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2001 DIGILAW 352 (PAT)

Sangita Housing Development Pvt. Ltd. v. Birendra Prasad Singh

2001-04-18

S.N.JHA

body2001
Judgment S.N.Jha, J. 1. These two miscellaneous appeals are directed against the judgment and order dated 31.3.93 passed by the Subordinate Judge 1st Court, Patna in Title Suit No. 406 of 1992 arising out of Misc. Case Nos. 1 of 1992 and 12 of 1992. The dispute relates to an arbitration award. The appellant filed Misc. Case No. 1/92 challenging inter alia, the jurisdiction of the Arbitrator. Meanwhile the Arbitrator pronounced the award. Misc. Case No. 12/92 was registered on the application of the respondent to make the award rule of the Court. After the appellant filed objection the case was converted into Title Suit. By the impugned judgment and order, the objection of the appellant was rejected, Misc. case No. 1/92 was dismissed and the suit i.e. Title Suit No. 406/92 was decreed in favour of respondent no. 1 i.e. the plaintiff. The facts giving rise to the dispute are as follows : 2. Plaintiff Shri Birendra Prasad Singh (hereinafter referred to as the respondent) owned and possessed a piece of land bearing M.S. Plot No. 1164 appertaining to Khata No. 64 of Tauzi No. 5225/14848 at Boring Canal Road in Patna town, measuring about 8840 sq. ft. having a double storied house over it bearing holding no. 277 within Circle No. 245 of the Patna Municipal Corporation. He entered into an agreement called Development Agreement with defendant M/s Sangeeta Housing Development Pvt. Ltd., a Private Limited Company, (hereinafter referred to as the appellant) on 26.8.87 for development of the property on certain terms and conditions. The appellant undertook to construct 24 flats of approximately 950 sq. ft. each, leaving out stairs, common space etc., and deliver possession of 25 percent of the saleable built up area to the respondent as consideration for the transfer of right, title and interest in the property in favour of the appellant. The choice of the 25 per cent built up area was to be mutually decided by the parties. As per the agreement if the appellant failed to construct 24 flats within the stipulated period he would be bound to deliver six flats or 6000 sq. ft. (approx.) built up area to the respondent out of the total number of flats constructed within the stipulated period. As per the agreement if the appellant failed to construct 24 flats within the stipulated period he would be bound to deliver six flats or 6000 sq. ft. (approx.) built up area to the respondent out of the total number of flats constructed within the stipulated period. There was also a condition that the appellant shall be liable to compensate the respondent in case of failure to construct and deliver the flats, to the extent of Rs. 18 lakhs and the appellant would have no claim over the property or the construction made thereon. The respondent was also entitled to 25 per cent of the garage, shops and open space besides the flats. The construction was to be made in accordance with the building plan sanctioned by the PRDA. The time was the essence of the Development Agreement and the appellant was bound to construct the building as per the sanctioned plan by 25.8.90 or within the extended period as mutually agreed upon. 3. The case of the respondent is that the appellant constructed only 14 flats8 out of which measuring built up area of 1300 sq. ft. and 6 measuring built up area of 1150 sq. ft. besides the stairs and common space. In course of construction also it did not stick to the sanctioned plan which gave rise to various litigations. It also attempted to construct a flat on the 4th floor without the consent of the respondent. All these gave rise to differences between the respondent and the appellant. On 7.1.89 the appellant informed the respondent that two flats having built up area of 1500 sq. ft. each and two flats having built up area of 1150 sq. ft. each were allotted to him. This according to the respondent was a clear violation of the Agreement. Further, without delivering six flats or 6000 sq. ft. built up area as agreed upon, the appellant started inducting persons in the remaining flats without the knowledge and consent of the respondent. When the respondent failed in his efforts to settle the differences with the appellant by mutual negotiation, he filed an application before (he Arbitrator named in the Agreement, Justice K.B.N. Singh, former Chief Justice of the Patna and the Madras High Courts, in terms of Clause 19 of the Agreement. According to the respondent, by violating the terms of Agreement the appellant lost its. According to the respondent, by violating the terms of Agreement the appellant lost its. rights over the property and construction made thereon and became liable to pay compensation of Rs. 18 lakhs. The respondent gave further details of the violation of the Agreement which it is not necessary to notice for the disposal of these appeals. 4. The case of the appellant is that pursuant to the Development Agreement dated 26.8.87 the respondent executed power of attorney in favour of the Managing Director of the appellant-Company on 3.11.87 but with respect to only 5 kathas 17 dhurs of land which comes to 1761 sq. ft. which was less than the area mentioned in the Agreement i.e. 8840 sq. ft. Thus, the area actually handed over to the appellant being less the respondent was not entitled to 6000 sq. ft. saleable built up area being 25 per cent of 8840 sq. ft. of land. The proportionate share of the saleable built up area on the basis of area handed over to the appellant on the basis of deed of power of attorney came to 5403.39 sq. ft. only out of which 5300 sq. ft. saleable built up area had already been delivered to the respondent comprising of flat no. 2 on the ground floor, flat nos. 102 and 103 on the first floor and flat no. 304 on the third floor. The respondent was thus entitled to the money value of the remaining 103.03 sq. ft. of built up area @ Rs. 270 per sq. ft. totalling Rs. 27,195.30 paise. As against this the respondent had already received sum of Rs. 1,50,000/- through cheques and pay orders on 11.3.88, 8.9.88, 18.10.88 and 1.12.88. After deducting the said amount of Rs. 27,195.30 paise from the amount paid to him, the respondent in fact was liable to pay sum of Rs. 1,22,804.70 paise. 