ORDER
Sharda Aggarwal, J.
1. The petitioner has filed the present petition under Section 8 of the Arbitration and Conciliation Act, 1996 against the respondents for appointment of an Arbitrator as disputes have arisen between the parties in connection with contract NO. 58380/DGOS/OS-P-II/Proc.Sec/605 dated 11th November, 1997 for supply of 15,19,100 numbers of towel hand bleach of a particular size at the rate of Rs.31/- per towel to the four consignees indicated by the respondents in the contract. The time, being the essence of the contract, the petitioner in order to execute the contract and supply the towels in the stipulated time started the manufacturing process and in the first phase manufactured three lakhs of towels and arranged the raw material for the balance quantity. Three lakh towels were sent to three consignees named in the contract but they refused to accept the same. In the process the petitioner had suffered huge losses on account of the breach of the contract on the part of the respondents. The petitioner issued a notice dated 22 nd May, 1998 bringing the entire facts to the notice of the respondents but the respondents kept silent. This led to subsequent notices and letters dated 28 thNovember, 1998, 16 th December,1998 and 12 th January,1999, wherein the petitioner had claimed the amount of losses suffered by him and in the alternative desired the disputes to be referred to the arbitrator in terms of the Arbitration clause contained in the contract. The respondents in their counter-affidavit challenged the legality and validity of the contract alleging that the same was got executed by playing fraud upon them and as such claimed that the contract was voidable and illegal and the arbitration clause fell with it. They claimed the contract to be voidable, as according to them the petitioner was not registered with DGQA/NSIC under the Single Point Registration Scheme and had not deposited the security amount which was a pre-requisite for the acceptance of the tender. Another contention raised is that the issuance of advance acceptance of tender was based on fraudulent and false information and as such did not amount to a concluded contract. According to the petitioner, the advance acceptance of tender sent by the respondents through a telegram amounted to a concluded contract and time being the essence thereof, the petitioner had started the manufacturing process and even sent three lakhs of towels to the three consignees named in the contract.
2. An objection raised by the respondents is that the petition under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) is not maintainable. No doubt, reference of Section 8 of the Act in the main petition is not correct but perusal of the petition makes it abundantly clear that the petitioner seeks the appointment of an arbitrator as the respondents failed to appoint one as contemplated by the Arbitration clause which clearly falls within the purview of Section 11 of the Act. The law is well settled that mentioning of a wrong provision of law in the title does not invalidate the petition. The present petition is, thereforee, treated as a petition under Section 11 of the Act.
3. Both the learned counsel for the petitioner and respondents have addressed their arguments and have taken the court through the records.
4. The pleadings of the parties make it abundantly clear that the respondents do admit that a contract was executed between the parties having the following Arbitration clause but the same being voidable became illegal and unenforceable in law.
22. Arbitration Clause:-
'In the event of any question, dispute or difference arising under conditions or any special conditions of contract, or in connection with this contract (except as to any matters the decision of which is specially provided for by these or the special conditions), the same shall be referred to the sole arbitration of the Secretary, Ministry of defense, or of some other person appointed by him. It will be no objection that the Arbitrator is a Government Servant, that he had to deal with the matters to which the contract relates or that in the course of his duties as a Government Servant he has expressed views on all or any of the matters in dispute or difference. The award of the Arbitrator shall be final and binding on the parties to this contract. It is term of this contract that :-
(a) If the Arbitrator be the Secretary, Ministry of defense,
(i) In the event of his being transferred or vacating his office by resignation or otherwise, it shall be lawful for his successor in office either to proceed with the defense himself or to appoint another person as Arbitrator; or
(ii) In the event of his being unable to act or becoming incapable of acting for any reason, it shall be lawful for him to appoint another person as Arbitrator; or
(b) If the Arbitrator be a person appointed by the Secretary, Ministry of defense, in the event of his dying, neglecting or refusing to act, or resigning or being unable to become incapable refusing to act, or resigning or being unable to become incapable to act, for any reason, or his award being set a side by the Court for any reason, it shall be lawful for the Secretary, Ministry of defense either to proceed with the reference himself or to appoint another person as Arbitrator in place of the out going Arbitrator. In every such case, it shall be lawful for the Secretary, Ministry of defense in place of the the record of the proceedings as then taken in the arbitration, or to commence the proceedings de-novo; as he may in his discretion decide.
(c) It is further a term of this contract that no person other than the Secretary, Ministry of defense, or the person appointed by him should act as Arbitrator and that if for any reason that is not possible, the matter is not to be referred to arbitration at all.
(d) The Arbitrator, may with the consent of all the parties to the contract enlarge the time from time to time for making and publishing the award.
(e) Upon every and any such reference, the assessment of the cost incidental to the reference and award respectively shall be in the discretion of the Arbitrator.
