JUDGMENT
A.K. Sikri, J.
1. The petitioner has filed this petition under
Section 20 of the Arbitration Act, 1940. The prayer
made is that the respondent be directed to appoint an
arbitrator in terms of the arbitration clause contained
in the agreement to resolve the disputes and
differences arisen between the parties.
2. It is stated in the petition that vide
agreement dated 1st October, 1985 the respondent had
taken on rent the premises belonging to the petitioner
situated in Udyog Vihar, Palam Road, Gurgaon comprising
of covered sheds of about 33,000/- sq.ft. in area as also
another area measuring about 4,000/- sq.ft. situated in
the administrative block, together with other
facilities at a monthly rent of Rs. 35,000/- exclusive
of water and electricity charges. A detailed agreement
was executed between the parties, wherein the contents
of letter dated 12th June, 1985 issued by Zonal Manager
of the respondent to its Regional Manager, were made
part of the agreement and were duly embodied in Clause
(xi) of the agreement. It is also stated that without
any rhyme or reason and to the utter surprise of the
petitioner, the respondent wrote letter dated 17th
July, 1987 (received by the petitioner on 30th July,
1987) informing that the respondent did not require the
demised premises and that the respondent would vacate
the same and surrender possession on or about 17th
August, 1987. The respondent gave a semblance of
giving one month notice commencing from 17th July, 1987
i.e. the date of the letter. In the said letter
reference of Clause 1 of the agreement was made and it
was emphasised that the notice was being given in terms
of the said clause. The monthly rent payable by the
respondent to the petitioner was quantified at
Rs. 30,257.70 paisa. The agreement was for three years
commencing from 1st October, 1985. Extension of one
year or less period could be granted, after the
expiration of three years, through mutual consultation.
However, vide letter dated 17th July, 1987 (received by
the petitioner on 30th July, 1987) the respondent
informed the petitioner that the respondent did not
require the demised premises and would vacate the same
on or about 17th August, 1987. The petitioner replied
the said letter challenging the contention of the
respondent reiterating that Clause 1 of the agreement
nowhere stipulated that tenancy could be terminated by
the respondent by giving any notice much less notice of
a duration of one month period. The contention of the
petitioner was that the tenancy was for a fixed period
of three years and could not be terminated prematurely.
It is also alleged in the petition that the respondent
however did not vacate the premises or hand over the
vacant possession in all respects in the condition in
which it existed before letting, and therefore, the
respondent continued to remain bound to pay the monthly
rent of Rs. 30,257.70 paisa. The rent is paid up to
June, 1987. In this way the petitioner claims the rent
for the period from July, 1987 to September, 1988. The
petitioner has also claimed water and electricity
charges and has alleged that even telephone bills have
not been paid by the respondent. The aforesaid demand
of rent was obviously negated by the respondent as
agreement dated 1st October, 1985 provided arbitration
clause being Clause (xi) thereof, present petition is
filed for appointment of an arbitrator. This
arbitration clause reads as under:
“All disputes and differences arising out
of in any way touching or concerning this
agreement whatsoever, shall be referred
to the sole arbitrator of any person
appointed by the Managing Director of the
Food Corporation of India. It will be no
objection to any such appointment that
the person appointed is or was an
employee of the Food Corporation of India
that he had to deal with the matters to
which the agreement relates, and that in
the course of his duties as such employee
of the Corporation had expressed views on
all or any of the matters in dispute of
differences. The award of such
arbitrator shall be final and binding on
the parties to this agreement. It is a
terms of this agreement that in the event
of any such arbitrator to whom the matter
is originally referred being transferred
or vacating his office or being unable to
act for any reason the Managing Director
of the Food Corporation of India at the
time of such transfer, vacation of office
or inability to act, shall appoint
another person to act as an Arbitrator.
Such person shall be entitled to proceed
with the reference from the state at
which it was left by his predecessor. It
is also term of this lease agreement that
no person other than a person appointed
as aforesaid should act as arbitrator and
if for any reason that is not possible,
matter is not to be referred to
arbitrator at all.
Provided further that any demand for
arbitration in respect of any claim(s) of
the Lessers under the lease agreement
shall be in writing and made within one
year of the date of termination or
completion (expiry of the period, of the
lease agreement and where such demand is
not made within the period of claim(s)
the Lessers shall be deemed to have been
waived and absolutely varied and the
Corporation shall be discharged and
released of all liabilities under the
lease agreement in respect of those
claims.”
3. Various disputes are mentioned in para 12 of
the petition as per which a total claim of
Rs. 16,60,575/- is made against the respondent.
4. The respondent has contested this petition and
filed reply to the same. Maintainability of the
petition is challenged on the ground that lease of
immovable property for a period of three years was
compulsorily registrable under Section 17 of the
Registration Act, 1908 and as the lease was not
registered, no right flows in favor of the petitioner.
It is also stated that in the absence of registration
of this lease, agreement cannot be looked into and as
the arbitration clause is contained in the said lease,
this also cannot be acted upon by the petitioner.
Various other objections have been taken on the merits
of the claims raised by the petitioner in the petition.
On the basis of the pleadings following issues were
framed:
1. Whether the petitioner firm is a duly
registered firm under the Partnership Act
and the petition has been signed,
verified and filed by a duly authorised
person?
2. Whether the agreement dated 1st October,
1985 did not require registration?
3. If issue No. 2 is proved, whether the
arbitration clause contained in the said
agreement can be read in evidence?
4. Relief.
5. The parties were allowed to lead evidence by
way of affidavits. Both the parties have filed the
affidavits.
