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2008 Supreme(Mad) 1631
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE K.K. SASIDHARAN
Union of India, owning the Southern Railway, rep. by its General Manager & Another Versus
Rajesh Damani, Proprietor, Allied General Sales Corporation, Chennai
C.R.P.(PD) No.2941 of 2007
Decided on : 10-06-2008
For the Petitioners:V.G. Suresh Kumar, Advocate.
For the Respondent:H. Kishore, Advocate.
The main legal point established is that the intention of the parties to settle disputes through arbitration, even without an express arbitration clause, constitutes an arbitration agreement. Additionally, when there is an arbitration clause in the agreement, it is mandatory for the Court to refer the parties to arbitration.
Headnote:
Arbitration Agreement - Indian Railway Standard Conditions of Contract - Clause 2900 - Summary
Fact of the Case:
The respondent filed a suit against the revision petitioners for declaring their action as illegal and unenforceable, and for seeking payment and other reliefs. The revision petitioners sought reference to arbitration based on the Indian Railway Standard Conditions of Contract, which was rejected by the Trial Court.
Finding of the Court:
The Court found that the Trial Judge erred in rejecting the application for reference to arbitration based on the non-production of the arbitration agreement, as the Purchase Order itself referred to the standard terms of the Indian Railways contract.
Issues: The main issue was the rejection of the application for reference to arbitration by the Trial Court based on the non-production of the arbitration agreement.
Ratio Decidendi: The Court emphasized that an arbitration agreement need not expressly refer to 'arbitration' and that the intention of the parties to settle disputes through arbitration is sufficient to establish an arbitration agreement. The Court also highlighted the mandatory nature of referring disputes to arbitration when there is an arbitration clause in the agreement.
Final Decision: The Civil Revision Petition was allowed, directing the revision petitioners to appoint an arbitrator within 30 days.
1. This Civil Revision Petition is directed against the order dated 211. 2006 in I.A. No.9425 of 2004 in O.S. No.6112 of 2003 on the file of XVII Assistant City Civil Court, Chennai.
2. The Suit in O.S. No.6112 of 2003 has been preferred by the respondent against the revision petitioners before the City Civil Court, Chennai praying for a declaration that the action of the revision petitioners in invoking the risk purchase recovery in respect of the Purchase Order dated 18. 1999, as amended by the order dated 15. 1999 is illegal, invalid and unenforceable and for a direction to the revision petitioners to pay to the respondent a sum of Rs.99,072/- with further interest on Rs.57,600/- at 24% per annum from the date of the Plaint till realization and for other incidental reliefs.
3. In the Plaint in O.S. No.6112 of 2003, it was the case of the respondent that the revision petitioners have placed Purchase Orders with him for supply of Fibre Glass Type R.P. Tissues as per I.C.F. Specification and the supply made by the respondent were not accepted by the revision petitioners and by virtue of their rejection advice, the revision petitioners have rejected the goods, as according to them, the supplied goods were found to be 0.30 mm thickness as against the required thickness of not less than 0.4 mm as per P.O. Specification.
4. The revision petitioners appear to have called upon the respondent to pay the test charges and ground rent and as per their communication dated 10. 1999, they threatened the respondent that if the goods are not removed within 7 days, the goods would be scrapped and disposed of. It was the further case of the respondent in the Plaint that he was prepared to take back the goods. But, however the revision petitioners informed the respondent that the goods were scrapped and disposed of without mentioning the value for which it was disposed of and subsequently, the revision petitioners have also invoked the risk purchase clause. In the said circumstances, the respondent has filed the Suit for declaration and for other consequential reliefs.
5. In response to the summons issued by the Trial Court, the revision petitioners entered appearance and filed an Application in I.A. No.9425 of 2004 praying for a reference to the parties to arbitration, in accordance with the terms as contained in Clause 2900 of the Indian Railway Standard Conditions of Contract.
.6. In the affidavit filed in support of the Application in I.A. No.9425 of 2004, it was the case of the revision petitioners that the Purchase Order has been placed under the terms and conditions of the Indian Railway Standard Conditions of Contract as is evident from the Purchase Order itself and as such, the remedy of the aggrieved is only to approach the Railway to refer the matter for arbitration in terms of the Contract and not to file a Suit before the Civil Court.
7. The Application in I.A. No.9425 of 2004 was contested by the respondent by filing counter, wherein it was his contention that there is no agreement for arbitration and no such agreement has also been produced before the Court to show that in fact there was such an agreement which contains provision for arbitration.
8. The learned Trial Judge considered the Application as well as the counter filed by the respondent and ultimately, the Application was dismissed as per order dated 211. 2006. The main reason for rejection of the Application is found to be the nonproduction of the agreement containing the arbitration clause before the Trial Court.
9. The order dated 211. 2006 in I.A. No.9425 of 2004 is the subject matter of the present Revision.
10. I have heard Mr. V.G. Suresh Kumar, learned counsel appearing for the petitioners and Mr. H. Kishore, learned counsel appearing for the respondent.
11. It is evident from the Purchase Order placed by the revision petitioners that the order was placed subject to the Indian Railway Standard Conditions of Contract. It was only on the basis
