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2020 DIGILAW 1284 (ALL)

Motilal & Sons Through Partner Rahul Rastogi v. M. D. U. P. Cooperative Sugar Factories Federation Ltd.

2020-11-04

ALOK MATHUR

body2020
JUDGMENT : 1. Heard Sri Vidhu Bhushan Kalia, learned counsel for all the applicants as well as Sri Sudhanshu Chauhan for the respondent through video conferencing in view of COVID-19 pandemic. 2. Since by means of instant applications all the applicants have approached this Court under Section 11 of Arbitration and Conciliation Act, 1966 for appointment of a sole arbitrator for adjudication of the dispute with the respondent and, thus, involve common questions of facts and law, hence, they are being decided by this common judgment and order. 3. It has been submitted that the applicants are agents, authorized and appointed by U. P. Cooperative Sugar Factories Federation by means of similar agreements entered into, between the applicants and U. P. Cooperative Sugar Factories Federation Ltd. on different dates i.e. 1.9.2015, 4.11.2016, 27.9.2017, 5.9.2018, 4.11.2016, 3.10.2015, 12.10.2016, 30.10.2017, 30.10.2017, 30.10.2017, 2.2.2017, 21.12.2016, 31.8.2015, 16.11.2016, 30.10.2017, 21.12.2016, 21.8.2015 17.5.2015 and 21.8.2015 respectively for a period of three years. 4. According to the terms of the agreement, the applicants (agents) were to sell and dispose of the sugar offered to it to the best advantage of the concerned factories for maximum price obtainable in the market. It has been submitted that certain differences arose between the applicants and the respondent with regard to supply, rate and payment pursuant to which a notice dated 21st February, 2019 (dated 12.3.2019 by some applicants) were sent by the applicants to the respondent invoking Arbitration Clause 26 of the aforesaid agreements for reference of the disputes to the sole arbitrator to be appointed in accordance with Arbitration and Conciliation Act, 1996. 5. When the respondent did not respond to the above notice dated 21st February, 2019/12.3.2019, the applicants have approached this Court under Section 11(6) of Arbitration and Conciliation Act, 1966 for appointment of an arbitrator. 6. It has been submitted that according to clause 26 of the agreements, the dispute, differences or questions touching or arising out of the said agreement shall be referred to the sole arbitrator by the Managing Director of the Federation, who may either arbitrate himself or appoint any other person as arbitrator, and it was further agreed that the provisions of U.P. Arbitration and Conciliation Act, 1996 as amended from time to time shall apply. 7. 7. It has been submitted that in view of the above fact that the differences and disputes have arisen between the parties and also that the provisions of Arbitration and Conciliation Act, 1996 have been made applicable as per the agreements, therefore, prayer was made that a sole arbitrator be appointed to settle the disputes arising between the applicants and the respondent. 8. The opposite parties have contested the claim of the applicants. It has been submitted that a perusal of the agreements would indicate that the Federation is an Apex society of Cooperative Sugar Mills Societies in Uttar Pradesh, and all the cooperative societies in Uttar Pradesh are its members and whereas, a decision was taken that the Federation will appoint agents who shall sell the sugar produced by various cooperative sugar factories. In furtherance to the said agreements, the applicants were appointed as agents. The respondent-Federation is a Cooperative Society duly registered under the provisions of U.P. Cooperative Societies Act 1965, and is also an Apex society of the cooperative sugar mills in the State of Uttar Pradesh as defined under the provisions of Section 2 (a-4) of U.P. Cooperative Societies Act, 1965. 9. The contention of the learned counsel for the respondent is that in the agreements entered into between the applicants and the respondent i.e. between the apex society cooperative (Federation) and its agents (the applicants), the provision of Section 70 of the U.P. Co-operative Societies Act, 1965 are attracted, which provide for reference of the dispute to the Registrar, Cooperative Societies, under the provisions of U.P. Cooperative Societies Act, 1965. 10. It was contended by the respondent that one of the businesses of the respondent-federation is the sale of sugar produced by its member societies, hence, the present dispute is within the scope of "business of co-operative society" i.e. Federation, and the dispute squarely falls within purview of section 70 of Cooperative Societies Act. Even otherwise, the final authority to decide whether the dispute comes within the ambit of business of a cooperative society or not, is the Registrar. 11. In sum and substance, it was vehemently urged that the dispute arising between the co-operative societies and its agents relating to sale of the sugar can be settled by resorting to the machinery prescribed under U.P. Cooperative Societies Act, 1965. 11. In sum and substance, it was vehemently urged that the dispute arising between the co-operative societies and its agents relating to sale of the sugar can be settled by resorting to the machinery prescribed under U.P. Cooperative Societies Act, 1965. It was further contended that the provisions of the Act of 1996 are inconsistent with the provisions of the Act of 1965, and therefore provisions of Arbitration and Conciliation Act, 1996 would not be applicable in the present case as special adjudicatory forum is provided in Statute for settlement of a dispute. 