Delhi District Court
Chiranji Lal vs Union Of India on 24 August, 2024
DLND010019042022
IN THE COURT OF MRS VINEETA GOYAL,
DISTRICT JUDGE (COMMERCIAL-03),
PATIALA HOUSE, NEW DELHI
ARB.A. (Comm) No.07 of 2022
CNR No. DLND01-001904-2022
In the matter of:
M/s.Chiranji Lal & Co.
Through its Proprietor Sh. Chiranji Lal
Having its office at :
A-82, Vishal market,
Tagore Garden,
New Delhi-110027. ........ Appellant
Versus
Union of India
Through The General Manager,
Northern Railway,
Baroda House,
New Delhi-110001.
Through Sr. Commercial Manager
Email:[email protected] ...... Respondent
Date of institution of suit : 08.03.2022
Date of Judgment : 24.08.2024
Digitally
signed by
VINEETA
VINEETA GOYAL
GOYAL Date:
2024.08.24
17:55:18
+0530
ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 1 of 16
Appearance : Sh. C.S. Parashar, Ld. Counsel for appellant.
Sh. Ashok Singh, Ld. Counsel for respondent.
JUDGMENT
1 The present appeal is filed under Section 37 of the Arbitration and Conciliation Act, 1996 (in short 'the Act') by the appellant praying for setting aside the order of the Ld. Arbitrator dated 27.11.2021 in case no.DIAC/2755/02-20 holding that the appellant tribunal has no jurisdiction to adjudicate the claimant's claim.
2 Appellant was the claimant before the Ld. Arbitrator. Brief facts of the appellant's case are as under :
(a) The appellant filed a claim petition before the Ld. Arbitrator stating that it is a proprietorship firm running its business in the name and style of M/s. Chiranji Lal & Co. On 13.02.2010, an offer for a contract was cleanliness and sanitation work of reservation and passenger halls, office rooms, galleries, all the existing toilets in the premises, cleaning of circulating area and collection of garbage, etc., and its removal from the Railway premises to nearby Railway / Corporation's, dustbin, for a period of one year i.e. since 07.03.2011 to 06.03.2012 at the rate of Rs.1,69,167/- per month, total amounting to Rs.20,30,004/- was accepted by respondent in favour of appellant vide letter Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:55:27 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 2 of 16 no.CCM/PM/T/C&S/38 dated 07.03.2011 issued from the office of Chief Commercial Manager / PM, Northern Railway IRCA - Reservation Complex, New Delhi. The agreement was executed on 07.03.2011 for a contract of aforesaid work at 13 PRs locations of NCR Delhi. The appellant satisfactorily completed the abovesaid work as well as the works given to him as per verbal orders in time and subsequently to expiry of running contract on 06.03.2012, it has been extended for a period of three months i.e. 07.03.2012 till 06.06.2012 vide letter dated 05.03.2012 on same terms and conditions. The appellant has alleged that respondent on various occasions extended the contract of the appellant till 25.07.2013 verbally as well as in writing and used to clear the bills as and when raised by the appellant. However, the period for which the appellant worked only on the verbal orders of respondent i.e. 07.06.2012 to 11.11.2012, 12.02.2013 to 26.03.2013 and 27.06.2013 to 25.07.2013, the bills for the said period was not cleared by the respondent. According to the appellant, he issued various letters to the respondent asking for his payment as well as appointment of Arbitrator. Thereafter, appellant approached Hon'ble High Court in Arb.P. 635/2019 u/s. 11 of Arbitration & Conciliation Act and the petition was allowed and Ld. Arbitrator was appointed. Before the Ld. Arbitrator Statement of Claim was filed by the appellant and respondent filed its Statement of Defence. The Ld. Arbitrator has framed four preliminary issues, which are as under :-
Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:55:37 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 3 of 16
(i) Whether the Arbitrator has any jurisdiction to adjudicate the claimant's claims?OPC
(ii) The Claimant's claims pertains to which period? OPC
(iii) Whether there was any contract between the parties during the period to which the claimant's claims pertains? OPC
(iv) Whether the claim is filed within the limitation period? OPD
