(1.)THIS petition filed on 21st July, 1980 under Sections 5, 11, 12 and 33 of the Arbitration Act, 1940 is for a declaration that the unilateral reference to arbitration in case No. 3-B/77 is void ab initio and unilateral nomination and appointment of Shri P. S. Kaicker respondent No. 3 as Sole Arbitrator is invalid and without jurisdition. The petitioners further pray for revocation of the authority of the said Arbitrator and to supersede the reference.
(2.)THE petitioner firm is a partnership concern having its factory at Yamuna Nagar (Haryana). THE petitioners are manufacturers of laminated springs and leaves. THEy submitted a tender for the supply of bear ing springs in Nov., 1972. THE respondent No. 2 accepted the quotation of the petitioners by a letter dated 31st January, 1973 and the detailed running contract dated 12th February, 1973. This contract is for the supply of 8400 Nos. + 25% of bearing spring (BC) 16 tonne Axle 4 wheeled wagons according to the specifications detailed in the contract. THE price settled was Rs. 400.00 less 1% rebate i.e. Rs. 396.00 each for first 5000 Nos. and Rs. 400.00 each for remaining 3000 Nos. This price was f. o. b Jagadhri. THE petitioners allege that the alleged acceptance of the tender by means of the said letters did not create any valid binding and concluded contract; the respondents have no right of cancellation of the contract which was never concluded and as such the cancellation letter dated 19th July, 1974 was unauthorised and illegal; the threat of the respondents to encash the bank guarantee of Rs. 27,000.00 by means of the letter dated 19th July, 1974 was illegal. THE petitioners served a notice dated 12th Nov., 1974 under Section 80. of the C. P. C. upon respondent No. 1 challenging the contract and for cancellation of the demand for encashment of the security deposit of Rs. 27,000.00. THE petitioners on 6th Jan., 1975 filed Civil Writ No. 24 of 1975 for quashing the letter dated 19th July, 1974, forfeiting the security amount of Rs. 27,000.00 and encashing the bank guarantee. An interim order was passed restraining the respondent from encashing the bank guarantee. On 10th Jan., 1975 the respondent issued a demand letter claiming a sum of Rupees 11,59,129.53 on account of damages purported to have been suffered by it for the alleged risk purchase of the store. On 22nd Feb., 1975 the petitioners filed a suit (original Suit No. 108/75) for a declaration that there was no valid, binding and concluded contract between the parties in terms of the alleged acceptance letters dated 31st Jan., 1973 or 12tb Feb., 1973, that the cancellation letter dated 19th July, 1974 and the alleged risk purchase was null and void and of no effect. By an interim order in the civil suit the respondents were restrained from giving effect to their letter of demand dated 10th January, 1975.
The petitioners submit that in the aforesaid legal proceedings the respondent Union of India did not file any application under Section 34 of the Arbitration Act for stay of those legal proceedings and therefore, the arbitration agreement, if any, in the said contract has been rendered void under Section 35 of the Arbitration Act and as such the matter could not be referred to arbitration. The petitioners further allege that the respondents ignoring the said legal proceedings by letter dated 3rd Dec., 1975 unilaterally appointed Shri N. S. Mehta, Additional Legal Adviser to the Government of India in the Ministry of Law as Sols Arbitrator to hear and determine the disputes and differences arising out of the said contract, that the reference to arbitration was unilateral vague and void ab initio, that by a further letter dated 21st Mar., 1977 the respondent appointed Dr. Bakshish Singh, Additional Legal Adviser to the Government of India in the Ministry of Law as Sole Arbitrator in substitution of Shri N. S. Mehta, that Dr. Bakshish Singh entered upon the reference on 12th April, 1977 but the respondent Union of India failed to submit its statement of claim either before Shri N.S. Mehta or before Dr. Bakshish Singh. The petitioners further allege that the respondent Union of India filed a petition under Section 28 of the Arbitration Act (O. M. P. 55/78 dated 17th Mar., 1978), but the arbitration proceedings were invalid and as such there was no question of any extension of time, that the said petition under Section 28 of the Arbitration Act is still pending.