5. A notice to the above effect was sent to the respondent by Advocate Birendra Kumar on behalf of the appellant on 7.9.91 to pay the amount with interest within 15 days of the service of notice. On 23.9.91 the respondent approached Justice K.B.N. Singh with an application to settle the disputes mentioned thereunder by arbitration in terms of the Agreement between the parties or to pass such other order or orders as may be deemed fit and proper. On 23.9.91 the respondent approached Justice K.B.N. Singh with an application to settle the disputes mentioned thereunder by arbitration in terms of the Agreement between the parties or to pass such other order or orders as may be deemed fit and proper. To complete the sequence of events it may be mentioned at this very stage that the respondent sent reply to the above said notice dated 7.9.91 by the appellant through Sri Janardan Prasad Singh, Advocate on 24.9.91 denying the claim of the appellant. Curiously no mention was made of the fact that respondent had already filed the above said application before Justice K.B.N. Singh a day earlier. 6. On 25.9.91 Justice K.B.N. Singh (hereinafter called the Arbitrator) informed the appellant that a reference had been made to him under clause 19 of the Development Agreement by the respondent for arbitration in the matter of differences and disputes arising out of or relating to the construction and terms and conditions of the said Agreement. The appellant was called upon to appear and file comments and objections. The appellant was informed that if it does not appear or fails to file any objection on the said date the arbitration would proceed exparte. An order to that effect was also drawn by the Arbitrator on 23.9.91. On 11.10.91 an application was filed by the Managing Director of the Company on behalf of the appellant-Company before the Arbitrator with a request not to proceed with arbitration and drop the proceeding pointing out, inter alia, that in terms of Clause 19 of the Agreement if there was difference between the parties each as party was supposed to appoint his arbitrator who may appoint umpire but the respondent without giving notice of intention to refer the alleged points for difference, had directly approached him i.e. Arbitrator. In these circumstances, he i.e. the appellant, did not consent to the illegal arbitration by him. The appellant also reserved its right to give reply on merit on the allegations which were described as wrong and misleading, as and when occasion arises. On 12.10.91 to which the proceeding was adjourned, documents were filed on behalf of the respondents who appeared through counsel; on behalf of the appellant application for adjournment till 27.10.91 was filed on the ground of non-availability of the lawyer on account of the Durga Puja. The proceeding was adjourned to 14.10.91. On 12.10.91 to which the proceeding was adjourned, documents were filed on behalf of the respondents who appeared through counsel; on behalf of the appellant application for adjournment till 27.10.91 was filed on the ground of non-availability of the lawyer on account of the Durga Puja. The proceeding was adjourned to 14.10.91. On 14.10.91 again application for adjournment was filed on behalf of the appellant. The Arbitrator heard the submissions of the Advocate on behalf of the respondent and fixed 21.10.91 for reply. It may be mentioned here that both on 12.10.91 and 14.10.91 the appellant was represented by one Sri Nand Kishore Prasad, Office Superintendent. On 21.10.91 and 22.10.91 the Arbitrator heard the counsel for the parties on the interpretation of Clause 19 of the Agreement under which reference had been made to him. On 24.10.91 he delivered a reasoned order overruling the objections of the appellant. He held that Clause 19 of the Development Agreement dated 26.8.87 constitutes arbitration clause within the meaning of Section 2(a) of the Arbitration Act and reference made under first part of Clause 19 of the Agreement was a valid reference, and there was no question of obtaining a fresh consent by the respondent from the other side i.e. the appellant in this regard. After the order was delivered prayer for adjournment was made on behalf of the appellant to file rejoinder to the main application dated 23.9.91. The Arbitrator granted time till 28.10.91 making it clear that no further time will be allowed for this purpose and both parties must file their respective documents, if any, by the date fixed, the documents would thereunder be admitted in evidence and marked exhibits and the proceeding will then proceed on merit. The application of the respondent for appointment of an Engineer Commission for measurement of the land as well as the constructed area was postponed to the next date for consideration. The Arbitrator also fixed his remuneration as well as the remuneration of P.A., Peshkar and Peon on the same day. In fact, on the same day sums of Rs. 10,000/- towards remuneration of the Arbitrator and Rs. 990/- towards remuneration of the staff were also paid on behalf of the respondent by Bank Draft dated 23.10.91. The Arbitrator noted that no such payment had been made by the appellant. In fact, on the same day sums of Rs. 10,000/- towards remuneration of the Arbitrator and Rs. 990/- towards remuneration of the staff were also paid on behalf of the respondent by Bank Draft dated 23.10.91. The Arbitrator