Civil Revision No. 3957 of 2008 (O&M) -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Civil Revision No. 3957 of 2008 (O&M) Date of decision: 19.08.2009 M/s Daler Singh ....Petitioners versus District Food & Supplies Controller, Kurukshetra ....Respondent CORAM: HON'BLE MR. JUSTICE VINOD K. SHARMA Present: - Mr. K.K. Gupta, Advocate, for the petitioner. Mr. A.K. Gupta, Addl. A.G., Haryana. *** VINOD K. SHARMA, J. The petitioner has invoked the jurisdiction of this Court under Article 227 of the Constitution of India, to challenge the order dated 8.4.2008 passed by the learned Additional District Judge, Kurukshetra, on an application filed under Section 34 of the Arbitration and Conciliation Act (hereinafter referred to as 'the Act'), for setting aside the award dated 19.10.2006. Along with the application, the petitioner moved an application for condonation of delay in filing the application under Section 34 of the Act. The petitioner pleaded, that the award dated 19.10.2006 was passed by the Arbitrator ex parte, and that no notice was issued to the petitioner with regard to arbitration proceedings. Even Civil Revision No. 3957 of 2008 (O&M) -2- after passing of the award, no notice was issued to him. The case of the petitioner was that he was admitted in PGI, Chandigarh, and, therefore, could not file application under Section 34, after the receipt of notice of execution. It was pleaded, that there is sufficient ground for condonation of delay to file objections under Section 34 of the Act. The application was contested by the learned Government pleader on the assertion that the time limit for filing objections against the award of Arbitrator is three months, but the objections have been filed after the expiry of one year and three months from the date of passing of award. It was the case of the respondent, that as per provisions of Section 34 of the Act, if objections are not filed within a period of three months, the objections cannot be entertained after expiry of period of limitation. It was also the case of the respondent, that so far as filing of the application under Section 5 of the Limitation Act was concerned, the Arbitration and Conciliation Act, 1996 is a separate statute and provisions of the Limitation Act are not application. It was also the contention of the learned counsel for the State, that as there is no provision for condonation of delay in filing objections beyond stipulated period. The application for condonation of delay, therefore, deserved to be dismissed. The petitioner placed reliance on the judgment of the Hon'ble Supreme Court in National Aluminium Co. Ltd. Vs. Pressteel & Fabtications (P) Ltd., 2004(1) Supreme Court Cases 540, whereas respondent placed reliance on the judgment of the Hon'ble Supreme Court in Union of India Vs. M/s Popular Construction Co., 2001 Supreme Court 4010. Civil Revision No. 3957 of 2008 (O&M) -3- The plea of the petitioner, that the award was ex parte without notice to the petitioner, was not accepted, as the proceedings of the Arbitrator showed that on 20.5.2003, the petitioner was present before the Arbitrator, and he had also signed the receipt of notice. He also noted the next date as 25.6.2003. On 4.7.2003, the petitioner appeared before the Arbitrator and offered to deposit a sum of Rs.50,000/- (Rupees fifty thousand only) on 14.3.2003. The said order was also signed by the petitioner. The petitioner deposited a sum of Rs.50,000/- (Rupees fifty thousand only) and agreed to deposit the second instalment on or before 28.11.2003. On 28.11.2003 again the petitioner agreed to deposit a sum of Rs.89,000/- (Rupees eighty nine thousand only). The next date was fixed 30.12.2003. On 9.9.2004, Sh. Varun Gupta, Advocate, appeared on behalf of the petitioner. Counsel for the petitioner thereafter appeared on 29.7.2005, 21.9.2005, 21.11.2005, 6.1.2005, 20.3.2006 and 2.5.2006. But on the remaining dates neither the petitioner nor his counsel appeared before the Arbitrator and ex parte proceedings were, therefore, ordered on 4.10.2006. Thereafter on 19.10.2006, ex parte award was given. The plea of the petitioner, that he had no notice of arbitration proceedings was, therefore, held to be ridiculous. The learned Additional District Judge also held, that the Hon'ble Supreme Court in Union of India Vs. M/s Popular Construction Co., (supra) has been pleased to lay down that the provisions of Section 5 of the Limitation Act were not applicable to the application challenging an award under Section 34 of the Act and, therefore, the sufficiency for not filing within the period stipulated could Civil Revision No. 3957 of 2008 (O&M) -4- not be entertained. The learned Additional District Judge was also right in not placing reliance on the judgment of the Hon'ble Supreme Court in National Aluminium Co. Ltd. Vs. Pressteel & Fabtications (P) Ltd. (supra), as in the said case, the Hon'ble Supreme Court did not hold that Section 5 of the Limitation Act could be invoked for condonation of delay. That was a case where benefit of Section 14 of the Limitation Act was given to the parties to hold that the objections filed were within the limitation. The learned Court further noticed, that even the ground pleaded for condonation of delay could not be accepted, as no proof of his admission in PGI was placed on record. The Court held that it could not be accepted, that the petitioner remained admitted in PGI, Chandigarh, w.e.f. 2.2.2007 or w.e.f. 25.9.2007 till 