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Case Number
Attorney(S)
  • Jaswant Singh
  • Sunder Lal
  • L.N.Sharma
  • Bali
Judges
  • Hon'ble Sh. Justice Jia Lal Kilam
  • Hon'ble Sh. Justice M. A. Shahmiri
Acts
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citation codes
Case Number
Attorney(S)
  • Jaswant Singh
  • Sunder Lal
  • L.N.Sharma
  • Bali
Judges
  • Hon'ble Sh. Justice Jia Lal Kilam
  • Hon'ble Sh. Justice M. A. Shahmiri
Acts
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Smart Summary

Summary of Opinion — Kilam, J. (First Appeal)

Source opinion reviewed and summarized exactly as provided; no information has been added beyond the text of the opinion.

Factual and Procedural Background

The appellant (Mr. C. Rai), landlord of two houses leased to Indian Military authorities under lease deeds dated 29-9-48 and 7-10-48, claimed compensation after both houses were gutted by fire on 21-9-50. The appellant alleged wilful negligence by army personnel. A Board of officers constituted by the Union of India (the non-applicant) in about September 1950 rejected the appellant's compensation claim.

The appellant's counsel sent a notice to the Union of India, Ministry of Defence, dated 1-3-53 asserting that a dispute had arisen which, under clause 18 of the lease, had to be referred to an arbitrator to be appointed by the Government of India. The appellant applied to the Court under Section 20 read with Section 8(1)(a) of the Arbitration Act seeking that the arbitration agreement be filed and an arbitrator appointed.

The Union of India resisted the application, inter alia, arguing that the notice served was invalid and the application therefore incompetent. The learned Chief Justice sitting in Chambers dismissed the application on the ground that the notice was not in conformity with Section 42 of the Arbitration Act because clause 17 of the lease had not been complied with. The present appeal challenges that decision.

Legal Issues Presented

  1. Whether a prior notice in the form and manner alleged by the appellant was necessary before an application under the Arbitration Act could be entertained by the Court (i.e., whether clause 17 or 18 of the lease made such a notice a condition precedent).
  2. Whether clause 17 of the lease requires that notice to the Government of India be given only through the Lands, Hirings and Disposal Service at Howrah (i.e., whether direct notice to the Government was invalid).
  3. Whether Section 8 of the Jammu & Kashmir Arbitration Act (relating to appointment by consent and court appointment on failure) applied to this dispute, or whether Section 20 (filing of arbitration agreement in Court) was the applicable provision.
  4. Whether the application was incompetent because the notice did not comply with Section 42 of the Arbitration Act, as found by the learned Chief Justice in Chambers.

Arguments of the Parties

Applicant's Arguments (Mr. C. Rai through Mr. Bali, counsel)

  • Under the facts of the case no notice was necessary to be given to the Union of India, and any defect in the notice was therefore immaterial.
  • Clause 17 of the lease does not make the giving of a notice to the Union of India a condition precedent for making an application to the Court under the Arbitration Act.
  • Clause 17 does not prohibit giving notice directly to the Government of India; it does not mandate that notice must be given only through the Lands, Hirings and Disposal Service, 24, Parganas, Howrah and Hoogly.

Respondent's Arguments (Union of India)

  • The notice given by the applicant was not a valid notice in conformity with Section 42 of the Arbitration Act (as the learned Chief Justice found), because clause 17 of the lease was not complied with.
  • On the basis that the notice was invalid, the present application was not competent and should be dismissed.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court's analysis proceeds by identifying and applying the relevant provisions of the Arbitration Act and the express terms of the lease (clauses 17 and 18), and by testing the learned Chief Justice's interpretation of clause 17 against the language of the lease and the statutory provisions.