noted that no such payment had been made by the appellant. On the next date i.e. 28.10.91 application was filed on behalf of the appellant for supplying copy of the above said order dated 24.10.91 on payment of cost. In the application it was stated that both the Managing Director as well as Senior Advocate were out of Patna. After hearing the submissions on behalf of the parties, the Arbitrator adjourned the proceeding to 2.11.91 reiterating his previous order regarding filing of the rejoinder, documents, if any, by the appellant. On 2.11.91 the documents produced by the respondent were admitted in evidence as exhibits. One Shri Bharat Prasad Singh was appointed as Engineer Commissioner. The application for copy of the order, however, was turned down on the ground that as the remuneration had not been paid either to the Arbitrator or the Office staff, there was no point in issuing copies of the orders. On 7.11.91 the Engineer Commissioner was directed to submit his report by 9.11.91. On behalf of the appellant an application was filed stating that its counsel had never agreed to bear the Arbitration cost because the arbitration proceeding was not valid and when the appellant had not accepted the Arbitrator, the question of paying arbitration cost did not arise. On 10.11.91 the Engineer Commissioner Shri Bharat Prasad Singh submitted his report. On 14.11.91 two applications were filed on behalf of the appellant. Accusing the Arbitrator of biased and indifferent attitude towards it the appellant informed him that hereafter it would not attend the proceedings. The appellant was informed that its acts amounted to misconduct under Section 11 of the Arbitration Act. While postponing the order on the said application, the Arbitrator examined the Engineer Commissioner as A.W. 1 and the respondent himself as A.W. 2, On account of paucity of time the hearing was adjourned to the following day. On the next date i.e. 15.11.91 the respondent filed rejoinder to the above said application of the appellant. The Arbitrator noted the absence of the appellant but as an indulgence adjourned the proceeding for the next day. On the next date i.e. 15.11.91 the respondent filed rejoinder to the above said application of the appellant. The Arbitrator noted the absence of the appellant but as an indulgence adjourned the proceeding for the next day. On 16.11.91 the Arbitrator noticed the absence of the appellant and after recounting the events observed that the appellant had appeared but ceased to contest the matter. Neither rejoinder to the main application nor any objection to the Engineers report had been filed nor the remuneration etc. had been paid to the Arbitrator or the staff and the Engineer Commissioner. In the circumstances, the Arbitrator heard the arguments on behalf of the respondent. On 21.12.91 he delivered his award. 7. In the meantime on 20.12.91 the appellant had filed Misc. Case No. 1/92 labelling the application under Sections 5 8, 11 and 33 of the Arbitration Act, 1940 seeking a number of reliefs including determination of the scope of Clause 19 of the Agreement, a declaration that there was no arbitration agreement and in any case, Justice K.B.N. Singh not being the duly appointed Arbitrator, had no jurisdiction to proceed with the arbitration and/or decide the issue regarding his jurisdiction. Alternatively, it was prayed that even if the reference is held to be valid, in the facts and circumstances the appellant may be granted relief to revoke the authority of the Arbitrator or he may be removed by the Court. 8. It so happened that on account of the employees strike in the Civil Courts at the relevant time, the aforesaid Misc. case was not taken up until 5.2.92. On 7.2.92 the case was admitted and notice was issued on 4.3.92. Meanwhile, it appears, the Arbitrator had sent his award to the concerned court, namely, the Court of First Subordinate Judge, Patna. On 9.3.92 the respondent filed application to make the award rule of the Court. The said application was registered as Misc. Case No.12/92. On notice the appellant appeared on 22.6.92 and filed objection to the award under Section 30 read with Section 33 of the Arbitration Act. The Misc. case was thereafter converted into Title Suit (T.S. No. 406/92) on 24.7.92. The two cases i.e. Misc. Case No. 1/92 and Title Suit No. 406/92 were amalgamated on 21.1.93. Case No.12/92. On notice the appellant appeared on 22.6.92 and filed objection to the award under Section 30 read with Section 33 of the Arbitration Act. The Misc. case was thereafter converted into Title Suit (T.S. No. 406/92) on 24.7.92. The two cases i.e. Misc. Case No. 1/92 and Title Suit No. 406/92 were amalgamated on 21.1.93. It is not necessary at this stage to refer to the course of events thereafter during the pendency of the suit in the court below except to mention that the cases were heard on a number of days on the point of (validity of) arbitration and condonation (of delay in filing objection to the award). After the hearing concluded, the parties filed their written arguments and the order was reserved on 26.2.93. After 2-3 adjournments finally the suit was decreed in favour of the respondent on 31.3.93. The award was made rule of the Court and Misc. Case No. 1/92 was dismissed with cost giving rise to these appeals. 9. The points formulated by the Court below for consideration were : (i) Whether in terms of Clause 19 of the agreement Honble Justice K.B.N. Singh can be said to be arbitrator or he was merely a conciliator? (ii) Whether there was any pre-existing dispute between the parties for referring the matter to the arbitrator? (iii) Whether there was any misconduct on the part of the arbitrator in giving the award? and (iv) Whether the objections taken by or on behalf of the defendants is barred by limitation? The court below decided all the points except the point of limitation in favour of the respondent. It held that Justice K.B.N. Singh was duly appointed Arbitrator and the reference was a valid reference; that dispute had arisen between the parties because the appellant had failed to deliver 6000 sq. ft. built up area to the respondent and he always avoided the measurement of the flats despite request by the respondent; that the allegation of bias was without any substance, there was no ground to hold that any substantial miscarriage of justice had occurred at the hands of the arbitrator. 