Corporation of India, Through Its Senior Regional Manager, Lucknow v. Karnail Singh
1986-07-25
B.N.MISRA, H.N.SETH
body1986
DigiLaw.ai
Judgment B.N. Misra, J. 1. THE Senior Regional Manager of the Food Corporation of India, Lucknow and the Managing Director of the Food Corporation of India, New Delhi, defendants nos. 1 and 2 respectively, I have filed this appeal against an order dated 16-12-1978 passed by the Civil Judge, Nainital, Camp at Haldwani, whereby he allowed the plaintiff's application under Section 20 of the Arbitration Act, No. X of 1940, (hereinafter referred to as the Act) and directed the defendant no. 2 to appoint a sole Arbitrator with in a period of two months failing which the Court was to appoint a sole Arbitrator to settle the dispute between the parties. 2. THE plaintiff entered into a contract with defendant no. 1 for transporting and stacking of goods as per terms contained in the contract which was initially effective for a period of two years from 1-6-71 and subsequently extended for one more year upto 1-6-74. THE plaintiff has alleged that he was not paid for several items of work and that his security amount was not refunded to him. According to the plaintiff, Rs.83,167.53 was due to him from the defendants. THE plaintiff asked the defendants to pay the amount claimed by him and also served a written notice dated 16-2-75 to appoint an Arbitrator for settlement of the dispute in accordance with the arbitration clause contained in the agreement between the parties. As the defendants failed to pay the plaintiff his dues or to appoint an Arbitrator, he filed an application to the Court on 13-9-1977 under Section 20 of the Act. THE plaintiff has prayed for the agreement to be filed in the court and for a direction do defendant no. 2 to appoint an Arbitrator and on his failure to do so, for appointment of an Arbitrator by the Court and reference of the dispute to the Arbitrator for decision. The defendants contested the plaintiff's application mainly on the grounds that the dispute as alleged by the plaintiff did not come within the terms of the agreement between the parties, that the application of the plaintiff under Section 20 of the Act was barred by limitation and that the plaintiff did not have a cause of action to seek relief from the Court as his bills for several items were still under consideration of defendant no. 1. 3.
1. 3. THE trial court on a consideration of the matter held that the dispute between the parties was covered by the terms of the contract and that the plaintiff's application had been filed within the period of limitation. Accordingly, the plaintiff's application was allowed and defendant no. 2 was directed to appoint a sole Arbitrator within a period of two months. It was further ordered that in case the defendant no. 2 failed to appoint the Arbitrator, the Court was to appoint the sole Arbitrator to settle the dispute between the parties. 4. IN course of his arguments learned counsel appearing for the appellants urged the same grounds which have been raised in the trial court. However, the foremost point which arises for decision is as to whether the present appeal is maintainable at this stage. IN this context it would be useful to extract the provisions of Sections 20 and 39 of the Act which have been amended by the U. P. Civil Laws Reforms and Amendment Act, 1976. The amended provisions read thus :- "20. Application to the Court for making reference :- (1) Where a person have entered into an agreement before the institution of any suit, with respect to the subject-matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that a reference be made according to agreement. (2) The application shall be in writing and shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested as plaintiff or plaintiffs and the remainder as defendant or defendants, if the application has been presented by all the parties, or, if otherwise between the applicant as the plaintiff and the other parties as defendants. (3) On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants, requiring them to show cause within the time specified in the notice why reference in accordance with the agreement should not be made.