  1. Applicability of Section 8:
    • The court examined Section 8(1)(a) and Section 8(2) (Jammu & Kashmir Arbitration Act) which apply where appointment of arbitrators is to be made by consent of the parties and, upon failure to appoint, the Court may be asked to appoint an arbitrator after statutory notice.
    • Clause 18 of the lease gives the Government of India the exclusive power to appoint an arbitrator and makes the arbitrator's decision conclusive and binding. There was no provision for appointment by mutual consent of the parties.
    • Consequently, Section 8 is not engaged because the clause does not contemplate appointment by concurrence of the parties; the Government alone had the power to appoint.
  2. Interpretation of Clause 17 and Section 42:
    • Section 42 provides a method of service for notices required by the Arbitration Act by reference to the arbitration agreement's provisions.
    • The learned Chief Justice construed clause 17 to require that notice be given only by post to the Lands, Hirings and Disposal Service at Howrah and not directly to the Government, and held the notice invalid on that basis.
    • The appellate court rejected that construction. Clause 17 states that any notice "shall be considered as duly given if sent ... through the post by registered letter addressed to the Lands, Hirings and Disposal Service..." The appellate court interpreted this as an enabling provision that designates an agent able to receive notice on behalf of the Government; it does not extinguish the Government's own power to receive notice directly nor make the method exclusive.
    • Thus, a notice sent directly to the Government of India could still be valid; clause 17 only declares that a notice sent to the specified service will be considered duly given.
  3. Applicability of Section 20:
    • Section 20 permits parties to apply to a Court to have an arbitration agreement filed in Court where an arbitration agreement exists in writing and a difference has arisen; the Court then directs notice to be given to the other parties and may order the agreement to be filed and make a reference to the arbitrator appointed under the agreement or to one appointed by the Court.
    • The court observed that Section 20 affords an alternative to proceeding under Chapter II (which includes Section 8). Section 20 does not require that a party give notice to the other side before making an application; the notice contemplated under Section 20 is given by the Court under subsection (3).
    • Given the existence of a written arbitration agreement (clause 18) and the dispute, the conditions for proceeding under Section 20 were satisfied; therefore Section 20, not Section 8, is the provision material to this case.
  4. Conclusions synthesizing statutory and contractual provisions:
    • Clause 17 or 18 of the lease does not make it necessary that, before applying to the Court under the Arbitration Act, the applicant must give notice to the other party.
    • Clause 17 does not make it essential that notice to the Union of India be given only through the Lands, Hirings and Disposal Service at Howrah.
    • Section 8 does not apply because appointment of an arbitrator was not to be by agreement of the parties; the Government alone had the power to appoint.
    • Section 20 permits a party to apply to the Court without having given prior notice under the procedural regime of Section 8; once a party proceeds under Section 20, no prior notice need be given by that party.
  5. Disposition and Orders:
    • On this analysis the appellate court accepted the appeal, set aside the order of the learned Chief Justice in Chambers, and remitted the matter to him with directions to call upon the Union of India to appoint an arbitrator and, failing such appointment, to appoint one himself.
    • The court also directed that each party bear its own costs in the appellate court, noting that the appeal involved a number of legal points.

Holding and Implications

APPEAL ACCEPTED; ORDER OF THE CHIEF JUSTICE IN CHAMBERS SET ASIDE.

Direct consequences for the parties:

  • The case is remitted to the learned Chief Justice in Chambers to invite the Union of India to appoint an arbitrator pursuant to the lease clause; if the Union fails to do so, the Court may appoint an arbitrator itself.
  • The appellant's application under Section 20 of the Arbitration Act was held to be competent; Section 8 was held not to apply to the facts of this case.
  • The parties were directed to bear their own costs in this Court.

Broader implications:

The opinion articulates an interpretation of clauses 17 and 18 of the lease and of Sections 8, 20 and 42 of the Arbitration Act as applied to these facts, but the opinion does not state that it establishes any binding new precedent beyond the resolution of the present dispute.

End of summary. All content is drawn exclusively from the provided opinion of Kilam, J., and Shahmiri, J.'s concurrence as recorded.

Show full summary ...

    C. Rai v. Union Of India .

    Kilam, J.:— This is a first appeal against an order of the learned Chief Justice sitting in Chambers and arises out of an application purporting to be under Section 20 read with Section 8(1)(a) of the Arbitration Act, made by Mr. C. Rai (applicant) against the Union of India, with the prayer that an arbitration agreement which subsists between the parties be filed and appointment of an arbitrator be ordered to adjudicate upon certain matters of dispute between the parties.

    2. This application was resisted by the Union of India on various grounds, one of such grounds being that the notice given by the applicant was not a valid notice and as such the present application was not competent. The application came up before the learned C.J sitting in Chambers who dismissed the application on the ground that “the notice which had been served (on the non-applicant Union of India) was not in conformity with Section 42 of the Arbitration Act, inasmuch as the provisions of cl. 17 of the lease agreement have not been complied with.” On behalf of the applicant, his learned counsel, Mr. Bali, attacked the order of the learned C.J on the following grounds: firstly, that under the circumstances of the present case no notice was necessary to be given to the Union of India and any defect in the notice was therefore immaterial, and secondly, that cl. (17) of the lease agreement does not make the giving of a notice to the non-applicant (Union of India) a condition precedent for making an application to the Court. He has further submitted that cl. (17) does not lay down that no notice can be given directly to the Government of India and that it should have been given only through the Lands, Hirings and Disposal Service, 24, Parganas, Howrah and Hoogly.

    3. Before dealing with the argument submitted by the applicant's learned counsel, some facts about this case may be given here, so as to understand the legal position taken by the non-applicant, the Union of India. The Indian Military authorities had taken on lease two houses belonging to the applicant-appellant by means of two lease deeds dated 29-9-48 and 7-10-48. On 21-9-50, both these houses caught fire and were completely gutted.

