M/S. Unissi (India)
Pvt. Ltd. Vs. P.G. Institute of Med. Edn. & Research [2008] INSC 1678 (1
October 2008)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 6039 OF 2008 (Arising
out of SLP(C) No. 9204 of 2006) M/s. Unissi (India) Pvt. Ltd. ...Appellant
VERSUS Post Graduate Institute of Medical Education & Research
...Respondent
TARUN CHATTERJEE,J.
1.
Delay
in filing this special leave petition is condoned.
2.
Leave
granted.
3.
This
appeal is directed against the Judgment and order dated 3rd of August, 2005 in
Arbitration Case No. 45 of 2004 passed by the Additional District Judge,
Chandigarh, dismissing the application filed by the appellant for appointment
of an Arbitrator on the ground that no Arbitration Clause was in existence
between the parties.
4.
The
brief facts leading to the filing of this appeal may be summarized as under :-
A tender was floated by the Post Graduate Institute of Medical Education and
Research (in short, "the PGI") on 21st of December, 2000 for the purchase
of Pulse Oxymeters, the format of which contained an arbitration clause. The
appellant gave an offer for the tender on 15th of January, 2001, which was
accepted by the PGI. Purchase orders were placed and in compliance with the
said order, the appellant had supplied equipments. The delivery of equipments
was also accepted by the PGI and the machineries were installed. The PGI
demanded the execution of an agreement containing an arbitration clause on a
non-judicial stamp paper duly signed.
The appellant signed
the agreement and sent it to the PGI but the signature of the authorities of
the PGI was never acquired. It is true that although the appellant duly signed
the agreement and sent it to PGI but the signature on the agreement had never
reached the appellants. According to the appellant, an agreement containing an
arbitration clause was executed between the parties. No payment was made by the
PGI against delivery of goods worth Rs.
22,16,853.60 though
the equipments were installed and put in use. The PGI, on the other hand,
however, forfeited the earnest money of Rs.2,12,160/-, which was encashed by
them.
Eventually, the PGI
got the equipments lifted and it was found by the appellant that the equipments
had been mis-handled and were no longer fit to be used/resold in the market. A
notice was served on behalf of the appellant of the matter to the PGI but no
reply was received. It was the case of the PGI that no agreement was executed.
The appellant was alleged to have committed fraud on the PGI by representing
themselves of being the manufacturers of the equipments, which were in fact,
according to the PGI, were imported from Korea. A Technical Committee of the
PGI on 14th of January, 2003, however, did not approve the purchase and
installation of the equipments and thus, by a letter issued in the year 2003,
the appellant was informed that the tender was rejected. According to the PGI,
the supply, not being in accordance with the specification, was rejected after
use and the appellant was debarred from dealing with the PGI for the next two
years. Therefore, it was alleged by the PGI that no arbitration agreement was
executed between the parties and, therefore, question of appointing an
Arbitrator in the present case could not arise at all.
5.
Finding
no other alternative, the appellant filed an application before the Additional
District Court at Chandigarh under Section 11(4) (a) of the Arbitration and
Conciliation Act, 1996 (in short, "the Act") for a direction upon the
PGI to appoint an Arbitrator. The Additional District Judge, Chandigarh, by the
impugned order dated 3rd of August, 2005, held that as there was no agreement
executed between the parties, the question of appointing an Arbitrator under
the Act could not arise at all. It was held by the learned Addl. District
Judge, Chandigarh that since the photocopy of the proposed agreement bears the
signature of only the appellant and not that of the PGI, it could not be held
that an arbitration agreement was executed between the parties and since there was
no signature of the PGI on the said agreement, which was sent after signature
of the appellant, remained only as an offer. Therefore, according to the
learned Additional District Judge, Chandigarh, in the agreement containing an
arbitration clause, it could not be held that the appellant was entitled to ask
for appointment of an Arbitrator under Section 11 of the Act. It is this order,
which is under challenge in this Court, which on grant of leave, was heard in
presence of the learned counsel for the parties.
6.
This
special leave petition, as initially filed, came up for consideration for
admission on 9th of May, 2006 when a question arose whether the said special
leave petition was maintainable in this court against an order of the
Additional District Judge, Chandigarh purported to have acted in the exercise
of its power under Section 11 (4)(a) of the Act. While issuing notice, this
Court passed the following order:- "This special leave petition has been
filed by the petitioner against the order dated 3.8.2005 passed by the Addl.
District Judge, Chandigarh in Arbitration Case No.45 dated 2.6.2004. According
to the learned counsel for the petitioner, the special leave petition is
maintainable in view of the recent judgment of the Constitution Bench in SBP &
Co. vs. Patel Engineering Ltd. & Anr. Reported in (2005) 8 SCC 618. In this
regard, he invited our attention to paragraph 47 sub-clause (vii), (x) and
(xi). In our view, there is a clear indication in the said judgment that
against the order passed by the Additional District Judge, the special leave
petition under Article 136 of the Constitution of India is entertainable by
this Court. (emphasis supplied) We, therefore, issue notice to the respondent
on the question of maintainability 6 of the special leave petition in this
Court against the order passed by the Additional District Judge,
Chandigarh.Issue notice on the application for condonation of delay also."
