Delhi High Court
Thomson Press India Ltd. vs Secretary Finance, Govt. Of N.C.T Of ... on 18 January, 1999
Equivalent citations: 1999IAD(DELHI)751, 77(1999)DLT746, 1999(48)DRJ493
Author: S.K. Mahajan
Bench: S.K. Mahajan
JUDGMENT S.K. Mahajan, J.
1. This order will dispose of the application of the defendants under Section 34 of the Arbitration Act for stay of the suit on the ground that there exists between the parties an agreement to refer the disputes to arbitrator. Brief facts giving rise to this application are:
2. That on or about 9.1.1991 the defendants issued a notice inviting tenders for the printing and supply of lottery tickets. The plaintiff submitted its tender and pursuant to negotiations, the terms for printing and supply of lottery tickets were agreed between the parties. Under the agreement, the defendants continued to issue print orders/release orders for printing of tickets of various lottery draws alongwith the art work and the details to be printed on the tickets. Certain amount in respect of the printing of the lottery tickets allegedly remained unpaid to the plaintiff despite reminders issued to the defendants and by letters dated 8th and 17th September,1992, the plaintiff expressed its inability to print the lottery tickets for the draw commencing 556 to 585 due to the break down of the machinery and the defendants were requested to make alternate arrangements for printing of tickets for those draws. By a letter dated 9.9.1992 the defendants called upon the plaintiff to continue to print the lottery tickets till the defendants could make alternate arrangements. Vide letter dated 25.9.1992 the plaintiff was informed that the print orders for printing of lottery tickets of Draws 572 to 599 were given to another printer @ Rs. 3,000/ per lac and consequent thereto the plaintiff agreed to bear the difference in rates of Rs. 260/ per lac as a special case. This arrangement, according to the plaintiff, was agreed to only for the draws 572 to 599 due to exceptional circumstances that were not anticipated and were beyond the control of the plaintiff i.e. force majeure conditions in terms of the agreement. Inspite of the plaintiff communicating to the defendants vide letters dated 7th and 8th October,1992 their readiness to resume printing of lottery tickets from Draw No. 600 onwards giving the time schedule therefor, the defendants chose to get the tickets printed from other printers for Draw No. 600 onwards. Though the print order for the said draws was also issued in the name of the plaintiff but in the absence of the supply of art work by the defendants the tickets could not be printed by the plaintiff. On 18.3.1992 the plaintiff issued a reminder to the defendants for release of Rs. 22,08,539/ as the principal amount due for printing and supply of lottery tickets, a sum of Rs. 10,61,546/ as the interest and a sum of Rs. 3,33,009/ on account of loss of interest on issue of paper stock and loss due to wastage and cost of conversion of reels to sheets and a sum of Rs.1,35,507/ being the earnest money and interest thereon. This amount having not been paid, the plaintiff filed the suit for recovery against the defendants.
3. On the suit being filed the defendants filed the application (I.A. No.10073/95) under Section 34 of the Arbitration Act contending interalia that an agreement dated 18.11.1992 was executed between the parties in terms of which the terms and conditions of the tender were to form part of the memorandum of agreement and were to be binding on both the parties. In terms of the said conditions dated 16.1.1991 duly signed by an authorised representative of the plaintiff the disputes and differences between the parties were liable to be referred to the Director (Lotteries) whose decision was held to be final and binding. It is submitted that the said clause constituted an arbitration agreement between the parties and as the defendants were always ready and willing to do all things necessary for the proper conduct of the arbitration in terms of the arbitration agreement between the parties, the suit was not liable to be proceeded with and was liable to be stayed.
4. The arbitration agreement which was relied upon by the defendants for stay of the suit was as under : "28. In the event of any question dispute,difference or contro versy arising between parties hereto concerning or relating to the rights, duties or liabilities of the parties hereunder or as to form the contents of any instruments/documents to be made or executed in pursuance to the conditions hereunder the contents or for the purpose of giving effect to them or for interpretation of true and correct intention of parties, the decision of Director (Lott) in respect thereof shall be final and binding and shall not be called into question in any proceedings."
5. In reply to the application it was contended by the plaintiff that the clause relied upon by the defendants was not an arbitration agreement and it did not give any jurisdiction whatsoever to any authority or person to arbitrate on issues of disputes/differences between the parties. It was also stated in the reply that defendant No. 2 deceitfully induced the plaintiff to sign a formal contract on 18.11.1992 after execution of all the job awarded to the plaintiff. Further, no job/order or work was awarded by the defendants to the plaintiff on or after 18.11.1992 and the amount sought to be recovered by the plaintiff was for the period prior to the said date and was, therefore,outside the purview and ambit of the alleged arbitration agreement. It was also stated that the defendants by their conduct and act had waived off and given up the clause pertaining to the execution of an agreement on award of the tender and accordingly reliance on the alleged arbitration clause was misconceived.
