CONTROLLER OF STORES Vs. KAPOOR TEXTILE AGENCIES

JUDGEMENT

(1.) The respondents entered into a contract for the supply of uniform cloth (Khaki Drill) for the year 1970-71 to the appellants. An agreement was executed in that respect on September 7, 1970. Besides other terms and conditions, it contained an arbitration clause, to the effect, that if on any question. difference or objection whatsoever would arise in any wav connected with or arising out of the aforesaid agreement. it would be referred for arbitration to any officer appointed by the Government of Punjab and the decision given by the Arbitrator would be final and binding upon the parties. In terms of the agreement, the respondents supplied Khaki Drill to the Controller of Stores on the contract rate. The delivery of the said Khaki Drill, costing Rs.15,456.00 -. had been accepted by the General Manager. Punjab Roadways, Ludhiana. Some of the Khaki Drill, on inspection, was rejected by the Director. State Transport, Punjab. Thereafter, the respondents were required to supply further Khaki Drill. They notified their willingness to do so subject to payment of the dues outstanding against the appellants. Therefore, the differences arose between the parties about the dues which were outstanding against the appellants. As such, the respondents approached the appellants to refer the matter for arbitration and when they did not pay heed to their request they made application under Sec. 20 of the Arbitration Act (hereinafter called the Act) to the Court for filing of the arbitration agreement and appointment of the Arbitrator. The said application was heard by the Subordinate Judge III Class, Patiala. The appellants did not dispute the broad facts of the case and indicated that they had no objection if the differences relating to the matters in dispute were referred for arbitration to Shri Bhagwant Kishore or Shri L. R. Khosla, Deputy Director of Industries, Punjab, Chandigarh. The respondents did not accept Shri Bhagwant Kishore or Shri L. R. Khosla as Arbitrator and pleaded that some independent person be appointed as Arbitrator. Hence, the following issues were settled:-

(2.) Shri J. V. Gupta, learned Counsel for the respondents, raised a preliminary objection that the appeal was incompetent, on two grounds. (1) that the Arbitrator had been appointed with the consent of the parties and, therefore, the appeal was barred vide Sec. 96 (3), Civil Procedure Code, and (2) that the impugned order was not appealable. In my opinion, the said objection is not well-founded. Sec. 96 (3) bars an appeal from a decree which has been passed with the consent of parties. Firstly, the impugned order cannot be said to be 'decree'. It is clear from Clause (iv) of Sec. 39 (1) of the Act that it provides appeals against orders and not against decrees. Secondly, as would be seen hereinafter, the consent given by the learned Assistant District Attorney to the appointment of the Arbitrator cannot be taken as valid so as to bind the appellants. Therefore, when it is an appeal against an order and not against a decree and the impugned order cannot be said to have been passed with the consent of the appellants, the first ground taken for raising the preliminary objection is not tenable.

(3.) Clause (iv) of Sub-sec. (1) of Sec. 39 of the Act provides appeal against filing or refusing to file an arbitration agreement. Mr. J, V. Gupta has been of the view that the appeal could be maintainable against an order of filing or refusing to file an arbitration agreement only, but no appeal lies against the order appointing an Arbitrator. The respondents averred in the application under Sec. 20 of the Act that there was arbitration agreement. The appellants did not dispute that fact and had no objection against referring the dispute for arbitration. So, the parties were not at issue with regard to existence or validity of the arbitration clause or respecting the dispute between them being referred for arbitration. As such, argues Mr. Gupta, that the Court was justified in referring the dispute between the parties for arbitration vide Order XV, Rule 1, Civil Procedure Code, and that part of the order is unassailable because the appellants did not oppose the reference of the dispute for arbitration. However, acording to Mr. Gupta, though the order respecting the filing of the arbitration agreement, which, as indicated above, was unopposed, was appealable yet the appointment of Shri Kuldip Singh, Executive Magistrate, Patiala, as Arbitrator had nothing to do with the filing of the award end, as such, no appeal was competent against that part of the impugned order. I have not been able to agree with him. True Sub-sec. (4) of Sec. 20 of the Act consists of two parts; firstly, filing of the arbitration agreement, and, secondly, the making of order of reference to the Arbitrator appointed by the parties, whether in agreement or otherwise, or where the parties cannot agree upon an Arbitrator, to an Arbitrator appointed by the Court. It is, therefore, essential to consider as to what is the extent and scope of the words 'filing of arbitration agreement'. Besides that, existence and validity of arbitration agreement and the question as to whether the dispute or difference, which has arisen between the parties, is covered by it (arbitration agreement) are within the scope of the said words, the appointment of Arbitrator may or may not be within the scope of the words. When a person is named in the arbitration agreement, his appointment as such would be included in the words of 'filing of the arbitration agreement'. Non-appointment of such a person (the one who is named in the arbitration agreement) or appointment of a person other than him would be tantamount to refusing to file arbitration agreement and, therefore, appeal is competent against such order under Clause (iv) of Sub-sec. (1) of Sec. 39 of the Act. So was observed in Union of India v. M. S. Grewal and Co. , AIR 1968 Cal 333. If none is named in the arbitration agreement, the appointment of an Arbitrator would not be tantamount to filing or refusing to file arbitration agreement and in such a case appeal against the appointment of such an Arbitrator may not be competent. The arbitration agreement, in the case in hand, provided that in the event of dispute or difference arising between the parties, the same was to be referred Eor arbitration to any officer appointed by the Punjab Government. The State of Punjab ha reply to the application under Sec. 20 of the Act, stated that the dispute might be referred for arbitration to Shri Bhagwant Kishore or Shri L. R. Khosla, Deputy Director Industries. Punjab, Chandigarh, Thus,' when the arbitration agreement and the reply put in by the State of Punjab are read together, it would be dear that the Arbitrator named by the Punjab Government according to the arbitration agreement was Shri Bhagwant Kishore or Shri L. R. Khosla. The Court did not appoint either of them and instead it (the Court) appointed Shri Kuldip Singh. Executive Magistrate, Patiala, as Arbitrator. That would certainly amount to refusing to file the award and. as such, the appeal lay against the said part of the judgment. i. e. , with regard to the appointment of Shri Kuldip Singh as Arbitrator, under clause (iv) of Sec. 39 (1) of the Act and the second ground of the preliminary objection is again without any substance. It follows that there is no force in the preliminary objection and the same is overruled.