(b) After hearing arguments of both the sides, the Ld. Arbitrator vide impugned order decided that the Tribunal no jurisdiction to entertain the claim petition. Being aggrieved by this order, the appellant has filed the instant appeal on various grounds. It is stated that Ld. Arbitrator in Clause (iii) of Para 18 of the impugned order has strongly observed that the appellant and the respondent have not expressly authorized him to do so hence, by virtue of Section 28 (3) of the Act, he is mandated to not decide EX AEQUOET BONO or AMIABLE COMPOSITEUR. It is stated that the Ld. Arbitrator failed to follow mandate as contained in Section 28(3) of the Act inasmuch as it failed to take into account the trade usage applicable to the transaction. In an earlier similar contract, the respondent continued to avail services of the appellant without their being any written extension of agreement, however, payment for the orally extended period were also made to the appellant after getting ex post facto sanctioned from the concerned authorities. It is also stated that Ld. Arbitrator has failed to decide the dispute in accordance with substantive law for the time being imposed in India. Ld. Arbitrator failed to appreciate the purport and ambit of Section 10 of the Indian Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:55:50 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 4 of 16 Contract Act, 1872. It is well settled by Hon'ble Apex Court in case of Alka Bose vs. Paramtma Devi and Ors. in Civil Appeal no. 6197/2000 pronounced on 17.12.2008, that oral agreements are also valid and that it is not necessary that agreement could be written only. Further, in case of Sheela Gehlot vs. Sonu Kochhar and Anr., reported in (2006) 92 DRJ, the Hon'ble High Court observed that oral agreements are valid and enforceable and there could not be any dispute about it and that for the oral agreement there should be some circumstances surrounding the alleged oral agreement. It is also contended that Ld. Arbitrator wrongly concluded in Para 21 of the impugned order that appellant has not set up any case whatsoever which indicates that clause 38 of the agreement is contained in terms of Section 7(4) (a to c) of the Act or that clause 38 of the agreement is constituted in terms of Section 7(5) of the Act for the Periods 1, 2 and 3 wholly or partly. It is submitted that there is no requirement that extension or an arbitration clause which is in writing must also be in writing even though the parties continue to extend the principal agreement orally. It is further submitted that Ld. Arbitrator failed to appreciate and apply the doctrine of agreement sub silentio a principle / doctrine laid down by Hon'ble Apex Court in case of M/s. Bharat Petroleum Corporation Ltd. vs. The Great Eastern Shipping Co. Ltd., pronounced on 12.10.2007. It is further contended that there was an agreement sub silentio as the respondent continued to avail the services of appellant on the Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:55:58 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 5 of 16 same terms and conditions without any objection to the agreement. It is further submitted in para 24 of the impugned order the Ld. Arbitrator has wrongly interpreted the clause 22 and 35 of the agreement. As per clause 22, there can be an extension of this agreement beyond 07.03.2011 by mutual consent and it is not necessary that extension should be in writing only. In the instant case, the extension of agreement was by way of oral offer by the concerned officers of the respondent railway and acceptance of the same by the appellant and execution of the same in terms of original agreement. It is submitted that the Ld. Arbitrator failed to appreciate that the contract was extended on the same terms and conditions on the same date as per clause 35 of the original agreement. However, the respondent on its own did not adhere to two conditions of 15 days prior notice and of maximum extension of three months inasmuch as no such notice was given by the respondent even before the written and admitted extension periods. The overall extension from 07.06.2012 to 11.11.2012 was given for five months i.e. more than three months, meaning thereby respondent had on its own waived or given up the condition for which appellant is not liable. It is further submitted that Ld. Arbitrator failed to appreciate letters dated 01.07.2013, 05.07.2013 and 10.07.2013 whereby respondent had admitted the work carried out by the appellant as per the agreement dated 07.03.2011 and that no denial whatsoever of the existing of agreement was raised by the respondent. It is further Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:56:05 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 6 of 16 submitted that Ld. Arbitrator also failed to appreciate that the work carried out by the appellant for the Periods 1, 2 and 3 was the same work as allotted to him vide agreement dated 07.03.2011 and also raised the payment as per schedule of the agreement. Further, the Ld. Arbitrator failed to appreciate that performance report produced by the appellant for the abovestated period wherein the concerned authority of the concerned locations have certified the performance for the said periods to be satisfactory. On all these terms, it is contended by the appellant that impugned order is erroneous and not in accordance with law and is prayed to be set aside.
