IMPORTANT POINT
Recourse to arbitration under Section 20 of the Arbitration Act can not be taken contrary to agreed stipulation in agreement between parties.

ORDER

This appeal arises out of arbitration proceedings. Clause 19 of the Arbitration Agreement entered into between the parties reads thus.

"All disputes and differences arising out of or in any way touching or concerning this agreement whatsoever (except as to any matter the decision of which is expressly provided for in the contract) shall be referred to the sole arbitration of any person appointed by the F.C.I.... It is also a term of this contract that no person other than a person appointed by the F.C.I. as aforesaid should act as arbitrator and if for any reason that is not possible the matter is not to be referred to arbitration at all."

2. The admitted case of the parties is that no arbitrator was appointed by the Food Corporation of India. The terms of the contract clearly stipulated that in case there is no agreement on the appointment of the sole arbitrator then no person other than the person to be appointed by the F.C.I. can act as an arbitrator and where it is not possible to appoint such an arbitrator, then the matter is not to be referred to arbitration at all.

3. The Award made by the Arbitrator [who had not been appointed in the manner prescribed by Clause 19 (supra)] on 20th of March, 1982 was, however, made a Rule of the Court by learned Sub-Judge, Trivandrum on 24th June, 1982 and a decree in terms of the Award followed. An appeal against the Award filed by the respondent succeeded in the High Court when the Division Bench of the Kerala High Court on 13th February, 1987 held that no arbitrator could have been appointed in view of the specific terms of Clause 19 of the agreement.

4. Section 20 of the Arbitration Act, 1940 on which learned counsel for the appellant relies is merely a machinery provision. The substantive rights of the parties are to be found in Section 8(1), Clauses (a) and (b). It is not disputed before us that the case of the appellants does not fall in any of the two clauses. Recourse to arbitration could not have been taken contrary to the agreed stipulation contained in Clause 19 of the agreement (supra). The Award made in this case was thus by a quorum-non-judis. That being the position, no fault can be found with the judgment of the Division Bench setting aside the award and the decree of the learned Sub-Judge, Trivandrum. This appeal, therefore, has no merit. It fails and is hereby dismissed. No costs.

Appeal dismissed.

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Parallel Citations of other Journals :

A. Mohammad Yunus (Dead) by LRs. v. Food Corporation of India & Anr., 2000(7) Supreme 722 .