EVEREST CO-OWNERS, A.B.C.versusM.P. STATE WARE HOUSING CORPORATION AND ANOTHER

A                 EVEREST CO-OWNERS, A.B.C.
                             v.
     M.P. STATE WARE HOUSING CORPORATION AND ANOTHER

                               OCTOBER 13, 1992

B           [S. RANGANATHAN AND B.P. JEEVAN REDDY, J.I.]

          Arbitration Act, 1940:

          Sections 8, 20, 31 and 33-Arbitration clause in the agreement-Sole
C Arbitrator to be appointed by both parties-One party making application
   before Coun-Absence of Jonna/ prayer-Whether application valid under
   Section 20--Could appointing Arbitrator-Validity of-Rejection of applica-
   tion for stay of Arbitration proceedings-lntetference under the Special Leave
  'jurisdiction.

D         Constitutipn of India, 1950:

          Anic/e 136--Special Leave jurisdictiott-Arbitration proceedings-Stay
    application-Refusal of-lnteiference with.

E         The appellant constructed some godowns which were let out on rent
    to Food Corporation of India for five years. During the said period of five
    years, the Respondent took the premises on rent from the Food Corpora·
    lion of India without notice to, or consent of the appellant. Snbsequently,
    the Respondent· Corporation expressed its willingness to enter into a lease
    deed with the appellant, and there was a joint inspection of the godowns
F   by the appellant, and some senior officials from both the Food Corpora·
    tion and the Respondent Corporation. This Committee in its report listed
    out certain damages to the premises which were to be repaired and some
    missing parts to be replaced by the Respondent. Thereafter the Respon·
    dent entered into an agreement oflease with the appellant. This agreement
G   contained an arbitration clause providing for appointment of sole Ar·
    bitrator by both the parties.

           Clause 2 of the lease agreement provided among other things, that
     in case. of any damage, the lessee would be liable for the cost of repair to
     the damage caused during the period of occupancy by the lesses. The extent
H    of damage was to be assessed by the lessors on the basis of the prevailing
                                         946
           EVEREST CO-OWNERS v. M.P. HOUSING CORPN.                     947

market rates in respect of material, labour and other contingency charges. · A

      The term of the lease having come to an end, a joint inspection or
the premises was carried out by the appellant and some officials or the
Respondent-Corporation, and this Committee in its report enumerated a
number or items or damages to the premises. The appellant wrote to the
Respondent calling upon it to pay damages· to the tune or Rs.4,76,984.SS       B
and followed it·up with a lawyer's notice. The respondent did not reply.

       Thereafter, the appellant made an application under Ss.8 and 20 of
the Arbitration Act, before the District Judge praying for appointment of
an Arbitrator. After following the procedure, the District Judge appointed
a retired IAS Officer as Arbitrator. The respondent filed an application
                                                                               c
under S.33 of the Act raising an objection that the.lease deed was inadmis-
sible in evidence as it has not been registered under the Registration Act,
which is still pending. The respondent also applied for stay ol' arbitration
proceedings and the same was rejected.
                                                                               D
     In the meantime, the arbitrator made an award. The respondent
made an application for setting aside the award and the application is
pending before the District Judge.

      The Respondent preferred two appeals before the High Court, one E
against the appointm<nt of Arbitrator and another against the refusal to
stay the Arbitration proceedings. The High Court set aside the appoint·
ment of the Arbitrator. Consequently it dismissed the other appeal as
infructuous.

      Being aggrieved by the High Court's order, the appellant preferred       F
to the present appeals.

      Allowing the appeals, this Court,.

       HELD: 1. The lease agreement itself was not denied and it is clear
that it provides for the appointment of arbitrator and this was obviously G
so whether both parties agreed or not. The circumstances also make it
clear that there were disputes between the parties regarrling the. extent of
damages to the premises during the tenancy by the respondent. Though
there was no formal prayer requesting that the arbitration agreement be
filed, there was clearly a valid application 'Under section 20. [9S4 A-Bl    H
    948                  SUPREME COURT REPORTS (1992] SUPP. 1 S.C.R.

