MANAGING DIRECTOR M. P. STATE WAREHOUSING CORPORATION BHOPAL v. EVEREST CO-OWNERS
1995-04-20
DEVINDRA KUMAR JAIN, P.N.S.CHOUHAN
body1995
DigiLaw.ai
ORDER D. K. Jain, J. - The appellant Managing Director, M.P. State Warehousing Corporation, Bhopal, has filed this Miscellaneous Appeal under Section 39(1)(vi) of the Arbitration Act (hereinafter referred to as 'the Act') against. Everest Co-owners, A., B. and C., Pushparajnagar, Satna, challenging the judgment and decree dated 4-1-1993, passed in Miscellaneous Judicial Case No. 32 of 1990, as per which the Award given by the Arbitrator, was ordered to be made the rule of law, and all the objections, except the objection regarding the amount of interest, reaised on behalf of the present appellant/non applicant, were rejected and a decree for the amount of Rs. 3,57,500.00 together with interest at the rate of 12% per annum from the date of vacation of the godowns till filing of application for arbitration on this amount, and at the rate of 6% per annum from the date of application till realization, was granted and which is under challenge in this appeal. 2(i) Briefly stated, the facts leading to this appeal are that three godowns constructed under ARDC Scheme of Government of India, by the respondent, had been leased out to Food Corporation of India, for a period of five years, but much before the expiry of the lease period on 7-9-1982, the Food Corporation of India has sub-leased the same on short term basis to the present appellant. While handing over possession of the three godowns by the Food Corporation of India to the present appellant, it was noticed that the godowns had suffered certain breakges and shortages of fixures etc. and, therefore, as FCI godowns had been held to be in continuous possession of M.P. Warehousing Corporation, the FCI got the damages repaired, replaced/rebuilt in all respects by the M.P. Warehousing Corporation. In a joint inspection report with FCI, respondent and appellant, dated 8-9-1982, appellant accepted to repair and replace the damages. As the appellant wanted to retain the godowns, as such lease-deed agreement for five years between the appellant and the respondent was executed on 12-1-1983. (ii) On completion of this term, a joint inspection was held on 30-3-1988, which contained the list of damages as agreed and the same was signed by the three Senior Officers of the appellant and also by the respondent. The respondent made repeated requests to the appellant for payment of the damages, as assessed on 30-3-1988, but the same were unheeded.
The respondent made repeated requests to the appellant for payment of the damages, as assessed on 30-3-1988, but the same were unheeded. Thereafter the respondent filed an application under Sections 8 and 20 of the Arbitration Act, before the District Judge, Satna, which was registered as Miscellaneous Judicial Case No. 32/90. Reply to the aforesaid application was filed on behalf of the present appellant on 6-11-1990. The agreement dated 12-1-1983, regarding the taking of godowns on lease, was admitted in the reply filed on behalf of the present appellant in its entirety. (iii) In view of the arbitration clause in the agreement, the parties had agreed for arbitration and the name of Shri R. B. Lal Shrivastava, I.A.S. (Retired) was proposed by the present respondent. The Advocate appearing on behalf of the appellant wanted time to consult his party for obtaining the consent regarding the name proposed by the respondent to be the Arbitrator, but inspite of time being granted by the court, on the date 5-7-1991, the appellant and his counsel remained absent with the result that Shri R. B. Lal Shrivastava was appointed Arbitrator by the court and he was directed to submit Award by 11-11-1991. (iv) The appellant submitted an application dated 6-7-1991 under Section 33 of the Arbitration Act, which was taken on record. The respondent filed its reply on 8-8-1991. Appellant submitted a rejoinder which was taken on record on 9-9-1991, in which it was mentioned for the first time regarding non-registration of the lease-deed. Respondent submitted its reply on 9-9-1991. On 23-9-1991, appellant filed an application under Section 31(3) of the Arbitration Act, to stay the proceedings before the Arbitrator, but the same was rejected by the District Judge, Regarding the objections which were taken on behalf of the appellant, the District Judge held that the objections may be taken after submission of Award by the Arbitrator. (v) The appellant went up in appeal to the High Court against the orders dated 5-7-1991 and 27-9-1991 passed by the District Judge. The High Court vide order Dated 13-1-1992, disposed of both the Miscellaneous Appeal Nos.
