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1969 DIGILAW 379 (ALL)

Union of India through The General Manager v. Industrial Gasses Ltd

1969-11-27

S.K.VERMA

body1969
JUDGMENT Verma, J. - This is an application in revision by the Union of India, through the General Manager, Diesel Locomotive Works, Varanasi, U. P. (here-in-after referred to as the 'Purchasers') against The Industrial Gasses Limited, Calcutta (hereinafter referred to as the 'Suppliers') , opposite party No. 1, through Mr. K. L. Garg, Managing Director and Mr. R. N. Dhar, Solicitor at Calcutta, opposite party No. 2., 2. The parties entered into an agreement, dated 21st April, 1965, for the supply of certain gasses by the suppliers to the purchasers and a written agreement was drawn up between the parties. Paragraph 21 of the agreement provided for arbitration : "In the event of any question or dispute arising under these conditions or in connection with this contract (except as to any matters the decision of which is specially provided for in these conditions) the matter in dispute shall be referred to two arbitrators, one to he nominated by the Buyers and one to be nominated by the Suppliers or in the case of the said arbitrators not agreeing then to an Umpire to he appointed by the Arbitrators in writing before proceeding on the reference and the decision of the arbitrators or in the event of their not agreeing of the said Umpire shall be final and conclusive and the provisions of the Indian Arbitration Act, 1940, and the Rules thereunder and any statutory modifications thereof shall apply." 3. It appears that disputes arose between the parties and a letter, dated 23rd March, 1967 was sent by the suppliers to the General Manager of the purchasers. The relevant portion of the letter is reproduced below : "Kindly refer to the Lease Deed and Agreement dated 21st April, 1965. made between us relating to the supply of Oxygen and Acetylene Gases. There have been repeated and persistent breaches of the said Lease Deed and Agreement on the part of the Diesel Locomotive Works in spite of repeated protests and letters. As a result thereof we have suffered heavy loss and damage for which the said Works are responsible. We have tried to settle our claims amicably but without any result. In the circumstances disputes having arisen between us, particularly as to the matters mentioned below, we desire to refer such disputes to arbitration in terms of clause 21 of the said Agreement. We have tried to settle our claims amicably but without any result. In the circumstances disputes having arisen between us, particularly as to the matters mentioned below, we desire to refer such disputes to arbitration in terms of clause 21 of the said Agreement. In terms of clause 21 of the said Agreement, dated lst April, 1965, we hereby nominate Shri R. N. Dhar, Solicitor of 12, Old Post Office Street, Calcutta-1 to be our Arbitrator and we request you to appoint an Arbitrator within seven days from the date hereof." This letter was received by the purchasers on 28th March, 1967. On 25th March, 1967, there was some telephonic communication between the parties with regard to the contents of which there is dispute. According to the purchasers, Mr. Garg, the Managing Director of the suppliers, agreed to go to Varanasi to try to settle the matter amicably, whereas according to the suppliers, Mr. Garg told Mr. M. B. Jagannath, Financial Advisor and Chief Accounts Officer of the purchasers that unless there were definite proposals which could redress the grievances of the suppliers, a visit to Varanasi would be pointless. On 30th March, 1967, Mr. M. B. jagannath addressed a letter to Mr. Garg in which he referred to the telephonic conversation and said that he was surprised to learn that Mr. R. N. Dhar had been appointed arbitrator by the suppliers as the matter could be discussed and settled amicably when the latter visited Varanasi on 10th April, 1967. Mr. K. L. Garg sent the following letter to Mr. Jagannath : "Kindly refer to your D. O. Letter No. 65/02-WI 156 of the 30th ultimo. I have already been to Banaras several times for the purpose of discussion of various claims of the Industrial Gases Ltd., against Diesel Locomotive Works, but unfortunately, nothing came out of such discussions. Very large sums of money are due to the Industrial Gases Ltd., From D. L. W. A tentative agree anent arrived at with your General Manager on one of the claims viz., Rentals, was also not kept by your office. There was no alternative, therefore, but to refer the matter to arbitration and this was done prior to your kind trunk call to me. There was no alternative, therefore, but to refer the matter to arbitration and this was done prior to your kind trunk call to me. Settlement is always welcome and I would request you to kindly let me have definite proposal on all outstanding claims so that I may discuss the matter with the board of Directors of the Company. Since the matter is already before the arbitrators, I can make this request, you will kindly appreciate, only without prejudice. As explained on trunks, I have no immediate programme of going to Banaras, but I may do so later after hearing from