JUDGMENT Attau Rahman Masoodi, J. Dispute & Arbitration 1. Time is right to promote alternative redressal forums where parties choose to settle disputes arising within their contractual or social relationship through reconciliation or arbitration but at the same time law of the land must apply, except where parties of their own free will and being competent, waive their rights against each other. 2. The appellant through this appeal filed under Section 37 of the Arbitration Act, 1996 has assailed the judgement and order dated 6.8.2012 passed by the District Judge, Lucknow under Section 34 of the Act in Regular Suit No. 49 of 2009 insofar as it affirms the award rendered by the sole arbitrator on 3.12.2008 whereby the counter claim raised by the appellant for payment of licence fee against the respondent was rejected except to the extent of incidental charges incurred in the nature of electricity and water. 3. The parties herein had entered into an agreement on 19.8.2002 whereunder the respondent had agreed to provide cafeteria services in the OPD on a monthly payment of licence fee to the Institute for a period of five years. The agreement no. 31/2002-2003 was initially valid for two years w.e.f. 20.7.02 and being extendable by one year subject to satisfactory performance and verification by the monitoring committee and for a further period of two years subject to satisfactory performance and terms mutually agreed was accordingly acted upon. 4. For a period of five years when the agreement operated between the parties, no dispute, in fact, was ever raised in terms of the arbitration clause-22 which reads as under: "22. In the event of any dispute arising in connection with this agreement whether during the subsistence of the contract or thereafter, the matter shall be referred to the Director, SGPGIMS, Lucknow for arbitration. The Director may himself act as or nominate an officer of the Institute to act as an arbitrator whose decision shall be final and binding on the parties. The proceedings before the arbitrator would be governed by the provisions of the Conciliation and Arbitration Act, 1999." 5. The agreement between the parties under no clause was extendable beyond five years, yet rights and obligations stood held over between the parties beyond the stipulated period. The proceedings before the arbitrator would be governed by the provisions of the Conciliation and Arbitration Act, 1999." 5. The agreement between the parties under no clause was extendable beyond five years, yet rights and obligations stood held over between the parties beyond the stipulated period. According to the appellant, the holding over period i.e. 20.7.2007 to 19.3.2008 constituted an implied contract on the same terms and conditions as were existing prior to 20.7.2007 under the agreement dated 19.8.02 and enforceable; whereas the respondent has flatly denied any such contractual obligation to pay the licence fee whatsoever in respect of the OPD cafeteria services at the space provided and agreed to serve the institute. The respondent denies the liability on the strength of an intimation sent on 4.8.2007 refusing to continue services as per the pre-existing agreement which according to the appellant was duly replied on 30.8.2007 by re-enforcing the contract as per the terms of earlier agreement. The letter dated 30.8.2007 followed by another response on the part of respondent vide letter dated 13.9.2007 which expressed willingness to continue with cafeteria services but without any payment of licence fee due to the reason of running loss in business. The services stood held over beyond 20.7.2007 but payment of licence fee was not made till a notice dated 20.12.2007 was sent by the respondent terminating the contract in terms of the pre-existing agreement. The notice dated 20.12.2007 being relevant is extracted hereunder: "I am instructed and authorised by my client M/S S.C. Agarwala, a proprietary firm having its office at 42, Purana, Quila (Babu Banarshi Das Nagar) Lucknow to issue nd cause open you amongst the following notice: 1. That you and my client has entered with in an agreement no.-31/2002-2003, which was effected since from 20th July 2002 as per condition no. 34 of the said agreement. 2. That as per condition no. 1 and 2 of the agreement, the maximum limit of said contract was up to five years, which has been completed on 20th July 2007. 3. That as per agreement condition, institute should have arrange its services till the expiration of said contract i.e. 20th July 2007. But institute was failed to float the fresh tender notice. That as per my client I am service this legal notice for termination of this contract under the condition no. 3. That as per agreement condition, institute should have arrange its services till the expiration of said contract i.e. 20th July 2007. But institute was failed to float the fresh tender notice. That as per my client I am service this legal notice for termination of this contract under the condition no. 32 of said agreement, which says that, "THE CONTRACT COULD BE TERMINATED BY GIVING THREE MONTHS NOTICE BY EITHER SIDE." 6. The dispute arose when a legal notice was issued by the appellant on 28.2.08 seeking to recover the licence fee from the respondent in terms of the agreement dated 19.8.2002. 