10. The submissions advanced on behalf of the appellant in support of the appeals may be summarized as follows. Clause 19 of the agreement merely empowered Justice K.B.N. Singh to settle the differences. His role was that of a conciliator rather than arbitrator. 10. The submissions advanced on behalf of the appellant in support of the appeals may be summarized as follows. Clause 19 of the agreement merely empowered Justice K.B.N. Singh to settle the differences. His role was that of a conciliator rather than arbitrator. In the event of his failure to bring about any settlement, the parties were to appoint any arbitrator each and such arbitrators could jointly appoint an umpire, if need be, to arbitrate the dispute. There is distinction between difference and dispute. Unless the claim put forward by one party is specifically denied, for the purpose of arbitration dispute cannot be said to have arisen. In the present case, the respondent did not make any endeavour to settle the differences across the table. There was no specific denial of claim. Nor any attempt was made to reach a settlement. After the appellant served advocates notice on him putting forward certain claims, the respondent rushed for arbitration. There being no existing dispute, the arbitrator had no jurisdiction to enter upon reference and the entire proceeding before him was therefore without jurisdiction. No opportunity was given to challenge the authority of the arbitrator. After the objection was overruled, the appellant was even denied copy of the order so that it could effectively carry forward the challenge to the competent court, and after the appellant filed misc. case, inter alia, for revoking the authority of the Arbitrator, in haste he proceeded to deliver the award. The facts and circumstances show that the Arbitrator was biased against the appellant and conducted the proceeding with a closed mind. 11. On behalf of the respondent it was submitted that Clause 19 of the agreement clearly provided for arbitration by Justice K.B.N. Singh. Only in case of non-availability of Justice K.B.N. Singh occasion could arise to appoint arbitrator or umpire as provided in the latter part of the clause. The correspondence entered into between the parties vide Exts. 3 and 6 shows a pre-existing dispute and therefore, upon reference by either party, the arbitrator was competent to entertain the reference and arbitrate the dispute. In any case, the appellant initially participated in the proceedings, it was only after the report of the Engineer Commissioner came that he stayed away from the proceeding. The appellant cannot thus challenge the authority of the arbitrator. The allegations of bias and misconduct are without any substance. In any case, the appellant initially participated in the proceedings, it was only after the report of the Engineer Commissioner came that he stayed away from the proceeding. The appellant cannot thus challenge the authority of the arbitrator. The allegations of bias and misconduct are without any substance. The appellant having agreed to get the dispute resolved by Justice K.B.N. Singh, implying that he had faith in himwhether as mediator or conciliator or arbitratorthe appellant was required to say as to when and what made it lose faith in him. 12. On the arguments made by the counsel for the parties three questions arise for consideration : (i) Whether the role of Justice K.B.N. Singh as per Clause 19 of the agreement was that of conciliator or arbitrator. In other words whether Clause 19 of the agreement authorised Justice K.B.N. Singh to act as Arbitrator? (ii) Whether there was any pre-existing dispute which could be referred to for arbitration. In other words, whether there was valid reference of the dispute? (iii) Whether the Arbitrator committed any misconduct in conducting the proceeding? 13. At this stage Clause 19 of the agreement on which the answer to the first question rests may be quoted as under : "That in case of any difference arising out of or relating to the lands and constructions thereon covered by this agreement or arising out of this agreement will be settled by reference of dispute to the arbitration of Justice K.B.N. Singh (retired), S.K. Puri, Patna - 800 001. In case of any difference, the owners and the developer shall appoint one arbitrator each who shall jointly appoint one umpire, if needed, and arbitrate under the provisions of Arbitration Act 1940." 14. A pain reading of the clause would suggest that it consists of two distinct parts. While under the first part the parties agreed to get their differences setted by Justice K.B.N. Singh, under the second part they further agreed that they would appoint one arbitrator each who could appoint an umpire, if needed, to arbitrate under the provisions of the Arbitration Act. Upon literal interpretation of the clause, it would appear, there is an apparent conflict between the two parts because there cannot be two-tier arbitration in respect of the same dispute. The ascertainment of the intention of the parties in the circumstances, becomes essential. The normal rule of interpretation of deeds etc. Upon literal interpretation of the clause, it would appear, there is an apparent conflict between the two parts because there cannot be two-tier arbitration in respect of the same dispute. The