- (1.) THIS revision is directed against the appellate order dated 10-2-1993 of the Additional District Judge, Amritsar, affirming the trial Court's order dated 24-10-1988 allowing the application under Sec. 20 of the Arbitration Act made by M/s. Narang Steel Rolling Mills.
(2.) BRIEF facts of the case, about which there is no dispute, are that Narang Steel Rolling Mills was let out to M/s. Ravi Engineering Works under a written lease-deed dated 6-4-1977 on certain terms and conditions. The lease continued till 2-8-1980 when the lease-deed was terminated and possession of the Rolling Mills was delivered back to the lessor. At that time a writing Ex. DX was prepared. Inter alia in that writing, it was mentioned that accounts had been settled between the parties. Later on 6-5-1981, a bill was received from the electricity department of the municipal committee raising a demand of Rs. 92509.58 for the period September, 197 6/03/1981. The prorata amount for the period during which the Mills were in occupation of the lessor worked out to Rs. 48,938. In the original agreement of lease there was an arbitration clause. Petitioner Narang Steel Rolling Mills, therefore, made an application in the Court of Senior Subordinate Judge, Amritsar, under Section 20 of the Arbitration Act for calling upon the opposite party to file the agreement and to refer the dispute to the Arbitrator. The application was contested. The trial Court allowed the application and appeal against the order was dismissed by the learned Additional District Judge, Amritsar, as already stated. Hence this revision. The contention of Mr. R. K. Battas, learned Counsel for the petitioner, is that with the writing (Ex. DX) at the time of restoring possession of the demised Mills to the lessor, the contract between the parties came to an end and the arbitration clause, which was part of the contract, could not independently survive and, therefore, there was no question of referring the dispute to the Arbitrator. He placed reliance on Hindustan Steel Limited, Bhilai v. M/s. Ramdayal Dau and Co., Drug, 1972 MPLJ 46. The opposite party failed to appear in the revision petition and it was proceeded ex parte.
(3.) A perusal of the authority relied on by Mr. Battas in my view does not advance the case of the petitioner. The question for consideration in that case was whether the extinction of the contract was a matter for the arbitrator to decide or the Court to decide. It was held that such a question in the nature of things was for the Court to decide as the Arbitrator derives his jurisdiction on the existence of the contract itself. There is no such dispute as far as the present case is concerned as the question whether the contract survives or has become extinct has been decided by the Civil Court itself. Incidently, in the aforesaid authority in Hindustan Steel's case reference is made to Union of India v. Kishori Lal, AIR 1959 SC 1362, in which after a review of a case law on the point their Lordships of the Supreme Court enunciated certain settled propositions. For the present purposes, principles at Sr. Nos. (v) and (vi) appear to be relevant and they are as under: (v) in the former case, if the original contract has no legal existence, the arbitration clause also cannot operate, for along with the original contract, it is also void; in the latter case, as the original contract is extinguished by the subsequent one, the arbitration clause of the original contract perishes with it; and (vi) between the two, fall many categories of disputes in connection with a contract, such as the question of repudiation, frustration, breach etc. In those cases it is the performance of the contract that has come to an end, but the contract is still in existence for certain purposes in respect of disputes arising under it or in connection with it. As the contract subsists for certain purposes, the arbitration clause operates in respect of these purposes." If the present case is taken to fall in proposition No. (v) i.e., if the original contract has no legal existence, the arbitration clause cannot operate. If, on the other hand, the proposition No. (vi) is applicable a distinction has to be made between performance of the contract on the one hand and existence of the contract itself on the other hand. In terms of proposition, where performance of the contract has come to an end, but the contract is still in existence for certain purposes in respect of disputes arising under it or in connection with it, the arbitration clause survives and further action in terms thereof has to be taken. In my view it is proposition No. (vi), which is applicable to the facts and circumstances of the present case. I am supported in reaching this conclusion by clause-9 of the lease-deed which reads as under :- 9. The lease shall pay in time all electricity bills, telephone bills, Excise duty, sale tax and other charges and levies of all types relating to the period of lease. If the lessor is obliged to discharge any such liability he shall be entitled to recover the same from lessee with interest at the rate of 12% per annum thereon. The lessors shall discharge all liabilities of whatever nature incurred prior to 6-4-77 themselves." (Emphasis supplied) The observation of the apex Court in Union of India v. M/s. L. K. Ahuja and Co., AIR 1988 SC 1172, extracted by the trial Court, further supports the above conclusion. These may be set out for facility of reference as under:- ".......In order to be entitled to ask for a reference under S. 20 of the Act, there must be an entitlement to money and a difference or dispute in respect of the same. It is true that on completion of the work, right to get payment would normally arise and it is also true that on settlement of the final bill the right to get further payment gets weakened but the claim subsists and whether it does subsist, is a matter which is arbitrable." (Emphasis added) ;