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2016 Supreme(All) 3616
ALLAHABAD HIGH COURT
Attau Rahman Masoodi, J.
Sanjay Gandhi Post Graduate Institute of Medical Sciences - Appellant
Versus
M/S S.C.Agarwal - Respondent
First Appeal No. - 167 of 2012
Decided On : 01-09-2016
For the Appellant :- Sanjay Bhasin, Mohd. Shakeel
For the Respondent:- Amit Dubey, Rajesh K. Singh, Yogesh Kesarwani
The main legal point established in the judgment is the importance of applying the law of the land in arbitration proceedings and upholding the rights and obligations of parties as stipulated in the agreement.
Headnote:
Dispute & Arbitration - Arbitration Act, 1996 - Section 37, Section 34 - 22, 29
Fact of the Case:
The appellant appealed the judgment and order passed by the District Judge, Lucknow under Section 34 of the Arbitration Act, 1996, related to the rejection of a counter claim for payment of license fee against the respondent. The dispute arose from an agreement between the parties for cafeteria services, and the issue was whether the appellant was entitled to the license fee for a period beyond the stipulated five years.
Finding of the Court:
The court found that the respondent had worked from 20.7.2007 to 19.3.2008, and the Arbitrator failed to apply the law of the land to award the license fee in favor of the appellant. The court allowed the appeal and remitted the matter to the sole Arbitrator for an independent decision on the issue of license fee.
Issues: The issues included the interpretation of the agreement, the jurisdiction of the Arbitrator to settle disputes arising from an implied contract, and the application of the law of the land in determining the claim of license fee.
Ratio Decidendi: The court held that the Arbitrator failed to apply the law of the land in awarding the license fee and remitted the matter for an independent decision. It also emphasized the importance of upholding the majesty of law and addressing any mistakes made by the parties.
Final Decision: The appeal was allowed, and the matter was remitted to the sole Arbitrator for an independent decision on the issue of license fee.
Attau Rahman Masoodi, J.
Dispute & Arbitration
1. Time is right to promote alternative redressal forums where parties choose to settle disputes arising within their contractual or social relationship through reconciliation or arbitration but at the same time law of the land must apply, except where parties of their own free will and being competent, waive their rights against each other.
2. The appellant through this appeal filed under Section 37 of the Arbitration Act, 1996 has assailed the judgement and order dated 6.8.2012 passed by the District Judge, Lucknow under Section 34 of the Act in Regular Suit No. 49 of 2009 insofar as it affirms the award rendered by the sole arbitrator on 3.12.2008 whereby the counter claim raised by the appellant for payment of licence fee against the respondent was rejected except to the extent of incidental charges incurred in the nature of electricity and water.
3. The parties herein had entered into an agreement on 19.8.2002 whereunder the respondent had agreed to provide cafeteria services in the OPD on a monthly payment of licence fee to the Institute for a period of five years. The agreement no. 31/2002-2003 was initially valid for two years w.e.f. 20.7.02 and being extendable by one year subject to satisfactory performance and verification by the monitoring committee and for a further period of two years subject to satisfactory performance and terms mutually agreed was accordingly acted upon.
4. For a period of five years when the agreement operated between the parties, no dispute, in fact, was ever raised in terms of the arbitration clause-22 which reads as under:
"22. In the event of any dispute arising in connection with this agreement whether during the subsistence of the contract or thereafter, the matter shall be referred to the Director, SGPGIMS, Lucknow for arbitration. The Director may himself act as or nominate an officer of the Institute to act as an arbitrator whose decision shall be final and binding on the parties. The proceedings before the arbitrator would be governed by the provisions of the Conciliation and Arbitration Act, 1999."
5. The agreement between the parties under no clause was extendable beyond five years, yet rights and obligations stood held over between the parties beyond the stipulated period. According to the appellant, the holding over period i.e. 20.7.2007 to 19.3.2008 constituted an implied contract on the same terms and conditions as were existing prior to 20.7.2007 under the agreement dated 19.8.02 and enforceable; whereas the respondent has flatly denied any such contractual obligation to pay the licence fee whatsoever in respect of the OPD cafeteria services at the space provided and agreed to serve the institute. The respondent denies the liability on the strength of an intimation sent on 4.8.2007 refusing to continue services as per the pre-existing agreement which according to the appellant was duly replied on 30.8.2007 by re-enforcing the contract as per the terms of earlier agreement. The letter dated 30.8.2007 followed by another response on the part of respondent vide letter dated 13.9.2007 which expressed willingness to continue with cafeteria services but without any payment of licence fee due to the reason of running loss in business. The services stood held over beyond 20.7.2007 but payment of licence fee was not made till a notice dated 20.12.2007 was sent by the respondent terminating the contract in terms of the pre-existing agreement. The notice dated 20.12.2007 being relevant is extracted hereunder:
"I am instructed and authorised by my client M/S S.C. Agarwala, a proprietary firm having its office at 42, Purana, Quila (Babu Banarshi Das Nagar) Lucknow to issue nd cause open you amongst the following notice:
1. That you and my client has entered with in an agreement no.-31/2002-2003, which was effected since from 20th July 2002 as per condition no. 34 of the said agreement.
2. That as per condition no. 1 and 2 of the agreem