12. The question which arises for determination by this Court is as to whether in the facts of the present case where an agreement has been entered into by U.P. Cooperative Societies (respondent) and their agents (applicants), the provisions of Section 70 of the U.P. Cooperative Societies Act, 1965 would be attracted for reference of the dispute for arbitrator or the provisions of U.P. Arbitration and Conciliation Act, 1996 would be applicable. 13. Clause 26 of the agreements is quoted as under:- "26. Every disputes, difference or questions touching or arising out of this agreement or the subject matter thereto excepting where the decision of the Federation shall be final under this agreement shall be referred to the sole arbitration of the Managing Director of the Federation, who may either himself or appoint any person as arbitrator whose decision thereon shall be binding on the parties hereto. The provisions of Arbitration and Conciliation Act, 1996 as amended from time to time shall apply." 14. Clause 26 of the agreements clearly provide that disputes, differences or questions touching or arising out of the agreement would be referred to the sole arbitrator and also that the provisions of Arbitration and Conciliation Act, 1996 shall apply. 15. Counsel for the applicants has vehemently submitted that provisions of the Arbitration and Conciliation Act, 1996 would be applicable in the present case as the parties have unequivocally agreed as such, and the said agreement has also been acted upon by both the parties and is therefore binding between them. 16. Learned counsel of the applicants has submitted that the Arbitration and Conciliation Act 1996 was enacted to give effect to the United Nations Commission On International Trade Law (UNCITRAL) adopted in 1985, by the Parliament in exercise of powers under Article 253 of the Constitution of India. 16. Learned counsel of the applicants has submitted that the Arbitration and Conciliation Act 1996 was enacted to give effect to the United Nations Commission On International Trade Law (UNCITRAL) adopted in 1985, by the Parliament in exercise of powers under Article 253 of the Constitution of India. It is submitted that any law made by the Parliament to give effect to any treaty, agreement or convention or any decision made at an international conference in exercise of powers under article 253 of the Constitution of India would prevail over any law made by the state legislature. It is noticed that the applicants have not sought any relief to declare section 70 of the U. P. Cooperative Societies Act 1965 to be repugnant to the provisions of Arbitration and Conciliation Act 1996, and neither Union of India or State of U.P have been made parties and, therefore, no relief in this regard can be granted. 17. Even otherwise the argument of repugnancy deserves to be rejected on the account of the fact that entry 13 of the concurrent list in the 7th schedule reads as under:- "13. Civil procedure, including all matters including the Code of Civil Procedure at the commencement of this Constitution, limitation and arbitration” 18. The U.P. Cooperative Societies Act, 1965 had received the assent of the President on 24.3.1966. The requirement, therefore, of Article 254(2) of the Constitution was satisfied and hence the U.P. Cooperative Societies Act, 1965 prevailed over the Indian Arbitration Act, 1940. Thereafter the Arbitration and Conciliation Act, 1996 was enacted by the Parliament repealing the earlier Arbitration Act, 1940. The Arbitration and Conciliation Act 1996, itself saves the provisions of other enactments like the U.P. Cooperative Societies Act as per section 2(4) and (5) of the said Act which specifically provide for operation of other special acts which provides for arbitration, and therefore, there cannot be any repugnancy between the two Acts. This aspect of the matter has been duly considered by the Hon’ble Supreme Court in the case of Madhya Pradesh Rural Road Development Authority and another vs L.G Chaudhary Engineers and Contractors (2012) 3 SCC 495 . The Supreme Court relied upon its earlier judgment in the case of T.Barai vs Henry Ah Hoe (1983) 1 SCC 177 . 19. To resolve the controversy, scope of both the enactments need scrutiny. The Supreme Court relied upon its earlier judgment in the case of T.Barai vs Henry Ah Hoe (1983) 1 SCC 177 . 19. To resolve the controversy, scope of both the enactments need scrutiny. Section 2(4) of the Arbitration and Conciliation Act provides that:- "This part except subsection (1) of section 40, section 41 and 43 shall apply to of the arbitration under any other enactment for the time being in force, as of the arbitration purpose was to arbitration agreement and if that other enactment for an arbitration agreement, except insofar as the provisions of this part are inconsistent with that another in enactment or with any rules made thereunder.” Section 2 (4) of the Arbitration and Conciliation Act, 1986 provides that the provision of that section will apply only if it is not inconsistent with the other enactment or with any rules made thereunder. 