2.1 Respondent did not file reply, however, raised objection that there is no written contract between the parties and the appellant is relying on oral contract. There cannot be any arbitral proceeding without there being the arbitral agreement.
Section 7(3) of the Act clearly specify that arbitration agreement shall be in writing. Admittedly, there is no valid or subsisting arbitration agreement between the parties. Since the requirement of Section 7 of the Act have not been satisfied as there being no valid or subsisting arbitration agreement between the parties for the Periods 1, 2 and 3, appeal deserves to be dismissed. It is stated that even assuming that certain services were provided by the appellant, they are neither covered by agreement dated 07.03.2011. No separate agreement was signed by both the parties Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:56:13 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 7 of 16 and there was no any mutual extension of agreement in accordance with the terms of agreement dated 07.03.2011. It is stated that Arbitral Tribunal has no jurisdiction to decide the alleged dispute beyond the period of contract or for the period when there was no contract. No arbitrator can be appointed for the dispute of the period when there was no written arbitration agreement. The appointment of Ld. Arbitrator is determined by the arbitration clause and the existence of arbitration agreement is dependent on the existence of valid written arbitration agreement. The arbitration clause in the agreement dated 07.03.2011 cannot be permitted to be extended subsequent to 06.03.2012. It is further stated that even as per the contract for the other period, clause 35 of the agreement stipulates that duration of the contract can be extended if the respondent desires on the same terms and conditions and at the same rate by giving the notice of 15 days for maximum of three months. It is not the case of the appellant that from 15 days notice was given for extension by the respondent. The agreement was thus, neither extended nor extendable for the period asserted in the claim petition. It is further submitted that respondent has allotted the contract to the appellant for one year (07.03.2011 to 06.03.2012) and after expiry of regular contract, the contract was further extended for period of three months as per clause 22 of the agreement from 07.03.2012 to 06.06.2012 on same terms and conditions. After that the work was again awarded twice for a period of three months (12.11.2012 to Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:56:19 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 8 of 16 11.02.2013) and (27.03.2013 to 26.06.2013) on quotation basis.
Further the contract was allotted to the appellant for a period of two years from 26.07.2013 to 25.07.2015. The appellant has already been given all the payments for the period during which he has been allotted the valid contract by respondent. As there had been no valid contract in between three spells i.e. 07.06.2012 to 11.11.2012, 12.02.2013 to 26.03.2013 and 27.06.2013 to 25.07.2013, so no payment was made to the appellant. It is thus, submitted that the arbitration clause contained in any agreement ceases to be any relevance after the expiry of contract period unless the dispute between the parties is one that had arisen during the subsistence of agreement. It is further submitted that there is no provision in Government Department to get any work on the basis of oral agreement and it is also clear that no payment in Government Department can be made on the basis of alleged oral agreement. It is further submitted that doctrine of sub silentio had no applicability in the present case when it was expressly agreed between the parties that arbitration agreement would have to be specifically carried out, which had admittedly not taken place. On these grounds, it is prayed that the appeal may be dismissed.
3 I have heard the Ld. Counsels for the parties and have also gone through the record as well as written submissions filed on behalf of the parties.
Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:56:27 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 9 of 16
4 Perusal of the impugned order would show that the Ld. Arbitrator framed four preliminary issues, one being the appellant's claim pertains to which period. The Ld. Arbitrator noted that it is admitted position that claimant's claim (appellant herein) pertain to the following periods :
Period 1 - 07.06.2012 to 11.11.2012 Period 2 - 12.11.2013 to 26.03.2013 Period 3 - 27.06.2013 to 25.07.2013
5 Further, impugned order would show that Ld. Arbitrator while adjudicating issue no.3 as to whether there was any contract between the parties during the Periods 1, 2 and 3, considered that admittedly the agreement dated 07.03.2011 is from 07.03.2011 to 06.03.2012 and it is admitted position that respondent's letter dated 05.03.2012, agreement was extended for three months from 07.03.2012 to 06.06.2012 as per the appellant herein consent letter dated 28.02.2012 on the same date, terms and conditions existing in the agreement. The Ld. Arbitrator further considered that clause 38 of the agreement is the only arbitration agreement between the parties, by virtue of agreement, during admitted original agreement period and by virtue of agreement as extended during admitted extended period. The Ld. Arbitrator in the impugned order after considering all the facts and terms of the agreement observed that since for the aforesaid periods, there was no contract or extension of contract validly there was no Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:56:34 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 10 of 16 arbitration clause empowering him to adjudicate. The Ld. Arbitrator discussed this clause on the anvil of Section 7(4) and Section 7(5) of the Act. Further perusal of the impugned order show that Ld. Arbitrator took note of the copy of letters dated 01.07.2013, 05.07.2013 and 10.07.2013 and observed that in response to para 16 of the Statement of Claim, the respondent has pleaded at page no.8 of the Statement of Defence that the payment of Rs.10,15,002/- was for the particular contract period upto 11.11.2012 and was not for the whole period as claimed by the petitioner. The Ld. Arbitrator after testing on the anvils of Section 7(4) and Section 7(5) of the Act returned the finding that clause 38 of the agreement does not exist during Periods 1, 2 and 3 wholly or partly. This view taken by Ld. Arbitrator needs to be examined in the light of the fact of the present case. The following two relevant clauses of the contract dealing with extension are reproduced as under :
"22. Any addition, alteration, review, modification and extension of this agreement shall be done only with the mutual consent of both the parties.
35. The duration of contract can be extended if Railway Administration desire on the same terms and conditions at the same rate of contract by giving 15 days notice for maximum of three months."
6 The combined reading of above shows that for extension only mutual consent of the parties is required. In so far as clause 35 is concerned, it only empowers the Railway Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:56:41 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 11 of 16 Administration for getting the work done during the extended period on same terms and conditions and at the same rate of contract be giving 15 days of notice for a maximum period of three months. This clause gives an option to the Railway Administration. In the instant case, the agreement was upto 06.03.2012, for which extension was given only upto 06.06.2012.
The abovementioned three periods are beyond that period, therefore, any services given and taken are deemed to be under separate oral contract and cannot be treated to be rendered under the agreement in question which contain arbitration clause with one condition is mutual consent and by virtue of clause 35 only for a period of three months.
7 Further, to challenge the impugned order, the appellant has mainly contended that Ld. Arbitrator has not considered the doctrine of sub silentio and has erred that in holding that it has no jurisdiction to entertain the same. It is contended that by the acts itself and the correspondences and the letters dated 01.07.2013, 05.07.2013 and 10.07.2013, it is evident that respondent processed the payment for the Periods 1, 2 and 3 but the final payment was not made. On the other hand, it is the contention of the respondent that although the appellant provided services after 06.06.2012 but those services even will not extend the term and condition of the expired agreement and there is no such deemed extension of agreement in terms of clause 35 of the Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:56:47 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 12 of 16 agreement which is even referred by Ld. Arbitrator. This clause stipulates that terms of agreement can be extended by giving 15 days notice for a maximum period of three months. Clause 22 provides that any alteration, addition, review, modification and extension of agreement shall be done with the mutual consent of both the parties. Meaning thereby the agreement can be extended as well as can be modified only by mutual consent by both the parties as there is no such separate writing expressing mutual consent of both the parties to modify or extend the operation of agreement even beyond 06.06.2012, thus, expired agreement cannot be taken advantage to initiate arbitration, as arbitration agreement as per Section 7 of the Act is to be in writing and there is no such writing.