(3) On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants, requiring them to show cause within the time specified in the notice why reference in accordance with the agreement should not be made. (4) Where no sufficient Cause is shown, the Court shall make an order of reference to the arbitrator appointed by the parties whether in the agreement or otherwise or where the parties cannot agree upon an arbitrator to an arbitrator appointed by the Court. (5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by the other provisions of this Act so far as they can be made applicable. Explanation : Where an arbitration agreement provides for reference to a person by name or designation, the fact that the arbitrator or umpire so named or designated is an employee of or is otherwise connected with one of the parties shall not by itself be deemed to be a reason for not referring the matter to the arbitrator or the umpire so named or designated." "39. Appealable orders :- (1) An appeal shall lie from the following orders passed under this Act and from none others to the Court authorised by law to hear appeals from original decrees of the court passing the order :- An order- (i) superseding an arbitration ; (ii) on an award stated in the form of a special case ; (iii) modifying or correcting an award ; (iv) Under Section 20, making or refusing to make a reference ; (v) staying or refusing to stay legal proceedings where there is an arbitration agreement. (vi) setting aside or refusing to set aside a award : Provided that the provisions of this section shall not apply to any order passed by a Small Cause Court.
(vi) setting aside or refusing to set aside a award : Provided that the provisions of this section shall not apply to any order passed by a Small Cause Court. (2) No second appeal shall lie from an order passed in appeal under this section but nothing in this section shall affect or take away any right to appeal to the Supreme Court." The maintainability of an appeal under Section 39 (iv) of the Act in circumstances similar to the present case was considered by this court in 1978 ALJ 1178 and this Court held :- "x x x x A perusal of the amended Section 20 of the Act clearly shows that under sub-section (4) thereof the Court is enjoined to make an order referring the dispute to arbitration either of the arbitrators appointed by the parties or where the parties are not able to agree, to an arbitrator appointed by it. Before making an order under Section 20 (4) of the Act, the Court must necessarily find out if the arbitrators have been named in the agreement and if not, it will have to ask the parties to nominate the arbitrators in accordance with the agreement and it is only after this has been done that an order under Section 20 (4) of the Act, referring the dispute to arbitrator can be made. In the circumstances, an order merely deciding that a dispute is to be referred to arbitrator does not amount to an order making a reference as contemplated by Section 20 (4). It is true that before making an order referring a dispute to the arbitrators appointed by the parties or to that nominated by the Court, the Court has to first resolve the controversy between the parties on the question as to whether the dispute can or cannot be referred to arbitration, and if it comes to the conclusion that it is to be so referred, it will have to ascertain the arbitrators to whom it can be referred and then make an order referring the dispute to the said arbitrators. An appeal under Section 39 can be filed only when the Court has determined the persons to whom the reference is to be made and has actually made an order referring the same to such persons. The section does not contemplate filing of an appeal at any earlier stage.
An appeal under Section 39 can be filed only when the Court has determined the persons to whom the reference is to be made and has actually made an order referring the same to such persons. The section does not contemplate filing of an appeal at any earlier stage. After the order referring the dispute has been made, it certainly will be open to the party filing an appeal against that order to show that in the circumstances the dispute should not be referred to arbitration and that if, for doing this it becomes necessary to question the correctness of reasoning contained in any earlier order which is not appealable It will also be able to challenge the validity of the earlier order as well An order dated 25-4-1978 which is under appeal does not contain any direction making a reference to named arbitrators, no appeal under Section 39 of the Act lies against that order and its validity cannot be questioned at this stage." 5. THE aforesaid decision has full application to the facts of this case. At present the decision of the trial Court that the dispute between the parties is to be referred to the arbitrator to be appointed by defendant no. 2 or by the court, does not amount to an order making a reference as contemplated by Section 20 (4) of the Act. As pointed out in the decision referred to above, an appeal under Section 39 (iv) of the Act can be filed only after the Court has determined the arbitrator to whom the reference is to be made and has actually made an order referring the dispute to him. In the present appeal the impugned order does not contain any direction of the court making a reference to any arbitrator and as such no appeal under Section 39 of the Act lies against the said order. THE impugned order cannot be questioned in appeal at this stage. 6. AS we have come to the conclusion that the appeal is not maintainable at this stage, it is accordingly dismissed. In the facts and circumstances of the case parties will bear their own costs of this appeal. Appeal dismissed.