20. A perusal of the U.P. Cooperative Societies Act, 1965 and rules of 1968 clearly indicate that they together form a complete code so far as arbitration in matters relating to Cooperative societies are concerned. The rules provide for the manner in which the reference is to be made, for the appointment of an arbitrator, an appeal against his decision, a second appeal against the decision of the appellate authority and also the manner in which the arbitration award shall be executed. The act and the rules provide for all aspects relating to the operation of Arbitration proceedings in connection with the dispute, and it is difficult to see as to which provision of the Arbitration and Conciliation Act, 1996 can be made applicable to an order passed under the U.P. Cooperative Societies Act read with the rules. 21. The inconsistencies in both the enactments are writ large. Under the Arbitration and Conciliation Act there has to be an agreement containing the arbitration clause in order to invoke the provisions of the Act, while under the cooperative societies act the existence of agreement is dispensed with. Any dispute relating to Constitution, management of the business of a cooperative society other than a dispute regarding the disciplinary action taken against the paid servant of the society arises, would be referable for arbitration. Again there is difference in formation of the Arbitral Tribunal in both the enactments. Any dispute relating to Constitution, management of the business of a cooperative society other than a dispute regarding the disciplinary action taken against the paid servant of the society arises, would be referable for arbitration. Again there is difference in formation of the Arbitral Tribunal in both the enactments. Under the Arbitration and Conciliation Act, 1996 Arbitral Tribunal as defined under section 2(1)(d), a sole arbitrator or a panel of arbitrators can be appointed, while under the U.P. Cooperative Societies Act the dispute is referable to the Registrar or Board of arbitrators in accordance with chapter XVII of the rules of 1968, who may decide the matter himself or appoint an arbitrator. The parties, therefore, clearly do not have a choice or autonomy in the choice of the Arbitral Tribunal under the Cooperative Societies Act. In my considered opinion section 2 (4) of the Arbitration and Conciliation Act makes provision of any other enactment or any rules made thereunder to prevail over of the Arbitration and Conciliation Act, 1996, subject to the conditions prescribed therein. 22. Hon’ble Apex Court in the case of Gujrat Urja Vikas Nigam vs Essar Power (2008) 4 SCC 755 considering the applicability of the provision for arbitration in the Electricity Act, 2003 viz. a viz. the Arbitration and Conciliation Act 1996 held that the general act will have to give way to the special act and in paragraph No.60 of the said judgment it has been held as under :- “However, since the electricity act, 2003 has come into force w.e.f 10/06/2003, after the date on adjudication of disputes between licensees and generating companies can only be done by the State Commissions or the arbitrator (or arbitrators) appointed by it. After 10/06/2003 there can be no anyone other than state commission of the arbitrator (or arbitrators) nominated by it.” 23.A Division Bench of this Court in the case of Bharat Heavy Electricals Ltd vs State of U.P. and Others 2014 (4) AWC 3543 , where in similar circumstances where the agreement between the parties had provided for application of The Arbitration and Conciliation Act 1996, while according to the Micro, Small and Medium Enterprises Development Act, 2006 which was a special Act, provided for Arbitration according to Section 18 of the said Act and this Court while dismissing the petition observed as under :- "5. Section 18 empowers the Council, upon receipt of a reference, to conduct a conciliation in terms of the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996. Where the conciliation is not successful and is terminated without a settlement between the parties, the Council is empowered to itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services. Sub-section (4) of Section 18 begins with a non obstante clause which operates notwithstanding anything contained in any other law for the time being in force. Under sub-section (4), the Council or as the case may be, the centre providing alternative dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India. 6. The Act thus provides for a statutory remedy of an arbitration in 5 sub-section (4) to Section 18 notwithstanding anything to the contrary contained in any other law for the time being in force. 7. In the present case, the Council is seized of the reference on a claim petition filed by the second respondent. 8. In this view of the matter, the relief of certiorari for quashing all the proceedings before the Council is manifestly misconceived. The proceedings had been entertained by the Council in pursuance of the provisions of the Act. Though there may be an arbitration agreement between the parties, the provisions of Section 18 (4) specifically contain a non obstante clause empowering the Facilitation Council to act as an Arbitrator. Moreover, section 24 of the Act states that sections 15 to 23 shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force." 