ascertainment of the intention of the parties in the circumstances, becomes essential. The normal rule of interpretation of deeds etc. is to give plain, literal meaning to the words used, but sometimes there is dichotomy in the words used or the words are not sufficient to convey clearly that the two parties meant. In that case their intention has to be gathered. In Odgers Construction of Deeds and Statutes (5th Edition at page 31) it is stated "Ordinarily, parties use apt words to express their intention; but often they do not. The cardinal rule again is that clear and unambiguous words previal over any intention, but if the words used are not clear and unambiguous, the intention will prevail. We have seen that the most essential thing is to collect the intention of the parties from the expressions they have used in the deed itself. What if the intention so collected will not square with the words used? The answer is that the intention prevails." 15. Counsel for the parties not only differed in their interpretation of the clause but also suggested different ways of reading. On behalf of the appellant it was submitted that the Court should not read the clause in manner as to make one or the other part redundant. If the interpretation suggested by the respondent is accepted it would render the second part redundant or superfluous. In view of the clear violation of the parties to appoint one arbitrator each and, if needed, an umpire to arbitrate the dispute under the Arbitration Act, the role assigned to Justice K.B.N. Singh could not be that of arbitrator. Justice K.B:N. Singh was merely authorised to settle the differences between the parties and thus his role was that of a mediator or conciliator. On behalf of the respondent, on the other hand, it was submitted that the second part of the clause should be treated as redundant. The second part could come into play only in the case of nonavailability of Justice K.B.N. Singh under the first part. On behalf of the respondent, on the other hand, it was submitted that the second part of the clause should be treated as redundant. The second part could come into play only in the case of nonavailability of Justice K.B.N. Singh under the first part. As he was not only available, but had also entertained the Reference, there was no question of the parties appointing any arbitrator, or the arbitrators, so appointed, appointing any umpire under the second part. 16. In my opinion, it is not possible to accept the plea of redundancy and ignore the second part. The ordinary rule is to read the document as a whole. In the present context, thus, the clause ought to be read as a whole. It is true that where the words of the deed are not clear and specific, the court in order to give effect to the intention of the parties may sometimes supply words, sometimes discard words and sometimes transpose words. But this should be done only where it is not possible to cull out or ascertain the intention of the parties. The parties, in the present case are well educated persons. The respondent, in fact, is a retired High Court Judge. It is difficult to believe that he was not aware of the implications and being aware allowed the conflict to creep in. The words "in case of any differences the owners and the developers shall appoint one arbitrator each..... if needed "in the second part cannot be said to have been inadvertently used. By agreeing to arbitration by the arbitrators appointed by both parties and an umpire appointed by them, he cannot at the same time have intended that Justice K.B.N. Singh would act as arbitrator. 17. I am inclined, in the facts and circumstances, to think that both parties having faith in justice K.B.N. Singh, a retired Chief Justice of the Patna High Court and the Madras High Court, at one stage, what they intended was that differences between them relating to lands or construction etc. be settled by him. In case he failed to amicably settle the differences, the parties would appoint arbitratorsone each and the arbitrator so appointed would appoint an umpire, for arbitration under the Arbitration Act. So read, there would be no conflict between the two parts of the clause and both of them could be given effect to. be settled by him. In case he failed to amicably settle the differences, the parties would appoint arbitratorsone each and the arbitrator so appointed would appoint an umpire, for arbitration under the Arbitration Act. So read, there would be no conflict between the two parts of the clause and both of them could be given effect to. If on the other hand Justice K.B.N. Singh is regarded as the arbitrator, the second part would be rendered meaningless and otiose. It is true that the word arbitration has been used also in the first part but, in context, the expression seems to have been loosely used. In K.K. Medi V/s. K.N. Modi & ors. (1998) 3 SCC 573 (at page 589) the Supreme Court observed that mere use of the word arbitrator does not mean that the person concerned was to act as arbitrator. While laying down the attributes of arbitration the court held in the facts and circumstances that the Memorandum of Understanding did not envisage reference of the dispute to the Chairman. IFC! for arbitration, if only provided for reference of issues to an expert for decision. 