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High Court Of Calcutta
SUJIT KUMAR SINHA
ITC CLASSIC FINANCE LTD. - Appellant
Versus
GRAPCO MINING AND CO.LTD. - Respondent
G. A. 52 Of 1997
Decided On : 04/01/1997
ARBITRATION - APPLICATION FOR REFERENCE OF CLAIM TO ARBITRATION - VALIDITY OF ARBITRATION CLAUSE - VAGUENESS AND UNCERTAINTY - APPOINTMENT OF ARBITRATOR - INTERPRETATION OF ARBITRATION ACT, 1996 - SECTIONS 8, 10, 11.
Fact of the Case:
Plaintiff filed a suit against defendants for recovery of amounts due under lease agreements and delivery of possession of equipment. Defendants filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking reference of the claim to arbitration as per arbitration clauses in the lease agreements.
Finding of the Court:
The court held that the arbitration clause was vague and uncertain as it did not specify the appointing authority for the arbitrator. The court also held that the second defendant, who was a necessary and proper party to the suit, had not signed the lease agreements containing the arbitration clause and therefore could not enforce the arbitration agreement.
Issues: 1. Whether the arbitration clause was vague and uncertain due to the omission of the appointing authority for the arbitrator? 2. Whether the second defendant, who had not signed the lease agreements containing the arbitration clause, could enforce the arbitration agreement?
Ratio Decidendi: 1. The court held that the arbitration clause was vague and uncertain as it did not specify the appointing authority for the arbitrator. The court noted that Section 11(2) of the Arbitration Act, 1996 allows parties to agree on a procedure for appointing the arbitrator, but in the absence of such an agreement, Section 11(5) provides for the appointment of the arbitrator by the Chief Justice or a designated person or institution upon the request of a party. However, the court found that Section 11(5) was inapplicable in this case because there was no agreement on the procedure for appointing the arbitrator. 2. The court held that the second defendant, who had not signed the lease agreements containing the arbitration clause, could not enforce the arbitration agreement. The court noted that Section 7(4)(a) of the Arbitration Act, 1996 provides that an arbitration agreement is not binding on a person who has not signed it. The court found that the second defendant was a necessary and proper party to the suit and that the claim of the plaintiff could not be adjudicated in the absence of the second defendant.
Final Decision: The court dismissed the defendants' application for reference of the claim to arbitration.
( 1 ) THIS is an application by the defendants/petitioners under S. 8 of the Arbitration and Conciliation Act, 1996 ("the said Act" for short) inter alia for an order for reference of the claim of the plaintiff in this suit to arbitration in terms of the arbitration agreements entered into by and between the plaintiff and the first petitioner Grapco Mining and Co. Ltd. The said arbitration agreements are contained in two several lease agreements respectively dt. 9th Sept. 1994 and 21st Oct, 1994. The said lease agreements are signed by the plaintiff and the first petitioner. The said lease agreements are both annexures to the present application
( 2 ) THE arbitration clauses contained in the aforesaid lease agreements are identical and it would be convenient at this stage to set out one of the said arbitration clause (at page 72 of the petition) :-"except where it has been provided otherwise, any dispute or difference arising out of or in connection with the agreement between the parties including any dispute or difference relating to the interpretation of the agreement or any clause thereof shall be referred to the sole arbitration of a person appointed by. . . . . . . . . . . and the provisions of The Arbitration Act, 1940 and rules framed thereunder and any amendment thereto, from time to time, shall apply. No objection shall be taken on the ground that the arbitrator so appointed is an employee of the Lessor or is in any way associated with the Lessor. The award of the arbitrator shall be final, conclusive and binding on all the parties. The arbitrator shall be competent to decide whether any matter of dispute or difference referred to him falls within purview of arbitration as provided for above and/or any matter relating to arbitration under the Arbitration Act, 1940"
( 3 ) IT is not in dispute that by reason of the repeal of the Arbitration Act, 1940 by the said Act, the provisions of the said Act would apply to the said arbitration clause.
( 4 ) IT appears from the plaint which is also an annexure to the present application (at pp. 15-26 of the petition) that by further agreements in writing dt. 9th Sept. 1994 and 21st Oct. 1994 entitled "supplemental lease agreements" between the plaintiff and the first and second petitioners. The second petitioner was made a party to both the aforesaid lease agreements "having thereunder the same rights and jointly and severally the same liabilities" as those of the first petitioner. The said supplemental lease agreements have not been annexed to the present application
( 5 ) THE claim of the plaintiff as laid in its plaint is against both the first and second petitioners for recovery of the amounts due and payable by them under the aforesaid lease agreements as modified from time to time by mutual agreements between the parties and delivery of possession of each and every item of equipment referred to therein. It is quite obvious that the second petitioner is a necessary and proper party to this suit
( 6 ) IN resisting the present application the learned counsel appearing for the plaintiff has submitted as follows :-a) Neither the original arbitration agreement nor a duly certified copy of the same has been annexed to the present application as required under S. 8 (2) of the said Act. 9 I am not impressed by the aforesaid submission. What have been annexed to the present application are the xerox copies of the aforesaid lease agreements which also form part of the plaint filed in this suit. Indeed the said lease agreements are relied upon by both the plaintiff at well as the petitioners and it is not in dispute that the said xerox copies are in fact the true copies of the same. It appears to me that the xerox copies of the said lease agreements containing the said arbitration clause that have been annexed to the present application are in sufficient compliance with the said S. 8 (2) of the said Act;b) As the claim of the plaintiff in this suit is not in disput
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