you. It will be a great pleasure to meet you and I look forward to it." Mr. Jagannath's reply to this, dated 20th April, 1967, is as follows : "When I spoke to you on phone on 25-3-1967, you gave me an impression that you would in all probability be visiting D. L. W. in the first week of this month and I was accordingly awaiting your visit with interest for discussing the various points of dispute between D. L. W. and your Company. As, however, you have now asked for definite proposals on all your outstanding claims, shall furnish shortly a note containing our views on all the items which require settlement according to you. It is, however, not clear to me how you have held that the matter is already before the arbitrators, as we still feel that the matter can be settled by mutual discussion and there is hardly any necessity to appoint an arbitrator at this stage." On 24th April, 1967, the Accountant of the suppliers sent the following letter to the General Manager of the purchasers : "We would draw your kind attention to our letter No. Banarasl 1164 10, dated 23rd March, 1967, advising you that we had nominated Shri R. N. Dhar, Solicitor, 12, Old Post Office Street, Calcutta-1, to be our Arbitrator and requesting you to appoint an Arbitrator within 7 clays from 23-3-1967. Although over 30 clays have since elapsed, no arbitrator has been appointed by you so, far. In the circumstances, we have appointed the said Shri R. N. Dhar to be the sole Arbitrator and have requested him to proceed with the arbitration. Although over 30 clays have since elapsed, no arbitrator has been appointed by you so, far. In the circumstances, we have appointed the said Shri R. N. Dhar to be the sole Arbitrator and have requested him to proceed with the arbitration. A copy of our letter, No. Banarasl, dated 18th April, 1967, addressed to Shri R. N. Dhar, Solicitor, is enclosed herewith for your information." Despite all this, Mr. Jagannath kept on talking of a discussion and amicable settlement and he sent another letter, dated 11th May, 1967, expressing the hope that the matter would be discussed and settled. On 22nd May, 1967, Mr. K. L. Garg sent the following letter to Mr. Jagannath : "I thank you for your letter D. O. No. 65/102-W/156, dated 11th May, 1967. What I requested you was (Sic) a definite proposal for settlement. What I have received, however, are objections sought to be raised by your office based on wrong facts and premises. These objections are one sided and they ignore our points and submissions. Some of the points now given were previously discussed with your Senior Officers and as I said earlier, even agreement on some of the points was not adhered to. Under the circumstances, it is best that the matter be decided by the Arbitrator who is already functioning. Your office may place their view points before him. A settlement is, however, always possible and welcome, I have no immediate programme of going to Varanasi but if I do, I shall be pleased to pay my respects to you and see if anything can be (lone to settle the issues. This is without any prejudice." It appears that thereafter legal advice was sought on behalf of the purchasers and the following letter was addressed to the suppliers by Mr. Jagannath :- "With reference to your letter No. Banarasll 19258, dated 24-4-1967, in the above matter, we have to point out that you have not considered the correspondence passed between yourselves and ourselves after you wanted arbitration and for the purpose nominated your arbitrator, but all of a sudden you by your aforesaid letter, dated 24-4-1967 have wrongly, illegally and unjustifiably served notice on the General Manager. Diesel Locomotive Works, Varanasi, U. P. inti- mating him your nominee Shri R. N. Dhar, Sole Arbitrator. Diesel Locomotive Works, Varanasi, U. P. inti- mating him your nominee Shri R. N. Dhar, Sole Arbitrator. We do not agree to this position, we have to point out that your first notice regarding arbitration No. Banarasl 116440, dated 23-3-1967 and thereby calling us to appoint an Arbitrator within seven days from the date of the said notice was illegal and not in accordance with the provisions of the Arbitration Act. As we find that you are adamant to have arbitration instead of settling the matter amicably, we do hereby nominate and appoint Shri K. Raman, Chief Design Engineer, D. L. W. our arbitrator. Please note that we do not in any circumstances agree to your nominated arbitrator to be the sole arbitrator. Please also note that we have claims against you and the same will be referred to the arbitrator in time for decision." To this, the following reply was sent on behalf of the suppliers : "Kindly refer to your letter No. 65 I 102 IWI 156, of 30th ultimo received on the 5th instant. We do not agree with you that we have not considered any correspondence. if you kindly indicate which particular correspondence we have not considered we shall be prepared to look into the matter. The correspondence has been going on for a long time but in spite of our repeated requests and representations made verbally and in writing nothing was done to settle our heavy claims. In the circumstances, we had no other option but to