Delhi High Court
Maruti Udyog Ltd vs Classic Motors Ltd. And Anr on 2 November, 2016
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 2nd November, 2016.
+ CS(OS) 87/1998, IA No.353/1998 (u/O XXXVIII R-5 CPC), IA
No.4241/1998 (u/O VI R-17 CPC), IA No.9833/1998 (u/O I R-10
CPC) & IA No.11482/1998 (u/S 8 of Arbitration Act) & IA
No.9310/1999 (u/S 151 CPC)
MARUTI UDYOG LTD. ..... Plaintiff
Through: Mr. Mudit Shrama and Mr. Tanmaya
Nirmal, Advs.
Versus
CLASSIC MOTORS LTD. AND ANR. ..... Defendants
Through: Mr. Kanwal Chaudhary, Adv.
AND
+ CS(OS) 74/2016 (earlier OMP No.107 of 1999) & IA No.8518/2008
(u/O VI R-17 CPC)
MARUTI UDYOG LTD. ..... Plaintiff
Through: Mr. Mudit Shrama and Mr. Tanmaya
Nirmal, Advs.
Versus
CLASSIC MOTORS LTD. ..... Defendant
Through: Mr. Kanwal Chaudhary, Adv.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. CS(OS) No.87/1998 was filed by Maruti Udyog Ltd. (MUL) against
Classic Motors Ltd. (CML) and Mr. Narender Anand for recovery of
CS(OS) Nos.87/1998 & 74/1016 Page 1 of 26
Rs.4,26,93,000/- with interest, pleading:
(i) that MUL, had in the year 1983 granted original dealership in
favour of Competent Motors, of which Mr. Raj Chopra and Mr.
Narender Anand were partners;
(ii) that on termination of the original dealership, two separate
independent dealerships were granted to the said Mr. Raj Chopra and
Mr. Narender Anand in the year 1988, with dealership to Mr.
Narender Anand being in the name of CML;
(iii) that CML, being one of the authorised dealers of MUL, was
required to take bookings of vehicles, customer payments and to
provide after sales service in respect of the said vehicles;
(iv) that on 31st August, 1994, MUL issued a 90 days notice of
termination of dealership of CML and called upon CML to settle the
accounts;
(v) that CML failed to come forward and instead indulged in
prolonged litigation;
(vi) that during the course of the said litigation, CML submitted
several pending customers/payments list but still failed to settle the
CS(OS) Nos.87/1998 & 74/1016 Page 2 of 26
accounts and as a result whereof, the liability of CML mounted;
(vii) that CML otherwise also had committed serious and persistent
violations of the sale policies and procedures of MUL;
(viii) that CML, instead of collecting payments from customers in the
name of MUL, collected payments in its own name and which were
not deposited in the account of MUL;
(ix) that this resulted in a shortfall of a large amount which became
evident from reconciliation between the bookings reported and the
payments actually received in vehicles purchase account;
(x) that pursuant to termination of dealership, while MUL was in
the process of delivering vehicles to the customers who had booked
against advance accounts, CML supplied different lists of pending
customers from time to time to MUL, thus making it difficult and
almost impossible for MUL to know and settle the claims of
customers for purchase of vehicles;
(xi) that due to aforesaid breaches by CML, a sum of
Rs.4,26,93,000/- was due from CML to MUL.
2. CS(OS) No.87/1998 was entertained and summons thereof issued to
CS(OS) Nos.87/1998 & 74/1016 Page 3 of 26
the defendants.
3. Before CML or Mr. Narender Anand could file written statement in
CS(OS) No.87/1998, MUL filed IAs No.4241/1998 and 9833/1998 for
amendment of the plaint and under Order I Rule 10 of Code of Civil
Procedure, 1908 (CPC) respectively for impleadment of another director
namely Mr. Bobby Anand of CML as defendant No.3 to the suit and for
amendment of the plaint inter alia to plead that the corporate veil of CML
was liable to be pierced and decree for recovery of money also passed
against Mr. Narender Anand as well as Mr. Bobby Anand.
