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Himachal Pradesh High Court · body

2001 DIGILAW 206 (HP)

JERATH ELECTRONICS & ALLIED INDUSTRIES PVT. LTD. v. HIMACHAL PRADESH MAHILA VIKAS NIGAM

2001-08-23

KAMLESH SHARMA

body2001
JUDGMENT Kamlesh Sharma, J.-This petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, herein after called ‘the Act for appointment of arbitrator, has been filed by the petitioner - company. The case set up by the petitioner company is that as per bye-laws 5(b) of the respondent company, it is entitled to 4% relief on its total investment by way of subsidy for the financial years 1991 -92 and 1992-93, which has been wrongly and illegally denied giving rise to the dispute referable to arbitration as per clause 17 of the bye-laws. 2. It is stated in the application and additional affidavit filed in support of the application that the petitioner company is registered as Small Scale Unit with the General Manager, District industries Centre, Shimla, w.e.f. 13.12.1989. It availed financial assistance from HP. Financial Corporation to the tune of Rs. 48.79 lacs. It applied for grant of subsidy which was refused by the Director, Social and Womens Welfare, Himachal Pradesh, vide letter dated 23.8.1993, on the ground that the respondent - Nigam has decided to discontinue the subsidy under Clause 5(b) of the Bye-laws. In view of this letter, the petitioner-company again approached the Managing Director of the respondent-Nigam and requested for referring the matter regarding grant of subsidy for the financial years 1991-92 and 1992-93 to Arbitrator as per clause 17 of the Bye-Laws. Further reminders were sent on 3.1.1994, 8.8.1994 and 1.9.1995. Ultimately, on 11.9.998, the Financial Commissioner-cum-Secretary (Welfare), to the Government of Himachal Pradesh, sent reply that the petitioner company is not entitled to subsidy as its case has never been sponsored or financed by the respondent-Nigam. It is also stated in this letter that clause 5(b) of the Bye-Laws stood withdrawn w.e.f. 28.2.1992 by resolution of the Board of Directors, hence the petitioner-unit is not entitled to any type of subsidy. 3. In reply to the petition, the stand taken in letter dated 11.9.1998, Annexure-P-2, is reiterated. It is averred that in the absence of any arbitration agreement between the parties, the petition is not maintainable. In affidavit dated 27.3.2001 filed by the Managing Director of the respondent-Nigam, it is further stated that since the claim of the petitioner company was not in consonance with the policy and Bye-Laws, it was not entitled to any subsidy. Otherwise also, the financial position of respondent-Nigam is not such as to grant subsidy to the petitioner. In affidavit dated 27.3.2001 filed by the Managing Director of the respondent-Nigam, it is further stated that since the claim of the petitioner company was not in consonance with the policy and Bye-Laws, it was not entitled to any subsidy. Otherwise also, the financial position of respondent-Nigam is not such as to grant subsidy to the petitioner. In another additional affidavit of Shri T.D. Negi, Managing Director of respondent-Nigam, it is stated that the claim of petitioner is hopelessly barred by limitation. It is denied that letters dated 3.1.1994 and 8.8.1994, Annexure P-9 and P-10, were ever received in the office of respondent-Nigam. It is reiterated that since there is no agreement between the parties, the dispute raised by the petitioner-company is not referable to arbitration. 4. This Court has heard the learned Counsel for parties and gone through the record. The learned Counsel for the petitioner has urged that under Clause 5(b), the petitioner-company is entitled to subsidy at the rate of 4% on its total investment for the financial years 1991-92 and 1992-93 when the said provision was in existence and operative and the petitioner-company is eligible having employed 60% women in its unit. The plea that there is no arbitration agreement between the parties, has been taken in reply to the petition for the first time which is not sustainable as the bye-laws are representation to the general public that whosoever is eligible, would be granted subsidy under Bye-Laws 5(a) and 5(b) and once the petitioner-company make application for the subsidy and it is denied by the respondent-Nigam, arbitration clause is liable to be invoked. On the other hand, the learned Counsel for the respondent-Nigam has argued that there is no agreement between the parties as envisaged under Section 7 of the Act in the absence of which the petition is not maintainable. Assuming but not admitting that the bye-Laws is an agreement between the parties, the dispute is not referable to arbitration being hopelessly barred by time. It is also submitted that the case of the petitioner-company is not covered under Bye-laws 5(b), as the unit of the petitioner company was neither sponsored nor financed by respondent. The learned Counsel for the respondent has also taken preliminary objection that the application under consideration is not in consonance with Rule 2 of the Arbitration Rules and it deserves to be [dismissed on this ground alone. 5. The learned Counsel for the respondent has also taken preliminary objection that the application under consideration is not in consonance with Rule 2 of the Arbitration Rules and it deserves to be [dismissed on this ground alone. 