(f) Subject as aforesaid, the Arbitration Act, 1940 and the rules there under and any statutory modifications there of for the time being in force shall be deemed to apply to the arbitration proceedings under this clause.
(g) The venue of arbitration shall be the place where the contract is concluded or such other place as the Secretary at his discretion may determine.
(h) In this clause the expression the Secretary, Ministry of defense means the Secretary, Ministry of defense, for the time being and includes, if there be no Secretary, Ministry of defense, the Officer who is for the time being the administrative Head of the Ministry of defense, whether in addition to other functions or otherwise.'
5. The contention of the respondents is that since the contract was got executed by playing fraud upon them and by misrepresentation of facts, the same was voidable, illegal and not enforceable. According to them, the Arbitration clause also fails with the contract. The arguments of learned counsel for the petitioner are two-fold. Firstly, the advance acceptance of tender made by the respondent by telegram dated 11th November, 1997 amounted to a concluded contract and secondly the questions regarding existence of Arbitration clause and the validity of the contract have to be decided by the arbitrator as per the provisions of Section 16 of the Act. It is submitted that the act of appointing an arbitrator is only an administrative act and the contentious issues arising between the parties have to be decided by the arbitrator.
6.According to the petitioner, the advance acceptance of tender amounted to a concluded contract, whereas according to the respondent it was to be followed by a formal acceptance of tender and the petitioner could not have started supply of towels without the formal acceptance of tender.
7. In support of his arguments the learned counsel for the petitioner has placed reliance on Jawahar Lal Barman Vs . The Union of India : [1962]3SCR769 . In the said case an advance letter of acceptance was sent stating that the offer was accepted subject to the depositing of 10% as security. However, the last paragraph of the 'advance acceptance' stated that the contract was concluded by the acceptance and a formal acceptance of tender was to follow. It was held by the Hon'ble Supreme Court that under Section 7 of the Contract Act, the acceptance of the offer must be absolute and unqualified, but the reading of the letter as a whole amounted to an absolute and unqualified acceptance of the offer or tender made by the contractor and it was not intended to make a substantial variation in the contract by making the deposit of the security a condition precedent instead of a condition subsequent. It was further held that in fact the failure on the part of the contractor to make the required security deposit, constituted a breach of the contract itself and, thereforee, the security deposit was a condition subsequent and not a condition precedent. It was held that the letter of advance acceptance of contract amounted to a concluded contract. In fact, this shows that much depends upon the construction of the letter of advance acceptance of tender.
8. Learned counsel for the petitioner has further relied upon an unreported judgment dated 8th September, 2000 in Suit No.2566-A/1966 & Suit No.1587-A/1997, Gupta Textile Mills v. Union of India and another and Union of India v. Gupta Textiles Mills of Hon'ble Justice K.S.Gupta of Delhi High Court. In the said case while deciding a petition under Section 14 and 17 of the Arbitration Act, 1940 the question had arisen as to whether advance acceptance of tender conveyed through a telegram by the Union of India amounted to a concluded contract or not? The relevant portion of the telegram by which the advance acceptance of tender was conveyed is reproduced as under:
'REG.CELL/T-3/038/G/0092(.) YOUR OFFER AGAINST TENDER ENQUIRY NO.T-3/038/G/0092 OPENED ON 14.8.90 IS HEREBY ACCEPTED FOR 80,000 NOS NETS MOSQUITO UNIVERSAL KHAKI MODIFIED PATTERN AT THE RATE OF RUPEES ONE HUNDRED AND SEVENTY EIGHT ONLY PER NUMBER (.) CST EXTRA (.) 5% S.D.APPLICABLE F.O.R.GOHANA (.) DELIVERY AS OFFERED (.) PRICES FIRM AND FIXED (.) Stores CONFORMING TO TENDER ENQUIRY SPECIFICATIIONS/DESCRIPTION (.) TERMS & CONDITIONS OF CONTRACT AS PER DGS&D-68; (REVISED) INCLUDING ARBITRATION CLAUSE 24 THEREOF & DGS&D-229; AS AMENDED up to DATE (.) CONTRACT CONCLUDED BY THIS ADVANCE ACCEPTANCE (.) FORMAL CONTRACT WILL FOLLOW FROM DGS&D; (TEX) BOMBAY (.) ACKNOWLEDGE.'
9. On the construction of the contents of the telegram reproduced above it was held that the said advance acceptance of tender amounted to a concluded contract.
