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Mining and Allied Machinery Corporation Ltd. Vs. Hope (India) Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberAward Case No. 31 of 1981
Judge
Reported inAIR1983Cal492
ActsArbitration Act, 1940 - Sections 30, 31(4) and 33
AppellantMining and Allied Machinery Corporation Ltd.
RespondentHope (India) Ltd.
Appellant AdvocateBhabra, Adv.
Respondent AdvocateP.K. Roy, Adv.
Excerpt:
- .....selected two names but did not appointany. the matter of appointment was left to the parties who appointed justice basil subsequently. mr. bhabra submitted that the true meaning of theword 'or' in the order was that the disputes would be referred to justice basu failing him to justice masud. he relied on : air1955cal588 in support of his contention. this appointment was made subject to acceptance by the persons mentioned in the order. as soon as mr. basu accepted it, he became the arbitrator appointed by court. mr. ray did not object against the construction. i accept the submission of mr. bhabra on this point.11. the result is that i must hold that this court has no jurisdiction to entertain this award. in this view of the matter, the question of going to the merit of the award does.....
Judgment:
ORDER

Pratibha Bonnerjea, J.

1. This is an application by M/s. Hope (Indial Ltd. under Sections 30 and 33 of the Arbitration Act for setting aside the award dated 30-8-1980. M/s. Hope (India) Ltd. entered into a contract for supply of goods to the respondentand indeed supplied certain quantity of the said goods. Thereafter disputes and differences arose relating to the said transaction. The contract between the parties contained an arbitration clause but the validity of the same was disputed. In that view of the matter, an application Under Section 33 of the Arbitration Act was taken out for determination of the existence and the validity of the said arbitration agreement being Matter No. 364 of 1977. The said application was heard by Mr. Sabyasachi Mukharji J., and it was held that there was a valid and subsisting arbitral ion agreement between the parties. Against that Order, M/s. Hope (India) Ltd. moved the Supreme Court and look out a special leave petition being S. L. Petition (Civil) No. 115 of 1979. But the said S. L. P. was not pressed. What transpired before the Hon'ble Supreme Court on that date was recorded in the order dated 3-5-79 which is set out in full below :--

Hon'ble Mr. Justice P. M. Singhal.

Hon'ble Mr. Justice A. D. Koshal.

For the petitioner : Mr. S. S. Roy, Sr. Adv., Mr. H. K. Puri, Adv.

For the respondents Mr. Soli J. Sarabji, Addl. Solicitor Gen. of India with Mr. A. K. Ganguli and Mr. K. Jaya-ram and Mr. K. Ramkumar, Advs.

Upon hearing counsel, the court made the following order :--

'Heard the learned counsel.

The special leave petition is not pressed and is, therefore dismissed. Learned counsel are however in agreement that the dispute and difference between the parties be referred to the sole arbitration or Mr. Justice Sudhamoy Basu or Mr. Justice Masud who are the retired Judges of the Calcutta High Court. The learned Additional Solicitor General wants to place on record that this has been agreed to in response to a suggestion which fell from the court and that this will not be precedent for the future. It is ordered accordingly.

Sd/- A. Appa Rao

Assistant Registrar.

2. What followed thereafter clearly appears from the records filed by the arbitrator in this proceeding. I find fromthis record that one S. L. Ganguli, Secretary of the respcndent Mining AndAllied Machinery Corporation Ltd.wrote a letter dated 16-5-1979 to theretired Judge Mr. Justice SudhamoyBasu in following terms :

To,

Mr. Justice Sudhamoy Basu (Retired) 53, Southern Avenue

Calcutta-29.

Dear Sir,

Sub. : Dispute between M/s. M.A.M.C. Ltd. and M/s. Hope (India) Ltd. arising out of Purchase Order No. p/6209982/VPC dated 24-6-75.

3. In pursuance to the direction of the Hon'ble Supreme Court of India daled 3-5-1979 in Special Leave to appeal (Civil) No. 115 of 1979 (copy enclosed) we hereby nominate you to act as sole Arbitrator in the above mention-ed dispute.

4. Kindly signify your acceptance to act as sole Arbitrator in the above mentioned dispute.

M/s. Hope (India) Ltd. is being informed separately

Yours faithfully,

Sd/-

(S.L. Ganguli)

Secretary.

Copy to :

M/s. Hope (India) Ltd.

Pench Steel Division

Kauak Building

41 Chowringhee Road

Calcutta 700071.