8 For the sake of repetition, perusal of the impugned order shows that Ld. Arbitrator in para 25 has returned a finding that a conjoint reading of clause 22 and 35 of the agreement indicate that extension of agreement is possible with mutual consent of both the parties; such extension has to be proceeded by a 15 days notice and such extension can be for a maximum of three months. Further, in para 26 of the impugned order, Ld. Arbitrator observed that original period was from 07.03.2011 to 06.03.2012 and admitted extended period was for three months from 07.03.2012 to 06.06.2012. This extension was as per the claimant's consent letter dated 28.02.2012 on the same rate, terms Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:56:53 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 13 of 16 and conditions and this extension lead to admitted extended period which was before Periods 1, 2 and 3.
9 Admittedly, the dispute which was raised before the Ld. Arbitrator is for the period subsequent to 06.06.2012, this indicates that dispute that is raised in the claim petition filed before the Ld. Arbitrator is not in respect of the work which took place prior to 07.06.2012. Admittedly for this period beyond 06.06.2012, there was no any written agreement entered between the parties. So far as the case of Bharat Petroleum Corporation Ltd. (cited supra) relied upon by the appellant is concerned, the facts were that Great Eastern Shipping Company had given one vessel by name Jag Praja on hire to Bharat Petroleum Corporation and contract was upto 30.06.1998. Extension of the agreement beyond this period was denied by Oil Ordination Committee and fresh tender was floated and the same was challenged by one of the bidders, consequent to which vessel continued to be chartered by Bharat Petroleum Corporation till 31.08.1999. When the dispute arose between the parties, as to the payment of the charges for this period, matter was referred to Arbitral Tribunal, wherein it was held that it has no jurisdiction to decide on the reference which was relatable to the period subsequent to 31.08.1998 when there was no agreement and it was challenged before Hon'ble High Court successfully and the said order was challenged before Hon'ble Apex Court. The Hon'ble Apex Court while considering Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:57:00 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 14 of 16 the conduct and the officers (silence) and the vehicle continued to be charged by Bharat Petroleum even after expiry of this agreement has held that doctrine of sub silentio is applicable. The facts of the case is entirely different as in that case before the Hon'ble Apex Court pending finalization of new agreement commencing from 01.09.1998, certain meetings took place between the oil companies and there were offers and counter offers between the parties and there were several letters exchanged for continuing use of the vessel on existing terms and conditions. But in this case, there has not been any extension beyond 06.06.2012 and there has been no compliance with the term as stipulated in clause 35 of the agreement and the claim in this case is pertaining to the post expiry period, this decision cannot be applied to the present case, thus, the doctrine of sub silentio is not applicable.
10 As discussed above, the agreement, admittedly came to an end on 06.06.2012. There is nothing on record to show that there was any communication between the parties stating that terms and conditions of the previous expired agreement would continue subsequently for the Periods 1, 2 and 3. Admittedly there is no modification, alteration, extension of the agreement beyond 06.06.2012 by writing signed by the parties. There is nothing on record to show that appellant or the respondent had made some offer or exchange of correspondences seeking Digitally signed by VINEETA VINEETA GOYAL GOYAL Date:
2024.08.24 17:57:07 +0530 ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 15 of 16 extension of duration of the agreement, and to that the other party remained silent to fall within the ambit of doctrine of sub silentio. Thus in such premises entire claim of the appellant is in respect of the work performed subsequent to 06.06.2012, therefore, arbitration agreement of this expired agreement cannot be applied in respect of the dispute which arose thereafter and not covered by the agreement. Further, arbitration agreement as required under Section 7 of the Act is not present and the arbitration agreement in the previous expired agreement, by any stretch of imagination, can be held to be continued even for the transactions of subsequent period. Thus, there is no infirmity in the impugned order dated 21.11.2021 passed by the Ld. Arbitrator. In these facts and circumstances of the case, present appeal is dismissed.
Parties are left to bear their own cost. No order as to the costs.
File be consigned to Record Room.
Digitally signed by VINEETA GOYAL VINEETA Date:
GOYAL 2024.08.24
17:57:12
+0530
Pronounced in the open Court (VINEETA GOYAL)
on 24th August, 2024 District Judge (Commercial-03)
Patiala House, New Delhi
ARB.A. (Comm) 07/22 M/s. Chiranji Lal & Co. vs. Union of India Page 16 of 16