Delhi High Court
Svapn Constructions vs Idpl Employees Cooperative Group ... on 20 December, 2005
Equivalent citations: 127(2006)DLT80
Author: Anil Kumar
Bench: Anil Kumar
JUDGMENT Anil Kumar, J.
Page 0062
1. This order will dispose of petitioner's petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator.
2. Brief facts to comprehend the disputes between the parties are that respondent No.1 which is a Cooperative Group Housing Society invited tenders for construction of 22 flats. The tender documents were to be collected from the office of the architect of the respondent No.1 M/s.Aakriti Consultants India (Pvt) Ltd, AC-1/179 C, Shalimar Bagh, Delhi. The tenders were to be received up to 3.30 PM on 10.6.1993 at the address of C-2/112, DDA flats, Lawrence Road, Delhi-110035 and were to be opened at 4 PM on the same date.
3. A letter dated 21.5.1993 was written to the petitioner intimating that the petitioner had been selected for issue of tender documents consequent to which tender was collected by the petitioner from the office of the architect at M/s.Aakriti Consultants India (Pvt) Ltd, AC-1/179 C, Shalimar Bagh, Delhi and tender was submitted as directed by the respondent No.1 which was opened at 4 PM on 10.6.1993 at C-2/112, DDA flats, Lawrence Road, Delhi-110035. After negotiation, the work was awarded to the petitioner. The negotiations also took place at C-2/112, DDA flats, Lawrence Road, Delhi-110035 which is apparent from the communication dated 9.7.1995 which was sent to the petitioner.
4. The special conditions agreed between the parties had an arbitration clause which is reproduced for reference:-
19: ARBITRATION Condition 54 of the General Conditions of contract shall be superseded by the following provisions for Arbitration. Except where otherwise provided for in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question,Page 0063 claim, right, matter of thing whatsoever in any way arising out of or relating to the contract, design, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works, or the executing or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole Arbitration of the person appointed by the Employer. There will be no objection if the arbitrator so appointed is a employee, and that he had to deal with the matters to which the contract relates and that in the course of his duties as such he had expressed views on all or any of the matters in dispute or difference. The Arbitrator to whom the matter is originally referred being transferred or vacating his or being unable to act for any reason, the employer shall appoint another person to act as Arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by the employer as aforesaid should act as Arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. In cases where the amount of the claim in dispute is Rs.50,000/- (Rs.Fifty Thousand) and above, the arbitrator shall give reasons for the award. Subject as aforesaid the provision of the Arbitration Act, 1940, or any statutory modification or re-enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceeding under this clause. It is a term of the Contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under the clause together with the amount or amounts claimed in respect of each such dispute. It is also a term of the Contract that if the Contractor(s) do/does not make any demand for arbitration in respect of any claim(s) in writing within 90 (ninety) days of receiving the intimation from the Employer that the bill is ready for payment, the claim(s) of the contractor(s) will be deemed to have been waived and absolutely barred and the Employer shall be discharged and released of all liabilities under the contract in respect of these claims. The Arbitrator(s) may from time to time with consent of the parties enlarge the time, for making and publishing the award. The decision of the Engineer regarding the quantum of reduction as well as justification thereof in respect of rates for sub-standard work which may be decided to be adopted will be final and would not be opened to arbitration. The work under the contract shall, if reasonably possible continue during the arbitration proceedings and no payment due or payable to the Contractor shall be withheld on account of such proceedings. The Arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties fixing the date of the first hearing. The Arbitrator shall give a separate award in respect of each dispute or difference referred to him.Page 0064 The venue of the arbitration shall be such place as may be fixed by the Arbitrator in his sole discretion. The award of the Arbitration shall be final, conclusive and binding on all parties to this contract.
5. The construction work which was awarded to the petitioner, was completed, however, the disputes arose regarding payment, necessitating the petitioner invoking the arbitration clause under the special conditions of the contract. The petitioner by letter dated 21.8.1997 requested the secretary of the respondent No.1 to appoint an arbitrator to adjudicate the disputes between the parties.
