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2013 Supreme(Bom) 2325
High Court of Judicature at Bombay
ANOOP V. MOHTA, J.
Lakshmi Machine Works Ltd.
Versus
Marathe Textiles Mills & Another
Appeal From Order No. 1105 of 2013 with CAA/1332 of 2013
Decided on : 25-11-2013
For the Appellant:Raju Subramanian, Senior Advocate with Paritosh Jaiswal with Ashok Purohit, Shalaka Mali i/by M/s. Ashok Purohit & Co., Advocates.
For the Respondents:R1, Rashid Khan with Ms. Priyanka Kothari, Balasaheb Deshmukh i/by Balasaheb Deshmukh, R2, Paritosh Jaiswal i/by Mr. Prashant Kulkarni, Advocates.
The central legal point established in the judgment is the principle of holding parties to their bargain in arbitration agreements and the burden of proof lying upon the party challenging the existence of the arbitration agreement.
Headnote:
Arbitration Act - Breach of Contract - Act of 1940 - Section 34
Fact of the Case:
The Plaintiff filed a Suit for breach of contract by mis-performance/delay in supplying machineries. The Defendants filed Applications under Section 34 of the Arbitration Act, 1940, which were rejected by the lower court. The dispute revolved around the existence of an arbitration agreement between the parties.
Finding of the Court:
The court found that the rejection of the Applications under Section 34 was erroneous as there was no objection raised at the earliest point of time about the non-receipt of the General Conditions of Sale of Goods, including the arbitration clause. The court emphasized the principle of holding parties to their bargain in arbitration agreements.
Issues: The main issue was the existence of an arbitration agreement between the parties and the rejection of the Applications under Section 34 of the Act of 1940.
Ratio Decidendi: The court held that in the absence of objection raised at the earliest point of time about the non-receipt of the General Conditions of Sale of Goods, the burden lies upon the Plaintiff to prove otherwise. The court also emphasized the principle of holding parties to their bargain in arbitration agreements.
Final Decision: The Appeal from Order was allowed, the impugned order was quashed and set aside, the Applications at Exhibits 20 and 31 were allowed, and the Arbitration proceeding was expedited to be disposed of within one year. No costs were awarded.
The Appellant/original Defendant has filed the present Appeal from Order challenging Order dated 11.12.2012 passed by the learned Joint Civil judge, Senior Division, Sangli, whereby Applications at Exhibits 20 and 31, under Section 34 of the Arbitration Act, 1940 (Act of 1940) were rejected and thereby directed the parties to proceed expeditiously in the Suit. The Plaintiff filed the Suit on 22.03.1993 for the breach of contract by mis-performance/delay in supplying the machineries so agreed. The prayers are joint and several against both the Respondents (Defendants). An mandatory injunction was also sought against them to continue to supply the spares of the machinery supplied by them and to provide service maintenance.
2. Both the contesting Respondents/Defendants filed these Applications within reasonable time i.e. 17.06.1994 and thereby requested to stay the civil proceedings till the disposal of arbitration proceedings in view of Section 34 of the Act of 1940. By the impugned order, both the Applications were rejected. We are not concerned at this stage the delay in rejecting such Applications which is practically more than 19 years.
3. Admittedly, two Revisions filed by the Appellants within limitation and thereafter challenged common order dated 11 December 2012. On 13 September 2013, the learned Judge, after recording the submissions, permitted the Appellants to file an Appeal from Order and thereby continued the ad interim reliefs granted in the Revisions for four weeks. The Revision Applications were accordingly disposed of with liberty to the Applicants to file appropriate Appeals from Orders. The Appeal is therefore preferred by the Appellants only and not the Agents/Respondent No.2. There is no dispute with regard to the acceptance of order/offer in question subject to the enclosed General Conditions of Sale of Goods (Reference No. 771-D). Letter dated 23 August 1989 also refers to “the enclosed General Conditions of Sale of Goods”. There is no dispute that the parties, based upon proposal and offer, accepted the contract and proceeded accordingly. There was no objection raised at any earliest point of time immediately after receipt of the order of acceptance where reference is made to the General Conditions of Sale of Goods. The objection was raised for the first time only in reply filed to the Applications filed by the Appellant about the non-receipt of General Conditions and specifically the last pages which reflects arbitration clause in question.
The arbitration clause is reproduced as under:
“X ARBITRATION
Any dispute whatsoever touching the quotation/contract including any dispute arising out of resale under Clause VII (b) shall be referred to two arbitrators each residing in Coimbatore holding responsible position in a firm or company which is a member of the Indian Chamber of Commerce Coimbatore, one to be appointed by each party to the dispute. The arbitrators shall before proceeding with the arbitration, nominate an umpire qualified as above mentioned and in the event of their inability to agree on an umpire the arbitrators will request the President of the Indian Chamber of Commerce Coimbatore to recommend an umpire and the umpire suggested by the said President can be chosen by two arbitrators. The arbitration will be held in accordance with the provisions of the Indian Arbitration Act 1940 and/or any then subsisting statutory modifications thereof.”
Respondent No.1/Plaintiff submitted that as there was denial to the acceptance and/or receipt of these Conditions including arbitration clause, the submission that there exists no arbitration agreement between parties, rightly accepted by the learned Judge and thereby rejected those Applications is, in my view, unacceptable, specially when there is nothing on record to show and/or justify and/or any objection taken immediately after receipt of the acceptance of order dated 23 August 1989 including the terms and conditions having arbitration cla