7. The above notice was replied by the respondent through a counter legal notice on 10.3.08 wherein the payment of licence fee was not only denied but on the contrary a claim for damages under various heads was raised against the appellant. The counter notice further mentioned that failure on the part of appellant to redress the grievance would lead to arbitration proceedings which shall be invoked as per agreement dated 19.8.2002 under the provisions of Arbitration Act, 1996. The dispute having arisen between the parties was referred to the sole Arbitrator by order dated 11.4.2008. The respondent raised the claims as under: "1. To immediately withdraw the illegal demand notice dated 28.2.2008 sent to my client. 2. Refund immediately the security deposit amount amount of Rs. 2,50,000/- illegally kept by your client. 3. Pay interest at bank rate on the security deposit amount from day of expiration of the contract, till date. 4. Pay amount for loss of revenue owing to illegal allotting other vent, @ Rs. 1 Lac per month from the date of termination of contract till date. 5. Pay interest @ 21% on the amount so arrived, to compensate my client who suffered both mentally as well as financially on account of contractual breach of your client. 6. Pay an amount of Rs. 5,500 towards cost of this notice." 8. The appellant on the other hand raised a counter claim before the Arbitrator for a sum of Rs. 14,33,880/- towards licence fee for a period w.e.f. 20.7.07 to 29.3.08 inclusive of interest past and future @ 18% as per the agreement executed on 19.8.2002 effective w.e.f. 20.7.2002. 9. Pay an amount of Rs. 5,500 towards cost of this notice." 8. The appellant on the other hand raised a counter claim before the Arbitrator for a sum of Rs. 14,33,880/- towards licence fee for a period w.e.f. 20.7.07 to 29.3.08 inclusive of interest past and future @ 18% as per the agreement executed on 19.8.2002 effective w.e.f. 20.7.2002. 9. The subject matter of the present appeal is confined only to the counter claim inasmuch as the claim of the respondent in its entirety was rejected by the sole Arbitrator and that part of the award remains unquestioned by the respondent. The present appeal is an outcome of the judgement passed by the District Judge, Lucknow under Section 34 of the Act in suit no. 49 of 2009 insofar as it relates to the rejection of counter claim pertaining to the period w.e.f. 20.7.07 to 19.3.08. The sole Arbitrator has rejected the counter claim by making the following observations : "The Respondent has filed a counter claim against the Claimant, the case of the Respondent that since the Claimant has acknowledged the letter of the Respondent by which it was to work till the alternative arrangements were made and as per the mutual understanding reached between the Respondent and the Claimant the Claimant was to work under covenants of the contract and the terms and conditions of the contract was equally applicable on the Claimant moreover since the Claimant has acknowledged the existence of the contract even after the expiry of the contract as is exemplified by the notice/letter dated 26.12.2007 (wrongly mentioned instead of 20.12.2007) purportedly written by Sh Kulbhushan Aggrawal, Advocate which quoted relevant provisions of the contract which manifestly forms affirmative acquiescence of the contract by the Claimant. Ld. Counsel for the Claimant has put forward the plea that there should be elementary constituents of the contract which is missing and as the claimant right from the beginning after expiry of the contract has made its stand clear to the Respondent by way of various correspondence which remained unanswered and as such there was no valid contract. In my view as per the submissions and the authority that Respondent can not unilaterally extend, create any contract and in the light of this fact, the claim of the Respondent stands rejected. In my view as per the submissions and the authority that Respondent can not unilaterally extend, create any contract and in the light of this fact, the claim of the Respondent stands rejected. I am conscious of the fact that the Respondent is an Institute which runs on public money and is primarily meant for public and I raised a specific query as to what could be the monthly expenditure on water and electricity in the area the cafeteria was functional. The Respondent has provided me details which on an average basis comes to Rs.12,320/- for electricity and Rs. 1,000/- on account of water consumption. Since the fact remains that Claimant did work for the period 20.07.2007 to 19.03.2008 and must have consumed the average electricity and water in the light of the fact I direct the Respondent to deduct Rs.97,739- and Rs.7,033/- on account of usage of electricity and water for the period mentioned above, from the security deposit of Claimant and refund the balance amount forthwith. Stamp Duty Calculation: - Security Deposit is Rs.2,50,000/- and the charges of consumed electricity is 97,739 and water charges is Rs.7033/- the total amount for deduction in security deposit is Rs.1,04,772/-therefore the amount for the payment of stamp duty comes to Rs.1,45,228/- (Rupees One Lac Forty Five Thousand Two Hundred Twenty Eight only) on which the stamp duty of Rs,1500/-@ Rs.10/- per thousand. In witness whereof the Parties to this Agreement have put their respective hands to this Agreement on this 3rd day of December, 2008 at Lucknow." 