Civil Revision No. 1606 of 2010 (O&M) -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Civil Revision No.1606 of 2010 (O&M) Date of decision: 02.08.2010 M/s New Gurindra Handloom House ....Petitioner Versus M/s Sheetal Drape (I) Pvt. Ltd. and another ....Respondents CORAM: HON'BLE MR. JUSTICE VINOD K. SHARMA Present: - Mr. Karan Nehra, Advocate, for the petitioner. Mr. Ravi Mattoo, Advocate, for respondent No.1. ***** VINOD K. SHARMA, J (ORAL) The petitioner has invoked the revisional jurisdiction of this Court to challenge the order dated 31.7.2009, passed by the learned Additional District, Patiala, vide which the objections filed by the petitioner to the execution of the arbitral award, stand dismissed. Respondent No.1 approached the Mumbai Textile Merchants' Mahajan for adjudication of the dispute, which was said to have arisen between the parties. The matter was referred in view of the fact, that in the bills raised by the respondent on the petitioner there was following clause: - “This sale is Subject to the Arbitration as per the Mumbai Textile Merchants “Mahajan” Rules relating to Arbitration in case of any dispute or differences arising under such Ankada, Contract or Invoice, Payment within 30 days from the date of Invoice otherwise interest @24% will be charged. Civil Revision No. 1606 of 2010 (O&M) -2- Cash Discount is allowed only if payment is made within 15 days.” On the request made by respondent No.1, the Mumbai Textile Merchants' Mahajan appointed Sh. Ghansham R. Jagad as their arbitrator. The letter was addressed to the petitioner for appointing second arbitrator so that the appointed arbitrators could appoint an umpire to adjudicate the dispute. The petitioner was also requested to deposit a sum of Rs.800/- (Rupees eight hundred only) towards arbitration cost. The petitioner failed to respond to the letter issued by Mumbai Textile Merchants' Mahajan vide reference No.141/95-2/2007- 2008 dated 27.6.2007, though it is claimed that it did not receive the notice. Whereas the case of respondent No.1 is, that there is proof of service on the petitioner. This Court need not go into this controversy, as the service of notice would not be immaterial for adjudication of the question raised. On failure of the petitioner to appoint second arbitrator, Sh. Ghanshyam R. Jagad, the arbitrator appointed by respondent No.1, threatened to proceed as sole arbitrator. The petitioner did not bother to answer this letter also. Finally an ex parte award was passed after some correspondence with the petitioner. The award was passed on 19.12.2007. The proceedings referred to above would show that respondents proceeded with the matter as if the arbitration was being held under the Arbitration Act 1940, though it stood repealed in January, 1996 and was not in force. Civil Revision No. 1606 of 2010 (O&M) -3- According to Arbitration and Conciliation Act, 1996, there is no provision for appointment of an arbitrator to act as sole arbitrator, as in that event the remedy is to approach the Hon'ble Chief Justice or his nominee who could appoint arbitrator after going into the validity of the arbitration agreement. The facts further reveal that as no objections under Section 34 of the Arbitration and Conciliation Act, 1996 were filed against the award, it was, therefore, treated to be a decree and, transferred to the learned Executing Court at Patiala. It is at the stage of execution, that the petitioner filed objections against the execution of the decree by raising a plea, that the award was void ab initio and without jurisdiction for want of arbitration agreement. The learned Executing Court dismissed the objections for want of challenge to award under Section 34 of 1996 Act. The learned counsel for the petitioner approached this Court, to challenge the order passed by the learned Executing Court on the ground that the decree, in pursuance to the award is null and void and without jurisdiction for want of arbitration agreement, thus, was not executable. It was also the contention of the learned counsel for the petitioner that void order could be challenged by the petitioner in execution without getting it set aside. There is force in this contention. It is well settled law, that the arbitrator gets his jurisdiction from arbitration agreement, and in absence of an arbitration agreement in terms of Section 7 of the Arbitration and Conciliation Act, 1996, the arbitrator has no jurisdiction Civil Revision No. 1606 of 2010 (O&M) -4- to entertain and try the dispute raised by the party and the award passed in absence of arbitration