The Installment Supply Limited Vs. Malkiat Singh and ors. - Court Judgment

Excerpt:
a) the case questioned the effectiveness of the arbitration clause under section 20 of the arbitration act,1940, on termination of the agreement by the appellant due to the non-fulfilment of the obligation by the respondent - the hire purchase agreement entered between parties contained the arbitration clause - it was held that, the arbitration clause did not ceased to exist on termination of the agreementb) it was adjudged under sections 30, 33, 14 and 17 of the arbitration act, 1940, that the plea for insufficient stamps had to be raised before the arbitrator and the burden is on the petitioner to prove the same before the arbitratorc) in the instant case, in hire purchase agreement entered between the parties total amount to be paid was 2,90,000, while the balance left was 95,700 - the claim was hijacked to rs 5,70,000 along with the retaining ownership of the vehicle - the petitioner recommended the name of its own persons as arbitrators for the settlement of the dispute - it was held that, court was bound by law to appoint arbitrator named in the agreement to refer the disputes to them -though it was suggested to legislature for amending act, in cases where in agreement both are private parties, the choice of the appointment lied with the court in case it was not satisfied with the name of the arbitrator referred in the agreement - - in so far as giving legal notice before filing the present petition is concerned, admittedly notice dated 27th july, 1995 was sent to the respondents 1 and 2 wherein the petitioner had stated that the respondents 1 and 2 have failed to pay the overdue hire money inspire of several reminders and the amount in question was demanded from the respondents 1 and 2. it was also stated in this notice that in case the respondents 1 and 2 fail to make the payment, the matter would be referred for arbitration in terms of clause iii of the h ire agreement. 3 as well. 6. simply because, for failure to fulfill the obligations under the agreement by respondents 1 and 2, the petitioner terminated the agreement, the arbitration clause contained in this agreement shall not cease to have effect. section 85 of the new act clearly saves such proceedings initiated under the old act. once the power is given to court to appoint arbitrator under the new act, as per section 11 thereof, it would be appropriate that at least in agreement where both are private parties, the choice of appointment should be with the court even if the arbitrator is named in the arbitration agreement and if the court is satisfied that the named arbitrator would not do justice in the matter being biased in favor of one of the parties.a.k. sikri, j. 1. this petition is filed by the petitioner under section 20 of the arbitration act, 1940 for appointment of an arbitrator and referring the disputes to him for adjudication. it is stated in this petition that on 15th june, 1990 the respondents 1 and 2 as hirers and respondent no. 3 as guarantor made a proposal to the petitioner company for hiring a tata diesel truck model lpt 1210 b/42 bearing chasis no. 364 052 5 10980 engine no. 692 d02 9 59493 and now bearing registration no. up-80a-9967. the petitioner company accepted the said proposal, and the petitioner and respondents entered into a hire purchase agreement dated 15th june, 1990 whereby the respondents 1 and 2 agreed to take the said vehicle on hire from the petitioner company and the respondent no. 3 agreed to stand guarantee for the respondents 1 and 2 on the terms and conditions contained in the said agreement. the liability of the guarantor in terms of the said agreement is co-extensive with that of the respondents 1 and 2 to the petitioner company. in terms inter alia, of the said hire purchase agreement the respondents 1 and 2 agreed to pay 34 monthly installments of rs. 8,300/- each and the 35 installment of rs. 7,800/- falling due on the 10th day of each month, beginning from 10th august, 1990. the respondents 1 and 2 were accordingly given delivery/possession of the said vehicle. it is further averred that the respondents 1 and 2 however paid only a sum of rs. 1,94,300/- towards hire money as against a sum of rs. 2,90,00/-. as on the date of filing the petition, the sum of rs. 2,20,414/- was overdue on account of hire installments, additional finance charges and incidental expenses. after adding the value of the vehicle which was estimated as rs. 3,50,000/- claim of rs. 5,70,414/- is made. since the respondents did not pay the amount inspire of issuing legal notice, the present petition has been filed for appointment of an arbitrator as agreement between the parties contains clause iii as the arbitration clause. the disputes are mentioned in para 9(a) of the petition.2. the respondents 1 and 2 did not enter appearance. however, the respondent no. 1 died during the pendency of the petition but his lrs. were not brought on record. this petition thereforee abates qua respondent no. 1. the respondent no. 2 was however proceeded against ex-parte. the respondent no. 3 only has contested the petition and filed the reply. opposing this petition for appointment of the arbitrator, the learned counsel for respondent no. 3 submitted as under:1) the respondent no. 3 being the guarantor and there was no notice of demand on the respondent no. 3 before filing the present petition, this petition is not maintainable against the respondent no. 3. 2) this court has no territorial jurisdiction to entertain the present petition as all the respondents reside and work for gain at agra and amount was also disbursed in agra. thereforee no cause of action or part of cause of action had arisen in delhi, within the territorial jurisdiction of this court, and thereforee this court lacks territorial jurisdiction to entertain this petition. 3) no effective steps are taken by the petitioner against the respondent no. 2 who is allegedly absconding along with the vehicle and thereforee the respondent no. 3 cannot be fastened with any liability. 4) as the agreement stands terminated, the arbitration clause also ceases to have any effect. 5) agreement in question is not properly stamped. 6) this petition is not maintainable as after filing of this petition, the arbitration act, 1940 stands repealed and it is arbitration and conciliation act, 1996 which is in operation. 