10. In the light of observations made by the sole Arbitrator, the civil suit filed under Section 34 of the Arbitration Act, 1996 was also dismissed by recording a specific finding as under: "......To my mind, when the contractor has written a letter prior to the letter dated 30 August 2007 written by the SG PGI taking a specific stand of not to continue to run the canteen on the similar terms and conditions existing during the five years of currency of the contract, how it can be said that the contractor had given his free consent to Institute for running a canteen. There is no evidence on record which would suggest that parties to the agreement were ever mutually agreed for continuation of running the canteen by the contractor even after the contract having been expired after lapse of the five years............. There is no evidence on record which would suggest that parties to the agreement were ever mutually agreed for continuation of running the canteen by the contractor even after the contract having been expired after lapse of the five years............. ................In the present case in hand also I do not find any where that the arbitrator had unlawfully assessed the evidence. He has given the reasons in support of the finding that the parties were not mutually agreed regarding extended terms of the contract. SG PGI authorities had unilaterally extended the terms of the contract to which the contractor has not given his free consent." 11. In support of the conclusion drawn, the court below has discussed the judgements placed reliance upon but has negated the claim on the ground of lack of a mutually consented agreement for continuation of running the services of cafeteria. Discussion 12. From a perusal of the judgement rendered by the Arbitrator and court below, it is quite clear that the counter claim relates to a period of time currency whereof falls beyond five years but it is specifically recorded that the respondent did work for the period from 20.7.2007 to 19.3.2008. 13. It is no more res integra that the factual questions collected by the Arbitrator are not open to judicial review under Section 34 of the Arbitration Act and consequently cannot be gone into in the suit proceedings even at this stage. The scope of appeal does not rest on a better footing than the scope of suit which is circumscribed within the ambit of Section 34 of the Act. Section 34 of the Arbitration Act has categorically restricted the scope of judicial review which cannot be undertaken beyond jurisdictional error or on the ground of fraud or a blatant misinterpretation of law affecting public policy. 14. In order to make out a case for interference, learned counsel for the appellant has candidly argued that the sole Arbitrator as well as the court below have failed to recognise the relationship between the parties to be that of an implied contract conditions whereof stood already laid down as per the agreement dated 19.8.2002 particularly when the respondent had himself terminated the relationship by notice dated 20.12.2007 referring to the same very agreement. It is urged that once the respondent has taken advantage of the said agreement for termination of contract, it would not be open to him to dispute its binding effect on rest of the terms. The position would have been different, learned counsel argued, if the respondent had withdrawn from his liability by giving a simple notice without availing any benefit under the previous agreement. 15. A question would also crop up as to whether the Arbitrator could assume jurisdiction in respect of a dispute pertaining the period of 'holding over' beyond five years simply because the respondent had worked to provide cafeteria services from 20.7.2007 to 19.3.2008. 16. From a bare perusal of the arbitration clause operating between the parties which has already been extracted above, it is clear that it applies to a dispute arising in connection with the agreement during the subsistence of the contract or thereafter. As to whether the arbitration clause would also enable the Arbitrator to settle disputes arising out of an implied contract unguided by any express terms; and as to whether mere termination of contract by notice dated 20.12.2007 and silence on the part of respondent to object to the jurisdiction of Arbitrator, the jurisdiction upon the Arbitrator under clause-22 can be construed to settle a dispute which falls outside the essence of time stipulated in the agreement, thus being relevant issues, call for an answer. The jurisdiction of the Arbitrator to entertain a claim is the first and the foremost issue in an arbitration proceeding which is to be construed in terms of the agreement between the parties, therefore, the question being significant calls for consideration. 17. Arbitration clause in an agreement, may be rigid or purposive. Such a clause is an independent covenant in itself. A rigid arbitration clause would not leave scope for arbitration in respect of other disputes which strictly do not arise within the essence of time stipulated in the agreement, but a purposive clause would encompass all disputes arising out of a contractual relationship owing its existence to an agreement and the essence of time becomes immaterial. The purposive intent of the arbitration clause is reflected from clause 29 of the agreement which reads as under: "29. That all disputes shall be settled through Arbitration only and it shall not be open to the either of the parties to take resort to any Court." 18. The purposive intent of the arbitration clause is reflected from clause 29 of the agreement which reads as under: "29. That all disputes shall be settled through Arbitration only and it shall not be open to the either of the parties to take resort to any Court." 