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High Court Of Calcutta
Nirmal Chandra Mukherji, Bankim Chandra Ray
BALSUKH REFRACTORIES AND CERAMICS LTD - Appellant
Versus
HINDUSTHAN STEEL LTD - Respondent
Civil Rule 251 Of 1973
Decided On : 07/23/1976
ARBITRATION - Appointment of Sole Arbitrator - Validity - Arbitration Agreement - Existence - Jurisdiction of Court - Bar to Institution of Legal Proceedings - Impartiality of Arbitrator - Frustration of Contract.
Fact of the Case:
Petitioner, a manufacturer of fireclay bricks, entered into a contract with the opposite party, a government company, to supply fireclay bricks and refractory goods. A dispute arose between the parties, and the opposite party appointed the respondent as the sole arbitrator. The petitioner challenged the appointment of the sole arbitrator and filed an application under Section 31 read with Sections 33 and 9 of the Arbitration Act, 1940, seeking to set aside the appointment and for a stay of arbitration proceedings.
Finding of the Court:
The court held that there was an arbitration agreement in the contract between the parties, as evidenced by Clause 23 of the General Conditions of Contract, which provided for compulsory arbitration in the event of a dispute. The court also held that the appointment of the respondent as the sole arbitrator was valid, as the petitioner had failed to appoint a new arbitrator within the specified time after the previous arbitrator had neglected or refused to act. The court further held that the bar to the institution of legal proceedings against the opposite party in any other Civil Court except in the appropriate Civil Court of Durg (District), as provided in Clause 24 of the General Conditions of Contract, was applicable to the petitioner's application, and that the Court of the Subordinate Judge, Asansol, did not have jurisdiction to entertain the application.
Issues: 1. Whether there was an arbitration agreement in the contract between the parties? 2. Whether the appointment of the respondent as the sole arbitrator was valid? 3. Whether the Court of the Subordinate Judge, Asansol, had jurisdiction to entertain the petitioner's application?
Ratio Decidendi: 1. The court held that there was an arbitration agreement in the contract between the parties, as evidenced by Clause 23 of the General Conditions of Contract, which provided for compulsory arbitration in the event of a dispute. The court relied on the fact that the petitioner had submitted tenders subject to the General Conditions, including the arbitration clause, and that the contract between the parties was subject to the arbitration clause contained in the General Conditions of Contract. 2. The court held that the appointment of the respondent as the sole arbitrator was valid, as the petitioner had failed to appoint a new arbitrator within the specified time after the previous arbitrator had neglected or refused to act. The court relied on Section 9(b) of the Arbitration Act, which provides that if an arbitrator neglects or refuses to act, the party who appointed him may appoint another arbitrator in his place. 3. The court held that the bar to the institution of legal proceedings against the opposite party in any other Civil Court except in the appropriate Civil Court of Durg (District), as provided in Clause 24 of the General Conditions of Contract, was applicable to the petitioner's application, and that the Court of the Subordinate Judge, Asansol, did not have jurisdiction to entertain the application. The court relied on the decision in Hakam Singh v. Gammon (India) Ltd., which held that parties can agree to confer jurisdiction on a Court that it does not possess under the Code of Civil Procedure.
Final Decision: The court dismissed the petitioner's application, holding that there was an arbitration agreement in the contract between the parties, that the appointment of the respondent as the sole arbitrator was valid, and that the Court of the Subordinate Judge, Asansol, did not have jurisdiction to entertain the application.
( 1 ) THIS revisional application under Section 115 of the Code of Civil Procedure arises out of an application filed by the petitioner under Section 31 read with Section 33 and Section 9 of the Arbitration Act of 1940 and it is directed against order No. 21 dated December 6, 1972 passed in Misc. Case No. 50 of 1972 by the learned Subordinate Judge, Asansol.
( 2 ) THE petitioner Company carried on business as manufacturers of and dealers in fireclay bricks and refractory goods in mouja Salanpur P. S. Salanpur, Sub-Division Asansol, District Burdwan, The opposite party No. 1 is a fully owned Government Company in public sector carrying on business as manufacturers of and dealers in Iron and Steel at Bhilai Steel Plant, Bhilai, District Durg, Madhya Pradesh. Sometime in 1966 the opposite party No. 1 sent a letter No. Expm/bm/pur -- 17 (1)/66 to the petitioner inviting tenders for supply of fireclay bricks and refractory goods of certain specifications to the opposite party No. 1. On February 24, 1966, the petitioner sent a letter to the opposite party No. 1 intimating that the petitioner could supply a certain quantity of fireclay bricks and refractory materials of the specifications mentioned therein and enclosed with it the tender No. BRCS/35/1832. The said letter contained all the terms and conditions. The opposite party No. 1 by letter dated December 31, 1966 accepted the said tender on certain terms and conditions. In the said letter there was a remark which is set out hereunder : "subject to conditions of acceptance of tender attached. "
( 3 ) IN accordance with the said agreement the petitioner from time to time sold and delivered diverse quantities of goods to the opposite party No. 1 at the petitioner's works' at Salanpur after the same had been duly inspected and approved at its factory at Salanpur. The opposite party No. 1 made payments from time to time in respect of goods so sold and delivered and after deducting the amounts paid by the opposite party No. 1 a sum of Rs. 86,120. 45 paise remains due from the opposite party No. 1 as the balance of price of goods sold and delivered besides other dues. The opposite party No. 1 in spite of repeated demands failed and neglected to pay the said sum. There was serious labour unrest in the petitioner's factory. Moreover, the opposite party No. 1 did not pay the balance price of the goods supplied. For these reasons the petitioner was compelled to declare a closure of its factory on August 4, 1969 and as such the aforesaid contract became impossible of further performance and void. The notice of such closure was given to opposite party No. 1 in due time.
( 4 ) IN February, 1971, the opposite party No. 1 wrongfully alleged that the petitioner had committed a breach of the said contract by not supplying the balance quantity of goods and the opposite party No. 1 had thereby suffered loss and damage. As such a dispute had arisen and the same should be referred to arbitration. It has been stated that though the said contract did not embody any arbitration clause the opposite party No. 1 by letter dated February 8, 1971, appointed the opposite party No. 2 as its arbitrator purportedly relying upon Clause 23 of the General Conditions of Contract and intimated the same to the petitioner asking it to appoint a person as the second Arbitrator. It has been submitted that the said contract did not contain any arbitration agreement and the said appointment by the opposite party No. 1 is illegal and invalid and the opposite party No. 2 has no jurisdiction to act as arbitrator. On February 20, 1971, the petitioner under protest appointed one Mr. Satipati Banerjee, Advocate, as the Second Arbitrator. The petitioner, thereafter, received a letter dated September 24, 1971 from the opposite party No. 1 intimating it that the opposite party No. 3 by its letter dated May 1, 1971, requested Mr. Satipati Banerjee to intimate when he would be able to come to Bhilai to discuss matters rega
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