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1985 DIGILAW 177 (DEL)

AJAY INDUSTRIES LIMITED v. UNION OF INDIA

1985-04-29

D.R.KHANNA, MALIK SHARIEF-UD-DIN

body1985
D. R. Khanna ( 1 ) THIS is a petition moved under sections 32 and 33 of the Arbitration Act by M/s. Ajay Industries Limited against the Union of India seeking determination of the existence and/or validity and/or the effect of the arbitration agreement purported to be contained in A/t No. SR-4/504- 24/053/30-5-73/1/427/paoc dated 22. 11. 1973. ( 2 ) THE background is that the petitioner had submitted a tender on 28. 8. 1973 for supplying 9137 screw couplings to the Director General of Supplies and Disposals in response to invitation to tenders floated in the first week of the same month. It had been provided that the tenders submitted would remain open for acceptance till 13. 11. 1973. According to the Union of India, advance acceptance of the tender was sent to the petitioner on 13. 11. 1973 and formal acceptance followed on 22. 11. 1973. Some supplies were also said to have been effected. Since the rest were not forthcoming, the Director General exercised his power to effect risk purchase. Those purchases were effected and the resultant loss suffered was claimed from the petitioner. The petitioner disowned the same and rather pleaded that there was no concluded contract between the parties and that since the arbitration clause was part of the contract, the same also could not be treated as operative between the parties. ( 3 ) THE Union of India claimed that clause 24 of the general conditions of contract provided for arbitration and under the same the Director General of Supplies and Disposal has been made competent to appoint an officer in the Ministry of Law as also arbitrator. In terms of this clause, the Director General was requested by the Union of India to appoint an arbitrator. Mr. M. S. Mehta was as such appointed on 25. 11. 1976. No claim was put up before him by any of the parties and he resigned on 9. 1. 1977. The Director General then appointed Mr. Bakshih Singh as arbitrator on 11. 8. 1977. The Union of India submitted its claim before this arbitrator but the present petitioner in the counter-claim challenged his jurisdiction to proceed with the reference. It was contended that although the Director General was empowered to appoint arbitrator, he could not have made reference by himself. Appearance was therefore, made under protest. Bakshih Singh as arbitrator on 11. 8. 1977. The Union of India submitted its claim before this arbitrator but the present petitioner in the counter-claim challenged his jurisdiction to proceed with the reference. It was contended that although the Director General was empowered to appoint arbitrator, he could not have made reference by himself. Appearance was therefore, made under protest. During the proceedings before this arbitrator the time for making of the award expired and as such the arbitrator required the parties to obtain extension from the Court. This was not done and as such he resigned on 31. 5. 1979. Finally one Mr. P. B. Kaicker was appointed as arbitrator in July, 1979. The arbitrator has however, so far not proceeded further except the filing of the claim and counter-claim before him. In this counter-claim as well the petitioner has contested the jurisdiction of the arbitrator and the reference of disputes and differences to him. ( 4 ) IN the present petition under sections 32 and 33 of the Arbitration Act, the petitioner is assailing the arbitration agreement and also that the reference to arbitration was unilateral and not binding on them. It has also been pleaded that the abitration agreement does not subsist. The application is opposed from the side of the Union of India and it is pleaded that now the matter is pending before the arbitrator for recording of evidence, and that entire purpose of the petitioner is to delay the disposal of reference. It was due to the misconduct of the petitioner it is stated that the Director General had to effect purchase of the articles not supplied, from the open market which resulted in substantial loss. It is this loss which the Union of India seeks to claim from the petitioner. ( 5 ) ADMITTEDLY no application under section 20 of the Arbitration Act was moved by any of the parties before reference of the disputes and different to the arbitrator. As already noted above, the petitioner has challenged the reference before the arbitrator in the counter-claim which has been submitted. Thus the petitioner has not been voluntarily taking any step to participate in reference ? No acquiescence therefore, can be imported. As already noted above, the petitioner has challenged the reference before the arbitrator in the counter-claim which has been submitted. Thus the petitioner has not been voluntarily taking any step to participate in reference ? No acquiescence therefore, can be imported. ( 6 ) IT being clear that the petitioner was not agreeable to reference, the proper course open to the Union of India was to have moved the Court under section 20 of the Arbitration Act and sought reference. Unilateral reference could not be justified. Such reference was held as invalid by the Supreme Court in the case of Seth Thawardas v. Union of India1 Similar views were expressed in the Full Bench decision of this Court in P. C. Aggarwal v. Banwari Jal Kotiya2 and Madhubala Private Limited v. Naaz Cinema and others9. The controversy came before me as well in the unreported decision given in the case of Som Nath Chadha and Co. v. Union of India and another* That was also a case of reference under clause 24 of the General conditions of Contract by the Director General of Supplies and Disposals to an arbitrator without the consent of the other party. It was held to be invalid. ( 7 ) IN the circumstances, the reference already made by the Director General to the arbitrator has to be struck down. Let the Union of India move an application under section 20 of the Arbitration Act and seek reference since the present petitioner is not agreeable to the reference. If the Court orders reference, the same would be binding on both the parties and the petitioner will have no choice but to join the reference. In any such proceedings under section 20 of the Arbitration. Act, Mr. Khorana states that he will set up his case of the non-existence of the arbitration agreement or the non-conclusion of the main contract. It will be for the parties to establish their respective cases in that regard then, and if it is found that the arbitration agreement existed and is subsisting, the reference would be made. ( 8 ) IN view of this direction and the striking down of the unilateral, reference, Mr. Khorana does not press his other reliefs as claimed in this petition. He reserves his right in that regard in the petition which the Union of India will move under section 20 of the Arbitration Act.