C. Rai vs Union of India (UOI)

Kilam, J.—This is a first appeal against an order of the learned Chief Justice sitting in Chambers and arises out of an application purporting

to be u/s 20 read with Section 8(1)(a) of the Arbitration Act, made by Mr. C. Rai (applicant) against the Union of India, with the prayer that an

arbitration agreement which subsists between the parties be filed and appointment of an arbitrator be ordered to adjudicate upon certain matters of

dispute between the parties.

This application was resisted by the Union of India on various grounds, one of such grounds being that the notice given by the applicant was not a

valid notice and as such the present application was not competent. The application came up before the learned C.J. sitting in Chambers who

dismissed the application on the ground that ''the notice which had been served (on the non-applicant Union of India) was not in conformity with

Section 42 of the Arbitration Act, inasmuch as the provisions of Clause 17 of the lease agreement have not been complied with.

On behalf of the applicant, his learned Counsel, Mr. Bali, attacked the order of the learned C.J. on the following grounds: firstly, that under the

circumstances of the present case no notice was necessary to be given to the Union of India and any defect in the notice was therefore immaterial,

and secondly, that Clause (17) of the lease agreement does not make the giving of a notice to the non-applicant (Union of India) a condition

precedent for making an application to the Court. He has further submitted that Clause (17) does not lay down that no notice can be given directly

to the Government of India and that it should have been given only through the Lands, Firings and Disposal Service, 24, Parganas, Howrah and

Hoogly.

Before dealing with the argument submitted by the applicant's learned Counsel, some facts about this case may be given here, so as to

understand the legal position taken by the non-applicant, the Union of India. The Indian Military authorities had taken on lease two houses

belonging to the applicant-Appellant by means of two lease deeds dated 29-9-48 and 7-10-48. On 21-9-50, both these houses caught fire and

were completely gutted.

The applicant-Appellant claimed compensation from the Army authorities for the loss sustained by him on account of the fire which, according to

him, had broken out as a result of wilful negligence of the Respondent's servants, i.e. the army personnel residing there, The non-applicant, Union

of India constituted, a Board of officers somewhere in September 1950 to go into the question of payment of compensation.

The Board rejected the applicant's claim, with the result that the Appellant sent a notice through his counsel to the Union of India Ministry of

Defence, on 1-3-53 in which a submission was made in the following words:

Now that the Government has finally refused to pay any compensation either on account of fire or the unauthorized removal of goods from these

bungalows by the army personnel, a dispute has arisen between my client and the Government which has under Clause 18 of the lease deed to be

referred to an arbitrator to be appointed by the Government of India.

This notice was held by the learned Judge in Chambers as not having been given in accordance with the provisions of Section 42 of the Arbitration

Act. Reference may be made to Clause (18) of the lease deed which runs as follows:

Should any dispute or difference arise out of or concerning the subject-matter of these presents or any covenant clause or thing therein contained

or otherwise arising out of this lease, the same shall be referred to an arbitrator to be appointed by the Government of India and the decision of the

said arbitrator shall be conclusive and binding on the parties thereto. The provisions of Arbitration Act, 1940, shall apply to such arbitration.

According to this clause, in case of a difference or dispute arising between the parties, power was vested in the Government of India to appoint an

arbitrator to go into the matter, the decision of such arbitrator appointed being conclusive and binding upon the parties.

The learned Judge in Chambers seems to be of the view that according to Sections 8 and 42 of the Arbitration Act notice was necessary to be

given to the Government of India before seeking redress from a Court of law, and as the notice was defective in so far as it was given direct to the

Union of India, the present application was not competent.

Now with all respect it appears to us that Section 8 of the Jammu & Kashmir Arbitration Act is not applicable to the facts of this case. According

to Section 8(1)(a):

Where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties and all the

' parties do not, alter differences have arisen, concur in the appointment or appointments, any party may serve the other parties or the arbitrators as

the case may be, with a written notice to concur in the appointment or appointments.

(b) ....

(c) ....

In Section 8 (2) it is laid down that:

If the appointment is not made within 15 clear days after the service of the said notice, the Court may, on the application of the party who gave the

notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall

have like powers to act in the reference and to make an award as if he or they had been appointed by consent of all parties.

Clauses (b) and (c) of Section 8 of the Arbitration Act have no connection with the facts of the present case and as such need not be discussed.

Now Clause (a) gives power to a Court to appoint an arbitrator on failure of the parties to do so, if the following conditions are satisfied:

(a) that there is a valid arbitration agreement;

(b) that there is provision in the arbitration agreement for appointment of an arbitrator by consent of the parties;

(c) that all the parties do not concur in the appointment of an arbitrator and that notice to the parties was given in terms of Sections 8 and 42 of the

Jammu and Kashmir Arbitration Act.

A reference to Clause 18 of the lease agreement which provides for the reference of any dispute between the parties to arbitration, would show

that in the present case there is no question of an arbitrator being appointed by consent of the parties, nor was there room for any difference to

arise with regard to the appointment of an arbitrator, for the simple reason that this clause provides that it is the Union of India, i.e., the non-

applicant which alone had the power to appoint an arbitrator. Such being the case, the applicant's consent or no consent was immaterial. The

applicant had agreed to absolute power being given to the Union of India for making appointment of an arbitrator whose decision had to be final

and binding upon the parties. A reference to Section 8 of the Arbitration Act would make it clear that it is only when common consent of the

parties is needed for the appointment of an arbitrator and that there is disagreement between the parties that the provisions of Section 8 would be

attracted.

