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R.C. Aggarwal v. Delhi Tourism
Factual and Procedural Background
The applicant issued a tender notice on 16th April 1982 inviting offers for shop premises to sell Indian Made Foreign Liquor (IMFL) in Delhi. The plaintiff submitted a tender and the parties entered into a licence agreement dated 15th July 1982, granting the licence for one financial year from April 1982 to 31st March 1983. The agreement contained an arbitration clause (Clause 15) providing for disputes to be resolved by arbitration under the Arbitration Act, 1940. In 1988, the respondent requested renewal of the agreement, but the plaintiff declined and demanded that the respondent vacate the premises. Despite legal notices, the respondent did not comply, leading to the present suit. The legal question arose whether the arbitration clause could be invoked after the expiry of the agreement without renewal.
Legal Issues Presented
- Whether an arbitration clause can be invoked after the expiry of the underlying agreement or contract between the parties in the absence of renewal.
Arguments of the Parties
Respondent's Arguments
- The respondent contended that disputes arising after the expiry of the agreement are still subject to arbitration if the original agreement contained an arbitration clause.
- Reliance was placed on several authorities supporting the proposition that arbitration clauses survive beyond the contract term.
- Reference was made to Section 16 of the Arbitration Act, 1996, arguing that the arbitrator has jurisdiction to rule on the existence or validity of the arbitration agreement and thereby decide disputes.
Plaintiff's Arguments
- The plaintiff maintained that arbitration clauses operate only during the subsistence of the agreement and cease to have effect once the contract expires.
- The plaintiff emphasized that the arbitration agreement became "dead" nearly 20 years prior, and that the remedy for disputes after expiry lies in a suit, not arbitration.
- It was argued that Section 16 empowers an arbitrator only to decide on the existence or validity of the arbitration agreement, not to arbitrate disputes after the agreement itself has ceased to exist.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The court analyzed the scope and temporal application of arbitration clauses, emphasizing that such clauses are intended to resolve disputes arising during the currency of the agreement. It rejected the respondent’s reliance on Section 16 of the Arbitration Act, 1996, clarifying that this provision only permits an arbitrator to decide on the existence or validity of an arbitration agreement, not to extend arbitration jurisdiction beyond the life of the contract. The court highlighted that the arbitration agreement must be in writing and subsist for arbitration to be invoked. Since the agreement expired long ago and was not renewed, the arbitration clause ceased to operate. The plaintiff’s remedy for disputes arising after expiry is through a civil suit rather than arbitration. The court found the respondent’s interpretation of the arbitration clause and Section 16 to be misconceived and dismissed the application accordingly.
Holding and Implications
The application to invoke the arbitration clause after expiry of the agreement is dismissed.
The court’s decision directly affects the parties by denying arbitration as a forum for dispute resolution post-expiry of the contract. It clarifies that arbitration clauses do not survive beyond the life of the underlying agreement absent renewal, and disputes arising after expiry must be resolved through ordinary civil proceedings. No new legal precedent was established beyond this application of existing principles.
J.D Kapoor, J.:— Short question involved for determination in this application under Section 8 is whether the arbitration clause can be invoked after the expiry of the agreement or contract between the parties on in the absence of renewal of the expired agreement.
2. The facts are more or less broadly admitted and are as under:—
3. The applicant floated a tender notice on 16th April, 1982 inviting sealed tenders for offer of shop premises for opening of Indian made Foreign liquor (in short IMFL) shops in various areas of Delhi. Pursuant to this notice plaintiff submitted its tender offering the suit premises for sale of IMFL As a consequence the parties entered into a licence agreement dated 15th July, 1982. As per clause 4 of the said agreement the licence was granted for a period of one financial year beginning from April, 1982 and ending on 31st March, 1983. Clause 15 of the said agreement was an arbitration clause which is to the following effect:—
“If any dispute of differences arises between the parties here to or their representatives or in regards to any other matter under these presents, save as to any matter the decision where is herein before expressly provided for, the same shall be referred to the sole arbitration of the Chairman of Delhi Tourism Development Corporation Ltd., and if he is unable or unwilling to act, to the sole arbitration some other person appointed by him. It will be no objection to any such appointment that the person appointed is/was an employee of the Corporation or that he had to deal with the matters to which the contracts relates and that in the course of his duties as such employee of the Corpn. He had expressed view on all or any of the matter in dispute or difference. The reference to the Arbitration shall be deemed to be a submission within the meaning of the Arbitration Act, 1940, or any statutory modification or re-enactment thereof, and the rules made there under for the time being in force shall apply to such reference and this deed shall be deemed to be submission to such arbitration.”
