C.M. Grover vs Kartar Singh Phool Singh <BR> C.M. Grover Vs Kirpal Singh Surinder Singh

Yogeahwar Dayal, J.

(1) The present suit was filed by way of an application u/s 14 of the Arbitration Act (hereinafter called the Act)by the sole arbitrator against M/s. Kartar Singh Phool Singh (respondent No. 1 claimant) and M/s. Kirpal Singh Surinder Singh of Faridabad(respondent No. 2 objectors) for filing of the award dated 23/11/1977on the request of respondent No. 1. ''

(2) On the filing of the award notices were issued to the parties to , award whereupon the objector (respondent No. 2) filed objections against the award purporting to be u/s 33 of the Act.

(3) Before I deal with the objections to the award, few other facts may also be noticed. The claimant-respondent No. 1 is running a commission agency business and supplied goods to the objectors (respondent No. 2) on terms and conditions contained in the bills Exs. R.2 and R. 3. According to terms No. 6,of the bill, the price of the goods was to be paid at Delhi and as per term No. 4 the disputes had to be settled through a person to be appointed by the Hindustani Mercantile Association.

(4) On 20/06/1974, the objector signed the cash-book of the claimant admitting liability to the tune of Rs. 60,000.00due as on 20/06/1974. On the same date, the objector allegedly entered into a agreement (Ex.R.1) dated 20/06/1974 agreeing to refer the disputes between the parties in relation to their dealings through the Hindustani Mercantile Association, Delhi, or to an arbitrator appointed by them.

(5) In October 1977, the claimant sent a notice to respondent No. 2claiming amount of Rs. , which included balance of the price as well as interest due up to 14.10.77 at the rate of Rs. 1.25% per month failing which the claimants will invoke the arbitration agreement.

(6) It appears that the objectors filed a suit for declaration challenging the existence of arbitration agreement and restraining the appointment of arbitrator but the suit failed and it was held that the suit was not maintainable

(7) In the meanwhile, on 15/10/1977, the arbitrator was appointed and he issued notice by the registered Ad post to the objectors for the appearance before him on 3/11/1977. The registered envelope came back with the endorsement "refused". The envelope is Ex. R-5 and the endorsement is Ex. R5/1. The arbitrator, however, sent another notice(Ex. R-7) to respondent No. 2 for their appearance before him on 17/11/1977 under postal certificates (Ex. R-6).

(8) The arbitrator thereupon proceeded ex-parte and after recording the statement made on behalf of the claimant gave an award for a sum of Rs. 68,193.32 which included a sum of Rs. 37,276.45 towards principal and Rs. 30,916.87 towards interest and also awarded future interest to the claimant at the rate of 15% per annum from 16/10/1977 till realisation of the whole amount from the objectors.

(9) As stated earlier, the objections were filed by the objectors purporting to be u/s 33 of the Act, dated 8/02/1978. The sum and substance of the case in the objections was that Shri Kirpal Singh who is the sole proprietor of the objector''s firm and carrying on business of cloth at Faridabad ,that Kartar Singh Phool singh (respondent No. 1) had approached them for the supply of cloth on credit through their commission agency at Faridabad and that the sale transactioned continued for a few years. Thereafter respondent No. 1 closed their commission agency business. The objectors never executed any document by way of an agreement in terms of Sections 2 and 33 of the Act whereby reference could be made of any dispute between them to the adjudicated through the Delhi Hindustani Mercantile Association. It was also pleaded that the claimant are alleging agreement in terms of Sections 2 and 33 of the Act whereby reference of any dispute between the two could be adjudicated by the said body. It was further pleaded that the said agreement is invalid and is not binding on the objectors.

(10) The grounds for setting aside of the award were contended in paragraph No. 5 of the objections. The grounds taken are :

(I)There is no arbitration , agreement and reference of any dispute to the arbitrator by the claimant against the objector is incompetent and any award on the basis of the incompetent reference is illegal and without jurisdiction.

(II)Since the requirements of Sections 8 and 20 of the Act have not been complied with, any reference of the matter to arbitration by the claimant is illegal and without jurisdiction, as the objectors are not a member of the aforesaid Association.

(III)The objectors are; not member of the said Association, while the claimant being .very old member of the said Association is very well known to all the members of the Association and to all the arbitrators. Shri C.M. Grover, the arbitrator in this case is a good friend-of the claimant. So, adjudication of dispute by him would be improper and is against the principles of natural justice.

(IV)The award has not been filed within time

(V)This Court has no jurisdiction to try the matter pending before it.