6. Clause 28 of the terms and conditions of the tender submitted by the plaintiff for approval of the defendant has already been quoted above. In terms of this clause in the event of any question, dispute or difference or controversy arising between the parties hereto concerning or relating to the rights, duties and liabilities of the parties thereunder or as to the form and contents of any instrument or document to be made or executed in pursuant to the conditions or for interpretation of true and correct intention of the parties, the decision of the Director (Lotteries) in respect thereof was made final and binding and was not to be called in question in any proceedings. Relying upon this condition, it is submitted by Mr. Nigam that this tender of the plaintiff was accepted by the defendants on 27.5.1991/18.8.1991. By this letter the defendants conveyed the approval of the Director, Delhi Lotteries to the acceptance of the negotiated tender of the plaintiff at the rates, terms and conditions mentioned in the said letter. Last paragraph of this letter made the conditions of tender as part of the agreement. In terms of this letter the plaintiff was requested to attend the office of the defendants to execute an agreement on nonjudicial stamp paper of Rs.10/ and the conditions of the tender were deemed to be taken as part of the agreement. Relying upon this letter Mr. Nigam contends that the terms and conditions of the agreement having been made part of the agreement it was too late a stage for the plaintiff to contend that the agreement was executed between the parties only on 18.11.1992 or that the entire printing work for which payment was being demanded having already undertaken by the plaintiff prior to the said date the agreement cannot be relied upon.
7. In reply to the arguments of Mr. Nigam, it is contended by Mr.Salwan, learned counsel for the plaintiff that: (1) unless the conditions of the tender were specifically made part of the written contract, it could not be said to be binding on the parties; (2) the agreement was executed after completion of the contract, namely on 18.11.1992; and (3) that the decision having already been taken by the Director, there could not be any question of the reference of disputes to him.
8. Elaborating his arguments Mr. Salwan contends that while the plaintiff had not executed any work for the defendants after 25.9.1992, the signing of the agreement on 18.11.1992 would have no effect upon the suit inasmuch as there was no agreement between the parties for reference of disputes upto 25.9.1992. It is also contended that the conditions of the tender having been subsequently made part of the written agreement the same were not binding upon the parties. He relies upon the judgment reported as State of Haryana & Another Vs. O.P. Singhal & Co., .
9. In State of Haryana & Another Vs. O.P. Singhal & Co., (supra) the court was concerned with a contract where the State Government had accepted a tender and the question was whether the said agreement was binding between the parties. Relying upon the provisions of Article 299 of the Constitution of India the court held that merely because of the submission of tender and acceptance thereof by the Government no binding contract as envisaged by Article 299 would come into existence and where no binding contract had come into being between the parties within the meaning of Article 299, the arbitration clause contained in the unsigned agreement could not be relied upon for claiming stay under Section 34 of the Arbitration Act. It was held that Article 299 was mandatory and in case it was not entered in those terms then it was a void transaction and cannot be given effect to in a court of law.
10. The judgment aforesaid, in my view, is not applicable to the facts of the present case. The court in State of Haryana & Another Vs. O.P.Singhal & Co., (supra) did not hold that by acceptance of tender no binding contract comes into being between the parties. All that has been held by the court is that as the contract was not entered into in terms of Article 299 of the Constitution of India its acceptance by an officer who was not authorised to act under Article 299 could not be made binding between the parties.
11. In terms of the Contract Act a valid contract comes into existence between the parties by acceptance of the offer. In this case the offer of the plaintiff contained in tender document was accepted by the defendants by its letter dated 27.5.1991 and the terms and conditions of the tender were made part of the agreement between the parties. It is not even the contention of the plaintiff that the acceptance was not issued by a person who was not authorised to issue the same on behalf of the defendants. The plaintiff is relying upon the agreement between the parties and is claiming the amount due to it under the same. Moreover, reference by Mr. Salwan to the force majeure clause in the agreement is in terms of the terms and conditions contained not only in the tender document but also in the agreement executed between the parties on 18.11.1992. In my view, therefore, it is not open to the plaintiff to contend that the tender conditions did not form part of the agreement between the parties or that the same having been executed on 18.11.1992 after the last print order was placed on the plaintiff are not binding on it. In my opinion, clause 28 of the tender conditions formed part of the agreement between the parties and is accordingly binding upon them.
12. The other contention raised by the plaintiff is that the said clause is not an arbitration agreement between the parties. For this he relies upon the judgment reported as Rajdhani Paper House Vs. R.K. Jain Sales and Another, .
13. In Rajdhani Paper House Vs. R.K. Jain Sales and Another, (supra) the court was concerned with the interpretation of the clause printed on the bills which stated that "in case of any dispute the judgment of the Tribunal or any other authority appointed by the Paper Merchant Association, Delhi (Regd.) will be final and binding." The court was concerned with the interpretation of clause 15 of the constitution of the Paper Merchant Association which authorised the Association to appoint arbitrators, umpires etc. and in case of any dispute between the members of the Association the same was liable to be referred to an arbitrator whose decision was made binding on the members. Interpreting these clauses the court held that the definition of an arbitration agreement is an agreement by which the parties to the agreement agree to submit future or present disputes to the arbitration for settlement and the wording of the clause appearing in the bill did not appear to be in that form and on the contrary it appeared that the parties had agreed to a private court to be set up by the Association to final judgment in their case. It was quite different from an agreement to refer disputes to arbitration. The application form in that case, according to the court, showed that the good offices of the Association were to be used for reaching an amicable settlement and the court, therefore, held the clauses in the bill as well as in the constitution of the Association not to be an arbitration agreement within the meaning of the Arbitration Act.
