UNION OF INDIA Vs. HIMCO INDIA LTD

JUDGEMENT

(1.) THIS is an application for filing an arbitration agreement and for an order of reference under Section 20 of the Arbitration Act. The arbitration agreement is a clause in the contract subsisting between the parties evidenced by the acceptance by the plaintiff of a tender submitted by the defendant. A copy of the letter of acceptance of the tender is annexed to the petition. The letter of acceptance is dated November 30, 1956 and is signed by one S.K. Dutt for and on behalf of the President of India from the Calcutta office of the Director General of Supplies and Disposals. The defendant is a company having its registered office at Bombay and the tender was sent by post from Bombay, The contract is for the supply of certain goods. The plaintiff is the buyer and the defendant the seller. It appears that the plaintiff paid and the defendant received the price of the goods sold and delivered. The defendant, however, claims that it is entitled to recover the sales tax of 5 per cent of the price paid as also interest and overhead charges. The defendant served on the plaintiff a notice of suit intended to be instituted against the plaintiff for the recovery of the said claim under Section 80 of the Code of Civil Procedure. In his reply dated June 9, 1960,, the Deputy Director, Litigation, for and on behalf of the Director General of Supplies and Disposals contended that the dispute raised is covered by the arbitration clause in the agreement and the Government was ready and willing to have the dispute adjusted by arbitration as provided in the contract. By the letter dated July 21, 1960 the defendant's Advocate Shri G.N. Lukdawalla contended, inter alia, than the defendant had agreed to arbitration by an 'unattached arbitrator' and not by the Director General of Supplies and Disposals or his nominee. The plaintiff's case is that the contract is in form No. WSB 133 and the arbitration clause in such contract provides for the arbitration by the Director General of Supplies and Disposals Or his nominee. The defendant persisted in its contention that it agreed to arbitration by an 'unattached arbitrator' and demanded a reference to an independent person from trade and commerce. Thereupon, the Government has taken out the present notice.

(2.) THE Government in inviting tenders stated that the conditions of contract as contained in form No. WSB 133, as amended up to date, will govern the intended contract. THE tenderers were required to answer certain questions. Question No. 3 which the tenderer was required to answer is in the following terms : Q. 3. Do you agree to sole arbitration of Director General of Supplies and Disposals or his nominee as provided in clause 21 of the general conditions of the contract form No. WSB 133? (Your acceptance or non-acceptance of this clause will not influence the decision of the tender. It should however be noted that an omission to answer the above questions will be deemed as an acceptance of this clause.) In the tender submitted by the defendant the above question has been answered as under : "We feel that there should be an unattached arbitrator.'

(3.) ARBITRATION clause in a contract though nothing more than a term in the contract, is different from the contract, so that even if the main contract is gone, the arbitration agreement may still remain effective. When there is an arbitration clause in a contract, there are really two agreements rolled into one--the main contract, as in the instant case, the contract for sale of goods and the arbitration agreement whereby the dispute in respect to the main contract is to be adjusted. Ordinarily the arbitration agreement being only a clause in the main contract, the conclusion of the main contract concludes the arbitration agreement as well. But the parties may very well choose to keep them apart. In the instant case, the invitation to tender issued by the Government required the tenderer to indicate whether he agrees to the sole arbitration by the Director General of Supplies and Disposals or his nominee, as contained in the arbitration clause. The note clearly indicates that the tenderer had the option to accept or not to accept it and this acceptance or non-acceptance will not influence the decision on the tender. It is clear, therefore, that the Government wanted the arbitration agreement in the standard form be kept apart from the main contract and people submitting their tender were at liberty not to accept the Director General of Supplies and Disposals or his nominee as the sole arbitrator. It is, however, stated that that an omission to answer the question in the tender submitted will mean acceptance of this clause in the standard form. In the instant case, the defendant while submitting the tender answered the question indicating that the arbitrator should be "unattached arbitrator". This amounts to a non-acceptance of the arbitration clause as in the standard form. Mr. Acharya contended that there are two ways of indicating acceptance of the clause and no other, namely, (1) intimation of acceptance in express terms by answering question No. 3 in the affirmative or (2) omitting to answer question No. 3. If the question is answered and the answer is not in the affirmative, as in the instant case, it cannot be said that the arbitration clause is accepted. This argument has force. I am unable to accept the argument of Mr. Chatterjee that the answer was not intended to be a non-acceptance of the clause but an acceptance, subject to a request that a non-attached person should act as an arbitrator. The defendant has not accepted the arbitration clause in express term, nor has it indicated its acceptance in the only other way indicated in the note, namely, by omitting to answer question No. 3. In my judgment, the defendant submitted the tender on the footing that it was only agreeable to the arbitration of the disputes in respect to the contract by "an unattached arbitrator."