appoint an arbitrator in terms of the Arbitration clause contained in the contract and having done so we requested you to appoint an arbitrator. As you have failed to appoint an arbitrator within the time provided by statute and it appeared that you had no intention to settle the dispute we appointed the arbitrator appointed by us to be the sole arbitrator long after the time limit had expired. We are entitled to do so under the clear provision of the Arbitration Act and it is strange that you characterise such lawful action on our part as wrong, illegal and unjustified. Whether you agree to the appointment of Shri R. N. Dhar as the sole arbitrator or not is immaterial. He is the sole arbitrator in terms of the Arbitration Act and he has full power and authority to arbitrate. Whether you agree to the appointment of Shri R. N. Dhar as the sole arbitrator or not is immaterial. He is the sole arbitrator in terms of the Arbitration Act and he has full power and authority to arbitrate. We deny that any notice given by us is either illegal or is not in accordance with the provisions of the Arbitration Act. You have no right to appoint any arbitrator at this stage. Further and in any event it was never intended that you should appoint one of your sub, ordinates as the arbitrator. Such appointment of a subordinate officer at this stage clearly shows that the Department is bent upon having its own way and has clearly no bona fide intention to settle our claims. It is denied that you have any lawful claims against us and all such claims are hereby rejected." Mr. Jagannath thereupon wrote back saying that the purchasers were perfectly justified in appointing an arbitrator. Mr. K. Raman, the arbitrator nominated on behalf of the purchasers by the letter, dated 30th May, 1967, then wrote to Mr. R. N. Dhar, who, according to the suppliers, was the sole arbitrator, that he had been appointed arbitrator on behalf of the purchasers and that a date may lie fixed so that the two arbitrators could meet in order to nominate an umpire. Mr. Dhar's reply was that he was the sole arbitrator and that he had fixed 18th August, 1967 at 4.30 p.m. for the commencement of the proceedings of arbitration. 4. Thereafter the Union of India, through the General Manager of the purchasers, filed an application in the Court of the learned Civil Judge of Varanasi, under the proviso to Section 9 of the Arbitration Act, 1940 (hereinafter referred to as the 'Act') , praying that the appointment of Mr. R. N. Dhar as the sole arbitrator, be set aside. This application has been dismissed by the learned Civil Judge. Hence this application in revision. Section 9 of the Act is reproduced below : "9. R. N. Dhar as the sole arbitrator, be set aside. This application has been dismissed by the learned Civil Judge. Hence this application in revision. Section 9 of the Act is reproduced below : "9. Where an arbitration agreement provides that a reference shall be to two arbitrators, one to be appointed by each party, then, unless a different intention is expressed, in the agreement : (a) if either of the appointed arbitrators neglects or refuses to act, or is incapable of acting, or (lies, the party who appointed him may appoint a new arbitrator in his place; (b) if one party fails to appoint an arbitrator, either originally or by way of substitution as aforesaid, for fifteen clear days after the service by the other party of a notice in writing to make the appointment, such other party having appointed his arbitrator before giving the notice, the party who has appointed an arbitrator may appoint that arbitrator to act as sole arbitrator in the reference, and his award shall be binding on both parties as if he had been appointed by consent; Provided that the Court may set aside any appointment as sole arbitrator made under clause (b) and either, on sufficient cause being shown, allow further time to the defaulting party to appoint an arbitrator or pass such other order as it thinks fit. Explanation :-The fact that an arbitrator or umpire, after a request by either party to enter on and proceed with the reference, does not within one month comply with the request may constitute a neglect or refusal to act within the meaning of Section 8 and this section." Learned counsel for the applicant raised two contentions before me. The first was that there was no valid notice under Section 9 (b) of the Act after the appointment of Mr. R. N. Dhar, as arbitrator and that the suppliers were not entitled to appoint lair. R. N. Dhar as sole arbitrator and his appointment was, therefore, illegal. The second contention was that, in any event, sufficient cause had been shown for setting aside the appointment of Mr. Dhar as sole arbitrator under the proviso to Section 9 of the Act. 1 have already quoted the whole of Section 9 of the Act. All that it requires is that the appointment. The second contention was that, in any event, sufficient cause had been shown for setting aside the appointment of Mr. Dhar as sole arbitrator under the proviso to Section 9 of the Act. 1 have already quoted the whole of Section 9 of the Act. All that it requires is that the appointment. of an arbitrator should be made prior