(v) The appellant went up in appeal to the High Court against the orders dated 5-7-1991 and 27-9-1991 passed by the District Judge. The High Court vide order Dated 13-1-1992, disposed of both the Miscellaneous Appeal Nos. 481 and 482 of 1991 preferred by the present appellant and the order of the District Judge, regarding appointment of Shri R. B. Lal Shrivastava as a sole Arbitrator, was set aside and since the other appeal was regarding the various objections raised with respect to appointment of the Arbitrator it was held to be infructuous as the appointment of the sole Arbitrator has already been set aside. (iv) The respondent went up in appeal against the aforesaid order dated 13-1-1992 passed by the learned Single Judge of this court to the Supreme Court, after obtaining Special Leave. The Supreme Court allowed the appeal, vide Judgement dated 13-10-1992 and as per this Judgment, the Order of the District Judge regarding appointment of Arbitration was upheld and the order of the District Judge refusing to stay arbitration proceedings, was also upheld. In view of the fact that the Arbitrator has made an Award. The application for stay has become infructuous. (vii) The Award, given by the sole Arbitrator Shri R. B. Lal Shrivastava, was received by the District Judge, Satna, on 1-11-1991. The parties were heard regarding the objections filed in respect of the said Award, and the District Judge, Satna, vide Judgment dated 4-1-1993, passed in M.J.C. No. 32 of 1990 made the Award a rule of law, which is under challenge in this Appeal filed on behalf of the present appellant. 3.
The parties were heard regarding the objections filed in respect of the said Award, and the District Judge, Satna, vide Judgment dated 4-1-1993, passed in M.J.C. No. 32 of 1990 made the Award a rule of law, which is under challenge in this Appeal filed on behalf of the present appellant. 3. The first submission made on behalf of the appellant by his learned counsel, is that the agreement of lease dated 12-1-1983, required compulsory registration under Section 107 of the Transfer of Properly Act, and under Section 17(1)(b) of the Registration Act, 1908, and as the aforesaid agreement of lease was not registered, it could not have been received in evidence, because of the bar under Section 49 of the Registration Act, and, on this ground alone, the arbitration clause referred to in the agreement of lease, could not have been imposed, and that, this preliminary objection had been raised by the appellant before the District Judge, Satna, in Miscellaneous Judicial Case No. 32/90 in the Rejoinder of the reply and the same was raised under Section 33 of the Arbitration Act, 1940 (hereinafter referred to as 'the Act'). It was contended by the learned counsel for the appellant that the learned District Judge wrongly assumed that the entire controversy about the validity and enforceability of Arbitration Agreement and objection raised by the appellant-Corporation stood impliedly overruled by the Order of the Supreme Court; whereas, the Supreme Court had left open to the District Judge to decide the pending applications under Sections 33 and 30 of the Act. In support of the aforesaid submission, reliance has been placed on Om Prakash Chawla v. The Union of India (Vol. LXXIV-1972 The Punjab Law Reporter p. 52). The Punjab Law Reporter page 52), in which it has been held as under : "Arbitration Act (10 of 1940), Section 34 - Unregistered lease deed-Arbitration clause contained in Enforcement of - Proceedings cannot be stayed - Registration Act (16 of 1908) - Section 49. Held, that like the period of lease, the rate of rent agreed upon, the terms regarding repairs of the building and the renewal of the lease, the method of settlement of disputes forms an integral part of the lease, and none of the terms of the lease can be treated to be collateral transaction.
