Foods Fats and Fertilisers Ltd. Vs. Ramkishandas Radhakishan - Court Judgment

Awasthy, J.

1. This is an appeal against an order passed by the District Judge, Ambikapur, in Civil Suit No. 11-A/79 D/- 29-1-1981, under Sections 14 and 17 read with Section 33 of the Arbitration Act.

2. The appellant-applicant is a public limited company and the non-applicant is a business firm. It is alleged that the appellant entered into a contract with the non-applicant through broker, M/s. Gopal Company for sale of Sal-seeds, kernels decorticated on 25-3-1976. According to the terms of the contract, it was agreed between the parties that in the event of any dispute relating to the said contract, it shall be referred for arbitration to the Tribunal of Bengal Chamber of Commerce and Industries, Calcutta for adjudication and the decision of the said Tribunal shall be binding on the parties. It was alleged that the non-applicant respondent committed a breach, hence a dispute arose and the matter was referred for arbitration by the applicant claiming compensation and damages amounting to Rs. 92,400/-.

3. The claim of the applicant-appellant was registered as Case No. 76/79 by the said Arbitrator and after hearing the parties Award No. 85 of 1979, was passed against the respondent non-applicant for an amount of Rs. 77,385/- in full and final settlement of their claim. The cost of arbitration was fixed at Rs. 660/-. The award was signed by the Arbitration and notices were served on both the parties. The applicant received the notice on 20-8-1979.

4. An application under Sections 14 and 17 of the Arbitration Act was filed in the Court of District Judge, Sarguja (at Ambikapur) on 4-9-1979 praying for presentation of the award in the Court and passing a decree in terms thereof. The award and the connected file was presented in the Court on or before 9-11-1979 when the District Judge ordered issue of notice to the respondent intimating the fact that an award has been filed. The respondent appeared on 29-11-1979 and went on taking time till 4-9-1980 when an objection under Section 30 of the Act was filed on behalf of the respondent against the award. An application under Section 33 of the Arbitration Act was also filed on the same day challenging the existence of arbitration agreement between the parties and alleging that the award was illegal and without jurisdiction. The appellant filed an objection to the application under Section 33 alleging that the said application was not maintainable and the Court had no jurisdiction to entertain it. It was also alleged that the proceedings under Section 33 of the Arbitration Act should be kept separate from the proceedings under Sections 14 and 17 of the Act.

5. The trial Court heard the arguments on 21-1-1981 and passed the impugned order rejecting, the application of the appellant u/s. 14 read with sec. 17 of the Act and allowed the application under Section 33 filed by respondent. The award filed by the Arbitrator was set aside. The appellant therefore, preferred this appeal under Section 39 of the Act.

6. The learned counsel appearing for the respondent argued that the appeal is not tenable under any of the cls. of Section 39 of the Act. The contention of the learned counsel is that the trial Court had rejected the objection filed by the respondent under Section 30 of the Act holding that it was barred by limitation. Against that order, no appeal has been preferred by the respondent. But on merits, the applicant's petition under Section 14 and 17 of the Act was dismissed vide para 22 of the judgment because its objection under Section 33 of the Act was allowed. Such a composite order as was passed by the Court below is not appealable under Section 39 of the Act.

7. It is contended that such an order does not fall within the purview of Section 39 of the Act as the Court has held that there was no clause for arbitration in the contract. It was neither an order superseding an arbitration nor it amounts to setting aside or refusing to set aside an award since there was no arbitration agreement.