18. If the clause is interpreted in the manner suggested above, it would follow that the role of Justice K.B.N. Singh was that of a mediator or conciliator, he could not assume the role of arbitrator. The arbitrator derives his authority under the agreement, if the agreement does not confer such authority he cannot assume it himself. The legal position has been lucidly stated in Russell on Arbitration in these words, "It might seem therefore that if the agreement between the parties is in effect and agreement to prevent disputes from arising and not an agreement as to how they are to be settled, then it is neither the agreement to refer to arbitration nor a submission to arbitration, and it is not within the Act." 19. The usual mechanism of resolution of dispute is through the process of Court. It is only when the parties agree to get the dispute resolved through arbitration that the person appointed by them (or by the Court) as arbitrator gets the authority to do so. In Khardah Company Ltd. V/s. Raymon & Co. The usual mechanism of resolution of dispute is through the process of Court. It is only when the parties agree to get the dispute resolved through arbitration that the person appointed by them (or by the Court) as arbitrator gets the authority to do so. In Khardah Company Ltd. V/s. Raymon & Co. (India) Pvt. Ltd., AIR 1962 SC 1810 the Supreme Court observed : "But what confers jurisdiction on the arbitrators to hear and decide a dispute is an arbitration agreement as defined in S. 2(a) of the Arbitration Act, and where there is no such agreement, there is an initial want of jurisdiction which cannot be cured by acquiescence." Though in a somewhat different context, earlier in Thawardas Pherumal V/s. Union of India, AIR 1955 SC 468 , it had said, "A reference requires the assent of both sides. If one side is not prepared to submit a given matter to arbitration when there is an agreement between them that it should be referred, then recourse must be had to the Court, under Section 20 of the Act and the recalcitrant party can then be compelled to submit the matter under subsection (4). In the absence of either, agreement by both sides about the terms of reference or an order of the Court under Section 20(4), compelling a reference, the arbitrator is not vested with the necessary exclusive jurisdiction." 20. The decision of the Kerala High Court in P. Narayhanan Nair V/s. E. Achuthan Nair, AIR 1974 Kerala 551 was relied upon by the counsel for both sides in this connection. The dispute in that case related to specification and demarcation of certain properties. Three had been an agreement between the parties earlier authorising inter alia, three persons to inspect and decide the dispute with stipulation that both parties would accept their decision. The plaintiff later filed suit for specification and demarcation of the suit property. The defendant objected to the maintainability of the suit on the ground that in terms of the agreement the only course open to the plaintiff was to seek decision through arbitration and that Section 32 of the Arbitration Act barred the suit. The plaintiff later filed suit for specification and demarcation of the suit property. The defendant objected to the maintainability of the suit on the ground that in terms of the agreement the only course open to the plaintiff was to seek decision through arbitration and that Section 32 of the Arbitration Act barred the suit. That section lays down, "notwithstanding any law for the time being in force........., nor shall any arbitration agreement or award be enforced ......otherwise than as provided in this Act." The objection of the defendant found favour with the trial court which dismissed the suit. On appeal by the plaintiff the High Court held that as the parties had merely agreed for mediation by the persons concerned, they cannot be called arbitrators within the meaning of the Arbitration Act and therefore, the bar of section 32 of the Act was not applicable. Repelling the defendants objection as to the maintainability the Court observed : "We do not think that the suit is one to enforce an award. The process of arbitration is the determination of a pre-existing dispute. Every agreement entered into for the purpose of avoiding a dispute cannot be said to be an arbitration agreement. If parlies are at variance on any issue, the issue has necessarily to be settled as between them. The process of reference to an arbitration could be agreed upon by the parties and in such cases the arbitrators award will be binding upon the parties to such agreement. But if it be that both parties agree that certain services will be rendered by mediators to settle matters which are not yet in dispute between them, but such settlement is desirable to avoid disputes in future, even though the persons who are appointed as mediators are styled as arbitrators they will not become arbitrators within the meaning of the Act." Amongst other the Court noticed the decision in In re Carus- Wilson and Greene (1886) 56 LJ QB 530. The following passage from the said decision may usefully be quoted : "There is an intermediate class of cases in which a person is appointed to determine disputes after they have arisen, but is not bound to hear evidence or argument. In those cases it may be more difficult to say whether the person is a valuer or an arbitrator. The following passage from the said decision may usefully be quoted : "There is an intermediate class of cases in which a person is appointed to determine disputes after they have arisen, but is not bound to hear evidence or argument. In those cases it may be more difficult to say whether the person is a valuer or an arbitrator. They must be determined according to the circumstances in each particular instance by the intention of the parties." 21. There being no agreement by the parties about arbitration by Justice K.B.N. Singh, or an order of the Court in that regard, he did not possess the necessary jurisdiction to arbitrate the dispute between the parties. Question no. 1 formulated above is accordingly answered in favour of the appellant and against the respondent. 