7.
On
a plain reading of this order passed by this Court on 9th of May, 2006, it is
evident that this Court was of the view that an application under Article 136
of the Constitution was maintainable against an order passed by the Additional
District Judge, Chandigarh. Furthermore, the learned counsel appearing for the
parties have also argued the case before us on merits, that is to say, on the
question whether an arbitration agreement exists between the parties for which
an Arbitrator could be appointed. Such being the stand taken by the learned
counsel for the parties and in view of the aforesaid order passed by this
Court, we do not intend to go into the question whether a petition under
Article 136 of the Constitution would at all be entertainable by this Court as
the Special Leave petition was entertained and notice was issued.
However, keeping this
question open for decision in an appropriate case, we would like to go into the
merits of the case, that is to say, whether an Arbitrator can be appointed in
view of existence of an arbitration agreement between the parties, although in
such agreement the PGI had not executed agreement by putting their signature on
the same.
8.
In
view of the aforesaid stand being taken by the learned counsel for the parties,
let us now examine the merits of this appeal. As noted herein earlier, the
learned Additional District Judge, Chandigarh held that their did not exist any
arbitration agreement between the parties and, therefore, question of
appointing an Arbitrator could not arise at all. Therefore, in order to decide
whether the order of the Additional District Judge was correct or not, we have
to consider the relevant facts as well as Section 7 of the Act for the purpose
of coming to a proper conclusion whether the agreement containing an
arbitration clause did exist between the parties or not. Before we proceed further,
we may examine Section 7 of the Act which runs as under :
"Section 7 -
Arbitration agreement (1) In this Part, "arbitration agreement"
means an agreement by
the parties to submit to arbitration all or certain disputes which have arisen
or which may arise between them in respect of a defined legal relationship,
whether contractual or not.
(2) An arbitration
agreement may be in the form of an arbitration clause in a contract or in the
form of a separate agreement.
(3) An arbitration
agreement shall be in writing.
(4) An arbitration
agreement is in writing if it is contained in- (a) a document signed by the
parties;
(b) an exchange of
letters, telex, telegrams or other means of telecommunication which provide a
record of the agreement; or (c) an exchange of statements of claim and defence
in which the existence of the agreement is alleged by one party and not denied
by the other.
9 (5) The reference
in a contract to a document containing an arbitration clause constitutes an
arbitration agreement if the contract is in writing and the reference is such
as to make that arbitration clause part of the contract."
9.
We
have carefully examined the provisions made under Section 7 of the Act which
deals with arbitration agreement. In Smita Conductors Ltd. vs. Euro Alloys Ltd.
[2001 (7) SCC 728], Article II Para 2 of New York Convention came up for
consideration before this Court. The provisions of Article II, Para 2 of New
York Convention is in pari materia to the aforequoted provisions of Section 7
of the Act. The provisions of Article II, Para 2 of New York Convention is
being quoted herein now. Para 2 runs as under :- "Para 2 - The term
"agreement in writing" shall include an arbitral clause in a contract
or an arbitration agreement, signed by the parties or contained in an exchange
of letters or telegrams."
10.
This
Court, while interpreting the aforequoted para 2 in the New York Convention
held in para 6 at pages 734-735 in Smita Conductors (supra) the following : -
"6. What needs to be understood in this context is that the agreement to
submit to arbitration must be in writing. What is an agreement in writing is
explained by para 2 of Article II. If we break down para 2 into elementary
parts, it consists of four aspects.
It includes an
arbitral clause (1) in a contract containing an arbitration clause signed by
the parties, (2) an arbitration agreement signed by the parties, (3) an
arbitral clause in a contract contained in exchange of letters or telegrams,
and (4) an arbitral agreement contained in exchange of letters or telegrams. If
an arbitration clause falls in any one of these four categories, it must be
treated as an agreement in writing.
In the present case,
we may advert to the fact that there is no letter or telegram confirming the
contract as such but there is certain correspondence which indicates a
reference to the contract in opening the letters of credit addressed to the
Bank to which we shall presently refer to. There is no correspondence between the
parties either disagreeing with the terms of the contract or arbitration
clause. Apart from opening the letters of credit pursuant to the two contracts,
the appellant also addressed a telex message on 23.4.1990 in which there is a
reference to two contracts bearing 11 Nos. S.142 and S. 336 in which they
stated that they want to invoke force majeure and the arbitration clauses in
both the contracts which are set forth successively and thus it is clear that
the appellant had these contracts in mind while opening the letters of credit
in the bank and in addressing the letters to the bank in this regard. May be,
the appellant may not have addressed letters to the respondent in this regard
but once they state that they are acting in respect of the contracts pursuant
to which letters of credit had been opened and they are invoking the force
majeure clause in these two contracts, it obviously means that they had in mind
only these two contracts which stood affirmed by reason of these letters of
credit. If the two contracts stood affirmed by reason of their conduct as
indicated in the letters exchanged, it must be held that there is an agreement
in writing between the parties in this regard.