4. The respondent requested the plaintiff vide communication dated 31st May, 1988 to enter into or renew the agreement and enclosed the draft agreement alongwith it. In response the plaintiff reminded the respondent/applicant that he was no more interested in entering into or renewing any agreement on the same terms and condition. He also made it clear in the said communication that he has written several letters to the defendant before terminating the agreement for vacating the premises and again called upon the defendant to vacate the premises at the earliest. The plaintiff did not pay any heed and was served a legal notice. It did not have any effect upon the respondent which gave rise to the instant suit.
6. There is no dispute as there is unvarying unanimous current of opinion that the arbitration clause in any agreement is incorporated with the sole intention of resolving the disputes that would arise during the currency of the agreement. Mr. Maninder Singh, learned counsel for the respondent, has referred to large number of authorities to convass the point that any dispute arising between the parties even after the agreement or contract has expired is liable to be determined and decided by way or arbitration if the parties in the original agreement had agreed to do so. I am afraid all the authorities relied upon by Mr. Singh are to the effect that the arbitration clause operates till the agreement or a contract is in existence. If the agreement becomes non-existent or expires, the remedy not is to get the dispute decided on determined by way of arbitration clause.
7. In the same vein the contention of Mr. Singh that Section 16 of the Arbitration Act, 1996 empowers the Arbitrator to rule on its own jurisdiction as well as on objection with regard to the existence or validity of the arbitration agreement is of no consequence as this power is conferred upon the Arbitrator to rule upon the existence or validity of the arbitration agreement and nothing more and nothing less. Section 16 of the new Act only permits the Arbitrator to decide a question relating to the existence of an arbitration clause which does not mean that he is holding powers to decide the disputes between the parties as an Arbitrator after the extinction of the agreement itself. The genesis of the disputes arising between the parties out of agreement or contract between Arbitrator in the agreement itself does not become redundant or extinct whereupon the arbitration clause itself becomes non-existent. Has it not been so the respondent itself would not have written back to the petitioner for renewing the agreement which was for a period of one year. Nor would have the plaintiff written back by saying that he has no intention to remove it and is only interested in getting the premises vacated.
8. Section 7 of the Arbitration Act is the pedestal or edifice on which the remedy by way of determining the disputes through arbitration is provided. According to Section 7 the arbitration agreement means an agreement between the parties to submit for the arbitration or certain disputes which have arisen or which may arise between the them in respect of a definite legal relationship whether contractual or not and sub-clause (3) of the Section provides unless and until the arbitration agreement is in writing the arbitration agreement is meaningless. The arbitration agreement has to be in writing duly signed by the parties. In the instant case the arbitration agreement upon which the respondent is banking became dead almost 20 years back. Merely because the plaintiff has not taken the remedy for 10-15 long years and letters after letters were sent and ultimately he served the legal notice does not mean that he is left remediless. The only remedy available to the plaintiff is by way of suit and not through arbitration as claimed by the respondent/applicant. Thus the reliance upon the judgments of the Supreme Court by the learned counsel for the respondent is entirely misplaced. provisions of section 16 are mis-construed and the concept as propounded by the learned counsel is misconceived as such a clause of arbitration clause emanates only through a written agreement. For the aforesaid reasons I do not find any merit in the application. Same is hereby dismissed.
Let the defendant file the written statement positively within two weeks. Replication be filed within two weeks thereafter. Be listed before the regular Bench on 22nd November, 2002.
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