(11) The claimant (respondent No. 1 ) filed reply to the objections. In the reply, the claimant asserted existence of the agreement dated 20/06/1974 as well as existence of arbitration clause in the bills on the basis of which the goods were supplied to the objectors. It was also submitted in the reply that the agreement dated 20/06/1974 is signed by the objectors and the objectors have deliberately concealed these facts. It was also pleaded that the objectors were served by notices both by registered Ad post as well as under postal certificate but the objectors deliberately failed to appear before the arbitrator and Therefore the arbitrator rightly proceeded ex-parte against the objectors. It was denied that the reference was unilateral. In this behalf it was pleaded that there is a valid agreement containing arbitration clause .Before invoking the arbitration clause, the claimant served a notice on the objectors u/s 8 of the Act dated 15/09/1977, which notice was received by the objectors and was filed before the arbitrator. It is also pleaded that according to law where parties have given any advance consent for referring the, matter to arbitration through a particular person, like the Hindustani Mercantile Association, then the invocation of arbitration does not become unilateral.

(12) It was also stated that the arbitrator has himself filed the award and Therefore no question of limitation arises. The friendship with the sole arbitrator was also denied.

(13) On merits, the claimant stated in reply that the amount of Rs. 60.000.00 had become due and the claimant asked the objectors to sign the cash-book in token of accepting liability and also interest into an agreement containing arbitration clause. The entry in the cash-book and the agreement were made on 20/06/1974.

(14) Before filing the rejoinder, the objectors filed an application under Order 6, Rule 17 CPC (I.A. 1669/1978) for amendment of the objections. The objections sought to be added by way of amendment was :

"THE objector/respondent No. 2 used to purchase the goods against the bills issued by respondent No. 1. The terms and conditions printed on those bills were never accepted by Respondent No. 2. Even if it is proved that the terms and conditions mentioned in the bills issued by Respondent No. 1 and the alleged Arbitration Agreement is binding on Respondent No. 2 the Arbitration Clause mentioned therein is vague and uncertain and the present dispute between the parties i.e. Respondent Nos.1 and 2 is not specifically covered by the said Arbitration Agreement "

THIS application came up for hearing before Prithvi Raj J. on 17/07/1978.It was opposed on behalf of the claimants. The claimant submitted that the objector had concealed that the arbitration agreement between the parties did exist ,but that it was not tenable in law as it was not a valid arbitration agreement in terms of Ss. 2 and 33 of the Act. The learned single Judge took the view that since the clause had not been assailed on the ground that the terms and conditions in the bills were not accepted by the objectors, it is too late in the day to make a grievance and the application for amendment was accordingly dismissed.

(15) However, a rejoinder dated 24/07/1978 was filed on behalf of the objectors wherein it was pleaded that the terms and conditions printed on the bills are not binding and even if an arbitration agreement is held binding, the arbitration clause is vague and uncertain and the disputes are not covered by it. The execution of the agreement dated 20/06/1974 was denied. It was also denied that on 20/06/1974 the objector signed the account books in token of accepting liability. The entering into the agreement containing the arbitration clause was also denied. In the rejoinder, yet another objection was taken that the Delhi Courts had no territorial jurisdiction which objection was, however, not taken in the objection petition itself.

(16) PRITHVIRAJJ.,BY order dated 29/09/1978, framed the following issues:

(1)Whether the award of the arbitrator is without jurisdiction in that there was no valid and binding arbitration agreement between the parties ? Op Objector.

(2)Whether this Court has no jurisdiction ? Op Objector.

(3)Relief.

(17) The claimants filed their documents and the arbitrator had also produced the original record. One of the documents produced during trial was the alleged agreement dated 20/06/1974 containing the arbitration clause .This agreement was initially marked as ''X'' as the objector denied his signatures at the place marked ''B'' therein. Thereafter, the signatures of the objector were taken as specimen signatures at the place marked ''A'' in the agreement marked ''X'' On this document itself, at place marked ''G'',appeared the name of the objector firm in the hand of the objector but this part was neither denied nor admitted by him. The objector merely denied the signatures at the place marked ''B''.

(18) The objector, in support of its case, filed a list of witnesses including the name of Shri Sakuja handwriting expert. However, no handwriting expert was examined by the objector and the objector examined himself as his own witness. Besides, he sought to examine Sant Ram(CW-l)andMeharGhand(CW-2). Sant Ram was sought to be produced for proving that the goods were received at Faridabad and the objector had been receiving them from their office at Faridabad. This witness appeared to me to be irrelevant and I, Therefore, discharged him. Mehar Chand was sought to be produced for proving that the payment were being made to the claimants bythe objectors at Faridabad. This witness also appeared to me to be irrelevant and I discharged this witness also.