5. After giving its best consideration this court is of the view that the dispute raised by the petitioner-company is referable to arbitration. The Bye-Laws of the respondent-Nigam are in the nature of representation to all those who were eligible for the subsidy under clauses 5(a) and 5(b) and the moment the eligible unit comes forward to claim subsidy and its claim is not considered, a dispute arises, the same is referable to arbitration as provided under Bye-Law 17. Bye-Law 17 is:- "In case of any dispute arising out of any provision of or in anyway touching or concerning these Bye-Laws, whatsoever, the mater shall be referred to the sole arbitration of the Secretary (Welfare) to the Govt. of Himachal Pradesh or his nominee acting as such at the time of reference. It will not be open to any party to object to such appointment that the arbitrator so appointed is a Govt. servant and he has to deal with matter to which these Bye-Laws relate and that in course of his/her duty as Govt. servant, he/she has expressed views on all or any of the matter in dispute or difference, the award of such arbitrator shall be final and binding or the parties." 6, Under Section 7 of the Act, Arbitration Agreement is defined as under:- "Arbitration agreement - (1) In this part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in: (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) an exchange of statements pf claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract." 7. No doubt there is no agreement signed by both the parties and the relationship between them is not contractual, yet as provided under subsection (1) of Section 7, the relationship between the parties does exist may not be contractual and the Bye-Laws of the respondent-Nigam being a representation to the general public do contain Arbitration Agreement by way of Bye-laws 17. This Arbitration agreement is between the management of the respondent-Nigam and all those with whom it is supposed to deal with and if any dispute arises between them, it is referable to Arbitration. The claim made by the petitioner-company alleging the existence of arbitration agreement and the defence raised by the respondent-Nigam not disputing the existence of clause 17, constitute Arbitration Agreement in writing. Therefore, the objection raised on behalf of the respondent that there is no Arbitration Agreement between the parties, is rejected. 8. Coming to the point of limitation, it is correct that the claim pertains to the years 1991-92 and 1992-93, but it was finally rejected on 11.9.1998 vide Annexure P-2 by the F.C.-Cum- Secretary (Welfare) to the Govt. of Himachal Pradesh from which date the present petition filed on 14.8.2000 is within the period of limitation as prescribed under Article 137 of the Limitation Act. Therefore, Prima-facie the claim of the petitioner is within limitation subject to ultimate decision by the Arbitrator. It is not in dispute that Clause 5(b) has been deleted vide resolution dated 2.8.1993. The claim of respondent-Nigam that it was deleted w.e.f. 28.2.1992 cannot be accepted, as Bye-Law giving substantive right to the parties cannot be withdrawn retrospectively. Therefore, this court is of the opinion that Bye- law 5(b) was in existence upto 2.8.1993 and the claim of the petitioner under Bye-law 5(b) can be considered by the Arbitrator. The perusal of Bye-Law 5(b) further shows that the claim of the petitioner is covered by it, provided it establishes its eligibility before the Arbitrator. Therefore, this Court is of the opinion that the dispute raised by the petitioner is referable to Arbitrator. The perusal of Bye-Law 5(b) further shows that the claim of the petitioner is covered by it, provided it establishes its eligibility before the Arbitrator. Therefore, this Court is of the opinion that the dispute raised by the petitioner is referable to Arbitrator. Since the named Arbitrator in the arbitration clause has finally rejected the claim of the petitioner, it will be just and proper to appoint another Arbitrator of the rank of Secretary to the Govt. of Himachal Pradesh. Therefore, the Financial Commissioner-cum-Secretary (Appeals) is appointed Arbitrator to adjudicate the dispute raised by the petitioner-company in accordance with law. 9. So far the judgment cited by the learned Counsel for the respondent. Tamil Nadu Electricity Board Vs. Sumathi and others, (2000) 4 Supreme Court Cases 543 is concerned, ft has been passed in the facts and circumstances of that case and it has no relevance to the case in hand. In Union of India and another Vs. M/S L.K. Ahuja and Co., AIR 1988 Supreme Court 1172, the learned Judges of the Supreme Court have categorically held that for reference to Arbitration, two things are required, firstly, whether there is a valid claim for reference and secondly, whether the claim to be adjudicated upon by the arbitrator is within limitation. So for the second contention is concerned, it is for the arbitrator to decide whether the claim is barred by limitation. (Also see: Major (Retd.) Inder Singh Rekhi Vs. Delhi Development Authority, AIR 1988 Supreme Court 1007). In the result, the present petition is allowed and the dispute raised by the petitioner is referred to Arbitrator i.e. Financial Commissioner-cum-Secretary to the Government of Himachal Pradesh. No order as to costs.