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High Court Of Delhi
APPLIED ELECTRONICS LIMITED - Appellant
Versus
MAHANAGAR TELEPHONE NIGAM LIMITED - Respondent
Decided On : 07/01/1996
ARBITRATION ACT, 1940 - SECTION 34 - STAY OF SUIT - ARBITRATION AGREEMENT - VALIDITY - PUBLIC POLICY - INDIAN CONTRACT ACT - PARTIES TO SUIT AND ARBITRATION AGREEMENT - COMPLEX QUESTIONS OF LAW - READINESS AND WILLINGNESS TO ARBITRATE - BIAS OF ARBITRATOR - POWER OF CMD TO APPOINT ARBITRATOR - INTERPRETATION OF ARBITRATION CLAUSE.
Fact of the Case:
Plaintiff filed a suit against MTNL and Union of India for recovery of Rs. 1,97,11,751.00, injunction restraining disconnection of pay phones, declaration that defendants are not entitled to reduce commission, compensation for losses due to excessive metering and billing, and wrongful disconnection of telephone connections. MTNL moved an application under Section 34 of the Arbitration Act, 1940, for staying the suit, relying on an arbitration agreement in the contract dated 28.2.1995.
Finding of the Court:
The court found that the arbitration agreement was valid and binding, the parties to the suit were parties to the arbitration agreement, the suit involved complex questions of law that could be decided by the arbitrator, the defendant was ready and willing to participate in arbitration, there was no likelihood of bias in the mind of the arbitrator, and the CMD had the power to appoint the arbitrator more than once.
Issues: 1. Whether the arbitration agreement was valid and binding. 2. Whether the parties to the suit were parties to the arbitration agreement. 3. Whether the suit involved complex questions of law that could not be decided by the arbitrator. 4. Whether the defendant was ready and willing to participate in arbitration. 5. Whether there was a likelihood of bias in the mind of the arbitrator. 6. Whether the CMD had the power to appoint the arbitrator more than once.
Ratio Decidendi: 1. The arbitration agreement was valid and binding as it was not opposed to public policy or hit by the provisions of the Indian Contract Act. 2. The parties to the suit were parties to the arbitration agreement as the Union of India was not a necessary party to the suit. 3. The suit did not involve complex questions of law that could not be decided by the arbitrator. 4. The defendant was ready and willing to participate in arbitration as it had demonstrated its willingness to proceed with arbitration. 5. There was no likelihood of bias in the mind of the arbitrator as no material was produced to show any bias or reasonable apprehension for the same. 6. The CMD had the power to appoint the arbitrator more than once as the arbitration clause did not limit the power of CMD of MTNL to appoint the Arbitrator more than once.
Final Decision: The court allowed the application under Section 34 of the Arbitration Act and stayed the suit.
( 1 ) THE defendant No. I M/s. Mahanagar Telephone Nigam Limited (MTNL) has moved the above application in the suit, under Section 34 of the Arbitration Act, 1940, for staying proceedings in the suit, in view of their being an arbitration agreement in the contract dated 28. 2. 1995, which is the subject matter of the aforesaid suit.
( 2 ) THE defendant s case is that Clause 2 of the aforesaid contract contains an arbitration Clause, categorically providing for reference of disputes and differences to the sole arbitration of the Chief Managing Director of MTNL or his nominee.
( 3 ) THE present suit has been filed by the plaintiff for recovery of Rs. 1,97,11,751. 00 (Rs. One crore ninety seven lakh eleven thousand seven hundred and fifty one only) against MTNL as defendant No. I and U. O. I as defendant No. 2. In addition, the plaintiff sought an injunction restraining the defendants from disconnecting the existing pay phones. A further declaration is sought that the defendants are not entitled to reduce the commission payable. The plaintiff also claims compensation for the losses suffered on account of excessive metering and billing and wrongful disconnection of telephone connections and downward revision in the commission.
( 4 ) THE reply to the application under Section 34 of the Arbitration Act has been filed by the plaintiff and rejoinder thereto has been filed by the defendant No. 1. The plaintiff does not dispute the arbitration agreement contained in the contract dated 28. 2. 1991. It is also not disputed that the subject matter of claims in the suit would also come within the ambit of the arbitration agreement. The plaintiff opposes the application under Section 34 of the Arbitration Act 1940 on the following grounds:
(I) Arbitration agreement is not valid and binding being opposed to public policy and hit by the Provisions of Indian Contract Act. (ii) Parties to the suit are not the parties to the arbitration agreement. The plaintiff has impleaded Union of India as one of the parties in the suit and Union of India is not a party to the arbitration agreement. (iii) The suit involves complex question of law which should not be decided by the Arbitrator. (,iv) The defendant No. I was not ready and willing toward the conduct of arbitration. (v) Likelihood of bias in the mind of Arbitrator appointed by the CMD MTNL and there being no right to fill the vacancy of the Arbitrator successively.
( 5 ) LET us examine each of the grounds put forth by the plaintiff.
(I) Arbitration agreement is not valid and binding being opposed to public policy and hit by the Provisions of Indian Contract Act. Counsel for the plaintiff submitted that the plaintiff had not agreed to the inclusion of the arbitration agreement and the contract was got signed by the defendant by using undue influence. It is stated that it was a case of unconscionable bargain. The defendant MTNL being in superior and more powerful position than the plaintiff, exploited the situation. Learned Counsel Mr. Arun Verma narrated the background in which the contract was entered into. He submitted that the plaintiff had protested against the inclusion of an arbitration clause in its proposal. However, the agreement was signed after a period of one year by which time the plaintiff had made huge financial commitment and the defendant No. I exploited the predicament of the plaintiff by misusing its superior and the dominant bargaining position. Learned Counsel relied on Central Inland Water Transport Corporation Limited and Other v. Brij nath Ganguly and Another, 1986 (3) S. C. C. 156 and LIC of India and Another v. Consumer Education and Research and Another, 1995 (5) S. C. C. 482 in support of his contention.
I find from the record that in the tender submitted, the plaintiff had only canvassed for a detailed comprehensive and fair agreement, which would avoid cause for any dispute or reference for arbitration. The plaintiff also suggested that arbitration, if
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