M/S Continental Milkose (India) ... vs Delhi Milk Scheme
2009 Latest Caselaw 1959 Del

     *         IN THE HIGH COURT OF DELHI AT NEW DELHI

                                      Date of Reserve: May 05, 2009
                                      Date of Order: May 11, 2009

+ Ex.P.No.233/2008

%                                                 11.05.2009

         M/S. CONTINENTAL MILKOSE (INDIA) LTD.      ..... Petitioner
                    Through:  Mr.Shiv Khorana, Adv.

         Versus


         DELHI MILK SCHEME                            ..... Respondent
                    Through:     Mr. A.K. Bhardwaj, Adv.

         JUSTICE SHIV NARAYAN DHINGRA

1.       Whether reporters of local papers may be allowed to see the
         judgment?

2.       To be referred to the reporter or not?

3.       Whether judgment should be reported in Digest?

         JUDGMENT

1. The respondent to this Execution Petition has taken

objection that this Petition for execution of the award dated 22nd

April, 2002 is not maintainable in view of the fact that the agreement

between the parties provided that the provisions of Arbitration and

Conciliation Act, 1996 would not be applicable and since the

provisions of Arbitration and Conciliation Act, 1996 were not to be

applicable, the award cannot be executed against the respondent.

Thus, the issue arises is whether the parties by an agreement can

exclude the application of a statute.

2. The relevant arbitration clause between the parties reads

as under:-

"AND WHEREAS according to clause 1.18 on page 10 of the contract of the agreement all disputes and differences arising between the parties shall be referred to the Sole Arbitrator appointed by the Secretary, Ministry of Law, Department of Legal Affair, Government of India for settlement of disputes.

AND WHEREAS the parties have agreed to refer and submit the disputes and differences to arbitration for adjudication and determination of such disputes and differences to Law Secretary.

AND WHEREAS Law Secretary has appointed Shri D.R. Meena, JS&LA as Sole Arbitrator to adjudicate the disputes.

WHEREBY agreed between the parties hereto as follows:

Parties do hereby refer and submit the matters in dispute between them for adjudication and determination to Shri D.R. Meena JS&LA as the Sole Arbitrator.

1. In the event of the Sole Arbitrator dying, neglecting or refusing to act or being unable to act for any reason of his award being set aside by Court for any reasons, it shall be lawful for Law Secretary to nominate another person in place of outgoing arbitrator to act Sole Arbitrator. The new Arbitrator so appointed shall as far as participate proceed from the stage where it was left by the outgoing Arbitrator.

2. The parties hereby agree to any extension of time that may be required by the Arbitrator for proper adjudication of the disputes.

3. The venue of the arbitration shall be in New Delhi or at such other places as may be decided upon by the Arbitrator.

4. The award made by the Arbitrator shall be binding on the parties, provided that any party aggrieved by such award may make further reference for setting aside or revision of the impugned award to Law Secretary whose decision shall be binding the parties finally and conclusively.

5. The Arbitrator and Law Secretary as the case may be, shall have power to determine the procedure to be followed in proceedings in pursuance of this agreement.

6. Any agreement, commitments and transaction entered into between the parties shall not be suspended during the arbitration proceedings and no payment due or payable by the parties shall be withheld unless any payment is or forms a part of the subject matter of the arbitration proceedings.

7. The provisions of the arbitration and conciliation Act, 1996 shall have to application to any proceedings held or award/decision made in pursuance of this agreement."

3. It is argued by counsel for the respondent that in view of

agreement between the parties that the provisions of Arbitration and

Conciliation Act, 1996 shall have no application to any proceedings

held or award/decision made in pursuance of the agreement, the

award cannot be challenged under Section 34. Counsel submitted

that the agreement provided for filing of further reference/revision for

setting aside the award before the Law Secretary and the respondent

had, in fact, preferred a reference before the Law Secretary even the

reference was dismissed and award passed in favour of the petitioner

was upheld. It is submitted that in view of the fact that the

provisions of Arbitration and Conciliation Act, 1996 were specifically

excluded, the respondent did not file objections under Section 34.