The above-mentioned two authorities are fully applicable to the facts of the case before this Court. In the case in hand the respondents had issued an advance acceptance of contract by issuing a telegram dated 11th November, 1997 which is reproduced as under:
'ADVANCE ACCEPTANCE OF TENDER NO.58380/DGOS/PROC SEC/OS PII605 DT 11 NOV 97 FOR PROCUREMENT OF TOWEL HAND BLEACHED 125CMX60CM (.) YR OFFER NO.58380/DGOS/TOWELS/97 DATED 20.2.97 AND REVISED OFFER DATED 29.09.97 AGAINST THIS OFFICE TENDER ENQUIRY NO.58380/DGOS/PROC SEC OPENED ON 20.2.97 (.) YOUR OFFERS AGAINST THE SUBJECT T/E HAVE BEEN ACCEPTED BY THIS DAY FOR QTY 15,19,100 NOS @ RS.31.00 PER NOS (.) SALES TAX AND E/D AT PRESENT NOT APPLICABLE ON THE ITEM BUT EXTRA IF LEVIED LATER (.) TOTAL COST RS.4,70,92,100/- (RUPEES FOUR CRORE SEVENTY LAC NINETY TWO THOUSAND ONE HUNDRED ONLY (.) FOR DESTINATION (.) D/P AS PER YOUR OFFER i.e. FOUR LAKH NOS WITHIN ONE MONTH I.E. BY 31.12.97 COMMA 4-5 LAKH NOS BY 30.4.98 AND 6-69 LAKH NOS BY 31.10.98 (.) SECURITY DEPOSIT RS.2,00,000/- (RUPEES TWO LAC ONLY) TO BE DEPOSITED WITHIN ONE MONTH (.) PAYMENTS TERMS 100% ON ACCEPTANCE AFTER INSPECTION (.) INSPECTION AT DEPOT PREMISSES (.) SUPLY WILL BE MADE 3.5 LAKH TO 9 FOD PATHANKOT COMMA 1.5. LAKH TO OD SHAKURBASTI COMMA 2.25 LAKH TO 223 ABOD SURANASI AND BALANCE QTY OF 7,94,100 NOS TO COD KANPUR (.) SUPPLY SHALL BE MADE SIMULTANEOUSLY TO ALL THE DEPOTS IN PROPORTION TO THE ALLOCATED QUANTITIES (.) ALL OTHER TERMS AND CONDITION AS PER SHCEDULE 'B' 2 (a) REVISED NOV 89 AS APPLICABLE (.) CONTRACT CONCLUDED (.) FORMAL A/T FOLLOWS (.) ACK RECEIPT (.) OVER.'
10. A perusal of this telegram shows that the respondents had accepted the offer of the petitioner for 15, 19, 100 Nos of towels at the rate of Rs.31 per towel, the total cost being Rs.4,70,92,100/-. It also provided the time and the period during which supply was to be made, the deposit of Rs.2 lakhs as security within one month and the names and destinations of the consignees. In the end, the telegram mentions that the contract was concluded and formal advance acceptance of tender would follow. This clearly shows that the payment of the security amount was not a condition precedent but a condition subsequent to the contract. The construction of the telegram as a whole amounts to an absolute and unqualified acceptance of the offer or tender made by the respondents, that is, this advance acceptance of the contract amounted to a concluded contract.
11. The second point for determination is, as to whether the question of validity of the contract and the existence of the Arbitration (sic) under Section 16 of the Act or can be decided by this Court. According to the learned counsel for the petitioner, this question squarely falls within the jurisdiction of the arbitrator, i.e., within the ambit of Section 16 of the Act and the Court under Section 11 of the Act cannot go into it, whereas according to the learned counsel for the respondents this Count can go into this question. Learned counsel for the respondents has placed reliance on Wellington Associated Ltd. Vs . Kirit Mehta : AIR2000SC1379 . A question was raised before the Hon'ble Supreme Court that it was only the arbitral Tribunal who could decide about the question of existence of the Arbitration clause in view of Section 16 of the Act. After considering the relevant provisions of the act is was held that the question regarding existence of the arbitration agreement could be raised before the arbitral Tribunal and could be decided under Section 16 of the Act by such Tribunal but the jurisdiction of Chief Justice of India, Chief Justice of any High Court or any other person designated to decide the question at the stage of Section 11 of the Act, was not excluded.