Held, that like the period of lease, the rate of rent agreed upon, the terms regarding repairs of the building and the renewal of the lease, the method of settlement of disputes forms an integral part of the lease, and none of the terms of the lease can be treated to be collateral transaction. Terms with regard to arbitration, being integral part of the lease deed, cannot be treated as collateral transaction, and where the lease deed is inadmissible for want of registration, the terms regarding reference to arbitration in case of a dispute, cannot be enforced and accordingly proceedings before a court cannot be stayed under Section 34 of the Arbitration Act. Reliance was also placed on (Choudhri Reghubir Singh v. Choudhri Umrao Singh (1912 Indian Cases page 500). In this case, after considering all the facts and circumstances and the evidence, it had been held that the agreement was inadmissible in evidence for want of registration. 4. In reply to the aforesaid submissions, made on behalf of the appellant, it was submitted by the respondent, represented by Gopalsharan Singh, that on behalf of the present appellant, written statement was filed on 6-11-1990 before the District Judge, Satna, in which the existence and validity of the agreement dated 12-1-1983 was admitted in its entirety. It was further contended that, in his application under Sections 8 and 30 of the Act, filed before the District Judge, he had suggested the names of the two Arbitrators and that, in the proceedings before the District Judge, the appellant was represented by his Advocate, who had agreed for arbitration and had participated in the proceedings and he had taken time to consult his partly for obtaining consent for the names of the Arbitrators from the appellant's side and, for this purpose, he had taken time. According to the respondent, he had then proposed the name of Shri R. B. Lal Shrivastava, I.A.S. (Retired), and, for this purpose, 15 days' time was again given to the appellant, but on the scheduled date, i.e., 5-7-1991, neither the appellant nor his Advocate attended the court and, hence, Shri R. B. Lal Shrivastava was appointed Arbitrator and he was directed to submit the award by 11-11-1991.
According to the respondent, the appellant submitted an application dated 6-7-1991 under Section 33 of the Act, which was taken on record in District Judge's Court on 10-7-1991 and that this application is nothing but English reproduction of his written statement dated 6-11-1990 and to this, the respondent had replied on 8-8-1991. The appellant had then submitted a Rejoinder which was taken on record on 9-9-1991, in which, for the first time, non-registration of the lease deed was mentioned. The appellant had filed an application on 23-9-1991 under Section 31(3) of the Act, to stay proceedings before the Arbitrator, but the same had been dismissed. However, the application under Section 33 of the Act, had been kept pending. Then the present appellant went up in appeal to the High Court against the orders of the District Judge dated 5-7-1991 and 27-9-1991 and the learned single judge of the High Court had set aside the order of the District Judge dated 5-7-1991 appointing the Arbitrator, while the order dated 27-9-1991 was declared to be infructuous. The respondent, then, went up in appeal to the Supreme Court and the order of the District Judge dated 5-7-1991 was upheld. It, was thus, contended that the appointment of the Arbitrator could not be challenged in view of the decision of the Apex Court. The respondent further submitted that the appellant accepted damages in the joint inspection report dated 30-3-1983 (Page 147 of the Paper Book). He had also accepted the lease deed agreement in its entirety with arbitration clause in his written statement dated 6-11-1990 (Page 157 of the Paper Book) and that, the appellant had agreed for arbitration and had also participated in the proceedings before the District Judge at the time of nomination of Arbitrator and, hence, under these circumstances, the appellant was precluded from objecting to the appointment of the Arbitrator. In support of his aforesaid submissions, the respondent placed reliance on M/s. Neelkantan and Bros. Construction v. Supdt. Engr. National High Way, Salem (AIR 1988 SC Page 2045 = 1989 (1) Arb. LR 34), and, after considering the facts of that particular case, it was held that if the parties to the reference either agree beforehand to the method of appointment, or afterwards acquiesce in the appointment made, with full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings.
