CENTRAL COALFIELDS LTD v. RANITAL TRANSPORT — 1994 DIGILAW 122 (CAL)

N. K. BATABYAL, J. ( 1 ) THESE two applications in connection with matters coming under section 20 of the Arbitration Act arising out of two appeals are taken up together. In Special Suit No. 72 of 1991, the plaintiff/respondent alleged that they were entitled to several claims for being adjudicated upon by way of arbitration. The application was filed in respect of six different contracts corresponding to different work orders. The transactions relating to the said contracts were different and the arbitration agreement pertaining to the said Work Orders and contracts were clubbed together for a single reference. The other appeal arises out of Special Suit No. 73 of 1991 in which an application was filed in respect of four different contracts corresponding to four different Work Orders. The transactions relating to the said four contracts were different and the arbitration agreement pertaining to the said Work Orders and Contracts were clubbed together for a single reference. ( 2 ) PURSUANT to an invitation to tender, the plaintiff/respondent submitted its offer for the job of transport of coal from several collieries owned by the appellant to its washeries. Such offers were also submitted by other tenderers and on the basis of competitive bids given by the coal transport contractors, the plaintiffs offer was found to he acceptable and on the said basis, the plaintiff was awarded the contract for transport of coal upon observing all formalities. Letter of Intent and the Work Orders were issued to the plaintiff. The plaintiff also furnished Bank Guarantee by way of security as per the requirement of the contract. The work was completed and payments were accepted by the plaintiff/respondent without any protest. Final bills of the plaintiff/respondent for the subject contracts were processed after acceptance of the respondent and sent to the Area Accounts Office for payment. Deductions were made in terms of the contract and no amount had been unreasonably withheld or deducted. There were shortage of coal so supplied by the respondent. It was contended that the purported claims of the plaintiff/respondent for refund of the alleged amount were after thought. The sane controversy arose in Special Suit No. 73 of 1991 also. Deductions were made in terms of the contract and no amount had been unreasonably withheld or deducted. There were shortage of coal so supplied by the respondent. It was contended that the purported claims of the plaintiff/respondent for refund of the alleged amount were after thought. The sane controversy arose in Special Suit No. 73 of 1991 also. ( 3 ) THE main contention of the appellant is that the entire work and/or transaction had been carried out outside the jurisdiction of this Hon'ble Court and no part of the cause of action arose within the jurisdiction of this Hon'ble Court. Agreements for arbitrations were distinct having regard to tire different agreements or contracts and the said contracts or agreements for arbitration could not be clubbed together giving rise to a single reference. The further contention of the appellant is that the transactions under the contracts had long been closed and the plaintiff/respondent is trying to reopen the settled matters and there was no referable dispute as alleged that the suit and the application being out of time are barred by limitation. ( 4 ) AFFIDAVITS were filed by the parties and the application under section 20 of the Arbitration Act came up for hearing for final disposal before the learned single Judge of this Hon'ble Court on 20th July, 1993 when His Lordship was pleased to pass the impugned order by which a retired Judge of this Hon'ble High Court was appointed to adjudicate the disputes in the above matter. ( 5 ) BEING aggrieved by and dissatisfied with the said order passed by the learned single Judge of this Hon'ble Court on 20th July, 1993, the appellant has preferred this appeal. Apart from the question of limitation and want of the jurisdiction, the appellant has contended that the parties are governed by Clause 35 of the General Terms and Conditions of the agreement under which all disputes arising out of in any work relating to the contract shall be referred to the sole Arbitration of an Officer appointed by the Managing Director of the Company and the decision of which shall be final and binding and the provisions of the Indian Arbitration Act, 1940 will apply to such arbitration proceedings. The impugned order was passed in violation of the said General Terms and Conditions which has been marked Annexure "b" with the petition. The impugned order was passed in