to the giving of the notice requiring the other party to the agreement to appoint an arbitrator and, in case the other party to the agreement does not appoint an arbitrator within fifteen days of the receipt of the notice, the party giving notice can appoint his arbitrator as sole arbitrator. I have reproduced the relevant portion of the letter, sent on behalf of the suppliers, dated 23rd March, 1967. It is clear from the contents thereof that Mr. R. N. Dhar was appointed arbitrator first and then there was a request that the purchasers may also appoint an arbitrator. The fact that the purchasers were asked to appoint an arbitrator within seven days of the date of the letter, will not make the notice, couched in the form of a request, invalid, because Mr. R. N. Dhar was not appointed sole arbitrator before the expiry of the statutory period of 15 days from the date of service of notice. Section 9 (b) does not prescribe the quantum of the interval that must intervene between the appointment of the arbitrator and the giving of the notice. All that is required is that the appointment must precede the giving of the notice, even though by a fraction of a second. The mere fact that information about the appointment and the notice, are contained in one and the same document, is of no consequence because the appointment was made prior to the giving of the notice. As the purchasers did not nominate their umpire within fifteen days of the receipt of the notice, the suppliers were well with their rights to appoint Mr. R. N. Dhar as sole arbitrator. 5. The validity of the notice under Section 9 (b) of the Act, has been challenged on one other ground. It has been argued that by means of the letter, dated 23rd March, 1967, the suppliers did not "appoint" Mr. R. N. Dhar as an arbitrator but merely "nominated" him and that nomination is not the same thing as appointment. 5. The validity of the notice under Section 9 (b) of the Act, has been challenged on one other ground. It has been argued that by means of the letter, dated 23rd March, 1967, the suppliers did not "appoint" Mr. R. N. Dhar as an arbitrator but merely "nominated" him and that nomination is not the same thing as appointment. In Drummond v. Hamer, 1942 (1) The All England Law Reports 398, an attempt was made to draw a distinction between "nomination" and "appointment". No opinion, however, was expressed by the learned judges of the King's Bench Division one way or the other. In Tew v. Harris, (1847) 11 Queen's Bench 7 : 100 English Reports 376 , the words "nomination" and "appointment" have been treated as synonyms. According to Webster's New International Dictionary, Second Edition, to nominate means "to name, or designate by name, for an office or place: to appoint: especially to name as a candidate for an election, choice, or appointment: to propose for office. I am, therefore, not prepared to hold that the nonce under Section 9 (b) of the Act was invalid because there was only a "nomination" and not an "appointment." 6. The second contention raised by the learned counsel for the applicant need not detain me long. He mainly relied on the correspondence reproduced above for the purpose of showing that the purchasers were negotiating for an amicable settlement and that the suppliers also mentioned, in at least two letters, that they would also welcome an amicable settlement. According to the learned counsel this constitutes sufficient cause. I do not agree. The fact that the suppliers said that they too would welcome an amicable settlement, did not mean that they had waived the rights conferred on them under the law. They were careful enough to say that the letter was being sent 'without prejudice'. If the officers of the purchasers continued to entertain a forlorn hope that the matter might be settled despite the firm stand taken by the suppliers, the least that can be said is that they acted unwisely by not appointing an arbitrator within the time allowed by law. I do not think that the Court below is wrong in holding that sufficient cause had not been made out by the applicant. 7. I do not think that the Court below is wrong in holding that sufficient cause had not been made out by the applicant. 7. Moreover, even if I feel that if I had been in the shoes of the learned Judge of the court below, I would have held that sufficient cause had been made out, I cannot substitute my views for those of the learned judge of the court below unless those views are perverse or absurd. The view that the learned judge of the court below has taken is a possible view and it cannot be said that it is perverse or absurd, see Hanuman Dass v. Prithvi Nath, A.I.R. 1956 Allahabad 677 and Manindra Land and Building Corporation Ltd. v. Bhutnath Banerjee, A.I.R. 1964 Supreme Court, Volume II, 1336. The learned judge of the court below has exercised his discretion and has refused to condone delay because in his view sufficient cause has not been shown. I cannot take a different view unless the exercise of that discretion is unreasonable or capricious. 8. No ground for interference in revision has, therefore, been made out. This application in revision is dismissed with costs. The stay order is vacated.