A       2.1. The High Court erred in setting aside the order or the District
  Judge appointing an Arbitrator. The application filed by the appellant
  before the High Court was under section 8 read with section 20 or the
  Arbitration act. In other words, there was a prayer In terms or section 20
  or the Act. The appellant's averment in his application that the respondent
B had taken from it three godowns on rent ror a period or five years on the
  basis or the written agreement dated 12.1.1983 between the parties was
  admitted by the respondent. In its reply, the respondent also stated that
  whatever agreement there was between the parties that was all In writing
  and there was no other verbal or oral understanding. The respondent did
  not allege either that the agreement was not binding between the parties
C or that the document ought to have been registered and was inadmissible
  without such registration. The joint inspection report on which the appel-
  lant relied was also no denied. The various averments in the reply dearly
  show that there was a factual dispute between the parties regarding the
  extent or damages to the godowns and the extent or liability or the respon·
D dent in this regard. All the facts necessary to warrant the appointment or
  an Arbitrator under section 20 or the Arbitration Act clearly emerged out
  or the averments in the application and the reply. (952 E-F ·G-H; 953 A·D)

          2.2. So far as the actual appointment or the arbitrat01· Is concerned,
    the agreement envisages the appointment or the arbitrator by both parties.
E   Indeed, this position was obviously accepted by the respondent; Despite
    opportunities given, the respondent did not suggest any names nor did it
    appear and put forward any specific objection to the name proposed by
    the appellant. Having regard to the circumstances, the District Judge acted
    rightly In appointing an arbitrator to adJudlcate on the dispute between
F   the two parties. (954 C-D)

          3. The application nnder section 31 (3) for stay or the proceedings
    before the Arbitrator bas been dismissed because the respondent bad not
    raised the objection during the pendency or the section 20 application and
    because the Court Interpreted its own record dated 8.4.1991 as showing
G   that both connsel bad agreed to the appointment or an arbitrator by the
    Court. The arbitrator had been directed to file the award by 11.11.1991 and
    already, two months bad elapsed. In the cireumstances, the Court saw no
    reason to grant stay or the arbitration proceedings, The application under
    section 33 Itself has been kept pending as the parties asked the District
H   Judge to decide only the question or stay. Hence the order dated 27.9.91
   EVEREST CO-OWNERS v. M.P. HOUSING CORPN. [RANGANATHAN, J.]        949


refusing to stay the proceedings cannot be interfered with under Article A
136 of the Constitution of India. The High Court did not interfere with the
order because the question of. stay became academic in view of Its decision
setting aside the appointment of the Arbitrator: Eventbougb the appoint·
m~nt of the Arbitrator is now declared valid, there Is no reason to interfere
with the Order dated 27.9.91 refusing to grant stay of the arbitration B
proceedings. (954 F -H; 955-A]

     CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4199·
4200 of 1992.

     From the Judgment and Order dated 13.1.1992 of the Madhya              C
Pradesh High Court in M.A. Nos. 481 and 482 of 1991.

     Appellant appeared in person.

         A Choudhary, Shahsi Thakur and Abhijat P. Medh for the Respon·.
dents.                                                                      D
         The Judgment of the Court was delivered by

      RANGANATHAN, J. Special leave is granted and 1tbe appeals are
disposed of after hearing both counsel.
                                                                            E
      The appeal has been preferred from an order of a learned Single
Judge of the Madhya Pradesh High Court dated 13.1.1992 by which the
learned Judge set aside ari order passed by the District Judge appointing
one Shri R.B.L. Shrivastava to arbitrate on the disputes between the
appellant and the M.P. State Ware Housing Corporation. Consequent on
this order, the learned Judge dismissed another appeal filed before it      F
(Miscellaneous Appeal No.482 of 1991) as infructuous.

     The facts leading the present appeal are as follows:-

      The appellant Gopal Saran Singh claims to represent "Everest Co·
owners, A.B.C." owning certain godowns situated in Satna. According to G
the appellant, these godowns were constructed in 1977 for, and let out on
rent to, the Food Corporation for a period of five years. Again according
to the appellant, even during the period of five years, the M.P. State Ware
Housing Corporation (hereinafter referred to as 'the Respondent') took
the premises on rent from the Food Corporation of India without notice H
    950                   SUPREME COURT REPORTS [1992] SUPP. 1 S.C.R.