    4. The applicant-appellant claimed compensation from the Army authorities for the loss sustained by him on account of the fire which, according to him, had broken out as a result of wilful negligence of the respondent's servants, i.e the army personnel residing there. The non-applicant, Union of India constituted a Board of officers somewhere in September 1950 to go into the question of payment of compensation.

    5. The Board rejected the applicant's claim, with the result that the appellant sent a notice through his counsel to the Union of India Ministry of Defence, on 1-3-53 in which a submission was made in the following words:

    “Now that the Government has finally refused to pay any compensation either on account of fire or the unauthorized removal of goods from these bungalows by the army personnel, a dispute has arisen between my client and the Government which has under cl. 18 of the lease deed to be referred to an arbitrator to be appointed by the Government of India.”

    6. This notice was held by the learned Judge in Chambers as not having been given in accordance with the provisions of Section 42 of the Arbitration Act. Reference may be made to cl. (18) of the lease deed which runs as follows:

    “Should any dispute or difference arise out of or concerning the subject-matter of these presents or any covenant clause or thing therein contained or otherwise arising out of this lease, the same shall be referred to an arbitrator to be appointed by the Government of India and the decision of the said arbitrator shall be conclusive and binding on the parties thereto. The provisions of Arbitration Act, 1940, shall apply to such arbitration.”

    7. According to this clause, in case of a difference or dispute arising between the parties, power was vested in the Government of India to appoint an arbitrator to go into the matter, the decision of such arbitrator appointed being conclusive and binding upon the parties.

    8. The learned Judge in Chambers seems to be of the view that according to Sections 8 and 42 of the Arbitration Act notice was necessary to be given to the Government of India before seeking redress from a Court of law, and as the notice was defective in so far as it was given direct to the Union of India, the present application was not competent.

    9. Now with all respect it appears to us that Section 8 of the Jammu & Kashmir Arbitration Act is not applicable to the facts of this case. According to S. 8(1)(a):

    “Where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties and all the parties do not, after differences have arisen, concur in the appointment or appointments, any party may serve the other parties or the arbitrators as the case may be, with a written notice to concur in the appointment or appointments.”

    (b) …………………

    (c) ………………….

    10. In S. 8(2) it is laid down that:—

    “If the appointment is not made within 15 clear days after the service of the said notice, the Court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like powers to act in the reference and to make an award as if he or they had been appointed by consent of all parties.”

    11. Cls. (b) and (c) of Section 8 of the Arbitration Act have no connection with the facts of the present case and as such need not be discussed. Now cl. (a) gives power to a Court to appoint an arbitrator on failure of the parties to do so, if the following conditions are satisfied:—

    (a) that there is a valid arbitration agreement;

    (b) that there is provision in the arbitration agreement for appointment of an arbitrator by consent of the parties;

    (c) that all the parties do not concur in the appointment of an arbitrator and that notice to the parties was given in terms of Sections 8 and 42 of the Jammu and Kashmir Arbitration Act.

    12. A reference to cl. 18 of the lease agreement which provides for the reference of any dispute between the parties to arbitration, would show that in the present case there is no question of an arbitrator being appointed by consent of the parties, nor was there room for any difference to arise with regard to the appointment of an arbitrator, for the simple reason that this clause provides that it is the Union of India, i.e, the non-applicant which alone had the power to appoint an arbitrator. Such being the case, the applicant's consent or no consent was immaterial. The applicant had agreed to absolute-power being given to the Union of India for making, appointment of an arbitrator whose decision had to be final and binding upon the parties. A reference to Section 8 of the Arbitration Act would make it clear that it is only when common consent of the parties is needed for the appointment of an arbitrator and that there is disagreement between the parties that the provisions of S. 8 would be attracted.

    13. Now coming to S. 42 which provides for some sort of a procedure as to how a notice required by the Jammu and Kashmir Arbitration Act is to be served otherwise than through Court, we find that this section lays down that such a notice shall be served in the manner provided in the arbitration, agreement. The learned Judge in Chambers having found that a notice was necessary has further held that such notice should have been given in accordance with cl. 17 of the lease deed and only through lands and hirings. Cl. 17 of the lease deed runs as under:—

    “Any notice to be made or given to the Government of India under these presents or in connection with the said premises shall be considered as duly given if sent by the Landlord/Landlords through the post by registered letter addressed to the Lands, Hirings and Disposal Service, 24, Paraganas, Howrah and Hoogly…….”

