RAYMOND WOOLEN MILLS LTD Vs. COAL INDIA LIMITED

JUDGEMENT

(1.) For an easy and early resolve of a dispute arising out of a commercial deal, it is now mostly preferred to go for an arbitration proceeding, of course, only in the event of failure by way of mutual consultation. There is thus an arbitration clause necessarily appended to an agreement pertaining to commercial dealings. Even though such a clause is purposely resorted to promote an element of trust between the parties and also to ward of legal strategy, a controversy is often raised before a court of law to construe a deed of agreement and to interprete the arbitration clause therein. In the instant case as well, the parties have joined issue whether the arbitration clause of an admitted agreement was enforceable by an entity, who though not being a signatory to the agreement, had an involvement and also felt aggrieved.

(2.) Upon a dispute having arisen with regard to the quality of supply of coal and the co-related payment/refund of the price thereof, the appellant-purchaser, Raymond Woolen Mills Ltd., moved an application under section 20 of the Arbitration Act, 1940 to enforce the arbitration clause of an agreement. This was objected to by the respondent-supplier, Coal India Ltd., and its subsidiary, South Eastern Coalfield Ltd., before the learned single bench of this court, who, by the impugned order dated April 11, 1996, upheld the stand taken by the respondents and dismissed the application while observing that the appellant being the individual purchaser-member of the Cement Manufacturers' Association had no right to enforce the arbitration clause, rather it (the appellant) should approach the said Association to seek redressal of the dispute through arbitration. It may be added here that the Agreement-in-question being dated January 1, 1985 was recorded apparently only between the respondent, Coal India Ltd. and the Cement Manufacturers' Association. The appellant individually was not a direct party or signatory to the Agreement deed.

(3.) For convenience's sake, it seems necessary to unfold some more materials on the factual matrix of the case. The respondent, Coal India Ltd. (CIL in short) being a country-wide undertaking of the Union Government of India was under contractual obligation to supply coal to the different cement manufacturing works or entities on certain commercial terms of purchase. The appellant, Raymond Woolen Mills Ltd. having its Division as Raymond Cement Works was one of such purchasers. Such purchasers, all being 25 in numbers as cement manufacturers had constituted a body known as Cement Manufacturers' Association. As per the commercial terms of supply, the payments for coal supplies were to be made by the Cement companies individually; and such payments were to be regulated by the results of joint sampling and analysis. To that effect there was an agreement as per the Agreement deed dated January 1, 1985 (referred to above), vide clause 3 : 12 of the deed.