(19) Apart from the reason given by me while discharging the aforesaid two witnesses, it is clear that in the objections filed u/s 33 of the Act, no plea had been taken that the award could not be filed at Delhi for want to territorial jurisdiction. In fact, the claimants have also placed on record two bills (Exhibits R. 2 and R. 3) which contemplated that the price of the goods was to be paid at Delhi. Nothing need be further said about it.

(20) The objector, in support of his own case, appeared as CW. 3. In this statement, he admitted having dealings with the claimants. He stated that he has been settling the balance every year and signing the books of account of the claimant, acknowledging the statement thereof. He, however)denied the existence of arbitration agreement. He also denied the signatures at the placed marked ''B'' on document marked ''X''. He admitted that he had received a letter from the claimant claiming the amount which was the subject-matter of the plaint before the arbitration. He also admitted to have filed a suit challenging the arbitration agreement and the said suit being dismissed. He also stated that he had received no notice from the Delhi Mercantile Association for any outstanding arbitration proceedings. He admitted that his correct address was M/s. Kirpal Singh Surinder Singh, Cloth Merchants, Town no.1 Market, N.I.T. PO. Faridabad, District Gurgaon,(Haryana). In cross-examination, he denied having received notice marked''Y''. He also denied having received any notice under postal certificate from the arbitrator.

(21) In rebuttal, the claimants examined Shri Kartar Singh, one of the proprietors of the claimant-firm. Kartar Singh, inter-alia proved the document marked ''X'' and deposed that the objector signed it at the place marked ''B'' in his presence. He also stated that part of the agreement is in his own. handwriting. He further deposed that the name of the firm at place marked ''C'' is in the handwriting of Kirpal Singh and Kirpal Singh had fully read and understood the terms and conditions in the bills before he had gone with the witness and his son for the purchase of the goods. The bills Exhibits R.2 and R. 3 were, however, admitted by Kirpal Singh.

(22) Kartar Singh as RW-1 also stated that they were regularly maintaining the books of accounts relating to their firm. This witness also stated that R-4- is the photostat copy of books of accounts which contained signatures of Kirpal Singh showing the balance due, i.e. Rs. 60,000.00 as on 20/06/1974.

(23) Kartar Singh also deposed that the arbitrator had sent a notice Exhibit R-5 by registered post to the objector-firm and also proved the postal endorsement of refusal (Exhibit R-5/A). He also deposed about Exhibit R-7,a copy of the notice which was sent to the objectors as well as certificate of posting (Exhibit R-6). He also deposed that the Prince Transport Company was appointed as carrier by the objectors and not by the claimants.

(24) In cross-examination on behalf of the objectors, this witness deposed that Exhibit R-1 is in the handwriting of this witness and the signature of Kirpal Sing are in the same ink but with a different pen. He also stated that the form of agreement is prescribed by the Mercantile Association and there is no provision in the form provided by the said Association for his signatures and, Therefore, he had not signed the agreement.

(25) The witness also stated that the agreement like Exhibit R-1 was executed even when the transaction was stated between the parties. It was again executed on 20/06/1974 when the balance was struck. He denied the suggestion that he had colluded with the postal staff for obtaining the report of ''refusal'' on the envelope Exhibit R-5.

(26) No suggestion was given to Kartar Singh that the arbitrator was a friend of his, nor was any statement made by Kirpal Singh to that effect.

(27) During the time the evidence was being recorded, the objectors filed an application for amendment of the issues. By my order dated February15, 1980, I amended issue No. 1 as- under :

" WHETHER the award of the arbitrator Js without jurisdiction in as much as there was no valid or binding arbitration agreement between the parties and whether the reference of the disputes to arbitrator is unilateral and incompetent."

(28) As stated earlier, the two bills (Ex. R. 2 and R. 3 dated 29/06/1974 and 27/07/1974 respectively) are admitted documents and they on their face show that the goods were being supplied on the conditions printed in the bills, which specifically stipulate that dispute between the parties would be adjudicated by a Judge/Tribunal to be appointed by the Mercantile Association. Since this was one of the conditions for supply of the goods, and after the acceptance of the goods by the objectors, this condition constitutes arbitration agreement. But apart from the arbitration agreement which may be spelt out from Exs. R. 2 and R. 3 the claimants have relied upon Ex. R. 1for showing the existence of arbitration agreement.