31.1.2008. Learned counsel appearing on behalf of the petitioner contended, that the learned Additional District Judge, Kurukshetra, committed an error in holding, that Section 5 of the Limitation Act was not applicable by ignoring that the Hon'ble Supreme Court in National Aluminium Co. Ltd. Vs. Pressteel & Fabtications (P) Ltd. (supra) had allowed the benefit of Section 14 of the Limitation Act, therefore, it was held that the Limitation Act was applicable to arbitration proceedings. This contention on the face of it is mis-conceived. Section 14 of the Limitation Act does not give power to the Court to condone the delay, but only permits extension of limitation prescribed under the statute by giving benefit to the party bona fide prosecuting remedy in the Court. Therefore, in view of the authoritative pronouncement of the Hon'ble Supreme Court in Union of India Vs. M/s Popular Construction Co., (supra), no fault can be found with the finding Civil Revision No. 3957 of 2008 (O&M) -5- recorded by the learned Additional District Judge, in dismissing the application moved for condonation of delay. The learned counsel for the petitioner thereafter contended that in view of the law laid down by this Court in Harbans Singh Vs. Punjab National Bank, 2003(1) PLR 99, the objections should have been decided on merits as the petitioner was not to gain anything by filing the objections late. This contention is again mis-conceived. Once, the provisions of Section 5 of the Limitation Act are not applicable, the question of condonation of delay did not arise at all. The learned counsel for the petitioner also contended, that the award passed by the learned Arbitrator was liable to set aside in exercise of jurisdiction under Article 227 of the Constitution of India, as there was no agreement signed by the parties nor there was any arbitration clause which could give jurisdiction to the Arbitrator to pass the award, therefore, the award was void ab initio. The learned counsel for the petitioner placed reliance on the judgment of the Hon'ble Bombay High Court in Jayant N. Sheth, Proprietor Struct Mast Engineers Vs. Gyneshwar Apartment Co- operative Housing Society Ltd., 1999(2) Arb. LR 115 (Bombay), to contend that the arbitration agreement which is not signed by the parties cannot give jurisdiction to Arbitrator to adjudicate the matter. Reliance by the learned counsel for the petitioner on the judgment of the Hon'ble Bombay High Court is totally mis-conceived. The Hon'ble Bombay High Court in Jayant N. Sheth, Proprietor Struct Mast Engineers Vs. Gyneshwar Apartment Co-operative Housing Civil Revision No. 3957 of 2008 (O&M) -6- Society Ltd. (supra), has been pleased to lay down as under: - “There is no arbitration agreement in the form of an arbitration clause in a contract or in the form of separate agreement in writing. Nor is it the case of the petitioner that there is an exchange of letters, telex, telegrams or other means of telecommunication or an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other party. What is claimed by the petitioner is that there was an understanding between the parties to enter i to an arbitration agreement. Obviously, such an understanding, even if there be any, cannot be construed as an arbitration agreement within the meaning of Section 2(1)(b) read with Section 7 of the Act.” In the present case, the arbitration agreement was not said to be on oral, but was part of contract entered into between the parties. The plea of the petitioner that he has not signed the agreement also stood belied, as the agreement Annexure P-1 was duly signed by the petitioner. The agreement was shown to the Court by the respondent, which bore the signatures of the petitioner, therefore, the reliance of the petitioner on the judgments of the Hon'ble Supreme Court in Smita Conductors Ltd Vs. Euro Alloys Ltd., 2001(7) Supreme Court Cases 728, Great Offshore Ltd. Vs. Iranian Offshore Engineering & Construction Company, JT 2008(9) SC 339, M/s Unissi (India) Pvt. Ltd Vs. Post Graduate Institute of Medical Education & Research, JT 2008(11) SC 89, is also totally mis-conceived. Rather the judgment of the Hon'ble Supreme Court in M/s Unissi (India) Pvt. Ltd Vs. Post Graduate Institute of Medical Education & Research (supra) goes against the Civil Revision No. 3957 of 2008 (O&M) -7- petitioner. The Hon'ble Supreme Court in the said case has been pleased to lay down as under: - “A tender enquiry NO. 2PGI/OGL/2K/6281 dated 21.12.2000 for purchase of Pulse Oxymeters was floated by the PGI. It is an admitted position that the appellant submitted their tender vide their offer No. UIPL/331177/00-01 dated 15.2.2001. The tender of the appellant was accepted by the PGI vide their letter No. PGI/P-61/02/477/11936-51 dated 29.09.2002 for supplying 41 Pulse Oxymeters to their different departments. The tender documents itself contain an arbitration clause and by reason of acceptance of the tender of the appellant by the PGI, it must be held that there was a valid arbitration agreement between the parties. The appellant supplied 41 Pulse Oxymeters and the receipt thereof was duly acknowledged on behalf of the PGI on the delivery challans. The service/installation reports of the aforesaid meshines were duly signed on behalf of the PGI. In the letters issued by the PGI, there was an apparent acknowledgement of supply of the aforesaid meters by the appellant and also reference to the aforementioned tender enquiry number. It is an admitted