4. CML, before submitting its first statement on the substance of the
dispute in CS(OS) No.87/1998, filed IA No.11482/1998 under Section 8 of
the Arbitration and Conciliation Act, 1996 (1996 Act) citing the following
arbitration clause:
"36. ARBITRATION
If any difference or dispute shall arise between the
parties hereto as to the construction or true intent and meaning
of any of the terms and conditions herein contained or as to any
payment to be made in pursuance hereof or as to any other
matter arising out of or connected with or incidental to these
presents or as to the rights, duties and obligation of either
party, such difference or dispute whenever and so often as the
same shall arise, shall be referred to the Tribunal of
Arbitration, Indian Chamber of Commerce, Delhi, under their
rules for the time being in force."
CS(OS) Nos.87/1998 & 74/1016 Page 4 of 26
in the dealership agreement between MUL and CML.
5. CS(OS) No.87/1998 stood at the said stage for nearly ten years and
was adjourned from time to time.
6. On 27th May, 2009, the counsels for the parties in CS(OS) No.87/1998
stated that the proceedings in CS(OS) No.87/1998 be adjourned sine die so
that the parties could pursue other suits, being CS(OS) No.1575/2004 and
CS(OS) No.1360/1997, first and come to know the outcome of the said suits.
On the said statement of the counsel for the parties, proceedings in CS(OS)
No.87/1998 were adjourned sine die with liberty to the parties to revive as
and when required.
7. Neither party applied for revival of CS(OS) No.87/1998 for nearly six
years and the Registry of this Court of its own listed CS(OS) No.87/1998 on
8th October, 2015, since when again the matter it is being adjourned. Vide
orders dated 31st August, 2016 and 27th October, 2016, it was informed to the
counsels that unless they proceed, CS(OS) No.87/1998 will be dismissed for
non-prosecution. In this regard it may be noticed that though CS(OS)
No.1575/2004 and CS(OS) No.1360/1997 on account whereof the
proceedings in CS(OS) No.87/1998 were stayed are stated to be still pending
but it was noted in the order dated 8th October, 2015 that without knowing
CS(OS) Nos.87/1998 & 74/1016 Page 5 of 26
what the said suits were and without finding a case for stay under Section 10
of CPC, CS(OS) No.87/1998 cannot be kept adjourned sine die. Neither
party has shown any justification for stay of proceedings in CS(OS)
No.87/1998 on account of CS(OS) No.1575/2004 or CS(OS) No.1360/1997
and on account whereof stay of proceedings therein was earlier sought and
granted. All that can be said is that MUL does not appear to be in any hurry
to recover the monies claimed in CS(OS) No.87/1998.
8. The other, CS(OS) No.74/2016 is a petition under Section 33 of the
Arbitration Act, 1940 (1940 Act) and when initially filed was numbered as
OMP No.107/1999 and seeks determination of the effect of the arbitration
clause as reproduced hereinabove and declaration thereof as having become
invalid, illegal, inoperative, discharged, superseded, nonest and void. It is
inter alia the case of MUL therein:
(a) that prior to the termination vide notice dated 31st August, 1994
supra of the dealership of CML, MUL had earlier also issued a notice
dated 6th April, 1991 to CML to show cause why its dealership should
not be terminated;
(b) that CML, on 20th April, 1991, filed a petition under Section 20
of the 1940 Act along with an application under Section 41(b) of 1940
CS(OS) Nos.87/1998 & 74/1016 Page 6 of 26
Act before this Court and the said petition was registered as Suit
No.1224A/1991 and in the said proceeding vide ex-parte order MUL
was restrained from terminating the dealership of CML pursuant to the
show cause notice dated 6th April, 1991;
(c) that upon MUL applying for vacation of the said order, its
application was dismissed but upon the matter being taken to the
Supreme Court, it was clarified that the interim order would not come
in the way of MUL exercising its right of termination under the
dealership agreement;
(d) accordingly, MUL vide notice dated 31st August, 1994 supra
terminated the dealership;
(e) that CML again filed a petition under Section 20 of the 1940
Act and which was registered as Suit No.2005/1994 of this Court;
(f) that vide interim order in the aforesaid Suit No.2005/1994,
CML was permitted to continue booking the vehicles but the said
order was also vacated by the Supreme Court;
(g) that CML thereafter on 15th November, 1994 instituted a suit
(being CS(OS) No.2544/1994) for declaration that the termination of
dealership was bad and for permanent injunction restraining MUL
CS(OS) Nos.87/1998 & 74/1016 Page 7 of 26
from acting in pursuance to termination of dealership;
(h) that CML, by instituting the civil suit, superseded and
abandoned the arbitration clause;
(i) that in view of institution of the civil suit aforesaid, the petition
under Section 20 of the 1940 Act being CS No.2005/1994 was
dismissed as withdrawn on 22nd November, 1994;
(j) that vide interim order in the CS(OS) No.2544/1994 supra, the
termination of dealership of CML was stayed but the said order was
vacated by the Supreme Court;
(k) that ultimately CS(OS) No.2544/1994 filed by CML for
declaration and permanent injunction was dismissed on 13 th
December, 1996;
(l) that the arbitration petition under Section 20 of 1940 Act being
Suit No.1224A/1991 earlier filed by CML was also dismissed vide
order dated 13th December, 1996 in view of the subsequent events;
(m) that MUL had been served with the notice of an arbitration
claim lodged by CML before the Tribunal of Arbitration of Federation
of Indian Chambers of Commerce and Industry (FICCI), even though
CS(OS) Nos.87/1998 & 74/1016 Page 8 of 26
the arbitration clause in the dealership agreement provided for
arbitration of the Arbitral Tribunal of Indian Chambers of Commerce;
(n) that FICCI had wrongly assumed jurisdiction;
(o) that the arbitration clause aforesaid in the dealership agreement
between the parties had been discharged, become inoperative and
invalid and did not survive owing to the events aforesaid.