LR 34), and, after considering the facts of that particular case, it was held that if the parties to the reference either agree beforehand to the method of appointment, or afterwards acquiesce in the appointment made, with full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings. Reliance was also placed on Jawahar Lal Barman v. Union of India ( AIR 1962 SC 378 ). The Apex Court had considered the scope, object and interpretation of Sections 28, 31, 32 and 33 of the Arbitration Act and observed as under : "The main object of introducing the provisions of Sections 31, 32 and 33 was to entrust the decision of the relevant disputes to the specified court and to require the parties to bring the said disputes for the decision of the said court in the form of petitions. Remedy by a regular suit is intended to be excluded. If a party affirms the existence of an arbitration agreement or its validity it is not open to the party to file a suit for the purpose of obtaining a declaration about the existence of the said agreement or its validity. Such a suit in terms is barred by Section 32. Section 33 consists of two parts. It is only persons who challenged the existence of the arbitration agreement that can apply under the first part of Section 33. Under the later part of Section 33, an application can be made to have the effect or purport of the agreement determined but not its existence. That means that an application to have the effect of the agreement can be made provided the existence of the agreement is not in dispute. Besides, if a person affirming the existence of an agreement is held entitled to apply to the court under the later part Section 33 for getting a declaration about the said existing agreement, then the first part of Section 33 would be wholly superfluous. Therefore, a party affirming the existence of an arbitration agreement cannot apply under Section 33 for obtaining a decision that the agreement in question exists.
Therefore, a party affirming the existence of an arbitration agreement cannot apply under Section 33 for obtaining a decision that the agreement in question exists. But having regard to the scheme of Sections 31, 32 and 33, it would not be unreasonable to hold that in matters which fall within the bar created by Section 32 if a suit cannot be filed it is necessarily intended that an application can be made and such an application can be made under the court's powers provided for by Section 31 and impliedly recognised by Section 32. On this construction Section 33 cannot be treated as exhaustive of all cases where applications can be made." 5. It was further submitted by the respondents that even an unregistered lease deed could be used for collateral-purpose. It was also submitted by the respondent that even in the appeal memo in Ground No. 3 it has been mentioned that the relief of damages may be collateral purpose. In support of the aforesaid submission that even an unregistered lease deed could be used for collateral purpose, reliance was placed on Sardar Amar Singh and another v. Smt. Surinder Kaur (AIR 1975 M.P. 330), Hamdasmmal v. Auaidappa (1991 SC Cases 715), and Union of India v. Kishorilal ( AIR 1959 SC 1362 ). From a perusal of the aforesaid citations, it is clear that even an unregistered document which requires compulsory registration, can be admitted in evidence for collateral purpose as per Section 49 of the Registration Act. In AIR 1959 SC 1362 (supra), it has been observed that an arbitration clause is a collateral term of contract as distinguished from its substantive terms but none the less it is an integral part of it. 6. A perusal of the record shows that in the application filed by the respondent under Sections 8 and 20 of the Act, before the District Judge, in para 1, he had specifically stated that the non-applicant had taken three godowns on rent from the applicant on 12th January, 1983 for five years, about which an agreement had been executed between them on 12th January, 1983, as per Annexure-A, and the averments made in para 1 had been accepted in full in the written statement filed on behalf of the present appellant. Thus, the existence of the agreement for lease executed by the parties on 12-1-1983 is not disputed.
Thus, the existence of the agreement for lease executed by the parties on 12-1-1983 is not disputed. It is also clear from the record that the District Judge, on 27-9-1991, had not decided the objection of the non-applicant/Corporation that the lease-deed dated 12-1-1983 is compulsorily registrable document under Section 107 of the Transfer of Property Act and under Section 17(1)(b) of the Registration Act, and, hence, cannot be used in evidence and this fact was also mentioned in the Judgment passed by the Supreme Court. The Supreme Court had upheld the appointment of the Arbitrator and, so, the appointment of the Arbitrator cannot be challenged by the appellant in this appeal. However, the effect of non-registration of the lease deed was not decided by Hon'ble the Supreme Court in the appeal, preferred on behalf of the respondent, on the ground that the case is already pending before the District Judge. 7. After a careful perusal of the case, cited by both the parties, it is clear that even an unregistered lease deed, which required compulsory registration, could still be admitted in evidence for collateral purpose. The existence of the written agreement for lease, dated 12-1-1983, was specifically admitted by the present appellant in the written statement, as already discussed above, and, so, if a party affirms the existence of an arbitration agreement or its validity it is not open to the party to file a suit for the purpose of obtaining a declaration about the existence of the said agreement or its validity and such a suit in terms is barred by Section 32 as was observed in Jawahar Lal Barman v. Union of India ( AIR 1962 SC 378 ). This would imply that a separate suit cannot be filed by a party concerned, if it has admitted the existence of arbitration agreement. Thus, even if a party had admitted the existence of the arbitration agreement, the party can still challenge its affect under Section 32 of the Act. It is also clear that, even a compulsorily registered document, if it is not registered, the same can be used for collateral purpose.
