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2000 DIGILAW 823 (DEL)

HIND BOOK HOUSE v. UNION OF INDIA

2000-09-15

S.N.KAPUR

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S. N. KAPOOR ( 1 ) FAO No. 42/76 Heard. ( 2 ) IN this case, the simple question which needs consideration is as to whether there was an arbitration agreement or not. ( 3 ) THERE are three undisputed facts: (I) The appellant sought arbitration by vide letter dated 10/03/1972; (ii) that letter was replied to by the respondents vide letter dated 11/04/1972 wherein it is mentioned that "as regards referring the matter to arbitration,we have no objection to this"; (iii) the respondents vide letter dated 22/06/1992 (Annexure-A) on the file of the learned trial court appointed Sh. O. P. Khanna, Under Secretary, CSIR, New Delhi, as the sole arbitrator in the matter in terms of Clause 5 of the 1916 Agreement and Clause (c) of 1968 Agreement. A copy of this letter was sent to the appellant also. ( 4 ) HOWEVER, as submitted by the learned counsel for the parties, the arbitrator did not act upon it and refused to act by letter dated 26/07/1972 (Annexure-D) in the appeal file. He sent a copy thereof to the petitioner also along wiih Secretary, CISR, New Delhi. ( 5 ) THE appellant thereafter failed to yet an arbitrator appointed. The respondents in stead of appointing arbitrator invoked the bank guarantee. The appellant moved an application under Section 20 of the Arbitration Act for appointment of an arbitrator. ( 6 ) THE respondents contend that there was no agreement of arbitration and therefore, the question of referring the matter to arbitration does not arise. The learned trial court has accepted the contention on the ground that the bank guarantee which was invoked did not incorporate any arbitration clause and that was totally independent of the arbitration clause. ( 7 ) SUBMISSION of the learned counsel for the petitioner is that the learned trial court had not considered the conduct of the respondents in not acting upon the directions issued by the Ministry incorporating arbitration clause and the conduct of the respondents in appointing arbitrator at the request of the appellant. ( 8 ) LEARNED counsel for the respondents Mr. Piyush Sharma opposes the relief sought by the appellant on the ground that there was no arbitration clause and the directions issued by the Ministry were not binding. ( 8 ) LEARNED counsel for the respondents Mr. Piyush Sharma opposes the relief sought by the appellant on the ground that there was no arbitration clause and the directions issued by the Ministry were not binding. Even if it is assumed for the sake of argument that there was arbitration agreement, it was a sole discretion of the Secretary to appoint or not to appoint any arbitrator. He also referred to clause 7 which provides as under: "it is also a term of these presents that no person other than a person appointed by the Secretary or administrative head of the Ministry or Department as aforesaid should act as arbitrator and, if for any reason it is not possible, the matter it not to be referred to arbitration at all. " ( 9 ) THE last feeble argument advanced by Mr. Piyush Sharma is that the appellant filed a suit earlier relating to bank guarantee and recovery of money. That suit was dismissed. But it is not in dispute that the appeal is pending. ( 10 ) HAVING heard the parties counsel I think that the first point raised by the learned counsel for the respondents regarding the maintainability of this appeal in view of the earlier suit and the pendency of the appeal. Mr. Piyush Sharma has very fairly conceded that since no reply could be filed the plea in that regard has not been taken up that the suit was barred by Order 2 Rule 2 or Section 10 or Section 11 Civil Procedure Code. In absence of such a plea this argument loses its force. Moreover, though written statement was filed, but in the written statement that objection was not taken. It two rights are available to the parties, one is to file suit to recover money and another is to seek arbitration, then a party who is to get money could seek remedy by both ways, specially when right to refer the matter to arbitration is in dispute. Otherwise the claim may be barred by time and the appellant may not be able to recover anything. But once the matter is referred to arbitration in terms of the arbitration agreement, then the respondents may have a right under old Section 34 of the Act to seek stay of the earlier suit or appeal as the case may be. Otherwise the claim may be barred by time and the appellant may not be able to recover anything. But once the matter is referred to arbitration in terms of the arbitration agreement, then the respondents may have a right under old Section 34 of the Act to seek stay of the earlier suit or appeal as the case may be. Consequently, the two causes of action are different and the petition for reference could be filed subsequently also. ( 11 ) NOW, coming to the existence of arbitration agreement, irrespective of the fact whether there was any direction from any Ministry or not once the appellant sought arbitration agreement in terms of an assumed agreement of arbitration and that assumed arbitration is not only accepted but acted upon by the respondents, the respondents were not left in a position to say that there was no arbitration agreement, for at least the letter dated 22/06/1972 read with letter dated 1 1/04/1972 and the directions of the Ministry do make out a very definite, clear and admitted case of arbitration agreement arising out of the correspondence signed by both the parties. Arbitration agreement need not be a formal agreement written on one paper signed by both the parties and it is not a Will which is required to be attested. No proof is required in this case, for arbitration agreement is proved by the correspondence exchanged and the conduct of the parties. ( 12 ) NOW, the question arises as to what step should betaken by this Court to bind the parties by their agreement as far as it may be possible. In this regard, in terms clause 7 of arbitration agreement which was acted upon by the parties referred to above the Secretary or administrative head of the Ministry or Department or his nominee could act as arbitrator. It was expected from the Secretary or administrative head of the Ministry to act as an arbitrator or to appoint another person to arbitrate the matters in dispute in between the parties. At this stage, since the Secretary or the administrative head of the respondent failed to act, two options are open. It was expected from the Secretary or administrative head of the Ministry to act as an arbitrator or to appoint another person to arbitrate the matters in dispute in between the parties. At this stage, since the Secretary or the administrative head of the respondent failed to act, two options are open. One is that the Court itself fills up the vacancy without giving any opportunity to the Secretary or the administrative head of the respondent to appoint any person as arbitrator and the other is to appoint an arbitrator of the Court after giving an opportunity to the administrative head or Secretary to fill up the vacancy in terms of the arbitration agreement as contained in the model agreement at pages 153 to 157 of the trial court record. ( 13 ) THIS Court opts for the second option, direct the Secretary or the Administrative Head of respondent No. 3 to appoint an arbitrator within four weeks from today. In case respondent. No. 3 fails to appoint within six weeks any person as arbitrator to consider the disputes in between the parties as were referred to Sh. O. P. Khanna, then this Court may itself appoint an arbitrator to go into those questions. ( 14 ) THE first appeal is disposed of accordingly.