9. The aforesaid OMP No.107/1999 was entertained and vide order dated
16th April, 1999 therein, the arbitration proceedings before FICCI were
stayed and remain stayed.
10. Pleadings in OMP No.107/1999 were completed and the same was
adjourned from time to time and it appears that it was being taken up along
with CS(OS) No.87/1998 and on statement of counsels for MUL and CML,
proceedings in OMP No.107/1999 also, as aforesaid, were adjourned sine die
vide order dated 27th May, 2009 and were revived suo moto by the Registry
of this Court as aforesaid.
11. On 20th November, 2015, OMP No.107/1999 was ordered to be re-
numbered as a suit, observing that MUL had not invoked any specific
provision of 1996 Act and thus the proceedings could not be numbered as an
OMP and had to be numbered as suit; hence it was re-numbered as CS(OS)
CS(OS) Nos.87/1998 & 74/1016 Page 9 of 26
No.74/2016.
12. The counsels have been heard on the pending applications as aforesaid
in CS(OS) No.87/1998 and on OMP No.107/1999 renumbered as CS(OS)
No.74/2016.
13. OMP No.107/1999 renumbered as CS(OS) No.74/2016 was instituted
on 12th April, 1999.
14. I have at the outset enquired from the counsel for MUL, as to how
after the coming into force of 1996 Act, which came into force on 22nd
August, 1996 and was in fact preceded by the Arbitration and Conciliation
Ordinance, 1996 which came into effect on 16th January, 1996, a petition
under Section 33 of the 1940 Act could be filed.
15. The counsel for MUL has referred to Section 85 of the 1996 Act, sub-
section (1) whereof repeals 1940 Act and sub-section (2) whereof provides
that notwithstanding the repeal of 1940 Act, the provisions of 1940 Act shall
apply in relation to arbitral proceedings which commenced before 1996 Act
came into force. Sub-section (2) of Section 85 of 1996 Act further provides
that 1996 Act shall apply in relation to arbitral proceedings which commence
on or after 1996 Act comes into force. The arbitration proceedings before
FICCI challenging which OMP No.107/1999 renumbered as CS(OS)
CS(OS) Nos.87/1998 & 74/1016 Page 10 of 26
No.74/2016 under Section 33 of 1940 Act has been filed, admittedly
commenced after coming into force of 1996 Act.
16. The counsel for MUL contends that since the dispute regarding
termination by MUL of dealership of CML arose on 15th November, 1994,
when CML filed CS(OS) No.2544/1994 impugning the termination notice
dated 31st August, 1994, the said date would be relevant.
17. I am unable to agree. The reference in Section 85(2) of 1996 Act is to
„commencement of arbitral proceedings‟ and not to „accrual of the dispute‟.
The relevant date is not of „accrual of dispute‟ but of „commencement of
arbitral proceedings‟. Per Section 21 of 1996 Act, the arbitral proceedings in
respect of a particular dispute commence on the date on which a request for
that dispute to be referred to arbitration is received by the respondent.