8. Reliance has been placed on the case of Uttam Singh Dugal & Co. Private Ltd. New Delhi v. Hindustan Steel Ltd., Bhilai Steel Project, 1982 MPLJ 598 : (AIR 1982 Madh Pra 206) for the proposition that an order made under Section 33 of the Act pronouncing upon the existence or validity of an arbitration agreement is not appealable under Section 39(1)(i) of the Arbitration Act. In the said case, since no award was passed, the High Court observed that it was an order under Section 33 simpliciter. It is relevant to mention that in that case the observation was : --

'Similarly, it is also not possible to say that the order of the Court below has set aside any award made by the arbitrators.'..(Para 13 at p. 612 of MPLJ) : (at p. 216 of AIR)

It was further observed in para 13 of the judgment that no interim award was passed by the arbitrators. Hence, it was held that Section 39(1)(vii) of the Arbitration Act was also not applicable. The facts of this case are distinguishable as the learned District Judge has set aside the award after holding that there was no arbitration agreement. The learned District Judge has held in para 22 of his judgment as under : --

'22. As a result of the above discussion, applicant's petition filed under Section 14 of the Act is hereby dismissed with costs, while that of the non-applicant filed under Section 33 of the Act is hereby allowed with costs. Award, being numbered as of 1979, dated 16-8-1979, given by the Tribunal of Arbitration of the Bengal Chamber of Commerce and Industries, Calcutta, in Case No. 76 of 1979, is hereby declared to be illegal and without jurisdiction and is, therefore, set aside.'

In this view of the matter, the case relied on by the learned counsel for the respondent is apparently distinguishable.

9. The learned counsel for the respondent then cited the case of Rajendra Dayal v. Govind (Misc. Appeal No. 5 of 1964, decided on 5-11-1969 reported in 1970 MPLJ 322.) In this case, the Division Bench of this Court did not decide if an appeal would lie in a matter of like this. It was observed that the High Court has ample power to set aside the decision of the lower Court in exercise of its revisional powers particularly when the illegality is patent. It was an appeal which was allowed by the High Court in spite of the fact that the award was held to be non-existent by the Court below.

10. The learned counsel for the appellant relied on the Full Bench decision in Makeshwar Misra v. Laliteshwar Prasad Singh, AIR 1967 Pat 407. In this case, it was held that :--

'Court while dismissing the case though did not use expression that award was set aside yet effect of its order is to set aside award and hence that order is appealable under Section 39(1)(vi) of the Arbitration Act.'

In this case, the Full Bench relied on the case of Nawab Syed Hasan Ali Khan v. Nawab Askari Begum, AIR 1959 All 777 and Waverly Jute Mills Co. Ltd. v. Raymon and Co. AIR 1963 SC 90 and approved the case reported in Deep Narain Singh v, Mt. Dhaneshwari, AIR 1960 Pat 201. The counsel for the appellant also relied on the case of Fateh Chand Murlidhar v. Juggilal Kamlapat, AIR 1955 Cal 465 for the proposition that 'where after an award had been filed, and application was made to the Court for setting it aside and it set it aside, dismissing the application for a judgment on the award by the same order, an appeal against the order which contains both the directions is competent.' In our opinion, the ratio of the cited cases is in favour of the appellant. We, therefore, hold that the appeal is tenable.

11. Learned counsel for the appellant argued that the application under Section 33 of the Arbitration Act filed by the respondent was barred by limitation. Article 119 of the Limitation Act is specific and the limitation prescribed is 30 days under Article 119 of the Limitation Act of 1963 which is the same as Article 158 of the Limitation Act of 1908. Since the application under Section 33 was filed beyond 30 days, it was barred by limitation. Reliance was placed on the cases of Sheoram Prasad v. Gopal Prasad, 1959 MPLJ 87 : (AIR 1959 Madh Pra 102); Madanlal v. Sunder Lal, AIR 1964 All 38, A.R. Savkur v. Amritlal Kalidas, AIR 1954 Bom 293 and Madan Lal v. Sunder Lal, AIR 1967 All 1233.

