ORDER
S.K. Pande, J.
1. This revision under Section 115 of CPC is directed against the order dated 9-7-02 passed by Second ADJ, Bhopal in C.S. No. 26-B/2002, rejecting the application under Section 8 of the Arbitration and Conciliation Act, 1996.
2. The facts in brief are that plaintiff/respondent M/s Kalpana Gears Pvt. Limited entered into an agreement with the defendant/petitioner to do the specified job on blank forgings to be supplied by the defendant/ petitioner. Accordingly, work order (Annexure R-2) was placed by the defendant/petitioner in respect of 35 blanks. There was an agreement to the effect that all cases of disputes arising out of the agreement aforesaid, shall be referred to the sole arbitration of the Executive Director/General Manager of BHEL, Bhopal or any other person, nominated by the said Executive Director/ General Manager to act as sole Arbitrator. Arbitration shall be under the Indian Arbitration Act, 1940 and rules made therein.
3. A bank guarantee to the extent of Rs. 8 lacs was also placed by the plaintiff/respondent with the defendant/petitioner in furtherance of the agreement. This bank guarantee submitted by the plaintiff/respondent was got encashed and appropriated towards the dues by the defendant/petitioner. Therefore, plaintiff/respondent instituted C.S. No. 26-B/2002 (Annexure R-1) in the Court of Second ADJ, Bhopal for recovery of Rs. 8,57,296/-. The defendant/petitioner, being served with the summons of the suit made appearance before the Court below on 4-2-98. Copies of the plaint-documents were not delivered to him till 26-3-98. On 1-4-98, the defendant/petitioner filed an application under Section 30 (sic: Section 34) of Arbitration Act, 1940 read with Section 8 of the Arbitration and Conciliation Act, 1996 (Annexure P-2). This application was dismissed by Court below vide order dated 13-9-2000, therefore, Civil Revision No. 2664/2000 was preferred by the defendant/ petitioner. Vide order dated 22-3-2001 in C.R. No. 2664/2000, the Court below was directed to rehear and decide the application afresh. After rehearing the parties, on this application (Annexure P-2) by passing the impugned order dated 9-7-2002, the Court below rejected the request of referring the matter to the arbitration as per agreement Clause No. 30.
4. It has been contended by the defendant/petitioner that the work order (Annexure P-3) was subject to the agreement enclosed. The Agreement Clause 30 is to the effect that all cases of disputes shall be referred to the sole Arbitrator Executive Director/General Manager, BHEL or any other person nominated by him to do so. Therefore, the Court below committed an error in rejecting the application (Annexure P-2). It has been submitted by plaintiff/ respondent that the work order (Annexure R-2) was issued in respect of 35 blanks only. The work was in progress, however, the Inspector of the defendant/petitioner visited the factory and rejected the job not being carried as per required drawing No. 24391600011 and declined to accept the material, as salvaging of gear of said blank forgings. Thereafter, the defendant/petitioner got encashment of bank guarantee. In the circumstances, Clause 30 of the agreement relating to arbitration could not have been invoked. Accordingly, C.S. No. 26-B/2002 for recovery of amount aforesaid, was filed. The order rejecting the application under Section 8 of Arbitration and Conciliation Act, 1996 is proper.
5. The work order (Annexure P-3)/(R-1) was issued subject to terms and conditions as per agreement executed between the parties. Clause 30 of the agreement is as under:–
30. Arbitration.– All cases of disputes arising out or relating to this purchase order shall be referred to the sole arbitration of the Executive Director/General Manager of BHEL, Bhopal or any other person (including an employee of BHEL), even though he had to deal with the matter relating to this Purchase Order in any manner, nominated by the said Executive Director/General Manager to act as sole Arbitrator. The arbitration shall be under the Indian Arbitration Act, 1940 and the Rules made thereunder. The Arbitrator may from lime to time with consent of parties enlarged the time for making and publishing the award.
6. The matter in dispute arose when an inspector of the defendant/petitioner visited the factory of the plaintiff/respondent and rejected the job being not carried out as per the required drawing No. 24391600011. It is stated that the work order (Annexure R-2) was in respect of drawing No. 2439160006 and rejecting the job with reference to another drawing could not be termed to be the breach of agreement. Learned Counsel for the petitioner contended that in the work order (Annexure R-2) the subsequent description of drawing No. 24391600011 has been mentioned. The job was strictly required to be done in consonance with the drawing number supplied with the work order. Therefore, the dispute is on the point whether as per the work order (Annexure P-3) / (Annexure R-2), the job was done by the plaintiff/ respondent and that the rejection of job by inspector was improper. In furtherance of report submitted by the inspector that the job was not carried out as per the required drawing, the defendant/petitioner proceeded with the encashment of bank guarantee and appropriated a sum towards the breach of agreement. The dispute between the parties is covered under the terms of agreement particularly Clause 30 which deals with arbitration.
7. Section 8 of the Arbitration and Conciliation Act, 1996 is as under:–
8. Power to refer parties to arbitration where there is an arbitration agreement.– (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
(2) The application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
(3) Notwithstanding that an application has been made under Sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.
8. The defendant/petitioner appeared before the Court on 4-2-98 in response to the summons of suit and was supplied with the copies of plaint and documents by plaintiff/respondent only on 26-3-98. On the very next date, i.e., on 1-4-98, defendant/petitioner filed an application (Annexure P-2) under Section 34 of the Arbitration Act, 1940 / Section 8 of the Arbitration and Conciliation Act, 1996 alongwith document as per list. The defendant/ petitioner at the very beginning requested the Court to refer the matter to the sole Arbitrator as per Arbitration Clause 30 in the agreement. There was no reason to reject the application on any other ground except those laid down under Section 8. May be that the C.S. No. 26-B/2002 has been filed for recovery of amount of bank guarantee encashed and appropriated by the defendant/petitioner, none the less the dispute is covered under the Agreement Clause 30. The parties must have been referred to arbitration. The Court below has erred in rejecting the application vide impugned order.
9. Consequently, revision is allowed. Impugned order is set aside. Instead, application (Annexure P-2) filed under Section 34 of the Arbitration Act, 1940/Section 8 of the Arbitration and Conciliation Act, 1996 is allowed. Parties to be referred to the sole Arbitrator as per Clause 30 of the agreement.
Parties to bear their costs. Counsel fee as per rules or certificate (whichever is less).