11.
Again
in Nimet Resources Inc. vs. Essar Steels Ltd. [2000 (7) SCC 497 at Para 5],
this Court observed as follows:- "If the contract is in writing and the
reference is made to a document containing arbitration clause as part of the
transaction, which would mean that the arbitration agreement is part of the
contract. Therefore, in a matter where there has been some transaction between
the parties and the 12 existence of the arbitration agreement is in challenge,
the proper course for the parties is to thrash out such question under Section
16 of the Act and not under Section 11 of the Act."
12.
Keeping
the aforesaid principles, as quoted hereinabove, in the aforesaid decisions of
this Court in kind, in fact what constitutes an arbitration agreement between
the parties, we have to examine whether there exists an arbitration agreement between
the parties or not in the facts and circumstances of the case. Let us,
therefore, consider the gist of the facts involved in this case. A tender
enquiry No.2PGI/OGL/2K/6281 dated 21.12.2000 for purchase of Pulse Oxymeters
was floated by the PGI. It is an admitted position that the appellant submitted
their tender vide their offer No.UIPL/331177/00-01 dated 15.2.2001. The tender
of the appellant was accepted by the PGI vide their letter
No.PGI/P-61/02/477/11936-51 dated 29.9.2002 for supplying 41 Pulse Oxymeters to
their different departments. The tender documents itself contain an arbitration
clause and by reason of acceptance of the tender of the appellant by the PGI,
it must be held that there was a valid arbitration agreement between the
parties. The appellant supplied 41 Pulse Oxymeters and the receipt thereof was
duly acknowledged on behalf of the PGI on the delivery challans. The
service/installation reports of the aforesaid machines were duly signed on
behalf of the PGI. In the letters issued by the PGI, there was an apparent
acknowledgement of supply of the aforesaid meters by the appellant and also
reference to the aforementioned tender enquiry number. It is an admitted
position that the appellant had sent the agreement containing the arbitration
clause, as per the format provided by the PGI, after duly signing the same on
requisite value of stamp paper for signing of the same by the PGI. The PGI
though admittedly received the same, did not send back the agreement to the
appellant after signing it as per the agreement between the parties. The PGI
admittedly had used the machines for about an year and thereafter returned the
same to the appellant. Subsequently, the bank guarantee furnished by the
appellant for Rs.2,13,160/- and the earnest money deposit of Rs.45,000/- was
encashed and forfeited by the PGI.
In view of the
aforesaid facts and the correspondences between the parties, particularly the
tender offer made by the appellant dated 15.1.2001 and supply order of the PGI
dated 29.9.2002, and, in our view, to constitute an arbitration agreement
between the parties and the action taken on behalf of the appellant and in view
of Section 7 of the Act and considering the principles laid down by the
aforesaid two decisions of this Court, as noted herein earlier, we are of the
view that the arbitration agreement did exist and therefore the matter should
be referred to an Arbitrator for decision. That apart, as we have already noted
herein earlier that in this case, the documents on record, in our view,
apparently show supply of materials by the appellant and acceptance thereof by
the PGI in pursuance of the tender enquiry by the PGI, wherein tender of the
appellant containing an arbitration clause was admittedly accepted by the
respondent. In that view of the matter, it cannot be said that the PGI should
now be allowed to wriggle out from the arbitration agreement between them.
13.
We
may reiterate that in this case admittedly the documents which are on record
apparently show supply of the material by the appellant to the PGI and
acceptance thereof by the PGI in pursuance of the tender enquiry by them
wherein tender of the appellant containing the arbitration clause was
admittedly accepted by the PGI. Accordingly, we hold that arbitration agreement
did exist and, therefore, dispute between the parties would be referred to an
Arbitrator for decision.
14.
Therefore,
considering the above aspects of the matter in this case, we must come to this
conclusion that although no formal agreement was executed, the tender documents
indicating certain conditions of contract contained an arbitration clause. It
is also an admitted position that the appellant gave his tender offer which was
accepted and the appellant acted upon it. Accordingly, we are of the view that
the learned Additional District Judge, Chandigarh erred in holding that their
did not exist any arbitration agreement between the parties and, therefore, the
order passed by him is liable to be set aside.
15.
For
the reasons aforesaid, the impugned order is set aside and the appeal is
allowed. We now direct that the matter may be placed before the Hon'ble Chief
Justice of the High Court of Chandigarh to appoint an Arbitrator in accordance
with law to resolve the dispute between the parties. The appeal is thus
allowed. There will be no order as to costs.
................................J.
[TARUN CHATTERJEE]
................................J.
NEW
DELHI:
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