12. Learned counsel for the petitioner has referred to a subsequent judgment of the Supreme Court in the case of Konkan Railway Corpn. Ltd. & Ors. Vs . M/s. Mehul Construction Co. : AIR2000SC2821 . It is submitted that in view of this judgment at the time of deciding an application under Section 11 of the Act all contentious issues are left to be raised before the arbitral Tribunal itself. A batch of cases had come up before a Bench presided over by Hon'ble Justice Majmudar who was the author of the case Ador Samia Pvt. Ltd Vs . Peekay Holdings Limited and Others : AIR1999SC3246 and it was contended that the decision in the aforesaid case required reconsideration and the Hon'ble Judge having acceded to the request, passed an order to place the batch of cases before a three Judges Bench and the said batch of cases camp up for decision before the three Judges Bench in this case. One of the question arose for consideration was 'the nature and scope of the order passed by the Chief Justice or his nominee in exercise of powers under Section 11 of the Act. It was held that the order passed by the Chief Justice under Section 11(6) of the Act is administrative in nature and the chief Justice does not function as a Court or a tribunal and, such an order, is not amenable to be challenged under Article 136 of the Constitution. It was held that the concerned authority could be directed by a writ of mandamus to perform its duty. While deciding so the Hon'ble Supreme Court considered the provisions under Section 13 and 16 of the Act and held as under:
'Section 16 empowers the arbitral Tribunal to rule on its own as well as on objections with respect to the existence or validity of the arbitration agreement. Conferment of such power on the Arbitrator under 1996 Act indicates the intention of the Legislature and its anxiety to see that the arbitral process is set in motion. This being the legislative intent, it would be proper for the Chief Justice or his nominee just to appoint an Arbitrator without wasting any time or without entertaining any contentious issues at that stage, by a party objecting to the appointment of an Arbitrator. If this approach is adhered to, then there would be no grievance of any party and in the arbitral proceeding, it would be open to raise any objection, as provided under the Act.'
13. It is contended by learned counsel for the petitioner that in view of the three Judges Bench judgment in Konkan Railway Corpn. Limited's case (supra), the law laid down in Willington Associates Limited's case (supra) does not hold good. At this stage, it would be appropriate to refer to another judgment of the Hon'ble Supreme Court in the case of Nimet Resources Inc. and another Vs . Essar Steels Ltd. : AIR2000SC3107 , where the question regarding existence of the arbitration agreement came up for consideration in an application moved under Section 11 of the Act for appointment of an arbitrator. In this case, both the Willington Associates Limited's case and Konkan Railway Corpn. Limited's case (supra) have been referred. In the said case Nimet Resources Inc., a company incorporated in Canada had entered into certain transactions with (sic) There was an arbitration agreement to the effect, that the disputes arising out of the agreement shall be referred to the arbitrator for adjudication. A confirmation letter was also sent acknowledging the execution of the contract. The purchaser acted upon the agreement and there was also some correspondence between the parties. The petitioner moved the Hon'ble Supreme Court for appointment of an arbitrator under Section 11 of the Act. The respondent denied the sale agreement, as well as the existence of the Arbitration clause. The stand of the petitioner was that Section 16 of the Act empowered the arbitral Tribunal to rule on its own, as well as on an objection with regard to the existence or validity of the arbitration agreement. Whereas the respondent had taken an opposite stand. The Hon'ble Judge of the Supreme Court relied on the decision of three Judges Bench decision in Konkan Railways Corpn. Limited's case (supra) and held that the appropriate course would be that the arbitrator should decided such a question under Section 16 of the Act rather than the Chief Justice of India or his nominee under Section 11 of the Act. The judgment in Willington Associates Ltd. case (supra) was also considered and distinguished.
14. In the case in hand the respondents in fact do not dispute that initially a contract having an Arbitration clause, was executed between the parties for the purchase of towels but they have claimed that the contract having been executed on account of fraud and mis-representation by the petitioner, had become voidable and illegal and along with it the Arbitration clause also fell. In view of the above legal position and specially in view of Konkan Railway Corpn. Limited's case (surpa) the contentious question regarding the voidability and illegality of the contract and the existence of the Arbitration clause has to be gone into by the arbitral Tribunal under Section 16 of the Act. The respondents in this case have placed the contract for supply of 15,19,100 Nos. of towels which were to be supplied to the four consignees indicated in the contract dated 11th November, 1997. The petitioner in order to execute the contract in time (sic) and in the first phase manufactured three lakhs number of Stores and arranged the raw material for the balance quantity and dispatched the same to three consignees by different transportation but the said consignees illegality refused to accept the same. The petitioner thereafter repeatedly wrote to the respondents and served the final notice dated 12th January, 1999 claiming the losses suffered by him and invoking the Arbitration clause for referring the dispute to an arbitrator in terms thereof. The respondents, however, failed to appoint the arbitrator despite the fact that the petitioner invoked the Arbitration clause, compelling the petitioner to move this Court under Section 11 of the Act to appoint an arbitrator.
15. In this view of the matter and facts and circumstances of this case, it is for the Chief Justice or the person designated by him to make the appointment of an arbitrator having due regard for considerations set out in Section 11(8) of the Act and to secure the appointment of an independent and impartial arbitrator and not merely order the recalcitrant party or the appointing authority to act.
16. I appoint Justice J.D.Jain a retired Judge of Delhi High Court as the sole arbitrator to decide the disputes and differences having arisen between the parties. He will issue notice to the parties and enter upon the reference. The Arbitrator/Arbitral Tribunal shall fix his own remuneration. Arbitrator appointed by this Court be communicated accordingly.
17. The petition is, accordingly, allowed with costs.