1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION Amk NOTICE OF MOTION NO. 2413 OF 2007 IN SUIT NO. 2925 OF 2005 Gayatri Dham Co-operative Housing Society Ltd. .. Plaintiff Vs. Satellite Developers Pvt. Ltd. & Ors. .. Defendants Mr. Snehal Shah with Akanksha Thakkar i/b Purnanand & Co. for the Plaintiff. Mr. Nitin Thakkar with Mr. Kapil More with Vijay B. Dhingreja for Defendant No.1. Ms. Alpana Gone i/b Kanga & Co. for Defendant No.2. CORAM : MRS. ROSHAN DALVI, J. DATE : 18th June, 2010. Oral Order 1. Defendant No.1 has taken out this Notice of Motion for recording a compromise arrived at between the Plaintiff and Defendant No.1. The compromise is by way of draft Consent Terms sent by the Attorneys of the Plaintiff to the Attorneys of Defendant No.1. The Consent Terms was not signed by the parties. Such Consent Terms would not constitute a lawful agreement of compromise “in writing and signed by the parties” as specifically mandated on the Order 23 Rule 3 of the Code of Civil Procedure. This provision is mandatory. It results in culmination of the 2 entire dispute between the parties in the suit. It is, therefore, required to be construed strictly. The Consent Terms is, therefore, not only required to be in writing but is required to be signed by all the parties who agree to put an end to the suit. 2. Hence under that provision such compromise cannot be recorded. Prayer (a) would, therefore, be required to be refused. 3. Defendant No.1 has sought to refer the dispute between the Plaintiff and Defendant No.1 to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 (the Act) under prayer (b) of the Notice of Motion. The agreement of arbitration as defined in Section 7 of the Act includes and an exchange of letters which provide the record of agreement under Section 7 (4) (b) of the Act. In this case this exchange of letters is by the Attorneys who are the professional agents of these parties. The Consent Terms are annexed to the letters of the Attorneys. The initial letter is of the Attorneys of the Plaintiff. That letter is dated 18th October, 2006. It is marked without prejudice. It forwards what is stated to be “the revised draft” of the Consent Terms “duly corrected” by the Plaintiff for the approval of Defendant No.1. 4. Upon receipt of the corrected draft, the Attorneys of Defendant No.1 under their letter dated 3 08.11.2006 approved “the revised draft” except for two grammatical corrections which did not show any counter offer. 5. It would have to be seen whether the corrected Consent Terms being sent by the Attorneys of the Plaintiff and accepted by the Attorneys of Defendant No.1 constitutes a completed contract of reference to arbitration by the parties, the agreement having been signed by their respective Attorneys being their respective professional agents under their respective letters to which the corrected copy of the Consent Terms was annexed. It is elementary that what can be done by the parties can be done by their agents. It is also clear that an annexure to a letter forms a part of the letter. When the letter of the Attorney’s of the Plaintiff is signed, it constitutes an offer or a proposal of the Plaintiff to refer the disputes to arbitration under the terms contained in the corrected revised draft of the Consent Terms. Once the letter is accepted and the revised draft of the Consent Terms is approved, the agreement between the parties is complete. 6. The Arbitration Act sets out the alternative mode of resolution of disputes. It allows the parties to refer their disputes to arbitration and get them resolved by that alternative mode. Section 89 of the Civil Procedure Code sets out arbitration as one of the alternative modes of resolution of disputes. Resolution of disputes by such 4 modes are not only facilitated, but encouraged. Consequently Section 7 of the Act showing the different aspects of arbitration agreement is required to be liberally interpreted. The exchange of letters would include the exchange of letters not only by the parties but by their agents. Further the term “letters” would include not only a stricto sensu letter but also its annexure. Hence if the letter is signed but the annexure is not, the annexure cannot be taken to be a mere draft; it must be taken to be signed by that party and could be taken to be a part of the arbitration agreement if, of course, it provides a record of the agreement. The various terms of the revised draft in this case provide a record of the agreement of reference to arbitration by and between the parties. The exchange of the Attorneys’ letters show the proposal and the acceptance of the draft and consequently the execution of the arbitration agreement in terms thereof. 7. It is argued on behalf of the Plaintiff that the letter of the Plaintiff’s Attorneys was marked “without prejudice” and hence it cannot even be considered by the Court. The letter though so marked was accepted and the Consent Terms annexed to the letter were approved. Once the without prejudice offer is accepted, the contract is complete. Mr. Thakkar on behalf of Defendant No.1 has rightly contended that such a contract does not thereafter remain to be without prejudice. It is a legally enforceable contract. 5 8. He has drawn my attention to the Judgment of the Hon’ble Supreme Court in the case of Chairman and MD, NTPC Ltd. V. Reshmi Constructions, Builders & Contractors ((2004) 2 Supreme Court Cases 663) in which it is held that the correspondence marked “without prejudice” is required to be interpreted differently in different situations (See Para 32). That Judgment has referred to and considered the definition of the phrase “without prejudice” in the Judgment in the case of Walker v. Vilsher ((1889) 23 OBD 335 (CA) 337). Lindley, L. J. has held in that case that the expression “without prejudice” means :- “without prejudice to the position of the writer of the letter if the terms he proposes are not accepted. If the terms proposed in the letter are accepted a complete contract is established, and the letter, although written without prejudice, operates to alter the old state of things and to establish a new one.” Further the Judgment considers the meaning of the expression “without prejudice” in Wharton’s Law Lexicon in which also it is shown that if the negotiation fails no advantage is to be taken under any without prejudice document. 9. The negotiations not having failed and the draft 6 Consent Terms having been sent albeit “without prejudice” and approved and accepted, prayer (b) is required to be granted and the disputes between the parties in the suit is required to be referred to arbitration. Hence the following order :- :: O R D E R :: 1. Prayer (a) is refused. 2. Prayer (b) is granted. 3. The dispute in the suit is referred to arbitration under Section 8 of the Act. The parties shall proceed as per procedure prescribed in the Arbitration and Conciliation Act, 1996 for reference of their disputes to arbitration. Suit is disposed of accordingly. The Plaintiff shall be entitled to sue any other party in a separate suit, if required. ( R. S. DALVI, J. )