Supreme Co-Operative Group, Housing Society Vs. M/S. H.S. Nag & Associates (P) Ltd. [1996] INSC 695 (9 May 1996)

K. Ramaswamy, Faizan Uddin, G.B. Pattanaik

ACT:

HEAD NOTE:

THE 9TH DAY OF MAY, 1996 Present:

Hon'ble Mr.Justice K.Ramaswamy Hon'ble Mr.Justice Faizan Uddin Hon'ble Mr.Justice G.B.Pattanaik K.Madhava Reddy, Sr.Adv., U.U.Lalit and Satish Vig, Advs. with him for the Petitioner.

O R D E R

The following Order of the Court was delivered:

This special leave petition arises from the order of the Division Bench of the High Court of Delhi made on 8.3.1996 in F.A.O. (OS)44/96. The petitioner had entered into a contract on September 4, 1996 with the respondent with covenant contained therein as under:

"And whereas the contractor has also agreed to execute work of seven towers with 100% external works with the said contract amount in the first instance and further work of the balance towers that would be entrusted the him within 4 months of the date of award of work at the same per sq.m. rates arrived at the above lump sm rice for each tower and for the alternate specifications.

And whereas the employer has accepted the officer of the contractor the said contract amount subject to the terms and conditions set forth herein and mutually agreed to by both the parties" Therein clause 32 relates to settlement of dispute by arbitration which reads as under:

"32-Settlement of Disputes by Arbitration;

If any dispute, question of controversy, the settlement of which is not herein specifically approved for, shall at any time arise between the owner and the contractor relating tot his contract or any clause or thing contained or the construction thereof or any portion of the same or the rights of duties or liabilities of either party, then in every such cases the matter in dispute shall be referred to the Arbitration of the Hony. Director, owner or him nominee and his decision shall be final and binding on both the parties ..........." In furtherance of the agreement, apart from 7 towers entrusted for construction, the construction of 3 more towers was awarded on December 12, 1988 and 4 more towers on March, 1990. Dispute and difference had arisen the construction of the latter 7 towers. The respondent invoking clause 32 of the agreement filed application under Section 20 of the Arbitration Act, 1940 (for short, the `Act') for calling upon the petitioner to produce the agreement and to have the dispute referred to arbitration. It was numbered as a suit on the original side of the High Court. Therein, the petitioner filed I.A. No.7860 of 1994 in Suit No.2760/93 under Order 7, Rule 1, CPC to dismiss the suit. Two grounds were mainly pressed for consideration in support thereof.

The first contention urged was that the petitioner being a co-operative Societies Act, 1972, the dispute is arbitrable under Section 60 of the Act and section 93 thereof puts an embargo on the power of the civil court to decide the dispute and that, therefore, the suit is not maintainable.

The learned single Judge and the Division Bench negatived the contention and in our view rightly, on the ground the Section 60 of the Co-operative Societies Act would apply to a dispute among members, past-members or persons claiming through them or between them and the society or the members of the committee or officers or agents etc. as envisaged in clauses (a) to (d) of Section 60(1) of the Co-operative Societies Act. By operation of the non obstante clause, the bar of suit attracts only if the dispute falls within the parameters of clauses (a) to (d) thereof and the bar of jurisdiction of the Court under Section 93 gets attracted in respect of the specified subjects in sub-section (1) of Section 93 thereof. Therefore, the plea of the bar of sections 60 and 93 is devoid of substance.

It is then contended in this Court that notice as required under Section 90, is a pre-condition to lay the suit. Since the proceedings under Section 20 of the Act was a suit, absence of notice meets with dismissal of the suit.

we find no force in the contention. As per ratio in Kalyan Peoples' Co-operative Bank ltd. vs. Dullhanbibi Aqual Aminsaheb Patil & Ors. [AIR 1966 SC 1066] prior to CPC 1976 Amendment Act, insistence upon a notice under Section 80 CPC in a suit under Order 21 Rule 63 renders no assistance to the petitioner. Even analogy of Section 80 CPC sought for in support of reference is of no avail, since rigour of notice under Section 80 CPC was softened by CPC 1976 Amendment Act in directing, in an appropriate case, post-suit notice.

Though application under Section 20 of the Act is treated as suit, in proceedings under the Act, it is a procedural part.

The mandatory requirement of section 90 does not get attracted to proceeding laid under Section 20 of the Act.

A serious contention raised by Shri K. Madhava Reddy, learned senior counsel for the petitioner, is that contract for arbitration is a precondition to avail arbitration.

Since the agreement for the 7 towers does not contain such arbitration clause, the application under Section 20 is not maintainable and, therefore, the suit deserves to be dismissed. We find no force in the contention. Undoubtedly, jurisdiction to arbitrate the dispute is founded upon an agreement entered with consensus ad idem under which the parties excluded established courts and submitted to the jurisdiction of the arbitrator for settlement of differences and disputes having arisen thereunder. Otherwise, court is devoid of jurisdiction to refer such disputes under Section 20 for arbitration. It is seen that the above quoted terms of the agreement and clause 32 of the contract read together clearly indicate that the award of the work during the course of execution is a part of the agreement originally entered into. Therefore, clause 32 of the agreement containing settlement of disputes by arbitration is an arbitration agreement within the meaning of Section 2 (a) of the Act. Therefore, application under Section 20 would be maintainable. We do not find any substance in the special leave petition.

The special leave petition is accordingly dismissed.

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