The petitioners further allege that the respondent again by letter dated llth Dec., 1979 unilaterally nominated and appointed Shri P. S. Kaicher, Additional Legal Adviser to the Government of India in the Ministry of Law, (respondent No. 3) to be the Sole Arbitrator in place of Dr. Bakshish Singh on the ground that he had since resigned, that respondent No. 3 Arbitrator entered upon reference on 31st Dec., 1979 and required the parties to file their respective claims and appear before him on 28th Jan., 1980, that the Union of India filed its statement of claim before the said Arbitrator claiming damages Rs. 11,59,129.53.
The respondents Nos, 1 and 2 in reply submit that the petition is barred by tune; it is barred under Order 2, Rule 2 of the Civil P. C. also; there was a concluded contract which was acted upon; the petitioners supplied 1805 Nos. of springs; they defaulted in supplying the remaining stores; the respondents vide letter dated 19th July, 1974 cancelled the remaining quantity and purchased the unsupplied quantity at the risk of the petitioners under the terms and conditions of the contract within six months from the date of breach. The respondents further submit that application under Section 34 of the Arbitration Act was not filed as the civil suit was for declaration that the contract in question was not concluded and was void; that there were no circumstances requiring the respondents to file any application under S. 34 of the Arbitration Act. The respondents further allege that S. 35 of the Arbitration Act is not attracted in the circumstances of the present case. They allege that Shri N. S. Mehta was appointed as Sole Arbitrator vide letter dated 3rd December, 1975 but he resigned and Dr. Bakshish Singh was appointed as Sole Arbitrator. It is admitted that the respondents filed their statement of claim before that before the proceedings in O. M. P. 55 of 1978 could mature. Dr. Bakshish Singh resigned and he could not be deemed to have entered upon reference.
The following issues were framed on 24th April, 1981 :- 1. Is the present petition barred by limitation ? 2. Is the present petition barred by the provisions of. Order 2, Rule 2, C. P. C. ? 3. Was there no valid, binding and concluded contract including the arbitration agreement, between the parties? 4. Is the appointment of Shri P. S, Kaicher invalid and without jurisdiction? 5. Is the authority of the arbitrator liable to be revoked or his appointment liable to be cancelled? 6. Is the arbitration reference liable to be superseded and arbitration agreement declared inoperative as alleged by the petitioner ? 7. Relief.
Shri Bapandra Singh Jauhar, partner of the petitioners has filed affidavit in support of the petition deposing about almost all the facts pleaded in the petition. Shri A. K. Aggarwal, Assistant Director of Supplies in the Office of the Director General Supplies and Disposal, New Delhi has fited a counter-affidavit in support of the defence. ISSUE No. 1:
Is the present petition barred by limitation ? The present petition was filed on 21st July, 1980 seeking relief under Sections 5, 11, 12 and 33 of the Arbitration Act for a declaration that the appointment of Shri P. S. Kaicker, respondent No. 3 is invalid, without jurisdiction and for revocation of his authority and for supersession of the reference. Learned counsel for the respondents submits that Shri N S. Mehta was the first Arbitrator who was appointed on 3rd Dec., 1975, that the petitioners did not take any action for removal of Shri Mehta or Dr. Bakshish Singh who was appointed on 21st March, 1977. His submission is that the petition ought to have been filed within three years from the date when the right to apply accrued to the petitioners. According to him, right to apply accrued on 3rd Dec., 1975 when the first Arbitrator was appointed and as the present petition was filed on 21st July, 1980 the same is barred by time.