violation of the said General Terms and Conditions which has been marked Annexure "b" with the petition. Accordingly, disputes are only to be referred to the sole Arbitration of an Officer appointed by the Managing Director of the appellant company and his decision shall be final and binding. In terms of the impugned order dated 20th July, 1993, arbitration agreements are to be filed and the Arbitrator appointed is to adjudicate the alleged disputes in the matter. The appellant received a notice fixing 25-9-93 for settling preliminary matters. In the premises unless immediately an order of stay is granted, the appellant will suffer irreperable lose and injury and the sole purpose of the appeal will be frustrated. The balance of convenience is in favour of granting an order of stay. Hence this application for stay of operation of the orders dated 20th July, 1993 passed by the Hon'ble Single Judge of this Hon'ble Court in Special Suit No. 72 of 1991 and Special Suit No. 73 of 1991. ( 6 ) IN the affidavit-in-opposition filed in connection with the matter arising out of a Special Suit No. 72 of 1991, it has been alleged that the appeal is not maintainable since the impugned order against which the appeal is sought to be preferred was passed with the consent of the parties. In paragraph 3 of the affidavit-in-opposition, it has been stated that when the matter was taken up by the learned Single Judge of this Hon'ble Court on 20th of July, 1993, Mr. Barin Ghosh, learned Advocate appearing for the appellant in the court below agreed to the form of the order proposed to be passed. The order thereafter was written out on the back sheet of the brief of the learned Advocate-on-Record and the same was shown to Mr. Ghosh, learned Advocate appearing for the appellant. Mr. Ghosh made certain changes in the said order in his own hand-writing and thereafter appended his signature in the said back sheet, thereby signifying his consent to the said order on behalf of the appellant. The same was thereafter signed by Mr. Ghosh, learned Advocate appearing for the appellant. Mr. Ghosh made certain changes in the said order in his own hand-writing and thereafter appended his signature in the said back sheet, thereby signifying his consent to the said order on behalf of the appellant. The same was thereafter signed by Mr. P. K. Ghosh, learned Advocate appearing for the plaintiff/respondent in the court below, and the said back sheet duty endorsed and signed on behalf of the parties by their respective Advocates was handed up to the court on the basis of which the impugned order was passed. In the A/o it has been further stated that the appellant has conveniently changed his counsel and has sought to prefer the instant appeal against the said consent order. The other grounds taken in the petition regarding the maintainability of the appeal have been denied in the affidavit-in-opposition. ( 7 ) IN the affidavit-in-reply, in paragraph 3 (j), it has been stated that the appellant never agreed to the appointment of an arbitrator in violation of the Arbitration Agreement and that the appellant never empowered the learned Advocate appearing for the appellant to agree to a consent order for appointment of Arbitrator in violation of the arbitration clause. In subparagraph (k) of para 3, it has further been stated that the purported consent is not binding upon the appellant. The appellant was not aware of any endorsement being made on the back sheet as stated in the A/o. It has been emphasized that the impugned order was passed without jurisdiction and is a nullity and has no legal efficacy. ( 8 ) IN the other appeal filed in connection with Special Suit No. 73 of 1991, the same contentions have been raised by the parties. ( 9 ) THE short question which falls for our decision is whether the parties can agree to an appointment of an Arbitrator under Section 20 (4) of the Arbitration Act, 1940, though some one else is named in the agreement. In S. Rajan v. State of Kerala and Anr. , (1992)3 SCC 608 , it has been held that sub-section (4) of section 20 of the Arbitration Act says that the reference shall be to the Arbitrator appointed by the parties. Such agreed appointment may be contained in the agreement itself or may be expressed separately. In S. Rajan v. State of Kerala and Anr. , (1992)3 SCC 608 , it has been held that sub-section (4) of section 20 of the Arbitration Act says that the reference shall be to the Arbitrator appointed by the parties. Such agreed appointment may be contained in the agreement itself or may be expressed separately. Where the agreement specifies and names the arbitrator, it is obligatory upon the court, in case it is