22. Another sine qua non of a valid of reference to the arbitrator is the pre-ex- istence of dispute between the parties. The case of the appellant is that after it served notice putting forward certain claim on 7.9.91 the respondent rushed to Justice K.B.N. Singh with an application to arbitrate the dispute without making any endeavour for amicable settlement across the table or to even identify the dispute. The law on the point is settled that the jurisdiction of an arbitrator depends not upon the existence of a claim or accrual of a cause of action but upon the existence of a dispute. The dispute implies an assertion of a right by one party and repudiation thereof by the other party. On behalf of the respondent it was submitted that the letter of the appellant dated 7.6.89 and the endorsement thereon by the respondent (marked Exts. 3 and 3/a by the arbitrator) coupled with the notice dated 7.9.91 (Ext. 6) suggest a pre-existng dispute. As a matter of fact, it appears that the arbitrator also relied on these three documents in coming to the conclusion that there was a pre-existing dispute between the appellant and the respondent. The Court below too has relied on them to hold that there was valid reference to the arbitrator. I am unable to accept the submission of the counsel for the respondent. The letter dated 7.6.89 (Ext. 3) and notice dated 7.9.91 (Ext. 6) were in the nature of claim by the appellant. The Court below too has relied on them to hold that there was valid reference to the arbitrator. I am unable to accept the submission of the counsel for the respondent. The letter dated 7.6.89 (Ext. 3) and notice dated 7.9.91 (Ext. 6) were in the nature of claim by the appellant. Dealing with this aspect of the case the arbitrator stated in his impugned award as under : "It may be relevant to mention here that the developer, through his letter dated 7th June, 1989 (Exhibit 3) had intimated to the owner that four flats covering 5300 sq. ft. of built up area have been allotted to him and on this letter itself the owner put an endorsement (Exhibit 3/a) indicating that he could not agree for less than 6000 sq. ft. built up area in terms of the agreement (Exhibit 5) and that too after actual measurement, since the area indicated was not the built up area. In reply to the aforesaid notice (Exhibit 6) the owner, through his lawyer, stated by a communication dated 24th September, 1991 (Exhibit 7) that the total area of land in possession of the owner was 8840 sq. ft. over which there was already a double storeyed house existing consisting of eight living rooms, six verandas, four bath rooms, an out-house and a court-yard." From paragraphs 14, 15, 16 and 17 of the award it is evident that in coming to the conclusion that there existed a dispute between the parties, the arbitrator took into consideration, nay, relied on the. reply of the respondent dated 24.9.91 in response to the appellants notice dated 7.9.91. But it is to be kept in mind that before sending the said reply, on 23.9.91 the respondent had already made an application to the arbitrator to "settle the dispute mentioned hereunder by arbitration". In my opinion the jurisdiction of the arbitrator and the validity of the reference has to be determined with reference to the state of affairs as existing on the date of the reference and not on the basis of any subsequent development. There cannot be post-facto satisfaction about the existence of a dispute. The facts as existing on the date of the reference and disclosed in the application and, thus, brought to the notice of the arbitrator would determine whether there was any pre-existing dispute. 23. There cannot be post-facto satisfaction about the existence of a dispute. The facts as existing on the date of the reference and disclosed in the application and, thus, brought to the notice of the arbitrator would determine whether there was any pre-existing dispute. 23. Counsel for the appellant rightly pointed out that the "details of dispute and differences" mentioned in paragraph 14 of the reference application dated 23.9.91 were never put up before the appellant. According to the counsel, the respondent seems to have presumed on receipt of the notice dated 7.9.91 that there existed dispute but the dispute could be regarded as dispute for the purpose of arbitration only after the claim of the appellant vide notice dated 7.9.91 was repudiated. Without formal repudiation of the claim it cannot be said that there was a pre-existing dispute on 23.9.91 when the application for arbitration was filed, and the arbitrator committed error of law in relying on the subsequent reply of the respondent dated 24.9.91 for the purpose of holding that there existed dispute between the parties. I find substance in the submission of the counsel for the appellant. The endorsement (Ext. 3/a) on the letter dated 7.6.89 (Ext. 3) also cannot be construed as repudiation of claim. In any view such claim and counter claim were made in 1989 itself. Claims having been put forward by the appellant vide notice dated 7.9.91, in my opinion, it was incumbent upon the respondent to first repudiate the claim. Only if such repudiation failed to elicit any positive response that it could be said that a dispute existed between the parties. In business transactions it is usual to make claim and counter claim against each other. Unless one party knows what the claim of the counter claim of the other party is, there is no occasion for him to either accept or deny the same, or reduce his claim so that the area and extent of dispute is identified and referred to for arbitration. 