Learned counsel for the petitioners on the other hand submits that Shri N. S. Mehta and Dr. Bakshish Singh who were appointed as Arbitrators did not enter upon reference. They did not take any action under the reference, that they resigned and Shri P. S. Kaicker respondent No. 3 was appointed as Sole Arbitrator on llth Dec., 1979. His submission is that right to apply for removal of the Arbitrator respondent No. 3 at the earliest arose on llth Dec., 1979 when he was appointed. He therefore, submits that the present petition is within time under Article 137 of the Limitation Act. In my view the. submission of the counsel for the petitioners is correct. The petitioners are claiming the removal of Shri P. S. Kaicker, Arbitrator appointed on llth Dec., 1979. As Shri Mehta or Dr. Bakshish Singh had not entered upon the reference there was no occasion for the petitioners to approach the Court for the removal or revocation of their authority. It is admitted on behalf of the respondents that Shri Mehta and Dr. Bakshish Singh did not enter upon the reference. Shri Kaicker, respondent No. 3 was appointed on llth Dec., 1979 and the present application having been filed on 21st July, 1980 for the revocation of his authority or his removal must be held to be within time under Article 137 of the Limitation Act. ISSUE No. 2:
(3.)2. Is the present petition barred by the provisions of Order 2, Rule 2, C. P, C. ? Order 2, Rule 2 of the Civil P. C. provides that every suit shall include the whole of the claim which a plaintiff is entitled to make in respect of the cause of action and if a plaintiff omits to sue in respect of any portion of his claim, he is not entitled to sue in respect of the portion so omitted. Learned counsel for the respondents submits that admittedly petitioners previously filed a writ petition seeking a declaration that the action of the respondents forfeiting the security amount of Rs. 27,000.00 was without jurisdiction. He further submits that in the civil suit the petitioners sought a declaration that there was no valid, binding and concluded contract, that the cancellation of the contract and the alleged risk purchase were null and void. His submission is that the petitioners ought to have included the relief now claimed in the present petition in the previous legal proceedings i.e." the writ proceedings and the civil suit. His submission is that as the petitioners have failed to claim the relief in the earlier proceedings, they are now debarred from instituting the present petition under Order 2, Rule 2 of the Civil P. C. Learned counsel for the petitioners on the other hand submits that the civil writ was filed on 6th Jan., 1975 and the civil suit was filed on 22nd Feb., 1975 on which dates these petitioners had no cause of action for the removal of Shri P. S. Kaicker, respondent No. 3 and therefore, provisions of Order 2, Rule 2 of the Civil P. C. are not applicable. Shri Kaicker, respondent No. 3 was appointed as Arbitrator on llth Dec., 1979 and therefore, I do not appreciate how the petitioners were in a position to seek relief for revocation of his authority or his removal at the time when the writ petition or the civil suit was filed. The objection of the respondents is not sustainable and I hold that the present petition is not barred under Order 2, Rule 2 of the Civil P. C. ISSUE NO. 3:
Was there no valid, binding and concluded contract including the arbitration agreement between the parties?
The admitted facts are that the petitioners submitted the tender in question on 13th Nov., 1972. The respondents issued advance acceptance of the tender by letter dated 31st Jan., 1973 and regular contract was issued under letter dated 12th Feb., 197The petitioners supplied springs numbering 1805. The respondents by letter dated 19th July, 1974 cancelled the contract and by letter dated 6th January, 1975 claimed damages on account of risk purchase.
Learned counsel for the petitioners submits that the alleged acceptance of the tender as contained in letters dated 31st Jan., 1973 and 12th Feb., 1973 was void on the ground that the meaning of the agreement is not certain. He submits that on account of the uncertainty of the delivery clause in the said letters, the agreement is void within the meaning of Section 29 of the Contract Act. This section reads as under:- 29. Agreements, the meaning of which is not certain, or capable of being made certain, are void. Illustrations a. A agrees to B "a hundred tons of oil". There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty. b. A agrees to sell to B one hundred tons of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void. c. A, who is a dealer in coconut-oil only, agrees to sell to B "one hundred tons of oil." the nature of A's trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of cocoanut-oil. d. A agrees to sell to B "all the grain in my granary at Ramnagar". There is a no uncertainty here to make the agreement void. e. A agrees to sell to B "one thousand maunds of rice at a price to be fixed by C." As the price is capable to being made certain, there is no unceitainty here to make the agreement void. f. A agrees to sell to B "my white horse for rupees five hundred or rupees one thousand". There is nothing to show which of the two prices was to be given. The agreement is void.