24. The Division Bench of this Court in the above judgment has approved the reference of the dispute to the forum provided under the Special Act rather than under the provisions of the Arbitration and Conciliation Act 1996, despite the fact that there was an agreement to the contrary between the parties, as is the case in the instant petition also. The above Division Bench Judgment clearly applies to the facts of the present case, and the ratio decidendi therefore is liable to be followed in present case also. 25. The above Division Bench Judgment clearly applies to the facts of the present case, and the ratio decidendi therefore is liable to be followed in present case also. 25. It was contended by the counsel for the applicants that where the parties have willingly and voluntarily agreed that the dispute be referred under the provisions of the Arbitration and Conciliation Act 1996, then they cannot be permitted to resile from the same. It was contended that the said agreement is binding between the parties. It is the contention of the applicants that the respondent is deemed to have waived its statutory right for redressal of their disputes in terms of the U.P. Cooperative Societies Act. 26. U.P. Cooperative Societies Act is a special act and the provision of resolution of disputes has been specifically provided for, as it was the intention of the legislature that the matter should not be sent to the civil courts or other forum, but an expeditious disposal of disputes was provided in the act itself. Public purpose can also be read into this provision, so as to prevent the cooperative societies from being exposed to litigation in the civil courts. 27. In the present case even though it is accepted that the respondent cooperative society had waived its right for arbitration in accordance with the provisions of the U.P. Cooperative Societies Act, 1965, the same shall not be given effect to by the court, as it has to be demonstrated that no public interest is involved in such a waiver. This aspect of the matter was considered by the Hon’ble Apex Court in the case of Krishna Bahadur vs Purna Theatre and others (2004) 8 SCC 229 when it was observed:- "9. The principle of waiver although is akin to the principle of estoppel; the difference between the two, however, is that whereas estoppel is not a cause of action; it is a rule of evidence; waiver is contractual and may constitute a cause of action; it is an agreement between the parties and a party fully knowing of its rights has agreed not to assert a right for a consideration. 10. A right can be waived by the party for whose benefit certain requirements or conditions had been provided for by a statute subject to the condition that no public interest is involved therein. 10. A right can be waived by the party for whose benefit certain requirements or conditions had been provided for by a statute subject to the condition that no public interest is involved therein. Whenever waiver is pleaded it is for the party pleading the same to show that an agreement waiving the right in consideration of some compromise came into being. Statutory right, however, may also be waived by his conduct." 28. In the present case, the applicants have entered into agreements with the Federation for purchase of the sugar produced by the members of the Federation which are themselves Cooperative societies. A dispute having arisen which is clearly pertaining to the business of a cooperative society where all the members of the respondent would be affected by the dispute raised by the applicant and therefore the agreement was entered into by the Federation, was clearly on behalf of all its member Sugar Mills and therefore there was a "public interest" element involved in the said agreement and hence the Federation could not have intended to waive this statutory prescription of redressal of disputes by arbitration in accordance with U.P. Cooperative Societies Act, 1965. 29. It has also been contended by the counsel for the applicants that the arbitration proceedings cannot proceed under the Cooperative Societies Act, inasmuch as the Registrar of the Cooperative Societies has sufficient interest and involvement of the respondent Federation, while an arbitrator has to be an independent person. This argument of the applicant also cannot be accepted in light of the fact that the reference of dispute under section 70 of the Cooperative Societies Act has to be referred to the Registrar, who may either arbitrate the matter himself or appoint another arbitrator. In case the applicants have any apprehension about the independence of the arbitrator, the same can be raised before the Registrar who is competent to resolve such a controversy as he is sufficiently empowered under the Act. 30. In light of the above discussions, in the facts of the present case where there exists a dispute between the Federation and agents, then the same has to be referred to the Registrar, Cooperative Societies, under the provisions of Cooperative Societies Act, 1965 and provisions of Arbitration and Conciliation Act, 1996 would not be attracted. The applications of the applicants under the Arbitration and Conciliation Act, 1996 are, therefore, misconceived. 31. The applications of the applicants under the Arbitration and Conciliation Act, 1996 are, therefore, misconceived. 31. No other point was urged by the applicants. 32. These applications moved by the applicants under section 11(6) of the Arbitration and Conciliation Act 1996 for appointment of sole arbitrator are devoid of merits and are hereby rejected.