Issue No. 1
6. It may be mentioned that the petitioner has
filed document of registration of the petitioner as a
partnership firm with the Registration of Firms which is
Ex. P-1 from which it stands established that the
petitioner is a duly registered firm under the
Partnership Act of which Sh. G.S. Bhatia is one of the
registered partners and therefore, competent of sign
and verify the petition and file the same. Even
otherwise, this issue was conceded by the learned
counsel for the respondent.
Issues Nos. 2 & 3.
7. It may be stated here that both the parties
agreed that lease agreement dated 1st October, 1985
required registration. However, the submission of the
learned counsel for the petitioner was that even in the
absence of a registration arbitration clause contained
in the said agreement could be read into evidence. The
submission of the learned counsel for the respondent
was to the contrary. Therefore, the whole thrust of
arguments by both the parties was on the question as to
whether arbitration clause in an unregistered agreement
could be looked into. Naturally, maintainability of
the present petition would depend upon this issue.
8. Section 2(a) of the Arbitration Act, 1940
defines arbitration clause as under:
“Section 2(a): “Arbitration agreement”
means a written agreement to submit
present or future differences to
arbitration, where an arbitrator is named
therein or not.”
9. Admittedly, the arbitration agreement does not
require any registration. No form is also required.
All that is required is that this arbitration agreement
has to be in writing. The agreement dated 1st October,
1985 containing the arbitration clause is in writing
and signed by both the parties. Even in case of
unregistered lease deed, the same can be looked into
for collateral purpose. Therefore, even if the said
lease agreement cannot be looked into evidence for
other purpose, the arbitration agreement can still be
segregated and treated as independent agreement in
writing duly signed by both the parties which is
binding on the parties. The law on this point is no
more res integra and stands settled by the following
judgments:
1. Rai Chand Jain v. Chandra Kanta
Khosla .
2. Damodar Valley Corporation v. K.K. Kar
.
3. M. Dayanand Reddy v. A.P. Industrial
Infrastructure Corporation Limited and
Ors. .
4. The Union of India v. Kishorilal Gupta
and Bros. .
5. Prem Lata and Anr. v. Ishar
Dass Chaman Lal and Ors.
.
6. Prabhu Shankar Jaiswal v. Sheo
Narain Jaiswal and Ors. .
10. Following observations in the case of
M. Dayanand Reddy v. A.P. Industrial Infrastructure
Corporation Limited and Ors. would be apposite:
“Under the Arbitration Act, 1940, only an
arbitration agreement in writing is
recognised by the Act. It has been held
by this court in Jugal Kishore
Rameshwardass v. Goolbai,
Hormusji, that it is not necessary that the
contract between the parties should be
signed by both the parties. But it is
necessary that the terms should be
reduced in writing and the agreement
between the parties on such written terms
is established. It has also been held by
this court in Union of India v. Rallia
Ram , that it is not necessary that all
the terms of the agreement should be
contained in one document. Such terms
may be ascertained from the
correspondence consisting of number of
letters. In Rukmanibai Gupta v.
The Collector, Jabalpur, ,
this court has laid down that an
arbitration clause is not required to be
stated in any particular form. If the
intention of the parties to refer the
dispute to arbitration can be clearly
ascertained from the terms of the
agreement, it is immaterial whether or
not the expression arbitration or
‘arbitrator’ or ‘arbitrators’ has been
used in the agreement. It is also not
necessary that agreement to arbitration
should appear in the document containing
the other terms of agreement between the
parties. Law is well settled that
arbitration clause may be incorporated by
reference to a specific document which is
in existence and whose terms are easily
ascertainable. it is to be noted,
however, that the question whether or not
the arbitration clause contained in
another document is incorporated in the
contract is always a question of
construction. It should also be noted
that the arbitration clause is quite
distinct from the other clauses of the
contract. Other clause of agreement
impose obligation which the parties
undertake towards each other. But
arbitration clause does not impose on any
of the parties any obligation in favor
of the other party. Such arbitration
agreement embodies an agreement between
the parties that in case of a dispute,
such dispute shall be settled by
arbitrator, or umpire of their own
constitution or by an arbitrator to be
appointed by the court in an appropriate
case. it is pertinent to mention that
there is a material difference in an
arbitration agreement inasmuch as in an
ordinary contract the obligation of the
parties to each other cannot, in general,
be specifically enforced and breach of
such terms of contract results only in
damages. The arbitration clause however
can be specifically enforced by the
machinery of the Arbitration Act. The
appropriate remedy for breach of an
agreement to arbitrate is enforcement of
the agreement to arbitrate and not to
damage arising out of such breach.
Moreover, there is a further significant
difference between an ordinary agreement
and an arbitration agreement. In an
arbitration agreement, the courts have
discretionary power of dispensation of a
valid arbitration agreement but the
courts have no such power of dispensation
of other terms of contract entered
between the parties. This very
distinctive feature of an agreement for
arbitration has been highlighted in the
decision in Heyman v. Darwins Ltd.
1942, AC 356. It has been held in North
Western Rubber Company, (1908) 2 KB 907
(overruled in 1961(1) AC 1314 on other
points), that an arbitration agreement
no way classifies the right of the
parties under the Contract but it relates
wholly to the mode of determining the
rights….”
Issue No. 4.
11. This petition is accordingly allowed. The
respondent is directed to file the original agreement
date 1st October, 1985 and as per the arbitration
agreement, Managing Director of the respondent is
directed to appoint an arbitrator within four weeks
from the date of receipt of the communication of this
order and refer the disputes mentioned in para 18 of
the petition to the said arbitrator for adjudication.
It is made clear that in case no arbitrator is
appointed by the Managing Director within the aforesaid
period, the petitioner shall be at liberty to approach
the court for appointment of an arbitrator by the
court.
12. This petition stands disposed of.