3. i do not find any merit in any of the aforesaid submissions. in so far as giving legal notice before filing the present petition is concerned, admittedly notice dated 27th july, 1995 was sent to the respondents 1 and 2 wherein the petitioner had stated that the respondents 1 and 2 have failed to pay the overdue hire money inspire of several reminders and the amount in question was demanded from the respondents 1 and 2. it was also stated in this notice that in case the respondents 1 and 2 fail to make the payment, the matter would be referred for arbitration in terms of clause iii of the h ire agreement. further admittedly the copy of this notice was sent to the respondent no. 3 with the following endorsement 'ad post to sh. rajinder singh (guarantor) as his liability is co-extensive with that of the hirers'. it was not simply a copy sent but in fact with the aforesaid endorsement even the demand was made from the respondent no. 3 as well.4. in so far as the aspect of jurisdiction is concerned, original agreement dated 15th june, 1990 is placed on record along with affidavit in evidence. it is stated in this agreement that it was executed at new delhi. further clause 17 thereof mentions that in case of any disputes, it is the court at delhi/new delhi alone which would have jurisdiction to try suits in respect of such claims/disputes.5. in so far as plea of respondent no. 3 to the effect that the petitioner has not taken any effective steps against the respondents 1 and 2 and for recovery of the vehicle and thereforee the respondent no. 3 is not liable is concerned, such plea is on the merits of the case and thereforee this court is not to decide this plea at this stage. it would be open to the respondent no. 3 to raise this plea before the arbitrator who shall consider and decide the same.6. simply because, for failure to fulfill the obligations under the agreement by respondents 1 and 2, the petitioner terminated the agreement, the arbitration clause contained in this agreement shall not cease to have effect. in fact disputes arose as per the agreement because of alleged non-payment by respondents of the hire charges and agreement empowers the petitioner to terminate the same. however, disputes shall still remain which can always be adjudicated as per the arbitration clause contained therein.7. so far as the objection regarding stamping of the agreement is concerned, it is explained by learned counsel for the petitioner that the agreement was got signed in triplicate and the covering page of the agreement was duly stamped which is with the bank. learned counsel for the petitioner explains that the copy of the agreement which was duly stamped was deposited with the bank and it would be for the petitioner to prove the same before the arbitrator. it would be open to the respondent no. 3 to raise this plea before the learned arbitrator and in case the petitioner is not able to substantiate its plea before the learned arbitrator, the learned arbitrator can take appropriate view in the matter.8. similarly, the contention based on the repeal of arbitration act, 1940 is without any force. this petition was filed in the year 1995 when indian arbitration act, 1940 was holding the field. merely because during the pendency of this petition the said act stands repealed and arbitration and conciliation act, 1996 came to be passed by the legislature is no ground to allege that this petition filed under section 20 of the arbitration act, 1940 is not maintainable. section 85 of the new act clearly saves such proceedings initiated under the old act.9. this application is accordingly allowed.as per the agreement, matter could be referred to the sole arbitration of any one of the four persons named therein. shri ramesh chand, advocate, delhi is accordingly appointed as arbitrator and the disputes mentioned in this petition are referred to him for adjudication. it would be open to the respondent to raise counter-claims, if any.10. before parting i may state that this case has left me disturbed. as per hire purchase agreement dated 15.6.1990 respondents 1 and 2 had agreed to take the vehicle in question on hire from the petitioner company and respondents 1 and 2 had agreed to pay 34 monthly installments of rs. 8,300/- each and 35 installments of rs. 7,800/-. the respondent paid initial sum of rs. 1,24,000/- and balance was financed by the petitioner. the amount to be paid by the petitioner for purchase of the vehicle was rs. 2,90,000/- inclusive of interest. as against that respondents 1 and 2 paid a sum of rs. 1,94,300/- towards hire money. thus balance left was only rs. 95,700/-. however, in the present petition the claim is hijacked to rs. 5,70,414/-. the petitioner has added additional finance charges of rs. 1,15,804/- on delayed payment, rs. 8,910/- as incidental expenses, thus making a total of rs. 2,20,414/-. to this amount the petitioner has also added rs. 3,50,000/- as the cost of vehicle. all imaginative claims are added. had the respondents 1 and 2 paid rs. 95,700/- at the appropriate time they would have become the owner of the vehicle in question. by making a default of that payment, the petitioner is not only claiming now a sum of rs. 5,70,414/- but also retains the ownership of the vehicle. above all, in the hire purchase agreement it has named its own persons as arbitrators who have to decide the fate of the case. in this arbitration application, jurisdiction of this court is limited and cannot go into the merits of the dispute. it would have been appropriate to at least appoint an independent arbitrator. however, being bound by the law as it stands, this court has no option but to appoint the arbitrator named in the agreement and refer the disputes to him. it is for the legislature to make suitable amendment in the arbitration and conciliation act, 1996 more particularly when the arbitration award can be challenged on the very limited ground and the ground admissible on merits is only when the award is against public policy. once the power is given to court to appoint arbitrator under the new act, as per section 11 thereof, it would be appropriate that at least in agreement where both are private parties, the choice of appointment should be with the court even if the arbitrator is named in the arbitration agreement and if the court is satisfied that the named arbitrator would not do justice in the matter being biased in favor of one of the parties.