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1981 Supreme(Del) 255
High Court Of Delhi
JAY RUBBERCO INDIA PRIVATE LIMITED - Appellant
Versus
STATE CHEMICALS AND PHARMACEUTICAL CORPORATION OF INDIA LIMITED - Respondent
Suit 373A of 1980
Decided On : 08/28/1981
A.N.PAREKH, K.K.BUCHAR, L.M.SINGHVI, S.S.RAY
The parties to an arbitration agreement can waive the statutory provisions set out in the First Schedule to the Arbitration Act, 1940, which set out the implied conditions of arbitration agreements.
Headnote:
ARBITRATION - JURISDICTION OF UMPIRE - WAIVER OF STATUTORY PROVISIONS - DISAGREEMENT BETWEEN ARBITRATORS - MISCONDUCT OF UMPIRE - AWARD OF INTEREST AND COSTS.
Fact of the Case:
The dispute arose from a contract for the sale of PVC Resins between the claimants, Jay Rubberco (India) P. Ltd., and the respondent, Civil Procedure Code, a government-owned company. The claimants made two applications for allotment of PVC Resins, and Civil Procedure Code issued two allocation orders intimating the price they would charge for the goods. The claimants paid the price and took delivery of the goods, but Civil Procedure Code later increased the price. The claimants invoked the arbitration clause in the contract, and the arbitrators appointed an umpire to decide the dispute. The umpire made a non-speaking award in favor of the claimants, and Civil Procedure Code filed objections to the award.
Finding of the Court:
The court held that Civil Procedure Code had waived their right to object to the umpire's jurisdiction by submitting to his jurisdiction and participating in the proceedings before him. The court also held that there was sufficient disagreement between the arbitrators to authorize the interference of the umpire. The court further held that the umpire's award was not invalidated by any misconduct on his part, and that he had the power to award interest and costs.
Issues: 1. Whether the umpire had jurisdiction to enter on the reference in lieu of the arbitrators. 2. Whether Civil Procedure Code had waived their right to object to the umpire's jurisdiction. 3. Whether there was sufficient disagreement between the arbitrators to authorize the interference of the umpire. 4. Whether the umpire was guilty of misconduct. 5. Whether the umpire had the power to award interest and costs.
Ratio Decidendi: 1. The court held that Civil Procedure Code had waived their right to object to the umpire's jurisdiction by submitting to his jurisdiction and participating in the proceedings before him. The court reasoned that the provisions of the First Schedule to the Arbitration Act, 1940, which set out the implied conditions of arbitration agreements, are for the benefit of the parties and can be waived by them. 2. The court held that there was sufficient disagreement between the arbitrators to authorize the interference of the umpire. The court reasoned that the arbitrators' disagreement on the venue of the arbitration proceedings constituted a disagreement on a matter of procedure, and that this was sufficient to authorize the umpire to enter on the reference. 3. The court held that the umpire was not guilty of misconduct. The court reasoned that the umpire's award was a non-speaking award, and that it was therefore not possible to say that he had made a mistake in law. The court also held that the umpire's decision to award interest and costs was not misconduct, as he had the power to do so.
Final Decision: The court dismissed the objections of Civil Procedure Code and made the award a rule of the court. The court also passed a decree in accordance with the award, and awarded the claimants interest at 18% per annum from the date of the decree till payment.
( 1 ) THE Dispute G. P. C. is an instrumentality of the State. Its full name is State Chemicals and Pharmaceuticals Corporation of India Ltd. It is a Government owned company. As a subsidiary of the State Trading Corporation it is trading in public sector.
( 2 ) CIVIL Procedure Code imported PVC Resins Japanese make in India in 1978. The actual users of this commodity could buy it from them. The claimants. Jay Rubberco (India) P. Ltd. , made two applications for allotment of PVC Resins. One application was made on 17th October, 1978 for allotment of 100. met. tons. The second application was made on 28th December, 1978 for 200 met. tons. Civil Procedure Code issued two allocation orders intimating the claimants that the price they would charge for the goods was Rs. 96901- per met. ton ex godown.
( 3 ) WITH two allocation orders in his hands the claimants representative went to Madras office of Civil Procedure Code to take delivery of the allotted quantity on August 7, 1979. He asked for. a release order. He paid the price of the goods by means of a demand draft of Rs. 3,52,716. 00. The Madras office did not deliver the goods. They said that the State Trading Corporation had placed an embargo on the sale of petroleum products and the necessary delivery order will be issued when the embargo is lifted. So the representative came away disappointed.
( 4 ) ON 31 August 1979 Civil Procedure Code sent a; telegram to the claimants informing them that the price of the goods in question had been raised from Rs. 9690. 00 per met. ton to Rs. 12,334. 00 per met. ton and that this increased price was effective from August 18, 1979. To this increase in price the claimant? protested. They said that it was a unilateral change and in terms of the contract CPC were not entitled to raise the price. Civil Procedure Code paid no head to the protest. They told the claimants that if they were prepared to pay the increased price they can have the goods . The claimants paid the increased price under protest and lifted the goods.
( 5 ) THERE was an arbitration clause in the contract of sale. The claimants invoked the clause. The clause provides for appointment of two-arbitrators, one by each party, and an umpire in case of difference of opinion between the arbitrators. He was to decide if they disagree. Accordingly, the claimants appointed Mr. J. L. Sabharwal, Advocate as their arbitrator. CPC appointed Mr. Bishen Narain, Senior Advocate as their arbitrator. The two arbitrators agreed upon the appointment of Shri S. M. Andley, retired Chief Justice of Delhi High Court as the umpire.
( 6 ) THE arbitration proceedings commenced at the resident of Shri, Bishen Narain at 32, Friends Colony, New Dcihi. The parlies filed pleadings before them. Before the stage of evidence arrived there was a difference of opinion between the arbitrators on the venue of arbitration proceedings. Mr. Sabharwal suggested that the witnesses should be examined at his residence in Punjabi Bagh or at his office. Mr. Bishell Narain did not agree to the change of venue. He wanted proceedings to continue at his residence. On this difference of opinion Mr. Bishen Narain adjourned the case sine die on May 22, 1980. On May 23, 1980 Mr. Sabharwal wrote to the umpire that since the arbitrators have. differed he should enter on the reference.
( 7 ) ON 29th May, 1980 the umpire wrote to the Civil Procedure Code that they shoud attend the proceedings before him on 4th June, 1980 at 10. 30 A. M. "in case you fail to appear, you will be proceeded ex parte", the umpire wrote. Civil Procedure Code did not appear. The umpire took ex parte proceedings against them. On June 30, 1980. Mr. A. N. Parekh, Advocate for Civil Procedure Code wrote to the umpire that he could not assume jurisdiction in the matter without the arbitrators sending him a notice of "their having disagreed on merits of the case". But Mr. Parekh did not persist in this objection. He requested the umpire to set as
