Delhi High Court Unipack Industries vs Subhash Chand Jain And Ors. on 1 November, 2001 Equivalent citations: 94(2001)DLT710, 2002(61)DRJ586 JUDGMENT V.S. Aggarwal, J. 1. Petitioner, Unipack Industries, is a partnership firm and has filed the present petition under Section 12 of the Arbitration and Conciliation Act, 1996 (for short the Act). It has been prayed that respondent No. 2 (Jagan Nath) who has been appointed as the Arbitrator should be removed from holding the office of Arbitrator with respect to alleged claims of respondent No. 1 (Subhash Chand Jain). 2. It has been pleaded that petitioner and respondent No. 1 had business dealings. The petitioner alleges that he was making regular payment to respondent No. 1 on bill to bill basis and no dispute was raised with respect to full and final settlement of account. Respondent No. 1 through his advance sent a notice dated 5th July, 2001 calling upon the petitioner to pay a sum of Rs. 16,37,312.99 with interest. A reply was sent to the Counsel that no amount was outstanding. Thereafter respondent No. 2 acting as Arbitrator is alleged to have sent notice dated 9th August, 2001 to appear before him on 6th September, 2001. At the request of the petitioner, copy of the statement of claim was made available to the petitioner. It transpired that arbitration is being conducted by Paper Merchants Association. 3. The petitioner claims that respondent No. 2 is liable to be removed because by sending notice of 5th July, 2001 the respondent No. 1 has waived the arbitration by directing the petitioner to pay the alleged amount. Furthermore it is claimed that respondent No. 1 had failed to point out the arbitration clause between the parties because the arbitration clause of the Paper Merchants Association is applicable only to the members of the association. The petitioner is not a member of that association and therefore there cannot be any arbitration qua the petitioner. Plea has also been raised that it is the duty of respondent No. 2 not to act as an Arbitrator. The petitioner does not expect any justice from him. There are reasonable doubts of his being under the influence of the member/respondent No. 1. On these facts above said prayer has been made. 4. At the threshold it was put to the learned Counsel for the petitioner as to how the present petition under Section 12 of the Act was available. According to the learned Counsel there is no arbitration clause qua the petitioner and in any case respondent No. 2 cannot be a fair Arbitrator and therefore he should be removed. 5. On careful consideration of the pleas raised at the bar and the pleadings it is patent that the present petition is not maintainable. 6. Section 2(b) of the Act defines the arbitration agreement to be an agreement referred to in Section 7. Section 7 explains as to what would be an arbitration agreement and reads: 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. (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 letter, telex, telegrams or other means of telecommunication which provides a record of the agreement; or (c) an exchange of statements of claim and defense in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. 7. In other words as per Section 7 read with Section 2(b) of the Act there has to be an agreement to refer the disputes or certain disputes with respect to defined legal relationship to arbitration. The arbitration agreement has to be in writing but as is apparent from Subsection (4) Section 7 even if it is not signed under certain circumstances contemplated under Clauses (b) and (c) of Subsection (4) to Section 7 still there can be an arbitration agreement. 8. The scheme of the Act clearly reveals that the Legislature in its wisdom though it appropriate that at the initial stage or while the arbitration proceedings commence there should be little interference by the Court. Section 12 prescribes the grounds to challenge the appointment of an Arbitrator and it reads as under: 12. Grounds for challenge.(1) When a person is approached in connection with his possible appointment as an Arbitrator, he shall disclose in writing any circumstances likely to give rise to