5. In response to that letter Mr. Justice Sudhamoy Basu wrote both the parties on 21-5-79 as follows:--

'I have received a letter dated 16-5-1979 from M/s. Mining and Allied Machinery Corporation Ltd. by which they nominated me in pursuance to the Supreme Court Order to act as the sole Arbitrator in the above matter. From the copy of the order of the Supreme Court, dated, 3rd May, 1979 it appearsthat I have been appointed to act as the sole Arbitrator by the Supreme Court on the submissions of both the parties, On that understanding I consent to act in the matter.'

6. He entered upon the reference and made and published his award on 30-8-80. The said award is in favour of the respondent and has been filed in this court. The present application for setting aside the said award has been taken out by M/s. Hope (India) Ltd. within the period of limitation. The grounds for setting aside are mentioned in paras. 8 to 20 of the petition. After 3/4 days' hearing, Mr. Bhabra appeared on the scene on behalf of the petitioner and submitted that this court has no jurisdiction. The arbitrator was appointed by the Hon'ble Supreme Court and the award should have been filed in that court alone. He strongly relied on Section 31(4) of the Arbitration Act and submitted that the Supreme Court has exclusive jurisdiction in this matter. In support of his contention, he cited : [1982]1SCR842 . In this case an order for reference on a Section 20 application under the Arbitration Act was made by the Delhi High Court who appointed an arbitrator. Subsequently an application under Sections 5 and 11 of the Arbitration Act was made for the removal of the said arbitrator. The same having been dismissed, the matter went up to the Supreme Court and the Supreme Court thereafter removed the arbitrator and appointed another. Certain directions were also given by the Supreme Court regarding the conduct of the arbitration proceeding. The award made in that reference was sought to be filed in the Delhi High Court, but was contested on the ground that it ought to have been filed in the Supreme Court. It was held that the Supreme Court appointed the arbitrator, retained control over the matter and as such it had exclusive jurisdiction under Section 31(4) of the Arbitration Act. The award should have been filed in the Supreme Court. This decision was based on a previous decision of the Supreme Court reported in : [1972]3SCR233 . According to Mr. Bhabra, this Court cannot entertain the award as in this matter also, the Supreme Court had appointed the arbitrator and has exclusive jurisdiction.

7. Mr. P. K. Roy, appearing on behalf of the respondent submitted that in : [1982]1SCR842 , it was an applicationunder Sections 5 and 11 where the Court hadjurisdiction to appoint an arbitrator.Whereas in the present case, partieswent up to the Supreme Court in connection with an application under Section 33of the Arbitration Act for declaration ofthe legality or validity of the Arbitrationagreement. Hence the question of appointment of an arbitrator by the Sup-preme Court did not arise. On properconstruction of the order of the SupremeCourt dated 3-5-79, it would be clearthat S. L. petition was not pressed andthe matter came to an end with the endof the S. L. Petition. Thereafter theparties agreeed before the SupremeCourt that they would refer the dis-putes to either of the two retired Judgesof the Calcutta High Court and in factsubsequently nominated Mr. JusticeSudhamoy Basu as their sole arbitrator.Hence the arbitrator was appointed bythe parties and not by the SupremeCourt. He distinguished the facts of theSupreme Court case relied on byMr. Bhabra with that of present case and pointed outthat in : [1982]1SCR842 , the Court retained control or seisin over the matter,passed directions for conduct of thearbitration proceeding from time to time.But it was not so in this case. This factwill clearly establish that the arbitratorwas not appointed by the SupremeCourt nor did the Supreme Court retainany control or seisin over this matter.He relied on Section 15 of the Civil P. C.

'Every suit shall be instituted in the Court of the lowest grade competent to try it.'

In support of his contention that the arbitrator was appointed by the agreement of the parties and the filing of the award in Calcutta High Court was done in accordance with Section 15 of the C. P. C. The word 'suit' included all other independent legal proceedings as well.

8. Mr. Bhabra submitted that Section 31 of the Arbitration Act will prevail 'Notwithstanding anything contained in any other law for the time being' as will clearly appear from the opening words of Section 31 of the Act. Hence the provision of Section 15 of the C.P.C. will not prevail over the provisions of Section 31 of the Arbitration Act.

