1999 Supreme(Bom) 144

IN THE HIGH COURT OF BOMBAY
Ashok Agarwal A.V. Savant, JJ.
M/s. Divya Shivlaks Impex ..... Appellants.
Versus
Shantilal Jamnadas Textiles (P) Limited ..... Respondents.
Appeal No. 35 of 1999 in Arbitration Petition No. 381 of 1998, decided on 24-2-1999.
Advocates appeared :
S.P. Dalal, for the appellants.
R.S. Tripathi, i/b Bhansal Bhansal, for the respondents.

Headnote:Section 10-See Arbitration - Concilation Act, 1996, Section 34.

       Section 7-Agreement between parties not providing any arbitration clause-Thus, dispute not to be referred to Arbitrator-Only printed note on invoices about reference to arbitration cannot infer agreement for arbitration-Thus award of Arbitrator in such matter without jurisdiction.-Court holds that there was no arbitration agreement between the parties. The contract, dated 2nd January, 1998 did not contain any arbitration clause. The subsequent correspondence exchanged between the parties also did not contain any stipulation that the sale was subject to the rules of the Merchants Mahajan much less a specific agreement of the Merchants Mahajan. Right from the inception, the appellants have been contending that there was no arbitration clause and that the Merchants Mahajan had no jurisdiction to arbitrate upon the dispute. The appellants have been consistently placing reliance on the original contract, dated 2nd January, 1998. The ratio of the two decisions of this Court on which Mr. Dalal has placed reliance are in Courts view, clearly distinguishable. On facts, in each of the two cases there was an express agreement to refer the dispute to the arbitration of the Merchants Mahajan which is conspicuously absent in the present case. Printed clause in the invoice is wholly unintelligible and does not, in Court view, make out an agreement to refer the dispute to the arbitration of the Merchants Mahajan.

       Sections 7 and 2(s)-Jurisdiction to arbitrator-No arbitration clause in the written contract-Clause printed on the invoice though illegible reading "This sale is subject to the sale Disputes and Arbitration rules of Mumbai Piece goods Merchants Mahatma"-Order for supply of goods-Dispute arising on rejection of some defective goods-Neither contract nor subsequent correspondence exchanged between parties containing any stipulation much less a specific agreement that dispute would be referred to arbitration much less a specific agreement that dispute would be referred to arbitration of Merchants rv1ahajan-Clause in question did not amount to an agreement to refer the dispute to the arbitration of Mahajan-Merchants Mahajan had no jurisdiction to arbitrate upon dispute-Ex-parte award as passed by sole arbitrator set aside in appeal against order of single Judge rejecting objection to the award.- The appellants had placed an order for supply of certain fabrics. Pursuant to written contract, the fabrics were delivered by the respondents to the appellants in various lots and invoices were raised on the appellants. In respect of goods received, there were some defects resulting in rejection of some of the goods. The appellants, therefore, asked for return of payment in respect of defective goods. The parties exchanged notices and thereafter, notice of arbitration was given to the appellants by the Mumbai Textile Merchants Mahajan enclosing the statement of claim of the respondents. The respondents appointed their arbitrator. The appellants wrote to the Merchants Mahajan categorically stating that there was no arbitration clause in the written contract entered into between the parties and therefore, the Merchants Mahajan had no jurisdiction to arbitrate upon the dispute. The Merchants Mahajan wrote to the appellants that every invoice of Merchants members carried a printed notation "that the particular deal will be subject to arbitration of Mahajan, if needed" and they were accordingly proceeding with the arbitration. The invoice contained an illegible clause reading "This sale is subject to the sale Disputes and Arbitration rules of Mumbai Piece good Merchants Mahatma". The Merchants Mahajan passed an ex-parte award the appellants having refused to take part in the proceedings. The appellants were admittedly not the members of the Merchants Mahajan. The record showed that there was no arbitration agreement between the parties. The contract, dated 2nd January, 1998 did not contain any arbitration clause. The subsequent correspondence exchanged between the parties also did not contain any stipulation that the sale was subject to the rules of the Merchants Mahajan much less a specific agreement that the dispute would be referred to the arbitration of the Merchants Mahajan. Right from the inception, the appellants had been contending that there was no arbitration clause and that the Merchants Mahajan had no jurisdiction to arbitrate upon the dispute. The appellants had been consistently placing reliance on the original contract. The printed clause in the invoice was not intelligible. There was no clause to the effect that the sale was subject to the arbitration rules of the Mumbai Piece Goods Merchants Mahajan. In absence of any other material to explain the said printed clause, it cannot be said that the same amounts to an agreement to refer the dispute to the art .ration of Merchants Mahajan. There being no arbitration clause in the written contract between the parties, the Merchants Mahajan had no jurisdiction to arbitrate upon the dispute. Ex-parte award as made by the sole arbitrator was, therefore, not sustainable. Appeal challenging order of single Judge rejecting objection to the award allowed. Appeal No. 782 of 1986 in Arbitration Petition No. 57 of 1986 in Award No. 10 of 1986, Arbitration Petition No. 61 of 1982 in Award No.6 of 1982, Dist.