Reference in this respect may be made to Milkfood Ltd. Vs. GMC Icecream
(P) Ltd. (2004) 7 SCC 288 and to Prem Sagar Khanna Vs. Ravi Khanna
AIR 2002 Delhi 98. In the latter, the suit in which application under Section
8 of the 1996 Act was filed, had been filed before coming into force of the
1996 Act though on the date of filing of the Section 8 application the 1996
Act was in force. The objection to the maintainability of the Section 8
application, on the ground of the 1940 Act being applicable owing to suit
having been filed before coming into force of 1996 Act, was held to be not
tenable. The arbitral proceedings before FICCI, impugning which OMP
No.107/1999 re-numbered as CS(OS) No.74/2016 has been filed, having
commenced after coming into force of 1996 Act i.e. after the dismissal on
13th December, 1996 of CS(OS) No.2544/1994 earlier filed by CML, the
said arbitral proceedings would not be governed by 1940 Act, for Section 33
thereof to be invoked by MUL. OMP No.107/1999 renumbered as CS(OS)
No.74/2016 was thus misconceived on its inception and ought not to have
been entertained and add to the arrears of pending cases of this Court.
18. The counsel for MUL has then contended that the arbitration
proceedings initiated by CML before the tribunal of arbitration of FICCI are
not maintainable as CML has waived the arbitration clause by invoking the
jurisdiction of the civil suit by filing CS(OS) No.2544/1994 for the reliefs of
declaration and permanent injunction and that the claim of CML before the
Arbitral Tribunal of FICCI is also barred by Order II Rule 2 of CPC.
19. Once the proceedings in which the said pleas are raised are not
maintainable, no finding on the said pleas can be returned.
20. Needless to state that it will be open to MUL to take the said pleas, if
entitled to, in accordance with 1996 Act.
21. I may in this regard also notice that the Arbitral Tribunal of FICCI
comprised of Justice J.D. Jain, Justice H.L. Anand and Justice M.K. Chawla.
None of the members of the Arbitral Tribunal so constituted survive today.
22. Thus, OMP No.107/1999 renumbered as CS(OS) No.74/2016 is
dismissed as not maintainable and with liberty aforesaid to MUL.
23. That brings me to CS(OS) No.87/1998 and the applications pending
therein.
24. Though the applications for amendment of the plaint and for
impleadment of Mr. Bobby Anand are pending therein but before that, in my
view, the application under Section 8 of 1996 Act has to be considered
because if the said application were to succeed, the other pending
applications in any case would be redundant and the entire controversy will
have to be referred to arbitration.
25. The counsel for MUL, qua application under Section 8 of 1996 Act in
CS(OS) No.87/1998 has contended that once CML had itself given a go-by
to the arbitration clause aforesaid by invoking the jurisdiction of the Civil
Court by filing CS(OS) No.2544/1994 and has lost in the said suit, it is not
entitled to invoke arbitration clause.
26. In my view, the same would not affect the existence or validity of the
arbitration clause by which MUL will continue to remain bound. Merely
because CML has not acted in accordance therewith would not mean that
MUL also can give a go-by to the same and invoke the jurisdiction of the
Court. Once CML has, in accordance with Section 8 of 1996 Act applied
invoking the arbitration clause for referring the parties to arbitration, this
Court cannot on such grounds continue with the suit.
27. Section 8 of the 1996 Act read with Section 5 thereof in my view does
not allow any scope for entertaining any pleas of waiver and abandonment of
arbitration clause by the applicant of an application under Section 8. The
Legislature, while enacting the 1996 Act, in Section 8 thereof has used the
language materially different from that used in corresponding Section 34 of
the 1940 Act. While under Section 34 of the 1940 Act, upon any party to an
arbitration agreement commencing legal proceedings against the other party
to the Agreement in respect of any matter agreed to be referred, the other
party could apply to the Judicial Authority before which the proceedings
were pending, to stay the proceedings and the Judicial Authority only „if
satisfied that there was no sufficient reason why the matter should not be
referred in accordance with the arbitration agreement and that the applicant
was, at the time when the proceedings were commenced, and still remains,
ready and willing to do all things necessary to the proper conduct of the
arbitration‟ had the discretion (as is evident from use of the word "may") to
make an order staying the proceedings, under Section 8 of the 1996 Act the
Judicial Authority before which an action is brought in a matter which is the
subject matter of an arbitration agreement is mandated (as is evident from
use of the word "shall") to refer the parties to arbitration "notwithstanding
any judgment, decree or order of the Supreme Court or any Court unless it
finds that prima facie no valid arbitration agreement exists". Though the
reproduced words have been added to Section 8 by the amendment of the
1996 Act w.e.f. 1st January, 2016 but in my view the same have to be taken
into consideration even for deciding this application under Section 8 of the
1996 Act which was filed long prior to the amendment of the 1996 Act w.e.f.
1st January, 2016. It has been so held recently in Raffles Design
International India Private Ltd. Vs. Educomp Professional Education
Limited 2016 SCC OnLine Del. 5521.