14. Mr. Nigam has relied upon a full bench judgment of the Punjab & Haryana High Court reported as M/s. Ram Lal Jagan Nath Vs. Punjab State & Another, as well as the judgments reported as Dewan Chand Vs. The State of Jammu and Kashmir, AIR 1961 J & K 58 and The State of U.P. Vs. Tipper Chand, .
15. In Dewan Chand Vs. The State of Jammu and Kashmir (supra) the court was concerned with the interpretation of an arbitration agreement which was as under: "For any dispute between the contractor and the Department the decision of the Chief Engineer PWD Jammu and Kashmir, will be final and binding upon the contractor."
16. The arbitration clause between the parties in M/s. Ram Lal Jagan Nath Vs. Punjab State & Another, (supra) was as under :
"In matter of dispute the case shall be referred to the Superin tending Engineer whose order shall be final."
The Jammu and Kashmir High Court in Dewan Chand Vs. The State of Jammu and Kashmir (supra) held that all that the statute requires was that there should be written agreement to submit a dispute to arbitration. It was not necessary that the words "reference" or "arbitration" should actually be used in the agreement if the agreement, in substance, amounts to an arbitration agreement within the meaning of Section 2(a) of the Arbitration Act. Ac cording to the court where the agreement stated that for any dispute between the contractor and the Department the decision of the Chief Engineer shall be final and binding upon the contrac tor, the agreement amounted to an arbitration agreement though the word "reference" was not used in this clause nor it was mentioned that the Chief Engineer would be the Arbitrator.
17. In Ram Lal Jagan Nath Vs. Punjab State (supra), the full Bench of the Punjab High Court held that the clause in the printed works contract to the effect that in the matter of dispute the case shall be referred to certain authority whose decision shall be final, amounted to an arbitration agreement. It was further held by the Court that absence of works like "Arbitrator" or "arbitration" in the contract and attending circumstances was wholly immaterial because their omission was amply supplied by the language expressly providing that the case, in the matter of dispute, shall be referred to the specified authority, whose decision shall be final.
18. Referring to these judgments of the Punjab & Haryana High Court in Rattan Lal Jagan Nath Vs. Punjab State (supra) and the judgment of the Jammu & Kashmir High Court in Dewan Chand Vs. The State of Jammu and Kashmir, (supra) the Supreme Court in The State of U.P. Vs. Tipper Chand (supra) held that the courts had correctly interpreted the clauses as amounting to arbitration agreement. The court held that the use of the words "any dispute between the contractor and the Department" were significant and were rightly interpreted as arbitration agreement.
19. In the present case as well it is clearly mentioned that in the event of any question, dispute, difference or controversy between the parties the decision of the Director (Lotteries) would be final and binding between the parties. As held in the judgments aforesaid, the court should look to the substance rather than the form of the agreement and the mere fact that the words like "reference" or "arbitrator" do not find place in the agreement it cannot be said that the agreement is not an arbitration agreement within the meaning of Section 2(a) of the Arbitration Act. No particular form appears to have been laid down as universal for framing an arbitration agreement; the only certain thing being that the words used for the purpose must be the words of choice and determination to go to arbitration and not problematic words of mere possibility. The fact that the decision of the Director (Lotteries) in respect of the dispute, difference or controversy between the parties has been made final clearly shows that the parties intended the disputes to be referred to the Director (Lotteries) for his decision. There was no other way Director (Lotteries) could give his decision on the disputes, differences and controversies between the parties unless they were raised and referred to him. Considering this clause rationally in that context, the conclusion, in my opinion, seems irresistible that the parties intended Director (Lotteries) to act as an arbitrator and in no other capacity. I, therefore, hold that there existed an arbitration agreement between the parties for reference of disputes between them to the arbitration of Director (Lotteries).
20. It is lastly contended by Mr. Salwan that even if it is held to be an arbitration agreement the right to arbitrate the disputes, if any, stood waived by giving his decision in the reply dated 28.2.1995 to the legal notice issued on behalf of the plaintiff. In my opinion, the contention of Mr. Salwan is not correct. Merely because a reply has been given on behalf of the Director (Lotteries) to the notice of the plaintiff it cannot be said that a decision has been taken by Director (Lotteries) on the disputes between the parties. Section 34 of the Act gives statutory right to a party to move the court after the proceedings are taken against it and mere denial of the plaintiff's entitlement to a particular amount by the Director who is the head of the Department will not mean that he has formed his opinion on such disputes and differences. In any case the Director (Lotteries) who had instructed the lawyer to give the reply is no longer the Director in the Department and in my view, therefore, it cannot be said that the defendants have waived their right to ask for arbitration of the disputes between the parties.
21. In view of the above discussion, I am being of the opinion that there exists an arbitration agreement between the parties, it is a fit case where the proceedings in the suit are liable to be stayed. I accordingly, allow the application and stay the proceedings in the suit.