Surana Commercial Company vs Food Corporation Of India
1986 Latest Caselaw 69 Del

JUDGMENT

Jagdish Chandra, J.

(1) On the petition brought by the petitioner M/s. Surana Commercial Company against the respondent Food Corporation of India (in short FCI)the order dated 18-8-1982 was passed by Charanjit Talwar, J. of this Court in the following terms : "...In view of my discussion above, I direct the respondent to file the arbitration agreement contained in Clause XXVII of the contract within four weeks from today and to appoint the Arbitrator as per the terms of the arbitration clause, within two months from today. No order as to costs." Admittedly, no arbitrator was appointed by Fci within two months period allowed by the Court in the aforesaid order. As a matter of fact, no arbitrator has been appointed by Fci uptil now. It is on account of this default on the part of Fci that the plaintiff has put up the present petition for the appointment of an independent arbitrator by the court itself.

(2) This petition has been resisted by Fci by taking up a preliminary objection to the effect that the making of the reference by the Court vide order dated 18-8-1982 was subject to the condition of the petitioner keeping the bank guarantee alive and effective till the award is published, and as the bank guarantee was not kept alive by the petitioner the reference could not be enforced.

(3) The learned counsel for the petitioner has relied upon the Full Bench authority of Delhi High Court as Ved Prakash Mithal v. The Union of India and others, according to which if the arbitrator is not appointed by the agreed appointer, such a case was contemplated by the authors of section 20(4) of the Arbitration Act, 1940 and that section 20(4) Conferred upon the Court a general residual power to appoint an arbitrator when the parties do not agree upon the arbitrator. The learned counsel for the respondent does not dispute this proposition in view of this Full Beach 381 authority of our own High Court and concedes that the Court is competent to appoint an independent arbitrator but he submits that the reference could not be enforced on account of the failure on the part of the petitioner to comply with the condition precedent of keeping the bank guarantee alive as ordered in the order of reference itself.

(4) The perusal of the order dated 18-8-1982 goes to negative the contention of the learned counsel for the respondent inasmuch as the keeping of the bank guarantee alive and effective till the award is published, was not made a condition precedent for the order of reference. The order of reference appears in the last but one para of the said order whereas the direction to the petitioner to keep the bank guarantee alive the effective till the award is published, finds mention in a separate para which is the last para of the order. The further contention of the learned counsel for the respondent is that there were only two disputes viz. . (1) pertaining to the refund of the security ; and (2) regarding the bank guarantee of the sum of Rs 3,63,205,00 P. Both have been furnished by the petitioner under the contract in question which was for the milling of 621 M. Ts. of Moong Whole into Moong Da! given by Fci to the petitioner wherein the respondent cancelled the said contract and had threatened the petitioner to resort to risk purchase at the risk and cost of the petitioner. The order dated 18-8-1982 itself shows the disputes not only regarding the bank guarantee but also in respect of the security amount and further the claim of damages of the petitioner against the Fci on account of breaches of the contract committed by the respondent as the cancellation of the contract by the respondent was alleged to be arbitrary and illegal by the petitioner, even though the valuation for the purpose of jurisdiction had been stated by the petitioner in its earlier petition under section 20 of the Arbitration Act, 1940 at the total amounts of the security amount and the bank guarantee amount, i.e. Rs. 3,94,335.00 P and, thus, it could not be said that merely because the petitioner had not kept alive the bank guarantee the reference to arbitrator could not be made as there was no dispute left for the arbitrator to adjudicate upon. The disputes regarding security and damages do remain open before the arbitrator to decide and even the question of not keeping alive the bank guarantee by the petitioner and the effect thereof can also be determined by the arbitrator. The contention raised by the learned counsel for the respondent is, thus, erroneous and cannot be accepted.

(5) For the aforesaid reasons and on the suggestion of the learned counsel for the petitioner which is not opposed to by the learned counsel for the Fci, I appoint Shri R. N. Misra, Additional Legal Adviser to the Government of India, Ministry of Law and Company Affairs as the sole arbitrator to adjudicate upon the decide the disputes and differences of the parties in respect of the aforesaid contract pertaining to the milling of 621 M.Ts. of Moong Whole into Moong Dal. This order be communicated to the arbitrator and even the dusty copy of the operative portion of this order be given to the petitioner's counsel for onward communication to the arbitrator. The fees of the arbitrator is tentatively fixed at Rs. 2.000.00 to be paid by both the parties in equal shares. This disposes of this petition.