28. In my view, to hold that notwithstanding such change brought about
by the Legislature in the 1996 Act, the pleas as of waiver and abandonment
of arbitration clause are still available in opposition to an application under
Section 8 of the 1996 Act, would amount to whittling down the amendment.
29. MUL, which had agreed to refer the disputes as have been made the
subject matter of CS(OS) No.87/1998, to arbitration cannot now be
permitted to instead of invoking the arbitration approach the Civil Court.
30. The pleas as raised by the counsel for MUL and which are for
adjudication herein are on the basis of CML, for adjudication of disputes
raised by it with respect to the same Dealership Agreement containing
arbitration clause, having approached the Civil Court instead of invoking the
arbitration and the said civil proceedings being CS(OS) No.2544/1994
having been dismissed by the Civil Court. I have wondered whether not to
hold that owing thereto CML is barred from applying in this suit under
Section 8 of the 1996 Act would be in the teeth of the words
"notwithstanding any judgment, decree or order of the Supreme Court or any
Court" in Section 8. In my opinion it would be.
31. Not only is the said plea as raised by MUL, not entertainable under
Section 8 of the 1996 Act but Section 5 of the said Act which commences
with non-obstante clause "notwithstanding anything contained in any other
law for the time being in force" prohibits this court from intervening except
where so provided in Part-I of the 1996 Act. Part-I of the 1996 Act as
aforesaid does not permit a suit, subject matter whereof is the subject of an
arbitration agreement, to be entertained if an application under Section 8 has
been filed.
32. In my view, the concept of waiver, applies to Section 8 of the 1996
Act only if no application thereunder is filed before submitting the first
statement on the substance of the dispute and not otherwise.
33. I am conscious that there are some judgments which may appear to be
contrary.
34. In Ministry of Sound International Ltd. Vs. Indus Renaissance
Partners Entertainment Pvt. Ltd. 156 (2009) DLT 406, the applicant of an
application under Section 8 of the 1996 Act had after the filing of the
application filed a civil suit and for reason whereof the application was
opposed by contending that the applicant had waived the right under Section
8 of the 1996 Act. However the said opposition was rejected observing that
the civil suit had since been withdrawn. The judgments of this court in
Bharti Televentures Ltd. Vs. DSS Enterprises Private Ltd. 123 (2005) DLT
532 and in Raj and Associates Vs. Videsh Sanchar Nigam Limited 113
(2004) DLT 318 cited by the plaintiff in that case were distinguished by
observing that in those cases the parties had earlier invoked jurisdiction of
civil courts, ignoring the arbitration clause.
35. Another Single Judge of this court in Kush Dairy Ltd. Vs. H.P.
Printers Pvt. Ltd. 2013 (135) DRJ 724 dismissed the application under
Section 8 of the 1996 Act observing that the action of the applicant of, before
filing the application, a civil suit with respect to the Agreement containing
the arbitration clause, amounts to waiving its right to invoke or enforce the
arbitration clause but without any discussion on the said aspect.
36. Undoubtedly in Raj and Associates supra it was observed that once
the plaintiff opts to file a suit it is no longer open to him to pray to the court
that the parties be referred to arbitration but in the said case there was no
application also under Section 8 of the Act. With respect, I am unable to
decipher on a reading of Bharti Televentures Ltd. supra, any proposition that
an application under Section 8 can be defeated by waiver; though it refers to
two judgments but which are found to be with respect to the provisions of
the 1940 Act.
37. Else, Supreme Court in P. Anand Gajapathi Raju Vs. P.V.G. Raju
(2000) 4 SCC 539 has held that the language of Section 8 is peremptory and
it is obligatory for the Court to refer the parties to arbitration in terms of their
arbitration agreement. It was further held that the object of Section 5 is of
encouraging resolution of disputes expeditiously and less expensively and
when there is an arbitration agreement, the Courts intervention should be
minimal and Section 8 has to be construed keeping the Legislative intention
in mind.