6. On failure of the respondent No.1 to appoint an arbitrator and refer the disputes to him in terms of clause 19 of the special conditions of contract, the petitioner filed the present petition for appointment of an arbitrator.
7. The petition is contested by the respondents. Respondent No.1 and respondent No.2 filed separate replies. The respondent No.1 contended that petitioner is a proprietorship concern and consequently the petition in the name of a proprietorship firm cannot be filed and is not maintainable. The respondents challenged the territorial jurisdiction of the Court asserting that the respondent No.1 is a Society and is managed under its bye-laws dated 11.2.1991 having its registered office at Gurgaon, Haryana which falls under the territorial jurisdiction of High Court of Punjab and Haryana at Chandigarh and therefore, the High Court at Delhi does not have jurisdiction. The petition was also contested the petition on the ground that there is no privity of contract between respondent Nos.2 to 4 and the petitioner as no arbitration agreement has been executed between the petitioner and respondent Nos.2 to
4. The respondents also contended that there is no arbitration clause even between the petitioner and respondent No.1 as in the agreement it was scored off and the special conditions are not signed by the respondent no.1. The respondents have opposed the petition on the ground that the addresses of respondents 2, 3 and 4 are the residential addresses of the President, Secretary and Treasurer of respondent No.1 who were holding such posts sometime back, however, who did not hold these posts at the time of filing the petition. The maintainability of the petition was also challenged on the ground that the respondent Nos.2 to 4 are not the necessary parties and the petition is bad for mis-joinder of parties and the petition is barred by limitation.
8. The petition was argued at length by the learned counsel for the petitioner and the respondents. The first plea of the petitioner is that there is an arbitration agreement in terms of clause 19 of special conditions of contract whereas the respondents have produced a copy of condition of contract (Part II general conditions) which also has an arbitration clause No.54 which, however has been scored off. The plea of the respondents is that since the arbitration clause in the general condition of contract has been scored off and the arbitration clause of the special condition being clause 19 has not been signed by the parties, therefore, there is no arbitration agreement between the parties.
Page 0065
9. It is not disputed that the tender of the petitioner was accepted pursuant to which the work was awarded and work was carried out in compliance with the conditions stipulated under the general conditions and the special conditions. So long as the parties are at ad-idem regarding the special conditions which were relied on, not signing the special conditions of contract containing arbitration agreement will not negate the same.
10. An agreement for arbitration is a sine qua non for adjudication of disputes by Arbitration. An arbitration agreement should be in writing i.e its terms should be reduced to writing but if the agreement is not signed and it is established by another written contemporaneous document, it will be binding between the parties. The Apex Court in Jugal Kishore Remeshwardas Vs Goolbai Hormusji, AIR 1955 SC 812 had held that in order to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties, and it is sufficient if the terms are reduced to writing and the agreement of the parties thereto is established. Section 2(b) stipulates an agreement referred to in Section 7 of the Arbitration and Conciliation Act,1996. Section 7(5) contemplates reference in a contract to a document containing an arbitration clause constituting an arbitration agreement, if the contract is in writing and the reference is such as to make the arbitration clause part of the contract. The agreement awarding contract for the construction of flat was signed by the parties. Special Conditions of contract, incorporate arbitration clause, arbitration agreement. Merely because the special conditions of contract were not signed by the parties, it will not negate arbitration agreement between the parties. In the facts and circumstances, therefore, it is held that there is an arbitration agreement between the petitioner and the respondent no.1. Perusal of agreement awarding works contract to the respondent no.1 also reveals that no rights or the liability of respondent no.2 to 4, who are president, secretary and treasurer of the society, are born out from the agreement. Perusal of the arbitration agreement in terms of clause 19 under the special conditions of contract reflects that the agreement was between the respondent No.1 and the petitioner. There is no arbitration agreement between the respondent No.2 to 4 and the petitioner. In the circumstances arbitrator cannot be appointed in respect of any alleged disputes between the petitioner and respondent Nos.2 to 4. Consideration of the disputes raised in annexure A to the letter dated 21.8.1997, it is apparent that the disputes are in respect of non payment of various amounts by respondent No.1 to petitioner and no disputes with respondent Nos.2 to 4 have been raised. Consequently, petitioner is not entitled to have an arbitrator appointed for adjudication of any dispute between the petitioner and respondent Nos.2 to 4. So it is held that there is no arbitration agreement between the petitioner and respondent nos.2 to 4. If there is no arbitration agreement between the petitioner and respondent nos. 2 to 4, the petition for appointment of arbitrator in view of arbitration agreement with the respondent no.1 is not liable to be dismissed. The effect of no arbitration agreement between the petitioner and respondent nos. 2 to 4 is that arbitrator is not appointed for any alleged disputes between the petitioner and respondent nos. 2 to 4.
