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1970 Supreme(Online)(Del) 9

DELHI HIGH COURT
S.K. Kapur, J
Shri Patanjal v. M/s. Rawalpindi Theatres Private Ltd. Delhi
Revision under S.115 of the Code of Civil Procedure



Advocates:
For the Petitioner: M. L. Bagai
For the Respondent: H. R. Sawhney

Only parties to an arbitration agreement can enforce or participate in the agreement's proceedings. Third parties cannot be included without the mutual consent of bound parties.

Headnote:(A) Arbitration Act, 1940 - Jurisdiction of Arbitrator - Court's direction to implead third-party in arbitration proceedings set aside - Arbitrator cannot alter agreements without mutual consent of parties bound by the arbitration agreement. (Paras 13, 8, 6)

(B) Jurisdiction - Court's direction without jurisdiction - If a party is not bound by the arbitration agreement, they cannot assert rights under it. (Paras 11, 10)

Facts of the case:
The dispute highlights issues surrounding an award set up under an arbitration agreement that was disputed on procedural grounds regarding notice and party representation.

Findings of Court:
The arbitrator had acted without jurisdiction by proceeding ex parte and failing to notify the parties of critical developments. The order remitting the case back for arbitration was upheld, minus the direction to implead a third party.

Issues: The primary issue was whether the arbitrator could include non-parties to the arbitration agreement in proceedings related to the claim amount due.

Ratio Decidendi: The court ruled that only parties bound by the arbitration agreement can participate in arbitration, reaffirming that the court lacks jurisdiction to include non-parties. Findings were based upon applicable laws and previous judgments referenced.

Result: Revision allowed; direction to include the third party set aside.

Table of Content
1. context of the judicial review of arbitration proceedings. (Para 1 , 2)
2. arbitration and the implications of non-participation by involved parties. (Para 3 , 4)
3. discussion on the validity of claims and required representations. (Para 5 , 6 , 7)
4. legal principles governing arbitration agreements. (Para 8 , 9 , 10)
5. final verdict on jurisdictional issues over arbitration proceeding parties. (Para 11 , 12 , 13 , 14)

1. This revision under S.115 of the Code of Civil Procedure against the order of the learned Commercial Subordinate Judge Ist Class, Delhi, dated 13-3-1968 has been placed before this Bench because of the importance of the question raised.

2. The learned Subordinate Judge has by the impugned order set aside the award dated 29-3-1967 on the ground that the arbitrator was guilty of misconduct because no notice was given to the party against whom ex parte proceedings were taken by him. The matter was, however, remitted back to the arbitrator for proceeding afresh from the stage when Shri Patanjal and Shri Om Parkash Mehra had last appeared before him. The arbitrator was further directed to make Shri W. N. Chowdhary a party to the arbitration proceedings so that all the interested parties may be represented.

3. Before proceeding with the contentions raised before us, it is desirable to briefly recapitulate the facts and circumstances giving rise to the controversy before us. On 21-7-1962, Shri Om Parkash Mehra wrote a letter to M/s. Rawalpindi Theatres (P) Ltd., Chandni Chowk, Delhi (Ex. P. 5) which it is necessary to reproduce in extenso : -
"I write to confirm that I am the rightly appointed legal representative of M/s. Shanti Niketan Films, Bombay, Producers of the film 'Warrant' and Financiers of M/s. Padam Films, Delhi, the Distributor of the Picture 'Warrant' for Delhi, and U. P. Circuits, I am enclosing herewith a letter of Authority issued by the above party in my favour.
I further confirm that I am entering Into this arrangement with you after consulting Mr. Patanjal, the Prop, of the said firm M/s. Shanti Niketan Films, Bombay, the Producers and this decision is within his knowledge.
"I further confirm that you have agreed to write your letter dated 21-7-1962 to the Motion Pictures Association, Delhi informing them that you are withdrawing your claim against the picture 'Warrant' and enabling the release of this picture on my assuring you as under. -
1. That I shall pay to Shri W. N. Chawdhry, 781, Nicholson Road, Kashmere Gate, Delhi, a sum of Rs. 9,500/-from the Distributors share becoming due from 'Warrant' of two weeks run at Delite Theatre, New Delhi and Imperial Cinema, Paharganj.
2.I declare that there is absolutely no lien of any type on the said share becoming due from above Theatre and that the said share shall not be utilised in any way, whatsoever, other than meeting your dues as above said.
I declare that you have agreed to write the above said letter to the Motion Pictures Association, Delhi on my assurances and representation and that if I had not assured you as above, you would not have written the said letter to the Motion Pictures Association Delhi. It is understood that I am responsible to make good the deficit, if any, to cover Rs. 9,500/-. In case of dispute, R. L. Duggal of 29 - D, Ramnagar, New Delhi will be the sole arbitrator.
for Shanti Niketan Films, Bombay
Sd/- Om Prakash Mehra,
Received the above mentioned
letter dated 21-7-1962 in favour
M. P. A. Delhi by me for its
delivery to the M. P. A.
Sd/- OM."
The main question argued before us relates to the meaning and scope of the assurance No. 1 in this letter, according to which Shri Om Prakash Mehra promised to pay to Shri W. N. Chowdhary a sum of Rs. 9,500/- from the Distributors share becoming due from 'Warrant' of two weeks run at Delite Theatre, New Delhi, and Imperial Cinema, Paharganj. According to the petitioners' counsel, Shri W. N. Chowdhary not being a party to the arbitration agreement, the arbitrator cannot make an



















































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