Now coming to Section 42 which provides for some sort of a procedure as to how a notice required by the Jammu and Kashmir Arbitration

Act is to be served otherwise than through Court, we find that this section lays down that such a notice shall be served in the manner provided in

the arbitration agreement. The learned Judge in Chambers having found that a notice was necessary has further held that such notice should have

been given in accordance with Clause 17 of the lease deed and only through lands and hirings. Clause 17 of the lease deed runs as under:

Any notice to be made or given to the Government of India under these presents or in connection with the said premises shall be considered as

duly given if sent by the Landlord/Landlords through the post by registered letter addressed to the Lands, Hirings and Disposal Service, 24, Para-

ganas, Howrah and Hoogly....

The learned Judge in Chambers has taken this clause to mean that it was essential for the peti. tioner to give notice to the Government of India

by sending the notice by post or by registered letter to the Lands, Hirings and Disposal Service, 24, Para-ganas, Howrah and Hoogly, and not

directly to the Government of India. We find it rather difficult to agree with this interpretation. Clause (17) of the lease agreement does not lay

down that any notice to be given to the Government of India shall be given only through the Lands, Hirings and Disposal Service, 24, Parganas,

Howrah and Hoogly, and not direct to the Government of India. It only says that if a notice is given to the Lands, Hirings and Disposal Service,

they will be competent to receive the said notice on behalf of the Government of India and such notice shall be considered as duly given. This

clause does not say that the Government of India had surrendered its right of receiving a notice to the Lands, Hirings and Disposal Service, 24,

Parganas, etc., nor does it make it incumbent upon the landlord to give notice to the Government of India only through the Lands, Hirings and

Disposal Service, Howrah. To take a common instance, the Lands, Hirings and Disposal Service, etc., were to act as agents of the Government of

India for the purpose of receiving notice on behalf of the landlord-appellant. As long as the principal does not surrender his right of receiving his

notice, a notice to the principal will be quite a valid notice. The phraseology of Clause (17) of the lease agreement would not suggest any other

interpretation. The words ""shall be considered as a duly given notice"" make it abundantly clear that an option was given to the landlord-Appellant

to send the notice to the Lands, Hirings and Disposal Service, Howrah. and the Government of India had declared that such notice shall be

considered by them I as duly given. It was, as is generally known, an enabling provision for the landlord, and the notice sent by the landlord-

Appellant cannot be held to be invalid though sent to the Government of India.

The application has been submitted by the landlord-Appellant u/s 20 read with Section 8. We have already found that Section 8 is not

applicable. But a reference to Section 20 would show that it is the only section which has a material bearing on the facts of the present case.

Section 20 of the Arbitration Act runs as follows:

(1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the

agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under

Chapter II may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court.

(2) The application shall be in writing and shall be numbered and registered as a suit between one or more of the parties interested or claiming to

be interested as Plaintiff or Plaintiffs and the remainder as Defendant or Defendants, if the application has been presented by ail the parties, or, if

otherwise between the applicant as Plaintiff and the other parties as Defendants.

(3) On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants,

requiring them to show cause within the time specified in the notice why the agreement should not be filed.

(4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator

appointed by the parties, whether in the agreement or otherwise, or where the parties cannot agree upon an arbitrator, to an arbitrator appointed

by the Court.

(5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by, the other provisions of this Act so far as they can be

made applicable.

According to Section 20 again an option has been given to a party either to proceed in Chapter II in which falls Section 8 or to come u/s 20.

According to Section 20 no notice is necessary to be given by a party to the other side. All that is needed to attract the provisions of Section 20 is

that there must be a valid arbitration agreement to refer to arbitration any dispute between the parties, and that the agreement to refer to arbitration

should be in writing and should be produced before the Court having jurisdiction in the matter, so that it may be ordered to be filed in order that an

arbitrator may be appointed and who may be called upon to act upon the agreement. It has been held in a number of authorities that once the

Court is satisfied that an agreement which is in writing and is before it was entered into by the parties, it can proceed u/s 20 of the Arbitration Act.

Now a reference to the facts of the present case reveals that all these conditions are fulfilled. Besides this, Section 20 does not lay down that a

notice should be given by one party to the other before making an application u/s 20 of the Arbitration Act. A notice under this section has to be

given by the Court. The present application has been submitted u/s 20 of the Arbitration Act read with Section 8. We have already seen that

Section 8 is not applicable to the facts of the present case. The only section that would apply to the present case is Section 20 of the Arbitration

Act.

Summing up, we come to the following conclusions:

(a) that Clause 17 or 18 of the lease deed does not"" make it necessary that before an application is submitted under the Arbitration Act to the

Court, a notice should be given by the applicant-Appellant to the other party (i.e., the Union of India).

(b) that Clause 17 does not make it essential that notice to the Union of India has to be given only through the Lands, Hirings and Disposal

Service, 24, Parganas, Howrah.

(c) that Section 8 of the Arbitration Act does not apply to the facts of the present case as an arbitrator was not to be appointed by the

concurrence of the parties but it was only one party, i.e., the Union of India, which was given power to appoint an arbitrator irrespective of the

concurrence or non-concurrence of the appellant.

(d) that Section 20 of the Arbitration Act gives an option to a party to apply under that section instead of Chap. II and that when once a party

proceeds under this section, no notice need be given.

We, therefore, accept this appeal, set aside the order of the learned C.J. in chambers and send the case back to him with the request that he will

call the other party, i.e., the Union of India, to appoint an arbitrator, failing which his Lordship may appoint one himself. In view of the fact that this

appeal involves a number of legal points, we leave the parties to bear their own costs in this Court.

Shahmiri, J.

I agree.