Page 0066
11. The next plea of the petitioner is that by letter dated 21.8.1997 the arbitration agreement between the parties was invoked and the respondent No.1 was asked to appoint an arbitrator and adjudicate the disputes stipulated in annexure annexed with the said letter. The petitioner, however, has produced only a photocopy of the said letter and nothing has been produced to show that the letter was sent to respondents and was received by them. Though the petitioner has produced the photocopies of the postal receipts bearing Nos.1466 and 1467 dated 21.8.1997, however, the original receipts have not been produced nor any explanation has been given for non production of copy of letter and original postal receipts. In absence of the copy of the letter dated 21.8.1997 alleged to have been served on the respondent and original postal receipts, the letter dated 21.8.1997 invoking the arbitration agreement between the petitioner and the respondent no.1 has not been proved by the petitioner. The petitioner has not been able to demonstrate in the facts and circumstances that the notice dated 21st August,1997 was served upon the respondents. The inevitable inference is that the alleged letter dated 21.8.1997 alleged to be sent by the petitioner was not sent nor received by the respondents and consequently the petitioner did not invoke the arbitration clause by letter dated 21st August, 1997. Consequently, the respondent No.1 was not liable to appoint an arbitrator as was claimed by the petitioner pursuant to letter dated 21st August,1997.
12. However, filing of the petition itself is a notice to the respondents seeking appointment of the arbitrator. Even after the service of the petition, the respondent no.1 failed to appoint an arbitrator. A division bench of this Court in Union of India Vs R R.Industries, 2005(12) DLT 572 had held that the party which does not exercise its right and crosses first limitation and then also crosses extended limitation and sleeps over its right, totally forfeit the right either to appoint the arbitrator or to have an arbitrator of its own department and in such circumstances, the appointment of arbitrator by Court was justified. Consequently respondent no.1 lost his right to appoint the arbitrator in accordance with the arbitration agreement stipulated in the special condition of contract and this Court shall be competent to appoint an arbitrator.
13. The next dispute between the parties is about the jurisdiction of the High Court of Delhi to entertain and try the present petition under Section 11 of the Arbitration and Conciliation Act, 1996. From the letter dated 21.5.1993 it is apparent that the petitioner was selected for issue of tender document which was given to the petitioner at Delhi. The tender document after completion and filing was submitted and was accepted at Delhi and it was opened at Delhi and even the subsequent negotiations had taken place on 17.7.1993 at Flat no.2/112, DDA flats, Lawrence Road, Delhi-110035 as per letter dated 9.7.1993. Therefore, in the circumstances, a part of cause of action had arisen at Delhi. In deciding as to where the contract is made, the provisions of Section 4 of the Contract Act are relevant and considering the facts and circumstances, it is inevitable to infer that the offer was made at Delhi and accepted at Delhi resulting into a binding contract and, therefore, a part of cause of action has arisen at Delhi. Merely because Page 0067the respondent No.1 is a Society having its registered office at Gurgaon, the cause of action which has arisen at Delhi will not be negated nor it can be stated that the jurisdiction shall only be at Gurgaon. The respondent No.1 has not shown and produced anything to show that there was any exclusion clause restricting the jurisdiction of the Courts at Gurgaon only in case of any dispute between the respondent No.1 and any other person. Reliance can be placed on AIR 1989 Punjab and Haryana 205, Union of India V/s.M/s.Shibboo Mal and Sons holding that in deciding the question as to where the contract is made, the Court must take into consideration the provisions of Section 4 of the Contract Act. It was held that where acceptance is conveyed to the plaintiff, a part of cause of action arises there and the Civil Court will have jurisdiction to entertain a petition under Sections 14 and 17 of the Arbitration and Conciliation Act. In another judgment relied on by the petitioner AIR 1986 Bombay 76 it was held that where the acceptance of the tender was communicated to the contractor, the part of cause of action had arisen and the Court at a place where acceptance of tender was communicated will have jurisdiction. A Division Bench of this Court in 2004 VI AD (Delhi) 142 had held that a contract can come into existence by exchange of letters which can be culled from them and a formal contract is a mere formality and if the same is not executed in writing, it would not mean that a final and binding contract has not come into existence. In the circumstances it is held that Delhi High Court has jurisdiction in the present facts and circumstances.
