General Manager J & K Co-Operative Supply And Marketing Federation v. Rama Rice & General Mills .

1. The parties to the litigation are alleged to have entered into an agreement providing an arbitration in ease of disputes and difference arising out of or in any manner touching or concerning the agreement for adjudication by the Registrar, Co-Operative Societies, J&X. After the expiry of the period of agreement, the respondent preferred a claim for the storage of paddy at the rate of Re 1/-per bag per day and upon denial of the liability by the appellant, preferred a claim of Rs. 11,77, 600. As the claims were not settled, an application under Sec, 20 of the Arbitration Act, was filed in this Court for making of the reference to an independent arbitrator. The petition was resisted mainly on the grounds that in view of the provisions of Sec. 63 of the J&K. Co-Operative Societies Act, no relief could the granted to be respondent herein and that in no case an independent arbitrator could be appointed. The learned Single Judge, while rejecting the pleas of the appellant herein appointed District Judge. Jammu, as the arbitrator for adjudication of all the disputes vide the judgment impugned in this appeal which is stated to be against law and facts requiring to be set aside.

2. I have heard learned counsel for the parties and perused the record.

3. Mr. Gupta, Scarred counsel appearing for the appellant has submitted that as the disputes raised by the respondent herein were covered by Sec. 63 of the j&k co-operative societies act, this court had no jurisdiction to entertain an application under Sec 20 of the Arbitration Act and grant relief as prayed, it is however, contended on behalf of the respondent that the disputes raised by the respondent were not covered by Sec. 63 in view of the provisions of sub-sec (2) of the said section specifying exhaustively the disputes which could be adjudicated under the j&k co-operative societies act,

4. The question as to whether the disputes raised by the respon­dent were covered by Sec, 63 of the j&k co-operative societies act or nor, is not relevant for the purposes of deciding this appeal in view of the fact that the parties had admittedly entered into an agreement wherein it was provided :

"All disputes-and differences arising out of or in any manner touching or concerning this agreement whatsoever shall be referred to the sole arbitration of REGSTRAR, COOPERATIVE SOCIETIES, J&K All points of law and facts will be exclusively decided by the arbitrator and it shall not be open to the contractor and the surety to plead that the Registrar Co-Operatives Societies, J&K, is the Head and the Officer of the Party No. 1."

The arbitration is provided for the potties to get their disputes settled through the intervention of a third person, as agreed to be appointed as a judge of the parties, but without having recourse to a court of law. The underlying idea of arbitration is based upon the principle of withdrawing the disputes from the ordinary courts and enabling the contending parties to substitute a domestic tribunal of their choice. The arbitration contemplated under the Act may be contractual or statutory. It has to be ascertained from the agreement that the parties had intended to make a submission to arbitrations i.e, there must exist animus arbitrandl. The essentials of an arbitration agreement within the meaning of Sec. 2 (a) of the Act are:

There should be an agreement between the parties;

Such agreement should be in writing; and

The agreement should be to refer the existing or future disputes to arbitration.

The statutory arbitrations are such arbitrations where there is no agreement or contract between the parties, but they are required to make a reference to an arbitrator under the provisions of some statute covering them. In such cases the enactment under the provisions of which reference is required to be made, shall be deemed to be the arbitration agreement and the consequent proceedings are required to be conducted as in the case of any other arbitration agreement. However, in statutory arbitration the provisions of sections 6 (1), 7, 12&37 would not apply as is provided under Soc. 46 of the Arbitra­tion Act.

5. Even if the parties are held to be bound by the provisions of Sec. 63 of the Co-operative Societies Act, yet, they are, not estopped from entering into or agreeing for a contractual arbitration as has been dons in the instant case. Sec. 34 of arbiration Act deals with the situations where one of the party to the agreement, is entitled to get the legal proceedings stayed in a case governed by an arbitration agreement. The right conferred under Sec. 34 of the Act can also be waived by the parties either specifically or by their conduct. It is true that Sec. 34 is not applicable to the statutory arbitration, but, that does not debar the parties from contracting for a fresh arbitration agreement for the appointment of a person or authority as an arbitrator under the provisions of the Act. No party is entitled to unilaterally repudiate or rescind the arbitration but no provision is made under the Act forbidding the parties from entering into a fresh arbitration agreement or substituting a contractual arbitration in place of statutory arbitration.