    14. The learned Judge in Chambers has taken this-clause to mean that it was essential for the petitioner to give notice to the Government of India by sending the notice by post or by registered letter to the Lands, Hirings and Disposal Service, 24, Paraganas, Howrah and Hoogly, and not directly to the Government of India. We find it rather difficult to agree with this interpretation. Cl. (17) of the lease agreement does not lay down that any notice to be given to the Government of India shall be given only through the Lands, Hirings and Disposal Service, 24, Parganas, Howrah and Hoogly, and not direct to the Government of India. It only says that if a notice is given to the Lands, Hirings and Disposal Service, they will be competent to receive the said notice on behalf of the Government of India and such notice shall be considered as duly given. This clause does not say that the Government of India had surrendered its right of receiving a notice to the Lands, Hirings and Disposal Service, 24, Parganas, etc., nor does it make it incumbent upon the landlord to give notice to the Government of India only through the Lands, Hirings and Disposal Service, Howrah. To take a common instance, the Lands, Hirings and Disposal Service, etc., were to act as agents of the Government of India for the purpose of receiving notice on behalf of the landlord-appellant. As long as the principal does not surrender his right of receiving his notice, a notice to the principal will be quite a valid notice. The phraseology of cl. (17) of the lease agreement would not suggest any other interpretation. The words “shall be considered as a duly given notice” make it abundantly clear that an option was given to the landlord-appellant to send the notice to the Lands, Hirings and Disposal Service, Howrah, and the Government of India had declared that such notice shall be considered by them as duly given. It was, as is generally known, an enabling provision for the landlord, and the notice sent by the landlord-appellant cannot be held to be invalid though sent to the Government of India.

    15. The application has been submitted by the landlord-appellant under S. 20 read with S. 8. We have already found that S. 8 is not applicable. But a reference to S. 20 would show that it is the only section which has a material bearing on the facts of the present case. Section 20 of the Arbitration Act runs as follows:—

    “(1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject-matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court.

    (2) The application shall be in writing and shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested as plaintiff or plaintiffs and the remainder as defendant or defendants, if the application has been presented by all the parties, or, if otherwise between the applicant as plaintiff and the other parties as defendants.

    (3) On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants, requiring them to show cause within the time specified in the notice why the agreement should not be filed.

    (4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court.

    (5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by, the other provisions of this Act so far as they can be made applicable.”

    16. According to S. 20 again an option has been given to a party either to proceed in Chapter II in which falls S. 8 or to come under S. 20. According to S. 20 no notice is necessary to be given by a party to the other side. All that is needed to attract the provisions of S. 20 is that there must be a valid arbitration agreement to refer to arbitration any dispute between the parties, and that the agreement to refer to arbitration should be in writing and should be produced before the Court having jurisdiction in the matter, so that it may be ordered to be filed in order that an arbitrator may be appointed and who may be called upon to act upon the agreement. It has been held in a number of authorities that once the Court is satisfied that an agreement which is in writing and is before it was entered into by the parties, it can proceed under Section 20 of the Arbitration Act. Now a reference to the facts of the present case reveals that all these conditions are fulfilled. Besides this, S. 20 does not lay down that a notice should be given by one party to the other before making an application under Section 20 of the Arbitration Act. A notice under this section has to be given by the Court. The present application has been submitted under Section 20 of the Arbitration Act read with S. 8. We have already seen that S. 8 is not applicable to the facts of the present case. The only section that would apply to the present case is Section 20 of the Arbitration Act.

    17. Summing up, we come to the following conclusions:—

    (a) that cl. 17 or 18 of the lease deed does not make it necessary that before an application is submitted under the Arbitration Act to the Court, a notice should be given by the applicant-appellant to the other party (i.e, the Union of India).

    (b) that cl. 17 does not make it essential that notice to the Union of India has to be given only through the Lands, Hirings and Disposal Service, 24, Parganas, Howrah.

    (c) that Section 8 of the Arbitration Act does not apply to the facts of the present case as an arbitrator was not to be appointed by the concurrence of the parties but it was only one party, i.e, the Union of India, which was given power to appoint an arbitrator irrespective of the concurrence or non-concurrence of the appellant.

    (d) that Section 20 of the Arbitration Act gives an option to a party to apply under that section instead of Chap. II and that when once a party proceeds under I this section, no notice need be given.

    18. We, therefore, accept this appeal, set aside the order of the learned C.J in chambers and send the case back to him with the request that he will call the other party, i.e, the Union of India, to appoint an arbitrator, failing which his Lordship may appoint one himself. In view of the fact that this appeal involves a number of legal points, we leave the parties to bear their own costs in this Court.

    19. Shahmiri, J.:— I agree.

    H.G.P

    20. Appeal accepted.

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    Comments

    C. Rai v. Union Of India .
    (Oct 8, 1956)