position that the appellant had sent the agreement containing the arbitration clause, as per the format provided by the PGI, after duly signing the same on requisite value of stamp paper for signing of the same by PGI. The PGI though admittedly received the same, did not send back the agreement to the appellant after signing it as per agreement between the parties. The PGI admittedly had used the machines for about an year and thereafter returned the same to the appellant. Subsequently, the bank guarantee furnished by the appellant for Rs.2,13,160/- and the earnest money deposit of Civil Revision No. 3957 of 2008 (O&M) -8- Rs.45,000/- was encashed and forfeited by the PGI. In view of the aforesaid facts and the correspondences between the parties, particularly the tender offer made by the appellant dated 15.1.2001 and supply order of the PGI dated 29.9.2002, and, in our view, to constitute an arbitration agreement between the parties and the action taken on behalf of the appellant and in view of Section 7 of the Act and considering the principles laid down by the aforesaid two decisions of this Court, as noted herein earlier, we are of the view that the arbitration agreement did exist and therefore the matter should be referred to an Arbitrator for decision. That apart, as we have already noted herein earlier that in this case, the documents on record, in our view, apparently show supply of materials by the appellant and acceptance thereof by the PGI in pursuance of the tender enquiry by the PGI, wherein tender of the appellant containing an arbitration clause was admittedly accepted by the respondent. In that view of the matter, it cannot be said that the PGI should now be allowed to wriggle out from the arbitration agreement between them. Although no formal agreement was executed, the tender documents indicating certain conditions of contract contained an arbitration clause. It is also an admitted position that the appellant gave his tender offer which was accepted and the appellant acted upon it. The learned Additional District Judge, Chandigarh erred in holding that their did not exist any arbitration agreement between the parties and, therefore, the order passed by him is liable to be set aside.” The reading of the judgment of the Hon'ble Supreme Court shows, that in spite of the fact that if one of the parties has not signed the agreement, the arbitration agreement was said to be valid, as the parties Civil Revision No. 3957 of 2008 (O&M) -9- had acted upon the contract. Learned counsel for the petitioner also contended, that Clause 7 of the agreement executed between the parties could not be said to be an arbitration clause, as the Director Food and Supplies, Haryana, was not nominated as Arbitrator, as he was to act as such. Clause 7 of the agreement reads as under: - “Except as otherwise provided, any dispute arising out of the terms of the agreement or their interpretation shall be referred to the Director Food and Supplies Haryana acting as such at the time of reference or such other person as Director Food and Supplies Haryana may by general or special order nominate in this behalf and his decision shall be final on both the parties.” In order to find out whether a clause in the contract constituted an arbitration agreement, what is required to be seen is (i) that the clause must contemplate that the decision of the Arbitrator would be binding on the parties (ii) that the Arbitrator derive its jurisdiction either from the consent of the parties or from an order of the Court or from the statute, the terms of which must be clear that the process is to be by arbitration. The arbitral tribunal should be constituted by agreement, and further that the decision of the arbitral tribunal should be final and enforceable in law. The Hon'ble Supreme Court in The Owners & Parties Vs. State Trading Corpn., (2001)6 Supreme 282 was pleased to lay down as under: - “While ascertaining the intention of the parties, attempt should be made to give meaning to the incorporation clause and to give effect to the same and not to invalidate or frustrate it giving a literal pedantic and technical Civil Revision No. 3957 of 2008 (O&M) -10- reading of the clause.” If the Clause 7 is read by following the rule of interpretation, it would be seen that the parties by agreement provided that any dispute arising out of the terms of the agreement or their interpretation was agreement to be referred to the Director Food and Supplies, Haryana, acting as such at the time of reference or such other person as Director Food and Supplies Haryana may by general or special order nominate in this behalf and his decision shall be final on both the parties. The contention of the learned counsel for the petitioner that the word 'acting as such' was to mean that he was to act as Director Food and Supplies, Haryana, is totally mis-conceived. The correct interpretation is, that Director Food and Supplies, Haryana, who is acting as such on the date of reference is to act as an Arbitrator. The parties further agreed to give him powers to nominate any other person to act as an Arbitrator. The ingredients of arbitration clause, therefore, are fulfilled in Clause 7 of the agreement executed between the parties. The contention of the learned counsel for the petitioner that there was no arbitration agreement between the parties, is totally mis- conceived and deserves to be rejected. No merit. Dismissed. (Vinod K. Sharma) Judge August 19, 2009 R.S.