6. In this case none of the parties have denied the execution of the arbitration agreement, nor have they challenged its validity under any provision of law. Even if it is presumed that the parties were gov­erned by the statutory arbitration in terms of Sec. 63 of the Co-Opera­tive Societies Act, Yet, it is proved that they voluntarily substituted a contractual obligation by means of an arbitration agreement executed on 24.10.1991 providing arbitration by Registrar, Co-Operative Societies, which was neither illegal nor forbidden under any statute. The parties were therefore, governed by the provisions of contractual agreement executed between them and the appellant could have not insisted for statutory arbitration in terms of Sec. 63 of the Co-operative Societies Act.

7. Under the agreement executed between the parties all disputes were required to be referred to the arbitration of the Registrar, Co- Operative Societies, J&K and the mere apprehension of the petitioner that, the Registrar being head of the department is biased and judge of his own cause was not sufficient for the appointment of any other person as an arbitrator. The parties with eyes open and knowing fully well that the Registrar, Co-Operative Societies was head of the depart­ment had agreed for adjudication of their disputes through him. The respondent, therefore, was not justified in praying for the appointment of any other person as an arbitrator without permitting the agreed arbitrator to adjudicate upon the disputes. The learned Single Judge, therefore, was not justified to substitute the District Judge as an arbi­trator in place of the agreed arbitrator. It has been held by the Supreme Court in U.P. Co-Operative Federation v. Sunder Brothers, Delhi AIR 1967 SC 249 that It is, of course, the normal duty of the Court to hold the parties to the contract and to make them present their dis­putes to the forum of their choice. The Supreme Court, was, however of t view that if it was shown that there were good grounds for apprehending that the arbitrator will not act fairly, the proceedings may be stayed. Similarly reliance of the learned counsel upon AIR 1971 J&K. 91 was irrelevant in the circumstances of the case. This Court had held that where it can be shown that agreed arbitrator was likely 10 show bias or there existed sufficient reasons to suspect that he will act unfairly or that he had been guilty of continued unreasonable con­duct or that he is prejudiced or formed opinion about any matter likely to be referred to his arbitration, a reference be made to a person other than the agreed arbitrator. Without referring to the unreasonable, bona fide or genuine apprehension based upon any fact or circumstance the learned Single Judge opted to refer the disputes to the District Judge, Jammu which was not warranted under law or the facts and circums­tances of the case. Under similar circumstances this Court refused to make reference of disputes to any other arbitrator except the Registrar, Co-Operative Societies in Arbitration Application No : 142/82 and 239/86 decided on 22-4-1987. Learned counsel for the respondent has also been very fair to on cede that under the normal circumstances, disputes should have, been- referred to the arbitration of Registrar, Co-Operative Societies in terms of the agreement executed between the parties.

8. Accordingly this appeal is partly allowed by upholding the? order of the learned Single Judge referring the disputes to an arbitrator other than the one provided under the statutory arbitration clause but set aside the same to the extent it appoints District Judge, Jammu, as arbitrator for adjudication of the disputes between the parties. We direct that all the disputes between the parties shall be referred to the arbi­tration of the Registrar, Co-Operative Societies, J&K, for adjudication under law. The parties shall be at liberty to file their detailed claims and counter claims before the agreed arbitrator, i.e the Registrar, Co-Operative Societies, J&K, who shall enter upon the reference and file his award within the statutory period of four months from the date he enters upon the reference.

Parties through their learned counsel have been directed to appear before the agreed arbitrator on 15th March, 1993.