9. To find out who has appointed the arbitrator in this matter, the order dated 3-5-79 has to be construed carefully. I agree with Mr. Roy that in Section 33 application, the question of appointment of an arbitrator by court will not arise. But what happened in this case The arbitration clause in this matter is that the Managing Director of the respondent will appoint a sole arbitrator and the petitioner will not be entitled to object if an employee of the respondent, even if he had dealt with the matter earlier and had expressed his opinion in any matter or all matters relating to the disputes, is appointed as the sole arbitrator by the Managing Director. This will be clear from Clause 3001 of the General Conditions of Contract for purchase (1973) which is Annexure 'B' to the statement of claim before the arbitrator. There is no doubt that this arbitration clause is extremely one sided. The reasons for the petitioner's taking out the application Under Section 33 of the Arbitration Act was to get out of this agreement. But he lost in his attempt before the trial Court. The matter then went up to the Supreme Court and a suggestion fell from the court that it would be better for the parties to go to an independent arbitrator. Therefore, the parties reconciled their disagreement as to the validity of the arbitration agreement and the petitioner was able to persuade the respondent to have an independent arbitrator. The respondent was willing but on one condition that this exception would not be cited in future as precedent. The purpose of the petitioner in Section 33 application was served. Hence there was no more any necessity of pressing the S. L. Petition. Only one difficulty remained. If after the dismissal of the S. L.. Petition, the respondent tries to back out from hav-iny an independent arbitrator then how to prevent that? The best safeguard would be to obtain an order of Court. Similarly, the respondent thought that if an order be obtained from court recording that this case would not he referred to in future as a precedent, then they could safely accept an independent arbitrator in this case. Hence both the parties were eager to obtain an order of court, which would be binding on the parties, and would protect their respective interests in future. All these culminated in the order dt. 3-5-1979. A careful reading of this orderwill show that it has two distinct parts as follows :

1st part :--

'The Court makes the following order :--

Heard the learned Counsel.The special leave petition is not pressedand is therefore dismissed.'

Second part :--

'Learned counsel are, however, in agreement that the dispute and difference between the parties be referred to the sole arbitration of Mr. Justice Sudha-moy Basu or Mr. Justice Masud who are the retired Judges of the Calcutta High Court. The learned Additional Solicitor General wants to place on record that this has been agreed to in response to a suggestion which fell from the Court and that this will not be precedent in future. It is ordered accordingly.'

10. This order was passed by the Supreme Court and the S. L. petition was dismissed on these terms. No doubt that this order was passed on the submissions of the parties but still it is an order of Court and binding on the parties. I have already mentioned that Mr. P. K. Roy is putting emphasis on his 'control theory', that is that in : [1982]1SCR842 , the Court was controlling the arbitration proceeding which conferred jurisdiction to the Supreme Court but in the present case no such control was exercised by the Supreme Court which showed that it has no jurisdiction. But I do not think that there is much sub-stance in it. Court's power to control the arbitration proceeding in that case flowed from the order of appointment of the arbitrator by that court. If the Court only appoints the arbitrator but does not think it necessary to give any further direct regarding the arbitration proceeding still that court alone will have the exclusive jurisdiction under Section 31(4) of the Act. I have no hesitation to hold that in this case too, the Hon'ble Supreme Court appointed the arbitrator. This construction is also corroborated by the subsequent facts. The respondent proceeded on the basis of the 'Court's order' as will appear from its letter dt. 16-5-1979 and Justice Basu also acted as the arbitrator on the basis of this order dt. 3-5-1979 as will beclear from his letter dt. 25-5-1979 set out above. None of the parties at that stage, came forward to say that that was not the case and that he was appointed by the parties only. No such clarification was made as there was nothing to clarify. Even on the face of the award, the learned arbitrator specifically mentioned that he was appointed by the Hon'ble Supreme Court. Therefore, it is clear that the arbitrator and the parties themselves proceeded on the basis that the arbitrator was appointed by the Supreme Court. It is now too late in the day to say otherwise. Another point has been raised by Mr. P. K. Roy that the appointment has not been made bv the Supreme Court as the order provides that Justice Basu or Justice Masud will act as the sole arbitrator. The Supreme Court merely selected two names but did not appointany. The matter of appointment was left to the parties who appointed Justice Basil subsequently. Mr. Bhabra submitted that the true meaning of theword 'or' in the order was that the disputes would be referred to Justice Basu failing him to Justice Masud. He relied on : AIR1955Cal588 in support of his contention. This appointment was made subject to acceptance by the persons mentioned in the order. aS soon as Mr. Basu accepted it, he became the arbitrator appointed by court. Mr. Ray did not object against the construction. I accept the submission of Mr. Bhabra on this point.

11. The result is that I must hold that this Court has no jurisdiction to entertain this award. In this view of the matter, the question of going to the merit of the award does not arise. I direct the awards to be taken off the record and be returned to the parties for filing the same in the proper court. In this view of the matter, there will be no order as to cost.


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