Delhi District Court
Sh. Deepak Duggal vs Sh. Subhash Chand Jian on 18 September, 2011
THE COURT OF MS. SAVITA RAO
ADJ-CENTRAL, TIS HAZARI COURTS, DELHI
Suit No. 267/08
IN THE MATTER :
Sh. Deepak Duggal
Proprietor of M/s Southern Pacific India
A-31/4, Mayapuri, Phase-I
New Delhi ...............Petitioner
versus
Sh. Subhash Chand Jian
Proprietor of M/s Vardhman Paper Mart
2355, Dharampura
Delhi ............Respondent
DATE OF FILING : 28.05.2008
DATE OF ASSIGNMENT TO THIS COURT : 25.04.2011
DATE OF ARGUMENT : 07.09.2011
DATE OF JUDGMENT : 08.09.2011
JUDGMENT
1. This is a petition U/s 34 of the Arbitration & Conciliation Act, 1996, challenging the legality, validity as well as requesting for setting aside the impugned award dated 01.11.2007, passed by the sole Arbitrator against the petitioner and in favour of the respondent herein. As stated, vide impugned order, the sole Page 1 of 12 Arbitrator has held the petitioner liable to pay to the respondent / claimant a sum of Rs. 5,96,564/- including principle amount & sales tax along with interest. The impugned order is challenged on the ground that there was no agreement of arbitration between the parties as envisaged U/s 7 of the Arbitration & Conciliation Act, 1996, since the reference to Arbitrator was made based upon a clause printed on the bills/invoice which was raised by the claimant against the purchases made by the petitioner which can not be termed as an agreement with respect to the reference of the dispute to the Arbitrator. Further that the petitioner is not a member of Paper Merchant Association and had never agreed for any dispute arising out of the transaction to be referred to the Arbitrator appointed by the said association of the respondent/claimant of which the respondent is a member and therefore, the adjudication of the alleged dispute of the claimant shall not be independent or impartial. It was further stated that the reference has been made on the basis of the alleged arbitration clause after the expiry of period of limitation since claim ceased to subsist and the relief with respect to the dispute Page 2 of 12 had become time barred, therefore, the same could not have been referred to the Arbitrator and that the reference to the Arbitrator is unilateral and is on the basis of the alleged agreement which has not been entered into by the respondent.
2. In reply to the petition, it was stated that the dispute as referred to the Arbitrator was legal in terms of law enumerated in terms of Section 7 of Arbitration & Conciliation Act, 1996. Since the petitioner himself had admitted the receipt of one bill wherein it was clearly mentioned that in case of any dispute including the dispute of any payment shall be referred to Paper Merchant Association for sole arbitration and the Judgment given by the Arbitrator appointed by the executive committee shall be final and binding on both the parties. The petitioner has failed to file any document in support of his refusal to accept the said clause as mentioned in each and every bill of the claimant, therefore, can not claim that adjudication of the dispute was not independent and impartial. It was also stated that the reference to the Arbitrator was also not time barred as neither the petitioner had replied to the letters dated 25.12.2004 and Page 3 of 12 06.07.2005 and the balance confirmation dated 31.03.2005, wherein the respondent had claimed the same amount from him for which the claim was filed rather it was the petitioner who had given a sum of Rs. 20,000/- to the respondent after receipt of one such letter in part satisfaction of the claim of the respondent herein. Hence, the reference was also not barred by limitation. It was also stated that in fact, the goods supplied to the petitioner were initially supplied to its sister concern M/s Kap Press Pvt. Limited having its registered office at the same address as that of the petitioner herein but it was the petitioner who requested to bill the material in question under the name Southern Pacific Industries and demanded another copy of the bill number 31605 dated 21.12.2001, since there was a correction in the earlier copy of the said bill due to change in the printing style of the said bill issued by the claimant by that time, the two bills differ in printing style only whereas all the contents are same. Rest of the contents of the petition were also denied.
3. I have heard the arguments of both the parties. The main crux of the argument of Ld. Counsel for petitioner is based upon Page 4 of 12 grounds that there was no agreement between the parties with regard to the reference of the dispute to the Arbitrator, arbitration was barred by limitation and that the respondent being the member of Paper Merchant Association, the adjudication of the dispute by the sole Arbitrator of Paper Merchant Association was not impartial.
4. For reference, Section 7 of the Arbitration & Conciliation Act, 1996, is reproduced here as under :
"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 contact or in the form of a separate agreement 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 by7 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 of statements of claim and defence 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 Page 5 of 12 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."