Thus, even if a party had admitted the existence of the arbitration agreement, the party can still challenge its affect under Section 32 of the Act. It is also clear that, even a compulsorily registered document, if it is not registered, the same can be used for collateral purpose. Considering the facts and circumstances of the present case, it is clear that the godowns, which has been taken on rent by the appellant from the respondent for a period of five years had been vacated and, so the only question was : whether according to the agreement dated 12-1-1983, the respondent was entitled to recover damages caused to the godowns at the time of vacation. The respondent had demanded the damages from the appellant, but the same were not paid, and, so he had applied in the court of District Judge, Satna, by filing a petition under Sections 8 and 20 of the Act, and, in these proceedings an Arbitrator was appointed, and who had been directed to give his award by 11-11-1991. From the record, it appears that the appellant had also appeared before the Arbitrator, but, later on, he had withdrawn from the proceedings and, thereafter, recording the evidence and after due consideration, he had passed an award in favour of the present respondent and the award has been submitted prior to the due date on 1-11-1991. Objections to the award had been invited and, thereafter, after hearing the parties, the District Judge, passed Judgment on 4-1-1993 in Miscellaneous Judicial Case No. 32 of 1990 making the award a rule of the court, which has been challenged by the appellant in this appeal. After considering the authorities cited by both the parties, we are of the clear opinion that even an unregistered lease deed, which requires compulsory registration, can be used for collateral purpose and, looking to the facts and circumstances of the present case, the same could be used for determination of the damages caused to the godowns, prior to its being vacated, as per the agreement dated 12-1-1983, the existence of which was clearly admitted by the appellant. In view of the above, we are unable to accept the aforesaid submissions made by the learned counsel representing the appellant, regarding the validity and effect of the agreement of lease in the present case. 8.
In view of the above, we are unable to accept the aforesaid submissions made by the learned counsel representing the appellant, regarding the validity and effect of the agreement of lease in the present case. 8. It was next submitted, on behalf of the appellant, that the District Judge, had overlooked the bias and misconduct of the Arbitrator. In this regard, the submission was that he had refused to stay the proceedings pending before him-although the appellant had preferred an appeal before this High Court, and, instead, he had passed an award. We have carefully perused the record and we are unable to accept the aforesaid submissions made on behalf of the appellant. In the absence of any stay order from the High Court the Arbitrator was not bound to stay the proceedings. It also cannot be said that, in order to favour the present respondent the Arbitrator had submitted the Award in a hurry because, from the record, it is clear that he had been directed by the District Judge to submit the Award by 11-11-1991. Therefore, bias on the part of the Arbitrator cannot be inferred just because he had submitted his Award on 1-11-1991. Beside this, it is also clear from the record that a joint inspection of the godowns of the respondent had been conducted on 30.3.1988 and the damages had been assessed in the presence of the officers of the appellant and the owner of the godowns represented by Shri Gopalsharan Singh. All this only goes to show that the appellant was just trying to create hurdles in the payment of damages to the godowns as claimed by the respondent. In view of the above, we are clearly of the opinion that there was absolutely no bias or misconduct on the part of the Arbitrator and was accept the finding of the District Judge, Satna, in this regard. 9. It was next submitted on behalf of the appellant, that the lease-deed agreement, dated 12-1-1983, does not provide any clause regarding interest and, therefore, the District Judge was in error in awarding prior interest and pendente lite interest, because, as per Section 29 of the Act, the court can only award interest from the date of the decree. We are not impressed by the aforesaid arguments. The District Judge has awarded interest on the amount of Rs.