(29) It is clear that the objectors did not have the courage to produce even the handwriting expert in support of denial of his signatures. The objector also did not have the courage to deny the portion marked ''C'' on document marked ''X'', which portion according to the claimants was in the handwriting of Kirpal Singh. Kirpal Singh also did pot have the courage to deny his signatures on the cash-book Ex. R-4. The date of arbitration agreement is the same as the date of signature in the cash-book. I am satisfied that Ex R-1was executed and bears the signature of Kirpal Singh at place marked ''B''.There is no invalidity in the arbitration agreement, nor is there any infirmity in regard to the arbitration agreement Ex. R-1. I, Therefore,, find that there was a valid and binding arbitration agreement.

(30) It was also argued that the term contained in the bill constitute an arbitration agreement. I, however, need not go into this question since I have already found that there exists an arbitration agreement dated 20/06/1974.

(31) The next question which arises is whether reference of dispute to the arbitrator was in any way unilateral or incompetent. This question in relation to an identical agreement is covered by a decision of Tatachari and Deshpande, JJ. (as their Lordships then were) in the case of P. C.Aggarwal v.K.N. Khosla and others-F.A.O.(O.S.)17/69 decided by this Court on 22.5.1974-reported as 1974 Rajdhani Law Reporter 596.

(32) It appears that the arbitration agreement contains an advance consent and there was no necessity of taking recourse to proceedings u/s 20 of the Arbitration Act.

(33) Another aspect of issue No. 1 which was argued before me related to the award of interest by the arbitrator with effect from 16/10/1977 till realisation of the whole amount. It will be noticed from the statement''s made before the arbitrator that the sum awarded includes partly the price of the goods and partly the interest. The entry in the cash-book (Ex."R-4) also shows that interest was to be paid by the objectors on the balance of the price remaining unpaid.

(34) The argument of the learned counsel for the objectors was that the arbitrator could not have awarded pendente lite interest or future interest .It will be noticed that the claim before the arbitrator itself included the claim as to interest and to my mind the reference included an implied term as to pendente lite interest. In fact, there is no bar to the arbitrator awarding pendente lite interest, and the case relates to realisation of the price under the sale of goods Act. The State of Madhya Pradesh Vs. Saith and Skelton (P) Ltd., was a case where all disputes including claim for payment of interest were referred to the arbitrator and in those circumstances the Supreme Court observed that the arbitrator can award pendente lite interest.

(35) The question whether pendente lite interest can be awarded bythe arbitrator also came up before Sultan Singh J. in the case of M/s. Manifold Machines (P.) Ltd. v. Municipal Corporation of Delhi- Suit No. 759-A of1975 dated 25/09/1978-reported as 1979 Rajdhani Law Reporter(Note) 29, wherein the Learned Judge of this Court following the decision of the Supreme Court in the case of M/s. Saith and Skelton P. Ltd. and others(supra) took the view that the arbitrator has power to award pendente liteinterest when disputes are referred to him and since there is no contract not to pay the interest on the amount found due, the arbitrator could award pendente lite interest.

(36) It appears to me that in the present case the very fact that the objector signed the entry in the cash-book (Ex. R-4) which shows payment of interest ,there was an implied agreement between the parties for payment of future interest as well, and in such circumstances the arbitrator was justified and had the power to award future interest. However, the award of interest by the arbitrator will be restricted till the passing of the decree.

(37) I, Therefore, find that there was a valid and binding agreement, between the parties and the reference was competent. I also find that the arbitrator had the power to award pendente lite and future interest ,but the interest so awarded will be restricted only till the passing of the decree.

(38) Issue No. 2 relates to the jurisdiction of this Court. I did not find any reason to frame an issue on this aspect of the matter for the simple reason that the territorial Jurisdiction of this Court was not disputed in the objection petition itself. It is in evidence that the arbitration agreement was entered in Delhi, that the price of the goods was to be paid at Delhi, and the arbitration proceedings were held at Delhi. Therefore, this Court had the territorial jurisdiction and the award could be filed for trial of the present proceeding in this Court.

(39) The result is that the objections filed by the objectors fail and are dismissed. The award of the arbitrator is made a rule of the Court and decree is passed in terms thereof. Further interest, however, will be only at the rate of 6% per annum from the date of the decree till realisation to the decretal amount. The claimant will also be entitled to the cost of the present proceedings.