agreement would be void and not capable of being executed. The judgment-debtor would be at liberty to challenge the said award/decree at any stage, including the learned Executing Court. The learned counsel appearing on behalf of respondent No.1, however, vehemently contended that the contention raised by the learned counsel for the petitioner cannot be sustained. Firstly, for the reason that the petitioner failed to avail an opportunity when notice was issued to it, therefore, it is not permissible for the petitioner to file objections against the execution of the decree, passed in pursuance to the award. Specially when the stand of the petitioner that there was no agreement cannot be sustained. The contention of the learned counsel for respondent No.1 is that in the bill raised, there was an arbitration agreement, between the parties, which has been reproduced above. On consideration, I find no force in the contention raised by the learned counsel for respondent No.1. It is pertinent to note that in order to constitute a valid arbitration agreement it has to fulfil the conditions stipulated under Section 7 of the Arbitration and Conciliation Act, 1996. Section 7 reads as follows: - “7. Arbitration agreement. - (1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. Civil Revision No. 1606 of 2010 (O&M) -5- (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in- (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) an exchange or statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.” The reading of the agreement reproduced above would show that it does not conform to the conditions stipulated under Section 7, therefore, it cannot be held to be an arbitration agreement. The clause at best can be said to be a clause which could permit the parties, if so desired, to enter into a fresh agreement for reference of their dispute to Mumbai Textile Merchants' Mahajan. This view finds support from the judgment of the Hon'ble Mumbai High Court in M/s Divya Shivlaks Impex Vs. Shantilal Jamnadas Textiles (P) Limited, 1999(2) BomCR 734 wherein the Hon'ble Mumbai High Court held as under: - “This sale is subject to the Sale, Disputes and Arbitration Rules of Mumbai Piece Goods Merchant Mahajan. Relying upon the above printed clause in the invoice the respondents' contention is that this amounts to an agreement to refer the dispute to the Mahajan. We must hasten to add that the printed clause is not Civil Revision No. 1606 of 2010 (O&M) -6- intelligible to us and, in our view, there is no clause which says that the sale was subject to the Arbitration Rules of the Mumbai Piece Goods Merchants Mahajan. It is difficult to appreciate the exact meaning of the printed words. On a plain reading of the said printed clause in the absence of any other material to explain the said printed clause, we cannot come to the conclusion that the printed clause quoted above amounts to an agreement to refer the dispute to the arbitration of the Mahajan. In our view, therefore, the printed clause does not amount to the agreement to refer the dispute to the arbitration of the Mahajan.” In view of the law referred to above, the award being totally without jurisdiction and null and void was not executable and the learned Additional District Judge, Patiala, committed an error in dismissing the objections, merely for want of objections under Section 34 of the Arbitration and Conciliation Act to challenge the award. The award passed was otherwise not executable, as the appointment of the arbitrator was also not in accordance with the Arbitration and Conciliation Act, 1996. There is no provision under the Arbitration and Conciliation Act, 1996 for an arbitrator appointed by the party to act as sole arbitrator, on account of non-appointment of arbitrator by other party. This provision was in Arbitration Act, 1940, which is not incorporated in the 1996 Act. The appointment of arbitrator by respondent No.1 could not act as sole arbitrator, thus, proceedings held by him as sole arbitrator are without jurisdiction. The award/decree, therefore, is not only void for Civil Revision No. 1606 of 2010 (O&M) -7- want of arbitration agreement but also for the procedure followed. For the reasons stated above, this revision petition is allowed, the impugned order is set aside, the objections filed by the petitioner against the execution of the decree in pursuance to the award are allowed. The execution application filed by respondent No.1 is ordered to be dismissed being not competent for want of valid decree. No costs. (Vinod K. Sharma) Judge August 02, 2010 R.S.