We are not impressed by the aforesaid arguments. The District Judge has awarded interest on the amount of Rs. 3,57,500.00, together with interest at the rate of 12% per annum from the date of vacation of godowns till filing of the application for arbitration, and at the rate of 6% per annum from the date of filing of the application till realisation of this amount. Even according to the recent decision of the Apex Court, even the Arbitrator is granted power to award interest and, so, it cannot be said that the District Judge could not have awarded the pendente lite interest as had been submitted by the learned counsel for the appellant. In Secretary, Irrigation Department, Gout of Orissa v. G. C. Roy ( AIR 1992 SC 732 = 1992 (1) Arb. LR 145), the Apex Court has observed in para 45 as under : "Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (alongwith the claim for principal amount or independently) is referred to the Arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes - or refer the dispute as to interest as such to the Arbitrator, he shall have the power to award interest. This does not mean that in every case the Arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view." The aforesaid decision has also been followed in M/s. Jagan Nath Ashok Kumar v. Delhi Development Authority (AIR 1995 Delhi 87). Therefore, the Civil Court can award interest under Section 34 of the Code of Civil Procedure. Thus, a person deprived of the use of money to which he is legitimately entitled as a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. Considering all the facts and circumstances of the present case, the submission, made on behalf of the appellant by his learned counsel, on the point of interest, cannot be accepted.
It may be called interest, compensation or damages. Considering all the facts and circumstances of the present case, the submission, made on behalf of the appellant by his learned counsel, on the point of interest, cannot be accepted. It also cannot be said that the discretion exercised by the District Judge calls for any interference in this appeal on the ground that the discretion had not been judiciously exercised. 10. Lastly, it was submitted, on behalf of the appellant, that the M.P. State Warehousing Corporation is wholly owned and controlled by the State Government and is, therefore, a public undertaking under the M.P. Madhyastam Adhikaran Adhiniyam, 1983. It was further submitted that a contract about lease of godown, repairs of godowns and damages thereof, is a 'Works contract' as defined in the M.P. Madhyastam Adhikaran Adhiniyam, 1983, and thus, the dispute between the appellant and the respondent could have been adjudicated upon only by the Arbitration Tribunal established under the M.P. Madhyastam Adhikaran Adhiniyam, 1983, and, thus, the Civil Court had no jurisdiction and the decree passed by the District Judge and the entire arbitration proceedings are void and illegal. The aforesaid submission, made on behalf of the appellant, cannot be accepted, because no such objection regarding the jurisdiction was raised before the District Judge or before the Arbitrator and this objection is being raised for the first time in this Miscellaneous Appeal. Besides this, "Works contract" is defined in Section 2(i) of the Act, does not cover the claim in respect of damages which had been claimed by the respondent in respect of damages caused to the godowns-regarding which a joint inspection had been carried out as has already been discussed above. Definition of "Works Contract" is reproduced below for the sake of convenience : "Works contract means an agreement in writing for the execution of any work relating to construction, repair or maintenance of any building, or superstructure, dam, weir, canal, reservoir, tank, lake, road, well, bridge, culvert, factory, workshop, powerhouse, transformers or such other works of the State Government or Public Undertaking as the State Government may by notification, specify in this behalf at any of its stages, entered into by the State Government or by an official of the State Government or Public.
Undertaking or its official for and on behalf of such Public Undertaking and includes an agreement for the supply of goods or material and all other matters relating to the execution of any of the said works." Considering the aforesaid definition of "Works Contract", it is clear that the agreement of lease, executed in writing between the parties, does not relate to the execution of work relating to construction, repair or maintenance of any building etc. For the aforesaid reasons, we are unable to accept the aforesaid submission made on behalf of the appellant regarding the ouster of the Civil Court's jurisdiction-in-view of the M.P. Madhyastam Adhikaran Adhiniyam, 1983. 11. Although in the Memo of Appeal, running into 34 pages, other objections had been raised, but, at the time of arguments, the aforesaid points raised in the Memo of Appeal, were not pressed and arguments had been restricted only on the points discussed in this appeal. 12. In the result, we hold that there is no merit in this appeal, which is, accordingly, dismissed with costs. The Judgment and Decree passed by the District Judge, Satna, in Miscellaneous Judicial Case No. 32/90, is hereby confirmed. Counsel's fee Rs. 2,000/- (Rupees two thousand), if certified. Decree be drawn up accordingly.