Dismissed

State of Haryana v. M/S.Dashmesh Woolen and Silk Mills & Ors.

Punjab & Haryana HC17 Nov 2008CR/2464/1991

Case brief

AI extract

What is this about?

The High Court dismissed a revision petition challenging an order quashing an arbitral award. While the Court found a valid contract existed, it upheld the appellate court's view that a unilateral reference was invalid because the authority's power to appoint an arbitrator was exhausted after exercising it once, per the contract terms.

What did the court decide?

The revision petition was dismissed as there was no merit.

State of Haryana Vs M/S.Dashmesh Woolen and Silk Mills… — Arbitration | Punjab & Haryana HC (2008)

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CR No.2464 of 1991

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

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CR No.2464 of 1991

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Date of Decision: 17.11.2008

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State of Haryana ....Petitioner

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Vs.

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M/s Dashmesh Woolen & Silk Mills & Anr.

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..Respondents

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Coram: Hon'ble Mr. Justice Vinod K.Sharma

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Present: Mr.Madan Gupta, Sr.DAG, Haryana, for the petitioner.

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Mr.Sarwan Singh, Sr.Advocate with Mr.N.S.Rapri, Advocate, for respondent No.1.

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Vinod K.Sharma,J. (Oral)

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This revision petition under Section 115 of the Code of Civil Procedure (for short the Code) is directed against the judgment dated 18.2.1991 passed by the learned Additional District Judge, Chandigarh vide which appeal filed against the order dated 8.9.1982 passed by the learned Sub Judge First Class, Chandigarh was accepted.

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The petitioner State of Haryana filed a petition under sections

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CR No.2464 of 1991

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14 and 17 of the Arbitration Act, 1940 (for short the Act) for making the award the rule of the Court in which respondent No.1 filed objections under sections 30 and 33 of the Act.

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It was claimed that the contract was executed between the State of Haryana and M/s Dashmesh Woolen and Silk Mills vide rate contract bearing No. GL/RC/209/72-73/38505-506 dated 20.4.1973. The case of the petitioner is that a dispute arose between the parties and in terms of the arbitration agreement the same was referred to Smt.Sushil Dogra, arbitrator who pronounced the award on 15.9.1978.

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The respondent took a plea that the award passed was illegal, void and without jurisdiction. It was claimed that Smt.Sushil Dogra could not be appointed as an Arbitrator as Shri S.P.Bhatia, Joint Director of Industries was appointed as an Arbitrator in exercise of authority vested in the State of Haryana under clause 18 of the agreement and once the said authority was exercised it could not thereafter appoint Smt.Sushil Dogra as an arbitrator. It was also claimed that there was no valid contract between the parties. A plea was also raised that the reference made to the Arbitrator was not valid one as it was a unilateral reference.

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The objections were contested.

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Learned trial court rejected the objections and made the award rule of the court.

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Appeal against the rejection of objections was accepted by the learned Additional District Judge, Chandigarh holding that there was no concluded contract between the parties and therefore, the award passed was without jurisdiction. The learned appellate court also held that the

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CR No.2464 of 1991

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appointment of Smt. Sushil Dogra as an Arbitrator was also vitiated as she could not be appointed as an Arbitrator after Bhatia was appointed as an Arbitrator.

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The learned court also held that the reference made was not in consonance with law as unilateral reference is not permissible.

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Mr.Madan Gupta, learned Senior Deputy Advocate General, Haryana challenged the impugned order on the plea that the learned lower appellate court was in error in coming to the conclusion that there was no valid contract between the parties. The contention of the learned counsel for the petitioner is that the learned lower appellate court has misread Clause 6 of Ex.O.2 to come to this conclusion.

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Clause 6 of Ex.O.2 reads as under:-

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“6. Failure to execute agreement, deposit prescribed security, effect supplies within the stipulated period, repeatedly offering supplies liable to rejection, without prior inspection by this Department may render your earnest money/security liable to forfeiture and cancellation of this acceptance letter and also blacklisting of your firm in addition to other remedies as available under terms of the contract.”

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There is force in this contention of the learned counsel for the

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petitioner. Clause 6 of Ex.O.2 gave power to the State of Haryana to cancel the contract which stood accepted.

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This view of mine finds support from the fact that subsequent thereto there was correspondence between the parties where the respondent sought concession from the petitioner.

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CR No.2464 of 1991

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Learned lower appellate court, therefore, was not justified in holding that there was no valid contract between the parties. Even otherwise, the reading of Ex.O2 shows that offer made by respondent was accepted, thus contract stood concluded. Clause 6 of Ex.O.2 reproduced above only gives right to cancel the contract and is not prerequisite as was held by learned lower appellate court.

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However, this revision deserves to be rejected on other two grounds, Arbitration Clause between the parties reads as under:-

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“18. If any question, difference or objection whatsoever shall arise, in any way connected with or arising out of this instrument or the meaning or operation of any part thereof or the rights, duties or liabilities of either party then save in so far as the decision of any such matter is herein before provided for and has been so decided, every such matter including whether its decision has been otherwise provided for and or whether it has been finally decided accordingly or whether the contract should be terminated or has been rightly terminated in whole or part and as regards the rights and obligations of the parties as the result of such termination shall be referred for arbitration to any officer appointed by Haryana Government and his decision shall be final and binding and where the matter involves a claim the amount if any awarded in such arbitration shall be recoverable in respect of the matter so referred.”

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Clause 18 authorized the State of Haryana to appoint an Arbitrator to adjudicate the dispute. In exercise of said power admittedly an

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CR No.2464 of 1991

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Arbitrator was appointed. Thereafter, it was not open to the State to appoint any other arbitrator as the authority appointed Arbitrator can be revoked only by the court, unless the arbitration agreement gives such a power to a party to fill up the vacancy.

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However, no such power was given in the arbitration clause entered into between the parties. This view finds support from the judgment of this court in the case of Messrs Shamji Mal Vs. Messers L.Sefton & Co. Ltd. Mirzapur and another 1954 P.L.R. 187, wherein this court was pleased to lay down that once the power to appoint an Arbitrator under the contract is exercised by appointing an arbitrator, thereafter there is no power with the authority to appoint another Arbitrator.

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The order passed by the learned appellate court is also required to be upheld as it has been rightly held that it is not enough for the contract to provide for arbitration as the arbitrator only gets jurisdiction when both the parties specifically agree to refer specified matters or, failing that, the court compels them to do so under the Act if the dispute is covered by it.

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This view finds support from the judgment of Hon'ble Supreme

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Court in the case of Seth Thawardas Pherumal V. The Union of India (1955) 2 S.C.R. 48 and the judgment of Hon'ble Calcutta High Court in the case of East India Construction, Co. (P) Ltd. Vs. Union of India AIR 1970 Calcutta 243, wherein it has been held that in the absence of specific provision in agreement giving power to the appointing authority to fill up vacancy, power to appoint arbitrator gets exhausted once it was exercised by the said authority. Thereafter it is only the court which is competent to appoint arbitrator.

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CR No.2464 of 1991

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In view of what has been observed above, there is no merit in the present revision petition which is ordered to be dismissed.

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17.11.2008 (Vinod K.Sharma) rp Judge

State of Haryana v. M/S.Dashmesh Woolen and Silk Mills & Ors.

Case brief

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State of Haryana v. M/S.Dashmesh Woolen and Silk Mills & Ors.

Case brief

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