       Section 34-Contract Act, 1872, Section 10-Applicability of Absence of arbitration in a contract between the parties-Absence of arbitration agreement not binding on parties-Terms of contract in writing-Does not alter by printing some clause on invoice-Absence of any document to support the presence of agreement clause-Ineligible copy of invoice cannot ,be termed as clause of agreement.- The short point which arises for our consideration is whether there was a arbitration clause in the contract between the parties so as to make the award binding on the appellant. It must be stated that as a result of the appellants having refused to take part in the arbitration on the ground that the Mahajan had no jurisdiction to arbitrate, the award that has been passed is an ex parte award under the said award, the sole arbitrator came to the conclusion that an amount of Rs. 1,09,660.00 plus Rs. 11,239/- being the amount of interest was payable by the appellant within 10 days from the date of receipt of the copy of the award by them falling which the respondents will be entitled to recover interest at 21 percent per annum from the appellant till date of payment. Rs. 500/- was awarded as cost of arbitration. Award is dated 5th August, 1998. It is this award which was challenged before the learned Single Judge who has dismissed the petition under the impugned order dated 17th November, 1998. - The said contract does not contain any arbitration clause. There is no other correspondence on record from which one can spell out any arbitration agreement b2tween the parties. There is no other material save and except the printed invoice with which we will deal presently which can spell out an agreement to refer the dispute to the arbitration of the Mahajan. There was a contract between the parties which contained an express clause to the effect that the dispute in respect of the sales covered by the said contract would be decided in accordance with the rules of the Mahajan. Secondly, there were invoices under which the goods were supplied. There invoices also contained as express clause to the effect that the dispute in respect of the sale covered by the invoices was to be decided in accordance with the rules of the Mahajan. The Division Bench thus came to the conclusion that in view of the written agreement the appellants contention that they were not bound to refer the dispute to the arbitration under the said rules and that they were not bound by the award could not be accepted. The learned Single Judge against whose decision the said appeal was preferred had also come to the same conclusion that there was a contract between the parties which contained an express clause to the effect that the disputes in respect of the sale covered by the contract would be decided in accordance with the rules of the Mahajan. So was the decision in respect of the invoice. It was in these peculiar facts that the Division Bench came to the conclusion that the appellants were bound by the arbitration agreement and the express clause in the invoice. We do not think that the ratio of the Division Bench decision in Appeal No. 782 of 1986 is of any application to the facts in the case before us. As indicate earlier, in the written contract dated 2nd January, 1998 there is no arbitration clause. There is no other correspondence from which the arbitration agreement can be spelt out. Printed condition on the invoice does not. In Court view, constitute an agreement to refer the dispute to the arbitrator.

       There was no arbitration agreement between the parties. The contract dated 2nd January, 1998 did not contain any arbitration clause. The subsequent correspondence exchange between the parties also did not contain any stipulation that the sale was subject to the rules of the Merchants Mahajan much less a specific agreement that the dispute would be referred to the arbitration of the Merchants Mahajan. Right from the inception, the appellants have been contending that there was no arbitration clause and that the Merchants Mahajan had no jurisdiction to arbitrate upon the dispute. The appellants have been consistently placing reliance on the original contract dated 2nd January, 1998. The ratio of the two decisions of this Court on which Mr. Dalal has placed reliance are, in our view, clearly distinguishable. On facts, in each of the two cases there was an express agreement to refer the dispute to the arbitration of the Merchants Mahajan which is conspicuously absent in the present case. Printed clause in the invoice is wholly unintelligible and does not, in our view, make out an agreement to refer the dispute to the arbitration of the Merchants Mahajan. In the circumstances, it is not possible for us to uphold the Judgment of the learned Single Judge.