Union of India (UOI) vs Usha Sawhney

Mukul Mudgal, J.—With the consent of the parties the matter is taken up for final hearing.

This appeal challenges the judgment of the learned Single Judge dated 13.01.2006 dismissing the petition u/s 34 of the Arbitration Act filed by the appellant, Union of India, challenging the award dated 02.11.2004 passed by the respondent No. 2 as a sole arbitrator. The dispute between the parties arises out of a contract appointing the respondent as a commission agent for the sale of railway tickets, by the General Manager, Northern Railway, Baroda House, New Delhi. The agency of the respondent was terminated by a letter dated 17.05.2002. The same was challenged by the respondent in Writ Petition (C) No. 1185/2002.

By common consent of the parties, the arbitrator was appointed on 14.01.2003 by learned Single Judge of this Court. The said order reads as follows:

As both the parties agree for settlement of disputes by means of arbitration, Justice Satpal, a retired Judge of the Punjab & Haryana High Court is appointed as arbitrator who shall enter upon reference and adjudicate upon the disputes as raised in this petition.

Statement of claim was filed before the said arbitrator. Upon receiving the notice, the appellant filed its reply, and after hearing both the parties and going through the record an award was passed granting a sum of Rs. 23,62,649/- with simple interest @ 10% from 10.02.1999 to 31.10.2004, totaling an aggregate sum of Rs. 37,01,550/-. 18% interest was also awarded on the said amount of Rs. 37,01,550/- plus costs of Rs. 75,000/-.

The main plea before the learned Single Judge centered around the appointment of arbitrator itself and it was, inter alia, pleaded that an appointment in a writ petition, was contrary to Clause 16.1, which reads as follows:

16.1 In the event of any difference of opinion or dispute between the Railway Administration and the contractor as to the respective rights and obligations of the parties hereunder of as to the true intent and meaning of those presents or any articles of conditions thereof, such difference of opinion shall be referred to the sole arbitration of an officer appointed by the General Manager, Northern Railway for the time being whose decision shall be final, conclusive and binding on the parties, the intention of the parties being that every matter in respect of this agreement must be decided by him as sole arbitrator and not taken to a Civil Court.

It was contended by learned Counsel for the appellant that since an approach to a civil Court is forbidden under the agreement, the arbitrator could not have been appointed by a writ Court. However, the learned Single Judge has held that both the parties had agreed that the dispute be referred to the arbitration of the named arbitrator and thus, the dispute was referred with the consent of the parties. The submission of the appellant that only the General Manager, Northern Railway, should appoint an arbitrator was rejected, as it was held that Clause 16 a constitutes only a contract/agreement between the parties and that by agreement the parties can modify, vary or supersede the said agreement. When the statement was made by the counsel for the parties before the Court, parties agreed to appointment of an arbitrator and the appellant cannot now turn around and contend that the appointment has to be made only in accordance with the aforesaid Clause 16 or in an application filed u/s 11 of the Act. Learned Single Judge has held, and in our view rightly so, that it is not necessary in all cases to approach the Chief Justice by filing an application u/s 11 of the Act and if the parties agree to appointment of an arbitrator mutually, the filing of an application u/s 11(5) of the Act would not be necessary. The learned Single Judge has held that consequently, the above plea of the appellant has no merit.

The learned Single Judge also noticed that neither in the arbitration proceedings, at any stage, nor in the reply before the arbitrator such a plea was raised challenging the appointment of the arbitrator, or the jurisdiction of the arbitrator to proceed with the matter. In addition to the above findings of the learned Single Judge, there are the following additional reasons as to why appeal should not be allowed:

A. The appellant has taken up this plea only after the award went against it. This conduct of the appellant disentitles the appellant to assail the award of the arbitrator. The party cannot take recourse to challenging the jurisdiction of the arbitrator, for the first time, in appeal against dismissal of its objections, upon finding that the award has gone against it.

B. Secondly, it was also contended before us that the counsel did not have the authority to agree on the appointment of arbitrator on behalf of Union of India. In our view this plea is unsustainable. The counsel was representing the General Manager, Northern Railway, Union of India and in that capacity he had full authority to agree to the appointment of an arbitrator. It is significant that the order dated 14.01.2003 was never challenged, and has become final.

The appellant has also raised the plea that the respondent was a partnership concern. The learned Single Judge has noticed that the letter dated 17.09.2002 addressed by the appellant itself shows that the respondent was accepted as a sole proprietor of M/s Srichand Sawhney & Sons. Learned Single Judge also noticed that except a solitary communication, there is nothing to show that M/s Srichand Sawhney & Sons was a partnership firm, and in any case this eventuality is also covered by directing to filing of an affidavit to that effect, which has been duly done. In the light of the above, we are satisfied that there is no merit in the appeal. We have also noticed the fact that the learned Single Judge has reduced the post award interest from 18% to 10% per annum. In this view of the matter, we see no merit in the appeal and dismiss the same with costs quantified at Rs. 10,000/- payable not later than four weeks from today.