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HIGH COURT OF CALCUTTA
R. S. Bachawat, C. N. Laik
UNION OF INDIA - Appellant
Versus
HIMCO (INDIA) PRIVATE LTD. - Respondent
A. F. O. O. 183 Of 1961
Decided On : AUGUST 13, 1962
ARBITRATION - AGREEMENT - APPOINTMENT OF ARBITRATOR - CONSTRUCTION OF CLAUSE - SUBSTITUTIONAL APPOINTMENT - POWER OF COURT TO APPOINT ARBITRATOR - INDIAN ARBITRATION ACT, 1940, SECTIONS 2 (A), 20 (4), 23 (1), 39 (IV), SCHEDULE I, PARAGRAPH 3.
Fact of the Case:
The Union of India invited tenders for the supply of certain goods. The tender form contained a query whether the tenderer agreed to sole arbitration by the Director General of Supplies and Disposals or his nominee as provided in Clause 21 of the General Conditions of Contract. The defendants submitted their tender stating that they felt there should be an unattached arbitrator. The Union of India accepted the tender subject to the conditions of the contract as contained in Form No. W. S. B. 138 as amended up to date. Clause 21 of the said Form contained the arbitration clause.
Finding of the Court:
The court held that there was a concluded arbitration agreement between the parties in terms of clause 21 of Form No. W. S. B. 133. The court also held that the arbitration agreement sufficiently complied with the provisions of Article 299 of the Constitution. However, the court erred in directing the filing of a modified arbitration agreement instead of the arbitration agreement set out in the petition.
Issues: 1. Whether there was a valid arbitration agreement between the parties? 2. Whether the arbitration agreement sufficiently complied with the provisions of Article 299 of the Constitution? 3. Whether the court erred in directing the filing of a modified arbitration agreement instead of the arbitration agreement set out in the petition?
Ratio Decidendi: 1. The court held that there was a concluded arbitration agreement between the parties in terms of clause 21 of Form No. W. S. B. 133. The court found that the defendants' suggestion for an unattached arbitrator was not accepted by the Union of India, and that the subsequent conduct of the parties showed that they had accepted the counter-offer of the Union of India, which was based on the terms of the acceptance of tender. 2. The court held that the arbitration agreement sufficiently complied with the provisions of Article 299 of the Constitution. The court found that the formal document embodying the arbitration agreement was expressed to be made by the President and was executed in proper form and by the appropriate authority, and that it satisfied the conditions of Article 299 of the Constitution, even though it came into existence before the contract was concluded. 3. The court held that the learned Judge should have directed the filing of the arbitration agreement as contained in Clause 21 of Form No. W. S. B. 133 and as set out in the petition. Instead of doing so he has directed the filing of a modified arbitration agreement. In substance he has refused to direct the filing of the arbitration agreement set out in the petition and has directed the filing of somewhat different arbitration agreement.
Final Decision: The appeal was allowed. The judgment and order passed by the Court below was set aside. The court directed that the arbitration agreement set out in paragraph 2 of the petition of the appellant be filed as of records herein. The court also directed that all matters in difference between the parties herein mentioned in the said petition including the question of the costs of the reference arc referred to the Director General of Supplies and Disposals in accordance with the aforesaid arbitration agreement.
( 1 ) THIS is an appeal by the Union of India from an order passed under Section 20 of the Indian Arbitration Act. The Union of India invited tenders for the supply of certain goods. The invitation contained inter alia the following query:"do you agree to sole arbitration by Director General of Supplies and Disposals or his nominee as provided in Clause 21 of me General Conditions of Contract Form W. S. B. 196? (Your acceptance or non-acceptance of this clause will not influence the decision of the tender. It should, however, be noted that an omission to answer the above question will be deemed, as an acceptance of the clause ). "
( 2 ) DEFENDANTS M/s. Himco (India) Private Ltd. submitted their tender dated October 3, 1956 wherein they stated at the foot of the query mentioned above as follows:--"we feel there should be an unattached arbitrator". The Union of India accepted the tender by A/t No. Cal. /pr-II (3)/16359-G/448 dated November 30, 1956. The acceptance stated inter alia that the conditions of the contract would be as contained in Form No. W. S. B. 138 as amended up to date. Clause 21 of the said Form contained the following arbitration clause:"in the event of any question, dispute or difference arising under these conditions or any special conditions of contract, or in connection with this contract, (except as to any matters the decision of which is specially provided for by these or the special conditions), the same shall be referred to the sole arbitration of the Director General of Supplies and Disposals or of some other person appointed by him. It will be no objection that the arbitrator is a Government servant, that he had to deal with the matters to which the contract relates or that in the course of his duties as a Government servant he has expressed views on all or any of the mailers in dispute or difference. The award of the arbitrator shall be final and binding on the parties to this contract. It is a term of this contract- (a) if the arbitrator be the Director General of Supplies and Disposals- (i) in the event of his being transferred or vacating his office by resignation or otherwise, it shall be lawful for his successor-in-office either to proceed with the reference himself, or to appoint another person as arbitrator; or (ii) in the event of his becoming unable to act, for any reason, it shall be lawful for the Director General of Supplies and Disposals to appoint another person as arbitrator; or (b) if the arbitrator be a person appointed by the Director General of Supplies and Disposals--in the event of his dying, neglecting or refusing to act, or resigning or being unable to act for any reason, it shall be lawful for the Director General of Supplies and Disposals cither to proceed with the reference himself or to appoint another person as arbitrator in place of the outgoing arbitrator. It is further a term of this contract that no person other than the Director General of Supplies and Disposals or the person appointed by him should act as arbitrator and that, if for any reason that is not possible, the matter is not to be referred to arbitration at all. Upon every and any such reference, the assessment of the costs incidental to the reference and award respectively shall be in the discretion of the arbitrator. Subject as aforesaid, the Arbitration Act, 1940 and the rules thereunder and any statutory modifications thereof for the time being in force shall be deemed to apply to the arbitration proceedings under this clause. Work under the contract shall, if reasonably possible, continue during the arbitration proceedings and no payment due to or payable by the Purchasers shall be withheld on account of such proceedings. The venue or arbitration shall be the place from which the acceptance note is issued or such other place as the Purchaser at his discretion may determine. In this clause the expression "the Director General of Supplies and Disposals" means the Director General of Supplies
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