12. In reply, the counsel for the respondent argued that Article 137 of the Limitation Act would apply to such a case as has been held in the case of The Kerala State Electricity Board v. T.P. Kunhaliumma, AIR 1977 SC 282. It has been held in that case that the changed definition of the words 'applicant' and 'application' contained in Sections 2(a) and 2(b) of the 1963 Limitataion Act indicates the object of the Limitation Act to include petitions, original or otherwise, under special laws. The interpretation which was given to Article 181 of the 1908 Limitation Act on the principle of ejusdem generis is not applicable with regard to Article 137 of the 1963 Limitation Act. Article 137 stands in isolation from all other Articles in Part I of the third division. Article 137 includes petitions within the word 'applications.' These petitions and applications can be under any special Act. It was further observed that when a petition is made to the District Judge as Court that petition was one contemplated by the Telegraph Act for judicial decision and the petition was within the scope of Article 137.

13. Article 119 of the Limitation Act prescribes limitation for --

(a) the filing in Court of an award; and

(b) setting aside an award or getting an award remitted for reconsideration.

The application filed by the non-applicant was not for setting aside an award or getting an award remitted for reconsideration. As has been stated earlier, it was an application challenging the existence of arbitration agreement between the parties which is not provided for in the Third Division to the Schedule under Article 119 of the Act. Hence, Article 137 would be applicable and we hold that the application under Section 33 was filed within time.

14. The counsel for the respondent then argued that there was no written arbitration agreement executed between the parties and signed by them. The arbitration clause in the Buyer's Note entered by the broker, M/s. Gopal Company cannot be said to be an arbitration agreement made by the parties. No privity of contract was created between the respondent and the appellant. Messrs Gopal Company is the agent of the appellant. Exhibit A-1 dated 25-3-1976 was addressed to the applicant and included the terms of the contract. The trial Court has also held that M/s. Gopal Company was acting in the capacity of an agent for the applicant. No Seller's Note was issued by the broker to the respondent. It is further argued that the agreement by the broker with the appellant does not bind the respondent-firm, especially when there is nothing on the record to show or suggest that the non-applicant had ever authorised the broker, M/s. Gopal Company to enter into the contract on its behalf or that the non-applicant had, in any manner, ratified the contract.

15. The learned counsel for the respondent relied on the case of Shri Vallabh Pitte v. Narasingdas Govindram Kalan, AIR 1963 Bom 157 and referred to para 15 thereof. His contention is that in case where the non-applicant does not admit the arbitration agreement, he may have recourse to any one of the four procedures given in that para. The fourth procedure is that : --

'He may not even adopt that procedure but may wait and take a chance of a decision in his favour and when an application is made to make a decree in terms of the award challenge the validity of the award on the ground that there was in fact no valid and existing contract of arbitration.'

He relied on the case reported in Jawahar Lal Barman v. Union of India, AIR 1962 SC 378 for the proposition that 'any party to an arbitration agreement' include the person alleged to he party to the arbitration agreement but denying its existence. It is, therefore, contended that the non-applicant had the right to file the objection under Section 33.

16. We have perused the record and we find that on 21-1-1981, the trial Court ordered to hear arguments on the maintainability of the applications. It is stated that --

'Prakaran Ke Gun-Doshon Par Vidwan Abhibhashakgan Ke Tark Sune Gaye.'

The trial Court did not record the evidence of the parties regarding the creation of the agency between the non-applicant and M/s. Gopal Company. An opportunity should have been given to the appellant for proving that M/s. Gopal Company was or was not the agent of the respondent. This has not been done by the learned lower Court. An objection has been raised before us that without affording an opportunity has been raised before us that to the appellant, a finding has been returned that M/s. Gopal Company was not the agent of the respondent-firm. This has been in violation of all the canons of law, We cannot permit to perpetrate this. After hearing the arguments on the preliminary objections, the learned trial Court should have afforded an opportunity to both the parties to adduce evidence for establishing if M/s. Gopal Company was an agent of the respondent or not.

17. We, therefore, set aside the impugned judgment and remand the case to the trial Court for giving due opportunity to both the parties for adducing evidence, documentary and oral, for establishing if there was an agreement of agency between M/s. Gopal Company and the respondent, and decide the case accordingly. The costs of this appeal shall abide the result of the petition in the trial Court.