24. In London & North Western & Great Western Joint Railway Companies V/s. J.H. Billington Ltd. 1899 AC 79 (HL), Lord Halsbury observed that before the arbitrator could enter upon the reference, it must be shown that a difference had arisen between the parties before the submission and, that the arbitrator would have jurisdiction only to adjudicate upon the particular difference which had arisen before the submission. If fresh differences arise after the arbitrator had entered upon the reference, the arbitrator cannot adjudicate upon them without a fresh submission. It would be useful to quote the following from the said decision : "A condition precedent to the invocation of the arbitrator on whatever grounds is that a difference between the parties should have arisen; and I think that must mean a difference of opinion before the action is launched, either by formal plaint in the country Court or by writ in the superior Courts. Any contention that the parties could, when they are sued for the price of the services, raise then for the first time, the question whether or not the charges were reasonable and that therefore they have a right to go to an arbitrator, seems to me to be absolutely untenable." In the same case, Lord Ludlow observed : "One matter about which I do desire to say a word.....is this......that this difference before action brought, and that it is too late.......afterwords to raise a difference which can be brought within the meaning of this section." In the above premises, 1 am of the view that the arbitrator committed error in treating the letter/reply dated 24.9.91 as repudiation of the appellants claim and assume on that basis that there existed a dispute between the parties. 25. In fairness to the respondent I must mention that apart from the decision in P. Narayanan Nair V/s. E. Achuthan Nair (supra), his counsel also relied on Uttamchand Saligram V/s. Mahmood Jewa Mamooji, AIR 1920 Calcutta 143, and Union of India V/s. Birta Cotton Spinning and Weaving Mills Ltd., AIR 1967 Supreme Court 688. He submitted that there need not be an express affirmation of assertion and denial and the same can be inferred from the conduct of the parties. There cannot be any dispute about the principle. But there is nothing on the record, at least brought to my notice, that there was any specific repudiation of claimby the respondent of the appellants claim or by the appellant of the respondents claimif the tetter dated 24.9.91 is excluded from consideration between 7.6.89 and 23.9.91 when the application was made to the arbitrator. 26. The second question in the facts and circumstances, also thus is answered in favour of the appellant and against the respondent. 27. 26. The second question in the facts and circumstances, also thus is answered in favour of the appellant and against the respondent. 27. It was submitted on behalf of the respondent that as the appellant had participated in the proceeding it is estopped from challenging the jurisdiction of the arbitrator and/or validity of the reference of the arbitration proceeding. The submission is totally misconceived. In view of the decision in Khardah Company Ltd. V/s. Raymon & Co. (India) Pvt. Ltd. (supra) there cannot be any dispute that where there is initial lack of jurisdiction in the arbitrator the defect is not cured by acquiescence. Dealing with this aspect it has been stated in Russell on Arbitration : "In cases where an arbitrator enters into the consideration of matters which are not referred to him, or which he has no jurisdiction to try, the ques tion is not one of waiver or estoppel, but of authority and a party continuing to attend the reference after objection taken and protest made does not give the arbitrator authority to make an award. If a party to a reference objects that the arbitrators are entering upon the consideration of a matter not referred to them and protests against it, and the arbitrators nevertheless go into the question and receive evidence on it, and the party, still under protest, continues to attend before the arbitrators and cross-examines the witnesses on the point objected to, he does not thereby waive his objection, nor is he estopped from saying that the arbitrators have exceeded their authority by awarding on the matter. Continuing to take part in the proceedings after protest made does not amount to be a consent." It may also be useful to notice the remarks of Lord Selborne L.C. in Hamlyn V/s. Betterlay, (1880) 6 QBD 63 as under: "In arbitrations, where a protest is made against jurisdiction, the party protesting is not bound to retire; he may go through the whole case, subject to the protest he has made." The above principle has been followed by courts in India in the cases of Chetandas Daga V/s. Radhakisson Ramchandra & ors. AIR 1927 Bombay, 533 and Rambaksh Lachmandas V/s. Bombay Cotton Company, AIR 1931 Bombay 81. AIR 1927 Bombay, 533 and Rambaksh Lachmandas V/s. Bombay Cotton Company, AIR 1931 Bombay 81. 28 As a matter of fact, in the present case, as noticed above, the jurisdiction of the arbitrator was challenged by the appellant at the very first instance, but its objection was overruled and unfortunately copy of the order was not supplied on grounds and in circumstances about which I feel diffident, depriving the appellant of the opportunity to carry forward the challenge to the Civil Court in good time. Much has been argued on behalf of the appellant about the conduct of the arbitrator, but in view of my conclusions on the first two questions, I do not think it is necessary to go into the question of misconduct or any other question. There being inherent lack of jurisdiction and the reference being invalid, the ultimate award must be treated as nullity and accordingly set aside. 29. Coming to the question of consequences of setting aside of the award, in view of my findings, there is no question of remitting the case to the court below for fresh decision. The only option to the parties is to go in for fresh arbitration, if so advised, through the arbitrators/umpire appointed in accordance with Clause 19 of the agreement. 30. In the result, these appeals are allowed, the award of the arbitrator dated 21.12.91 is set aside. Consequently, the order/decree of the court below making the award rule of the Court also is set aside leaving the parties free to appoint arbitrators for arbitration. There will be no order as to costs.