D-Ionic India (P) Ltd. vs State Of Rajasthan And Ors.
2002 Latest Caselaw 23 Del

JUDGMENT

J.D. Kapoor, J.

1. Inspite of several opportunities given to respondent No. 1 for filing the copy of the agreement, respondent No. 1 has failed to file the same.

2. This is a petition under Section 20 of the Arbitration Act for reference of the disputes between the parties to the Arbitrator. Clause 13 of the Agreement between the parties provided as under: "Any dispute, disagreement or question arising out of or in consequence of this Agreement or relating to its construction or performance which cannot be settled amioable shall, from the date either party informs the other in writing that such dispute or disagreement exists and requests in such notice to refer the matter to arbitration, shall be submitted to arbitration for final settlement.

3. As is apparent from the aforesaid Clause the Secretary, Department of Rural Development, Government of India was required to nominate a serving officer to act as an sole Arbitrator within 30 days of the service of notice by either of the party in this regard. Since respondent No. 1 has resisted this application and sought time to file the agreement to show that the Clause of Arbitration was not in operation as Clause 51 provided that in the event of any dispute arising between the parties in respect of any of the matters comprised in the agreement, the same shall be settled by a competent court having jurisdiction over the place where agreement is executed by no other court.

4. However, another clause cited by the respondent No. 1 regarding the adjudication of the disputes and differences by the arbitrator is Clause 23 which reads as under :

"Clause 23 - If any question, difference or objection whatsover shall arise in any way in connection with or arising out of this instrument or the meaning of operation of any part therefore of the rights, duties or liabilities of either party then save in so far as the decision of any such matter as hereinbefore provided for and has been so decided, every such matter constitution a total claim of Rs. 5,000/- or above, whether its decision has been otherwise provided for and whether it has been finally decided accordingly or whether the contract should be terminated or has been rightly terminated and as regards the right or obligations of the parties at the result of such termination shall be referred for adjudication to a sole arbitrator to be appointed as hereinafter provide.

For the purpose of appointing the sole arbitrator referred to above, the Chief Engineer will on receipt of notice and prescribed fee from the contractors send a panel of three names not below the rank of Superintending Engineer of the Rajasthan Government and who shall be at presently unconnected with the contract, the contractor shall on receipt of the names as aforesaid select any on of the persons names, to be appointed as a sole Arbitrator and communicate his name to the Chief Engineer. The Chief Engineer shall thereupon appoint the said person as the sole Arbitrator without delay. The arbitration shall give reasons forward.

Subject as aforesaid, the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment therof and the rules made there under and for the time being in force shall apply to the arbitration proceedings under this Clauses."

5. The question whether the Arbitrator has jurisdiction to decide the disputes and differences raised by the petitioner in the petition is itself subject matter of the decision of the Arbitrator, Section 16 of the Arbitration Act of 1996 confers power upon the Arbitrator to rule on its own jurisdiction including ruling on any objections with respect to the existence or validity of the Arbitration Agreement and for that purpose an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract and a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

6. Sub-section(3) of this Section also provides that as soon as the matter is alleged to be beyond the scope of authority of the Arbitrator, such a plea should be raised during the arbitral proceedings. Where the arbitral tribunal takes a decision rejecting the aforesaid plea and continues with the arbitral proceedings and makes an arbitral award, a party aggrieved by such an arbitral award is entitled to make an application under Section 34 of the Act for setting aside such an arbitral award.

7. In view of the aforesaid provision of Section 16 and the dispute raised by the party with regard to the existence of the arbitration Clause in respect of disputes and differences pointed out in the petition . I find that the objections raised by the respondent No. 1 are liable to be raised before the arbitral

8. The objection raised by respondent No. 3 that it is not a necessary party and has wrongly imp leaded may be raised before the Arbitrator. However, for respondent No. 3 this order will not be applicable as it is neither a party to the agreement nor has any claim been preferred against it stemming from the disputes and differences referred in the petitions.

9. The petition is allowed. However, the Secretary, Department of Rural Development, Government of India shall nominate a serving authority to act as a sole Arbitrator within 30 days.