18. A conjunctive reading of clause 22 with clause 29 of the agreement leaves no room for doubt that the parties had resolved to subscribe to arbitration in relation to all the disputes arising out of the contractual relationship even if it relates to the period of 'holding over' beyond five years for which the agreement was entered into. 19. In the circumstances of the case it is held that the arbitration clause being couched with the terminology of purposive construction did enable the arbitrator to go into the dispute of counter claim, which arose beyond the stipulation of time prescribed in the agreement. 20. The nature of contract giving rise to counter claim is yet another issue to be addressed in the light of the findings recorded by the Arbitrator keeping in view law of the land. 21. To appreciate the issue, the Court is to be guided by the findings recorded by the Arbitrator and re-appreciation of evidence is impermissible. At the appellate stage, this Court would decline to probe the questions of fact or re-appreciate the evidence. The appellant in order to establish his grievance drew attention of the Court to Section 70 read with other provisions contained in Chapter V and VI of the Contract Act. The appellant cited the following case laws: 1. ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 ; 2. Centrotrade Minerals and Metals Inc. v. Hindustan Copper Ltd., (2006) 11 SCC 245 ; 3. Phulchand Exports Ltd. v. O.O.O. Patriot Ltd. (2011) 10 SCC 300 ; 4. Shri Lal Mahal Ltd. v. Progetto Grano Spa, (2014) 9 SCC 433; 5. O.N.G.C. Ltd. v. Western Eco International Ltd. (2014) 9 SCC 263 ; 6. Board of Control for Cricket in India v. Cricket Association of Bihar (2015) 3 SCC 251 ; 7. Haji Mohd. Ishaq v. Mohd. Iqbal and Mohd. Ali & Company, (1978) 2 SCC 493 ; 8. N. B. Krishna Kurup v. Union of India, (2005) 12 SCC 261 ; 9. Excise Commissioner v. Issac Peter, (1994) 4 SCC 104 ; 10. Board of Control for Cricket in India v. Cricket Association of Bihar (2015) 3 SCC 251 ; 7. Haji Mohd. Ishaq v. Mohd. Iqbal and Mohd. Ali & Company, (1978) 2 SCC 493 ; 8. N. B. Krishna Kurup v. Union of India, (2005) 12 SCC 261 ; 9. Excise Commissioner v. Issac Peter, (1994) 4 SCC 104 ; 10. Shyam Lal v. State of Punjab, (1977) 1 SCC 336 . 22. On the contrary, learned counsel for the respondent disputing any contractual obligation has submitted that the courts ought to be cautious of its limitations. He has relied upon the following case laws in support of his contentions: 1. State of Maharashtra v. Hindustan Construction Co. Ltd. (2010) 4 SCC 518 ; 2. M/s H. M. Kamaluddin Ansari & Co. v. Union of India and others, AIR 1984 SC 29 ; 3. Housing and Urban Development Corporation v. Leela Hotels Ltd., (2011) 12 SCC 724; 4. State Trading Corporation of India v. M.S. Toepfer International, 2014(5) R.A.J. 301 (Delhi); 5. Rashtriya Ispat Nigam Ltd. v. M/s Dewan Chand Ram Saran, (2012) 5 SCC 306 ; 6. Mcdermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 ; 7. Shree Vinayak Cement Clearing Agency v. Cement Corporation of India, 147 (2007) DLT 385; and 8. Union of India v. Bikram Singh Findings 23. Bearing in mind the principles enunciated in the case law cited by the parties and having regard to the finality of the findings, the Court proceeds to record as under: 24. It is sufficiently gathered from the findings recorded by the Arbitrator that the respondent has worked from 20.7.2007 to 19.3.2008. This finding has remained unchallenged by the respondent. The finding of fact was a sufficient premise to construe the relationship between the parties to be that of an implied contract but the Arbitrator as well as court below failed to attach any meaning to the own finding so recorded which certainly defeats the object of the provisions contained in Chapter V and VI of the Contract Act, 1872 and in particular Section 70 read with Section 73 and 74. Therefore, the learned Arbitrator having found the respondent to have worked from 20.7.2007 to 19.3.2008 failed to apply law of the land so as to award licence fee in favour of the appellant which was stipulated under the agreement and continued to be a part of liability during the entire period of service. The agreement stipulated an unequivocal condition of payment of licence fee which was not linked to the loss or gain made in business by the respondent but was rather dependent upon the actual working of the opposite party which fact is sufficiently recorded in the impugned award of the sole Arbitrator and left unnoticed by the court below. Public policy requires a party to be dutiful to his rights and obligations. 25. Once it is conclusively recorded that the opposite party had worked from 20.7.2007 to 19.3.2008, a contrary finding that there was no contract between the parties or the contract could not be unilaterally extended, in my humble opinion, is against the spirit of law contained in Chapter V and VI of the Contract Act. A violation of law within the scope of Section 34 of the Act, therefore, is made out and such an opinion is disapproved. The sole Arbitrator in order to uphold the majesty of law must revisit the issue in the light of evidence and determine the claim of licence fee in the light of attending circumstances afresh. To this extent, the appeal filed by the appellant is allowed and the matter is remitted to the sole Arbitrator for decision on the issue of licence fee independently afresh. The mistake of any party, if any, is also open to be dealt with in accordance with law. Parties shall appear before the sole Arbitrator for which notice of the date fixed shall be issued. The matter shall be dealt with expeditiously. 26. The appeal is accordingly allowed with no order as to cost.