38. I may in this regard also notice that the subject matter of CS(OS)
No.2544/1994 filed by CML was entirely different from the subject matter of
the present suit. It is rather MUL which could have taken the plea of Section
8 of the 1996 Act or of Section 34 of the 1940 Act in CS(OS) No.2544/1994
but is not found to have so taken. That in my view would not deprive CML
from applying under Section 8 of the 1996 Act in CS(OS) No.87/1998
wherein MUL has made monetary claim against CML and when even MUL
does not controvert that claim made in CS(OS) No.87/1998 is the subject
matter of admitted arbitration agreement between the parties.
39. Recently in Sundaram Finance Limited Vs. T. Thankam 2015 SCC
OnLine SC 147 it was held that once an application in due compliance of
Section 8 is filed, the approach of the Civil Court should not be to see
whether the court has jurisdiction but to see whether its jurisdiction has been
ousted and that the general law is to yield to the special law.
40. As far as the presence of Mr. Narender Anand already a defendant in
CS(OS) No.87/1998 or the application for impleadment of Mr. Bobby Anand
in the said suit and who are not party to the arbitration clause is concerned,
Supreme Court has now in Chlora Controls India Pvt. Ltd. Vs. Severn Trent
Water Purification Inc. (2013) 1 SCC 641 held that owing to the persons
such as them being not privy to the arbitration clause, the arbitration clause
cannot be defeated. The counsel for CML and Mr. Narender Anand and Mr.
Bobby Anand also agrees and states that MUL in arbitration proceedings
can, if makes out a case, make a claim against the said Mr. Narender Anand
and Mr. Bobby Anand as well.
41. The counsel for MUL has also argued that there is no Indian Chamber
of Commerce for reference of disputes for arbitration whereto the arbitration
clause aforesaid provides.
42. The said question is no longer res integra. Supreme Court in Pricol
Limited Vs. Johnson Controls Enterprise Ltd. (2015) 4 SCC 177 was
concerned with a clause for reference of disputes to an Arbitrator to be
appointed in accordance with the Rules of Arbitration of the Singapore
Chamber of Commerce. It was not in dispute that the Singapore Chamber of
Commerce mentioned in the said clause is not an arbitration institution
having any rules for appointment of Arbitrators. However construing the
reference to Singapore Chamber of Commerce as to Singapore International
Arbitration Centre (SIAC), SIAC was approached for appointment of
Arbitrator and impugning which the other party initiated legal proceedings in
India. It was held that on a reasonable and meaningful construction of
arbitration clause, the Arbitrator was to be appointed by SIAC inasmuch as
Singapore Chamber of Commerce was admittedly not an arbitration
institution having its own rules for appointment of Arbitrators. It was further
held that the most reasonable construction of the said clause would be to
understand the reference to Singapore Chamber of Commerce as to SIAC.
43. Reference in this context may also be made to Enercon (India) Ltd.
Vs. Enercon GMBH (2014) 5 SCC 1 where it was held that when faced with
a seemingly unworkable arbitration clause, it is the duty of the Court to make
the same workable within the permissible limits of the law, without
stretching it beyond the boundaries of recognition. It was further held that
Sections 8, 10, 11 & 45 of the 1996 Act confer power upon court to prevent
failure of arbitration; a common sense approach has to be adopted to give
effect to the intention of the parties to Arbitrate - attitude of a reasonable
business person and an officious bystander has to be adopted and the court
can thus legitimately supply the missing line/obvious omission to give effect
to the intention of the parties. Finding the arbitration clause in that case to be
though providing for arbitration of three arbitrators but not finding an agreed
mechanism for appointment of the three arbitrators, the words "two
arbitrators appointed by the parties shall appoint the third arbitrator" were
read into the arbitration clause and in the facts and circumstances the
Supreme Court itself appointed the third arbitrator.
44. Taking cue from the above I may add that Section 7(1) defines
arbitration agreement only as an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which may arise
between them in respect of a defined legal relationship, whether contractual
or not. It does not require the arbitration agreement to also provide who will
be the arbitrator and how the arbitrator will be chosen. Section 10(1) of the
1996 Act provides that the parties are free to determine the number of
arbitrators and only places the limitation that such number shall not be an
even number. Section 10(1) by using the words "the parties are free to
determine the number of arbitrators" makes it optional and not mandatory for
the parties to determine the number of arbitrators. Rather, Section 10(2)
provides that failing the determination the arbitral tribunal shall consist of a
sole arbitrator. Section 11(2) again provides that the parties are "free to agree
on a procedure for appointing arbitrator or arbitrators", again, making it
optional for the parties to agree to a procedure for appointment of arbitrators
and not making it mandatory for the parties to do so. Further, Section 11(3)
provides for the contingency of the parties having not agreed and provides
the procedure for such appointment.