Otherwise, the respondent would have filed objections against the

award under Section 34. The respondent in order to set aside the

award had filed a suit for declaring the award as null and void and so

long as the suit of the respondent was not decided, this execution

was not maintainable.

4. The other ground taken by the respondent is that the

initial agreement entered into between the parties was prior to 1996

and only Arbitration and Conciliation Act, 1940 was applicable to the

parties. It is only under that agreement that the parties had agreed

for reference of disputes to the Arbitrator and the Arbitrator was

supposed to publish the award and a notice of the award was to be

received by the respondent under the Old Act, 1940 so that the

respondent could file objections against the award. Since the

respondent had no opportunity to file objections against the award

either under the Old Act, 1940 or under the New Act, 1996, this

execution under Section 34 of the Arbitration and Conciliation Act,

1996 was not maintainable.

5. The respondent has relied upon para 7 of the M/s. Delta

Mechcons (India) Ltd. vs. Marubeni Corporation JT 2007 (8) SC

327 which reads as under:-

"It is open to the parties while entering into an arbitration agreement to provide as to how the arbitral tribunal should be constituted. It is also open to them to provide for the rules to be followed. As I read the arbitration agreement, I find that the parties had reserved unto themselves the right to nominate an arbitrator each stipulating that the two arbitrators so nominated, should agree upon the third arbitrator to act as the Chairman. In other words, the parties by their agreement have left it to the two arbitrators to appoint a third arbitrator to act as the Chairman. They have also agreed that in case of failure of the two arbitrators to appoint the third arbitrator, the third arbitrator was to be appointed by ICC. The parties had also provided that the arbitration should be conducted in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce."

6. Counsel for the petitioner, on the other hand, submitted

that the parties by an agreement cannot exclude the applicability of

a statute enacted by parliament and such a condition contained in

the agreement shall be illegal and void in view of the Section 28 of

the contract Act. He relied upon the Rajasthan Housing Board vs.

Engineering Projects (India) Ltd. AIR 2000 Rajasthan 200.

7. The invocation of the arbitration clause in this case had

taken place after coming into force of Arbitration & Conciliation Act,

1996. The parties entered into an agreement for referring the

disputes to Mr.D.R. Meena because of the existence of an arbitration

clause in the contract. Once there is an arbitration clause in the

contract and the arbitration is invoked in terms of the contract, even

if the parties subsequently enter into an agreement that the

Arbitration and Conciliation Act, 1996 would not be applicable, such

an agreement has to be held as void in view of Section 28 of the

Contract Act which provides that every agreement by which any

party thereto is restricted absolutely from enforcing his right under or

in respect of any contract, by the usual legal proceedings, or which

limits the time within which he may thus enforce his rights is void to

that extent.

8. A perusal of arbitration agreement shows that the award

of Mr. D.R.Meena was to be respected by the parties. The aggrieved

party could make a reference to the Law Secretary as stated in the

agreement. The respondent, in this case, had preferred a reference

and failed. Thereafter, as per agreement, the petitioner had become

entitled to the award amount. Now as per respondent, this award

cannot be executed because of the ouster clause making provision of

Arbitration and Conciliation Act, 1996 not applicable to the parties. I

consider that this ouster clause which takes away the right of the

petitioner from getting the fruits of adjudication done by the

Arbitrator is void ab initio in view the section 28 of the Contract Act. I

therefore hold that this award is executable. The respondent was at

liberty to challenge the award if the respondent had intended to do

so. The respondent could have filed an application either under Old

Act or under the New Act. The failure of the respondent to file an

application under Section 14/17/33 of the Arbitration Act, 1940 or

under Section 34 of the Arbitration and Conciliation Act, 1996 has

resulted into this award becoming final and executable. I therefore

hold that the award is executable against the respondent.

9. List on 15th September, 2009.

May    11, 2009                      SHIV NARAYAN DHINGRA J.
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