5. It was on the strength Clause 4 (C) of Section 7, it was argued by Counsel for respondent that two invoices were raised upon the petitioner dated 21.12.2001 and 19.01.2002. One of which is admitted by the petitioner also, though the goods against the other invoice dated 19.01.2002, were also supplied to the petitioner which bills contain receipt by the petitioner concern in form of stamp affixed on the same and in both the invoices, there was a specific mention of the reference of the dispute to the Arbitrator in case of any dispute including the dispute of non- payment to the Paper Merchant Association. It was argued that the said invoices were raised upon the petitioner and the bills were accepted without any protest, therefore, the terms and conditions mentioned in the bills are supposed to be agreed by the customer as well as it amounts to a contract between both the parties, therefore, it can not be said that there was no agreement of arbitration between the parties. For this, Ld. Page 6 of 12 Counsel for respondent also placed reliance upon AIR 1963, SC 1685, Union of India v/s Rallia ; AIR 1955 SC 812, Jugal Kishore Rameshshwardas v/s Mrs. Goolbai Hormusji ; AIR 1996 SC 318, J.K. Jain & Ors. v/s DDA ; AIR 1985(3) SCC 255 Banwari Lal Kotiya v/s P.C. Aggarwal ; wherein inter alia it was observed that "in order to constitute an arbitration agreement, there must be a valid agreement to refer the present or future dispute to the Arbitrator and the agreement must be in writing and must be accepted by the parties. It is however not a condition of an effective arbitration agreement that it must be incorporated in a formal agreement executed by by both the parties, nor it is required to be signed by the parties and it is sufficient if the terms are reduced to writing and the agreement to the parties thereto is established." There can not be any dispute with respect to proposition of law as laid down in the above said authorities but it is to be seen if the mention on the invoice can be termed as arbitration agreement between the parties in terms of law as propounded.
6. In AIR 1963, SC 1685, Union of India v/s Rallia, the Page 7 of 12 arbitration agreement was not written but there was held to be a valid contract resulting from correspondence between the parties which is not so in the instant case since except for the invoice raised, there is no other correspondence between the parties whereby, they had agreed to subject to be within the jurisdiction of the Arbitrator.
7. In AIR 1996 SC 318, J.K. Jain & Ors. v/s DDA, the arbitration clause was not included in the agreement itself but the terms and conditions of the tender form including term about reference of disputes to arbitration, was agreed to be made part of main agreement and binding between parties. However, in the instant case, there is also no previous agreement between the parties or the proposal from the side of the respondent which was subsequently become part of the agreement or contract between the parties.
8. AIR 1985(3) SCC 255 Banwari Lal Kotiya v/s P.C. Aggarwal, there was a valid agreement between the parties containing the arbitration clause and the question was only with respect to the reference of the dispute to the arbitration for which Page 8 of 12 it was held that the fresh assent was not required to make an actual reference to arbitration. This is also not the situation in the instant case, since there is no dispute with respect to the invocation of subsequent assent for making actual reference to the Arbitrator but the agreement for reference of dispute to Arbitrator is itself in dispute.
9. In AIR 1955 SC 812, Jugal Kishore Rameshshwardas v/s Mrs. Goolbai Hormusji, there was a contract note between the parties which was held to be valid and therefore, the mention of arbitration clause in the said contract note was also held to be valid which is again distinguishable from the facts of the instant case. None of the authorities as placed on record by Ld. Counsel for respondent comes to his rescue since in the instant matter, it was only on the invoice, that there was mention of arbitration clause. The petitioner of course admits having received the goods against one of these invoices but there was no acceptance on the part of the petitioner to agree to refer the dispute between the parties to the arbitration. At the most, the term mentioned in the invoice can be termed as proposal for reference of the dispute Page 9 of 12 to the Arbitrator which was required to be accepted by the petitioner which is not a case here. Mere acceptance of the goods against this invoice affixing the stamp or putting and the signature on the invoice as token of receipt of the material, would not constitute an arbitration agreement between the parties. There is no other agreement between the parties with respect to the above nor any exchange of correspondence whereby it can be inferred that the petitioner at any point of time had agreed for reference of the dispute to the Arbitrator. There having been no consensus ad-item with respect to mention of the reference of dispute to the Arbitrator on the invoice which was only an unilateral act on the part of the respondent, the subsequent reference to the Arbitrator under these circumstances can not be held to be valid.
10. The next contention of Ld. Counsel for petitioner is with respect to the reference having been made to Arbitrator being barred by limitation. The invoices which were raised were dated 21.12.2001 and 19.10.2002 and the supply against one of the invoices had been admitted against which the payment as stated Page 10 of 12 had also been made but even if the limitation is counted from the date of second invoice which is though disputed yet the limitation would expire in October, 2005 whereas the matter was referred to arbitration in November, 2005. The respondent has claimed that the petitioner had made part payment of Rs. 20,000/-, subsequently, therefore, the payment having been made by the petitioner, the reference to the arbitration was within period of limitation. The respondent nowhere in his claim referred to the arbitration had mentioned about the factum of receipt of Rs. 20,000/- as part payment seeking extension pf the period of limitation which fact also does not find mention in the award passed by Ld. Arbitrator. Be that as it may, since the agreement with respect to the arbitration itself has not been found to be executed between the parties, the further question with respect to reference of dispute beyond period of limitation would be irrelevant to be decided here. Similarly, the plea of Ld. Counsel for respondent that the respondent was a member of Paper Merchant Association as well member of many committees of the said Association, list of which is also filed on record, Therefore, Page 11 of 12 the award passed by Ld. Arbitrator could not have been impartial and unbiased, is also not required to be discussed for the absence of the valid arbitration agreement between the parties.
11. In view of the above, there having been no valid arbitration agreement between the parties, the award passed by Ld. Arbitrator can not be sustained and is accordingly, set aside. The respondent is at liberty to take the recourse as per law for settlement of its dispute. Arbitral proceedings be sent back and this file be consigned to Record Room.
ANNOUNCED IN OPEN COURT ON 8th DAY OF SEPTEMBER, 2011 (SAVITA RAO) ADJ-CENTRAL/TIS HAZARI COURTS DELHI Page 12 of 12