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Allahbad High Court
RAJESHWARIPRASAD,A.K.KIRTY
Fertilizer Corporation of India Limited - Appellant
Versus
Domestic Engineering Installation - Respondent
Decided On : 05/23/1968
ARBITRATION - Agreement to file - Arbitration clause - Nomination of arbitrator - Refusal or unwillingness to act - Power of Court to appoint arbitrator - Section 20(4) of the Arbitration Act, 1940.
Fact of the Case:
The plaintiff, a contractor, entered into a contract with the defendant, a fertilizer corporation, for the execution of certain works. The contract contained an arbitration clause providing for the settlement of disputes by the General Manager of the defendant or his nominee. Disputes arose between the parties and the plaintiff served a notice on the defendant calling upon the General Manager to act as arbitrator or to nominate an arbitrator. The General Manager did not take any action on the notice. The plaintiff, therefore, filed an application under Section 20 of the Arbitration Act, 1940, praying that the arbitration agreement be ordered to be filed and the dispute be referred to arbitration. The defendant contended that the application was not maintainable as no agreement had been reduced to writing or had been executed before the petition was filed. It was also contended that the disputes were covered by Clause 64 of the General Directions and Conditions of Contract (GDCC) and were not covered by Clause 65 of the GDCC, which was the arbitration clause. The defendant further contended that the General Manager had not refused to act as arbitrator and that he had not been approached to appoint an arbitrator. The Court below held that the application under Section 20 was maintainable, that the disputes fell within the scope of the arbitration clause, and that the General Manager had failed to arbitrate or to appoint a nominee to arbitrate. The Court below also held that the General Manager had rendered himself incapable of either acting himself as arbitrator or appointing a nominee for the purpose of arbitration. The Court below, therefore, directed that the arbitration agreement be filed in Court and asked the parties to submit the name of an agreed arbitrator within ten days from the date of the order so that disputes contained in Annexure "A" of the petition with the exception of the disputes given under Items Nos. 4 and 11 be referred to him.
Finding of the Court:
The Court held that the arbitration agreement was in existence before the institution of the suit, that the disputes pointed out by the plaintiff were covered by Clause 65 of the GDCC and were not covered by Clause 64 of the GDCC, that the General Manager had refused to arbitrate or to appoint a nominee to arbitrate, and that the General Manager had rendered himself incapable of either acting himself as arbitrator or appointing a nominee for the purpose of arbitration. The Court also held that the Court had the power to appoint an arbitrator under Section 20(4) of the Arbitration Act, 1940, in case the parties could not agree upon an arbitrator.
Issues: 1. Whether the application under Section 20 of the Arbitration Act, 1940, was maintainable? 2. Whether the disputes pointed out by the plaintiff were covered by Clause 65 of the GDCC and were not covered by Clause 64 of the GDCC? 3. Whether the General Manager had refused to arbitrate or to appoint a nominee to arbitrate? 4. Whether the General Manager had rendered himself incapable of either acting himself as arbitrator or appointing a nominee for the purpose of arbitration? 5. Whether the Court had the power to appoint an arbitrator under Section 20(4) of the Arbitration Act, 1940, in case the parties could not agree upon an arbitrator?
Ratio Decidendi: 1. An arbitration agreement need not necessarily be signed by the parties and it is sufficient that the terms are reduced to writing and the agreement of the parties thereto is established. 2. The disputes pointed out by the plaintiff were covered by Clause 65 of the GDCC and were not covered by Clause 64 of the GDCC. 3. The General Manager had refused to arbitrate or to appoint a nominee to arbitrate. 4. The General Manager had rendered himself incapable of either acting himself as arbitrator or appointing a nominee for the purpose of arbitration. 5. The Court had the power to appoint an arbitrator under Section 20(4) of the Arbitration Act, 1940, in case the parties could not agree upon an arbitrator.
Final Decision: The Court dismissed the appeal and upheld the order of the Court below directing that the arbitration agreement be filed in Court and asking the parties to submit the name of an agreed arbitrator within ten days from the date of the order so that disputes contained in Annexure "A" of the petition with the exception of the disputes given under Items Nos. 4 and 11 be referred to him.
R. PRASAD, J. :- This is a first appeal from order filed under Section 39 of the Indian Arbitration Act, 1940. The appeal has been filed on behalf of the Domestic Engineering Installations Gorakhpur through its partner Sri Gorakh Mohan Das (hereinafter referred to as the plaintiff). The respondent to this appeal is Fertilizer Corporation of India Ltd. (hereinafter referred to as defendant).
2. The order appealed against is an order purported to have been passed under Section 20 of the Indian Arbitration Act, 1940 (hereinafter referred to as the Act).
3. The plaintiff filed an application under S. 20 of the Act alleging inter alia the facts given hereinunder. The defendant invited sealed tenders in August, 1964 for carrying out the work of laying Main Sewerage in the Fertilizer's Township. The plaintiff submitted its tender which was eventually accepted by the defendant on or about 20th October 1964. The work-order dated 19/20th October 1964 was issued to the plaintiff which contained in detail the various terms of the contract. It was also noted therein that the work had to be executed in accordance with the terms and conditions of the notice inviting tenders (hereinafter referred to as "NIT") and the general direction and conditions of contract (hereinafter referred to as "GDCC"). Clause 65 of the G. D. C. C. contained arbitration clause which provided for the settlement of disputes arising under the contract. When the plaintiff started executing the work, it found that it was required to do certain work which was wholly different from the work tendered for. The plaintiff further met with the difficulty that the Engineer Incharge of the work on behalf of the defendant neglected to give adequate instructions to the plaintiff as required by the terms of the contract. Certain major disputes arose during the course of the work. Accordingly, the plaintiff sent a notice dated 17th December 1964 to the General Manager of the defendant in accordance with Cl. 65 of G. D. C. C. calling upon him to himself act as arbitrator or nominate some one else to act as arbitrator and to refer the dispute to arbitration. The General Manager did not take any action on the notice sent by the plaintiff. The plaintiff, therefore, sent a reminder on 13th January 1965. Thereafter, Shri Gorakh Mohan Das partner of the plaintiff firm personally met Shri N. R. Sheshadari, the then General Manager of the defendant. The plaintiff requested Mr. Sheshadari to proceed in the matter of arbitration but he refused to act as arbitrator and showed his unwillingness to appoint any other arbitrator. It was under those circumstances that the plaintiff proceeded to file his application under Section 20 of the Act on the 18th January 1965. The plaintiff prayed that the agreement be ordered to be filed and the dispute be referred for arbitration. The proceedings initiated by the plaintiff proceeded as a suit as required by the provisions of the Indian Arbitration Act and the application was treated to be the plaint in that suit. Some further facts were incorporated in the plaint as a result of the order of the Court below allowing the plaintiff to make amendments therein.
4. The additional facts introduced in the plaint are that in May 1965, Mr. N. R. Sheshadari was replaced by Mr. B. K. Khanna as General Manager. Shri Gorakh Mohan Dass approached Shri B. K. Khanna also and requested him to settle the dispute that had arisen under the contract. Mr. B. K. Khanna is said to have first assured the plaintiff that he would try to give necessary relief to the plaintiff, but later on, he went back upon his words and insisted that the plaintiff should withdraw his petition filed under Section 20 of the Act. He held out that he would be able to do something in the matter only after the petition had been withdrawn by the plaintiff from Court. Shri Gorakh Mohan Das, however, did not agree to the suggestion made by Sri B. K. Khanna. As a result thereof, Shri B. K. Khanna got a
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