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High Court Of Delhi
UNION OF INDIA - Appellant
Versus
RAMAN IRON FOUNDRY AND STEEL ROLLING MILLS - Respondent
Suit 274A of 1978
Decided On : 09/15/1987
ARBITRATION - VALIDITY OF ARBITRATION AGREEMENT - AMBIGUOUS LANGUAGE IN ACCEPTANCE OF TENDER - NO BINDING AGREEMENT TO REFER DISPUTES TO ARBITRATION - ARBITRATION PROCEEDINGS RENDERED VOID DUE TO PENDING SUIT COVERING THE SAME SUBJECT MATTER - AWARD SET ASIDE.
Fact of the Case:
The Union of India accepted the tender of the respondent for the supply of C.I. Brake Blocks, subject to the conditions of contract contained in DGSandd Form No. 68 (Revised), including/excluding clause 24 thereof. The respondent contended that the acceptance of tender was not unqualified as no variation clause had been incorporated therein. The Union of India amended the acceptance of tender and incorporated a price variation clause. The respondent failed to supply the contracted goods, and the Union of India cancelled the contract. The respondent challenged the cancellation of the contract and the demand for damages by the Union of India in a suit before the Delhi High Court. The Union of India referred the dispute to arbitration, and the Arbitrator awarded damages in favor of the Union of India.
Finding of the Court:
The court held that the acceptance of tender was ambiguous and uncertain regarding the inclusion or exclusion of the arbitration clause. The court found that the respondent had challenged the existence of a valid arbitration agreement and had not participated in the arbitration proceedings after raising the objection. The court also held that the subject matter of the suit filed by the respondent and the arbitration proceedings was similar and that the Arbitrator should have stayed the proceedings upon receiving notice of the suit. Therefore, the court set aside the award of the Arbitrator.
Issues: 1. Whether there exists a binding agreement between the parties to refer the matter to arbitration? 2. Whether the respondents can question the validity of the reference in view of their participation in the arbitration proceedings before the arbitrator? 3. Whether the arbitration proceedings were rendered void in view of a pending suit between the parties for recovery of damages?
Ratio Decidendi: 1. An arbitration agreement must be certain and not ambiguous because it excludes the normal forum for adjudication of disputes, namely, the civil courts. The ouster of the civil courts' jurisdiction must be clear and unambiguous. 2. The respondent had challenged the existence of a valid arbitration agreement and had not participated in the arbitration proceedings after raising the objection. Therefore, the respondent could question the validity of the reference. 3. The subject matter of the suit filed by the respondent and the arbitration proceedings was similar. The Arbitrator should have stayed the proceedings upon receiving notice of the suit. Therefore, the arbitration proceedings were rendered void.
Final Decision: The court set aside the award of the Arbitrator.
( 1 ) THE challenge in this suit is to the award of the Arbitrator/dated 31st December 1977 on a dispute having been referred to him.
( 2 ) BRIEFLY stated the facts are that in pursuance of an invitation to tender the respondent No. 1/objector gave an offer for the supply of C. I. Brake Blocks. This offer included a price variation clause which, inter alia, provided that the price offered would be subject to various in case of increase in price of the raw material being used.
( 3 ) THE petitioner/union of India accepted the offerlide its acceptance of tender dated 30th June 1975, by an advance acceptance of tender. Subsequently, a formal acceptance of tender was issued dated 7th August 1975 in which clause 7 read as follows : "conditions of Contract :- As contained in form No. DGSandd-68 (Revised) includinglexcluding clause 24 thereof as amended to date will apply to this contract. " (Italics added ).
( 4 ) ACCORDING to respondent No. 1 the acceptance of tender was not unqualified because no variation clause had been incorporated therein as had been suggested by the said respondent. Thereupon, a letter was issued amending the acceptance of tender and incorporating therein a price variation clause.
( 5 ) ,it appears that the contracted goods were not supplied by the res- pondent. On 5th September 1975 the Union of India cancelled the contract at the risk and cost of the respondent/
( 6 ) THE/respondent sent a notice under section 80 Civil Procedure Code dated 10th November 1976 in which it was submitted that there was no concluded contract which had been arrived at between the parties and that the cancellation of the contract was illegal. On 28th December 1976 the Union of India informed the respondent through a letter that the latter was Iiable to pay damages to the tune of Rs. 1,73,743. 00 on account of risk purchase having been undertaken by the petitioner.
( 7 ) WHEN the amount claimed as damages was not paid, the purchaser wrote to the DGS and D to appoint an Arbitratory Vide order dated 15th April 1977 the then Director General of Supplies and Disposals referred the dispute to the sole arbitration of Dr. Bakshish Singh, respondent No. 2.
( 8 ) AFTER the Arbitrator entered upon the reference the respondent entered appearance. On 9th September 1977 application was filed before the Arbitrator to the effect that there was no valid contract between the parties and that the reference to arbitration was vague and void ab initio. A request was made to adjourn the proceedings to allow the respondent to file a civil suit and obtain a stay order.
( 9 ) ON 17th November 1977, suit No. 1121/77 was filed by the respondent, inter alia, challenging the contract and the impugned demand of the Union of India. A praper was also made for an injunction against the Union of India not to act in any manner to the prejudice of the respondent.
( 10 ) ON 16th December 1977 the respondent moved an application under Section 35 of the Arbitration Act before the Arbitrator in which it was stated that a civil suit had been filed in this Court and that the said suit wholly and substantially covers the subject matter which is pending for arbitrations The Arbitrator was accordingly requested not to proceed with the matter.
( 11 ) ON 30th December 1977 no one appeared on behalf of the respondent before the Arbitrator. The application under Section 35 which had been filed was rejected by observing that the nature of both the proceedings was different. Thereupon the award was made on 31st December 1977 awarding a sum of Rs. 98,000. 00 in favour of the Union of India
( 12 ) THE Union of India then moved a petition under Sections 14 and 17 of the Arbitration Act in this Court being Suit No. 274-A/78. Notice was issued to the Arbitrator, who filed the award and proceedings in Court. Thereafter notice was issued to the parties and the respondent has filed objections under Sections 19, 30 and 33 of the Arbitration Act. The main contentions of the re
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