14. The other objection of the respondents is that the petition for appointment of an arbitrator under Section 11(6) of Arbitration and Conciliation Act has been filed by M/s.Svapn Cosntructions which is a sole proprietorship concern, which is not a legal entity and consequently the petition is not maintainable. The petition was filed in the name of a proprietorship firm which is neither registered company nor a joint family nor a partnership firm. A petition or legal proceedings can be filed by a legal entity. The respondent has relied on ; P C Advertising Vs. Municipal Corporation of Delhi; , Miraj Marketing Corporation Vs. Vishakha Engineering to contend that a petition or legal proceedings in the name of a sole proprietorship concern which is not a legal entity is not maintainable. No plausible arguments have been advanced by the petitioner as to how the petition in the name of a proprietorship firm which is neither a registered company nor a joint family nor a partnership firm is maintainable.
15. Perusal of the petition reveals that petition has been filed in the name of sole proprietorship firm which is not a legal entity through its sole proprietor. A sole proprietorship firm is not a legal entity which can sue in its own name though any two persons claiming or being liable as partners and carrying on business may sue or be sued in the name of firm of which such persons are partners at the time of accruing of cause of action, however under Order XXX of the Code of Civil Procedure and under any other provision of code a person carrying on business in a name other than his can sue in the name other than his. In Miraj Marketing Corporation (supra) relied on by the respondent, it was held that a sole proprietorship firm which is not a legal entity can not Page 0068sue in its own name. In that case, plaintiff was described to be a proprietorship firm represented through a person who had neither signed the plaint nor had signed the power of attorney which was filed in the case and no statement was made in the plaint as to who was the proprietor of the firm. In the case of P.C. Advertising (supra), it was held that the suit filed in the name of proprietorship firm which was neither a registered company nor a joint family nor a partnership firm, in the absence of any prayer to seek amendment to allow the sole proprietor to sue in his name was maintainable.
16. The petition has been filed in the name of M/s Svapn Constructions and not in the name of Shri.A. K. Khanna its sole proprietor. In the petition filed by the petitioner, no prayer has been made seeking amendment to sue in the name of the sole proprietorship firm. Even according to the averments made in the petition, though it is stated that Mr.A.K. Khanna is the sole proprietor of the firm, M/s.Svapn Construction, however, no permission has been sought to sue in the name of the sole proprietorship firm. If the sole proprietorship firm is not a legal entity, the petition should have been filed by the sole proprietor in his name on behalf of his sole proprietorship firm and not in the name of sole proprietorship firm. Considering it from any point, the inevitable inference is that a petition in the name of a sole proprietorship firm's name which is not a legal entity is not maintainable.
17. Therefore, in the facts and circumstances, the petition which has been filed by a sole proprietorship firm, which is not a legal entity, is not maintainable and it is, therefore, dismissed. However in the facts and circumstances of the case, parties are, left to bear their own costs.