satisfied that the dispute ought to be referred to the arbitrator, to refer the same to the arbitrator specified in the agreement. It is not open to the court to ignore such an arbitration clause of the agreement and to appoint another person as an arbitrator. Only in cases where the arbitrator specified and named in the agreement refuses or fails to act or where the agreement does not specify any arbitrator and the parties cannot also agree upon an arbitrator, does the court get the jurisdiction to appoint an arbitrator. ( 10 ) IN Messrs. Dharnrajanal Gobindram v. Messrs. Shamji Kalidas and Co. , ( AIR 1961 SC 1285 ), it has been held as follows : ( 11 ) "this argument overlooks the fact that this is a statutory arbitration governed by its own rules, and that the powers and duties of the court in sub-section (4) of section 20 are of two different kinds. The first is the judicial function to consider whether the arbitration agreement should be filed in court or not. That may involve dealing with objections to the existence and validity of the agreement itself. Once that is done, and the court had decided that the agreement must be filed the first part of its powers and duties is over. It is significant that an appeal under section 39 lies only against the decision on this part of subsection (4 ). Then follows a ministerial act of reference to arbitrator or arbitrators appointed by the parties". ( 12 ) IT is obvious that once the court decides that a dispute ought to be referred to the arbitrator named, it is obligatory upon the court to refer the dispute to the arbitrator specified in the agreement and it is not open to the court to appoint any other person as arbitrator. ( 12 ) IT is obvious that once the court decides that a dispute ought to be referred to the arbitrator named, it is obligatory upon the court to refer the dispute to the arbitrator specified in the agreement and it is not open to the court to appoint any other person as arbitrator. This last part of the function of the court is in the nature of a ministerial work and only in those cases where the arbitrator specified and named refuses or fails to act does the court get the jurisdiction to appoint an arbitrator when the condition necessary for exercising that jurisdiction by the court are there. ( 13 ) ANOTHER point which has been argued before us is that once an order or judgment obtained by the consent of counsel has been drawn up and passed, it cannot form the subject of an appeal and cannot be set aside except in a fresh action brought for that purpose. In such an action the compromise may be set aside on a ground which would invalidate any other agreement between the parties, including mistake, illegality or duress, but not otherwise (Vide: Halsburry's Laws of England, Vol. 3 (1) paragraph 521 at page 542 ). It has also been argued on the basis of the principles laid down in Byram Peslonji Gariwala v. Union Bank of India and Ors. ( AIR 1991 SC 2234 ), that the words "in writing and signed by the parties" inserted in Order 23 Rule 3 of the C. P. Code Amendment Act, 1976 necessarily mean and include duly authorised representative and counsel. Thus a compromise in writing and signed by counsel representing the parties, but not signed by the parties in person, is valid and binding on the parties and is executable even if the compromise relates to matters concerning the parties but extending beyond the subject matter of the suit. ( 14 ) THE above contentions can hold little water in this case because no order was drawn up in this case when the appeals were filed and no compromise in writing has been filed by the parties. Hence we reject the contention of the learned lawyer for the plaintiff /respondent. ( 14 ) THE above contentions can hold little water in this case because no order was drawn up in this case when the appeals were filed and no compromise in writing has been filed by the parties. Hence we reject the contention of the learned lawyer for the plaintiff /respondent. In view of the legal position as discussed above, we are of the view that the court did not get jurisdiction to appoint an Arbitrator otherwise than the one named in the arbitration agreement in the peculiar facts and circumstances of the case. Accordingly we uphold the contention of the learned lawyer for the appellant. With the consent of the parties, the appeals are taken as on today's list and the two appeals and tire applications are disposed of by this order. The impugned orders are accordingly set aside. The appeals are allowed. This order will govern both the appeals arising out of Special Suit Nos. 72 and 73 of 1991. A. M. Bhattacharjee, CJ.-I agree. Appeal allowed.