45. I thus conclude that an agreement between the parties to submit to
arbitration their disputes in presentie or in future is enough for invoking
Section 8 of the 1996 Act and for invoking the said Section 8 it is not
necessary that the parties should have also agreed to the number of
arbitrators or to the procedure of appointing the arbitrators or that the
number of arbitrators or the procedure for appointing arbitrators should be
correct. Even if the number of arbitrators agreed upon between the parties is
an even number or even if the procedure agreed upon by the parties is
unworkable, it would be a case of parties having not so agreed, setting in
motion the procedure statutorily prescribed in Sections 10 and 11 of the 1996
Act. I have in Dr. Deepashree Vs. Sultan Chand & Sons AIR 2009 Delhi 85
and Pooja Gambhir Vs. Parveen Jain 2009 SCC OnLine Del. 1504 held that
an arbitration between the parties for appointment of an even number of
arbitrators is to be construed as inviting the application of Section 10(2) of
the Act.
46. Applying the aforesaid principles to the arbitration clause in the
present case, it is found that the parties had unequivocally agreed to refer
their disputes to the arbitration and the same constitute an arbitration
agreement within the meaning of Section 7 of the 1996 Act. Even if the
contention of the counsel for the MUL were to be correct that there is no
Indian Chamber of Commerce, Delhi, it would not make the arbitration
agreement otiose or redundant. Similarly even if CML has wrongly
approached FICCI instead of Indian Chamber of Commerce, Delhi, the same
would also not be a ground for defeating the application under Section 8.
47. Reference may also be made to Shree Bhowani Cotton Mills Vs.
Union Textile Traders AIR 1966 Cal 588 where the arbitration agreement
was for reference of disputes to the arbitration of Indian Chamber of
Commerce and the courts at Calcutta alone were agreed to have jurisdiction.
The said arbitration clause was challenged on the ground that it was not
agreed that the arbitration was to be of Indian Chamber of Commerce of
which city. It was held that since the exclusive jurisdiction had been agreed
to be of the courts at Calcutta, the arbitration clause has to be read as
providing for arbitration of the Indian Chamber of Commerce, Calcutta. I
may mention that the arbitration in Gangadhar Gourisankar Vs.
Bissessarlal Kanhaiyalal MANU/WB/0275/1958 (DB) was also agreed to
be of Indian Chamber of Commerce, Calcutta. Similarly, in Jindal
Aromatics Vs. South Coast Spices Exports Private Limited
MANU/DE/1065/2001 also the arbitration agreed to was of the Indian
Chamber of Commerce, Delhi. The contention of the counsel for the MUL
that here is no Indian Chamber of Commerce, Delhi is thus found to be
misconceived. Reference may also be made to Gaurishankar
Bhagwandasji Dubey Vs. M.P. Housing Board, Bhopal
MANU/MP/0087/1976 (DB) where the challenge to the clause for arbitration
of Housing Commissioner of the Circle on the ground of there being no such
authority was defeated by holding that the reference has to be construed as
the Housing Commissioner of the Madhya Pradesh Housing Board.
48. Thus, IA No.11482/1998 under Section 8 of 1996 Act in CS(OS)
No.87/1998 succeeds and parties to CS(OS) No.87/1998 are referred to
arbitration with observations aforesaid and CS(OS) No.87/1998 is disposed
of.
49. The parties are left to bear their own costs.
50. The interim order in force in CS(OS) No.87/1998 to however continue
in force till 7th January, 2017 to enable MUL to take appropriate orders in
proceedings to be instituted.
51. I may record that though the counsel for CML stated that this court
may vide this order itself appoint a sole arbitrator in place of the Arbitral
Tribunal earlier constituted by FICCI and proceedings before which were
stayed by interim order in CS(OS) No.87/1998, but the counsel for MUL is
not agreeable.
RAJIV SAHAI ENDLAW, J.
NOVEMBER 02, 2016
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