to Mr. B.K. Chowdhury,Barrister-at-Law as the arbitrator. The arbitratoris directed to make his award within four monthsfrom the service of this order on him. Costs of this application will be costs in the arbitrationproceeding; certified for two counsel. I direct expeditious drawing up of this order.


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