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High Court Of Delhi
MILK FOOD LIMITED - Appellant
Versus
GMC ICE CREAM PRIVATE LIMITED - Respondent
ORIGINAL MISCELLANEOUS PETITION 94 of 1998
Decided On : 10/13/1999
ARBITRATION - INDIAN ARBITRATION ACT, 1940 - ARBITRATION AND CONCILIATION ACT, 1996 - APPLICABILITY - CONSENT ORDER OF COURT - JURISDICTION - SECTION 21 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - INTERPRETATION - NOTICE FOR INITIATING ARBITRATION PROCEEDINGS - WHO CAN SEND - CLAIMANT OR RESPONDENT - SECTION 37 (3) OF THE INDIAN ARBITRATION ACT, 1940 - PURPOSE - LIMITATION OR OTHER PURPOSE - SECTION 34 OF THE INDIAN ARBITRATION ACT, 1940 - APPLICATION FOR STAY - NATURE AND PURPOSE - NOT AN APPLICATION IN A REFERENCE UNDER SECTION 31 (4) OF THE ACT.
Fact of the Case:
Petitioner and respondent entered into an agreement for the manufacture and sale of ice cream. A dispute arose between the parties, and the respondent filed a suit in the Court of Munsif-I, Gaya. The Trial Court stayed the proceedings, and the order was affirmed by the Additional District Judge. The petitioner filed a Civil Revision before the High Court, which allowed the defendant's application under Section 34 of the Arbitration Act. The respondent appointed a retired Judge of the Supreme Court as the Third Arbitrator without the petitioner's knowledge or consent. The Arbitrators issued a notice to the petitioner with the direction of filing a claim by the respondent. The petitioner filed an application seeking direction/clarification that only the provisions of the Indian Arbitration Act, 1940 should be applicable to the arbitration proceedings pending before the Arbitrators.
Finding of the Court:
The Court held that the arbitration proceedings commenced on the date of the consent order of the High Court on 6th May, 1997, and accordingly, the parties have to be governed by the provisions of the Arbitration and Conciliation Act, 1996. The Court also held that the petitioner was aware of the third arbitration from the very beginning and it has to be assumed that the petitioner by necessary implication gave consent for referring the disputes to the arbitration.
Issues: 1. Whether the provisions of the Indian Arbitration Act, 1940 or the Arbitration and Conciliation Act, 1996 would apply to the arbitration proceedings pending before the Arbitrators? 2. Whether the Arbitrators (majority order) erred in holding that the arbitration proceedings commenced from the date or order of the High Court of Patna dated 6th May, 1997? 3. Whether the Arbitrators erred in holding that the arbitral proceedings commenced only when the Arbitrator actually entered upon the arbitration reference and not when the notice by one of the parties requesting for arbitration is sent?
Ratio Decidendi: 1. The Court held that the arbitration proceedings commenced on the date of the consent order of the High Court on 6th May, 1997, and accordingly, the parties have to be governed by the provisions of the Arbitration and Conciliation Act, 1996. 2. The Court held that the Arbitrators (majority order) did not err in holding that the arbitration proceedings commenced from the date or order of the High Court of Patna dated 6th May, 1997. 3. The Court held that the Arbitrators did not err in holding that the arbitral proceedings commenced only when the Arbitrator actually entered upon the arbitration reference and not when the notice by one of the parties requesting for arbitration is sent.
Final Decision: The Court approved the majority order dated 6th April, 1998 and accordingly concluded that the parties in the arbitration proceedings shall be governed by the Arbitration and Conciliation Act, 1996.
( 1 ) THE petitioner Milk Food Ltd. has approached this Court by filing a petition under Section 33 of the Arbitration Act, 1940 in which a prayer has been made that order be passed clarifying that the provisions of Indian Arbitration Act, 1940 would apply to the arbitration proceedings pending before the Arbitrators and the order of the two Arbitrators passed on 6. 4. 1998 be declared as incompetent and illegal.
( 2 ) THE brief facts necessary to dispose of this petition are recapitulated in the succeeding paragraphs.
THE petitioner is engaged in a business of manufacturing, marketing and sale of Ghee, Milk Powder, Dairy Whitener, Liquid Milk and Yogurt, etc. Earlier the petitioner was engaged in the business of marketing and sale of Ice Cream under the brand name "milkfood 100%". It is further stated in the petition that respondent No. 1 approached the petitioner with an offer for manufacturing the Ice Cream for the petitioner. The said respondent further represented that it was going to instal a plant for manufacture of Ice Cream having suitable capacity and would arrange for all necessary personnel, permission and labour. The respondent would manufacture Ice Cream on the directions of the petitioner. An agreement between the parties was executed and according to the agreement, respondent No. 1 was to deposit Rs. 10 Lakhs with the company for a period of 5 years. The deposit shall carry interest at the rate of 15 per cent per annum compounded quarterly.
( 3 ) ACCORDING to Clause 20 of the said agreement which reads as under :
"in case of any dispute or any difference arising at any time between the company and the manufacturer as to the construction, meaning or effect of this agreement or any clause or thing contained therein or the rights and liabilities of this company or the manufacturer hereunder in relation to the premises, shall be REFERRED TO to a single Arbitrator, in case the parties can agree upon one, and failing such agreement, to two Arbitrators one to be appointed by either party and in case of disagreement between the two Arbitrators aforesaid and insofar as and to the extent that they disagree to, an Umpire to be appointed by the said two Arbitrators before they enter upon the reference. All such arbitration proceedings shall be in accordance with and subject to the provisions of the Arbitration Act, 1940, or any statutory modification or re-enactment. "
( 4 ) ACCORDING to the petitioner, the respondent did not take any steps in accordance with the said agreement and in any event the respondent did not each alongwith its letter of May 7,1995, which was to be sent in 1992. Consequently, the payment sent in May, 1995 was returned. It is stated by the petitioner that by that time the petitioner had also entered into negotiations/agreements with Brooke-Bond Lipton India Ltd. for assignment of its Trade Marks, Assignments of Marketing Sales and Distribution Assets and non-competition agreement, etc.
( 5 ) RESPONDENT No. 1 filed a suit in the Court of Munsif-I, Gaya. The Trial Court stayed the proceedings and the order of the Trial Court was affirmed by the learned Additional District Judge in appeal. Thereafter, a Civil Revision was filed before the High Court against the order of the Munsif Court, Gaya, Bihar dated 3. 8. 1995 whereby the defendant s application under Section 34 of the Arbitration Act was allowed.
( 6 ) IT has been alleged that the respondent had appointed Mr. A. B. Rohtagi, a retired Judge of this Court as the Third Arbitrator without the knowledge or consent of the petitioner. The Third Arbitrator (Umpire) could have been appointed by the two respective Arbitrators only.
( 7 ) THE Arbitrators issued a notice to the petitioner with the direction of filing claim by respondent No. 1. When it became clear that the Arbitrators were proceeding under the provisions of the Arbitration and Conciliation Act, 1996 immediately thereafter the petitioner filed an application seeking direction/
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