A to, or consent of, the appellant. Subsequently, it is said, the respondent
    expressed its willingness to enter into a lease deed with the appellant in
    respect of the godowns. Before taking over the godowns from the appellant
    and the execution of a lease agreement, the appellant alleges, there was a
    joint inspection of the godowns by the appellant, senior officers of the Food
    Corporation of India and two senior officials of the respondent. The report
B
    of this "Committee" liste<i certain damages to the premises and referred to
    a decision "that the above damages are to be repaired and missing parts
    are to be replaced by the respondent" in consultation with and in concur-
    rence with the owners of the godowns. The respondents thereafter entered
    into an agreement of lease dated 12.1.1983 with the appellant. This agree-
C   mei;it contained an arbitration clause under which "all disputes and dif-
    ferences arising out of or in any way touching or concerning the lease
    agreement shall agreement shall be referred to sole arbitration of any
    person appointed by both the parties." Clause 2 of the lease agreement also
    provided that the lessee was to maintain the godown and to keep the
D   godown fit in all respects during the term of the tenancy and also kept it
    insured against fire etc. and in case of any damages, it would be liable for
    the cost of repair to the damage caused during the period of occupancy by
    the lessee. The extent of damages was to be assessed by the lessors on the
    basis of prevailing market rates in respect of material, labour and other
    contingency charges. This agreement of lease was signed by the Managing
E   Director of the respondent and the appellant.

           On 22.3.1988, the term of the lease came to an end. According to the
    appellant, i~ March, 1988, a joint inspection of the premises was carried
    out by the appellant along.with three officials of the respondcnt-Corpora-
F   tion. The report of this "committee'' enumerates a number of items of
    damage to the premises. On 13.9.1988, the appellant wrote to the respon-
    dent calling upon it to pay the damages caused to the godown by the
    respondent. On 28.12.1989, the appellant sent a lawyer's notice claiming
    damages to the tune of Rs.4,76,984.55p. as per details set out in the earlier
    letter and requiring that, in case the assessment done by the petitioner was
G   disputed, the dispute should be referred to the arbitrator appointed by
    both the parties as per the agreement of lease. The respondent did not
    reply to either of the notices given by the appellant. .

          On 1.3.1990, the appellant made an application before the learned
H District Judge, Satna purporting to be under sections 8 and 20 of the
   EVEREST CO-OWNERS v. M•P. HOUSING CORPN. [RANGANATHAN, J.]        951

Arbitration Act praying that the Court be pleased 'to appoint an arbitrator A
as per Arbitration Clause and refer the dispute between the parties to the
said arbitrator. The respondent filed a reply dated 6.11.1990. Thereafter,
the application came up for hearing before the learned District Judge on
several occasions. According to the appellant, the learned District Judge
recorded the following minutes in the order-sheet on 8.4.1991:-
                                                                           B
        "The applicant by Shri C.B. Sharma, Advocate. The non-
        applicant by Shri M.D. Sharma, Advocate. The advocates
        for parties have agreed that the agreement be filed as
        applicant regarding the appointment of Arbitrator. Now
        according to consent of parties the Arbitrator is to be            c
        appointed. The applicant's Advocate Shri C.B. Sharma
        has proposed two names. The list of these ·was given to
        M.D. Sharma, Advocate. Shri M.D. Sharma suggested that
        he would give his consent about the said Arbitrators after
        negotiating with his party or would propose the name of
        his own Arbitrator. For this proceeding-case put-up on             D
        7.5.1991."

On 7.5.1991, the proceedings got adjourned as the Judge was on leave. On
11.5.1991, the minute reads:-
                                                                           E
        "Parties want time for submitting name for Arbitrator.
        Time granted. Case fixed for submitting the name of
                   1
        Arbitrator/

On 20.6.1991, minute reads:-
                                                                            F
        "Today name of Shri R.B. Lal Shrivastava, I.AS. (Retired)
        was proposed by 'Panch' Shri C.B. Sharma (Arbitration).
        Now non-applicant either to accept the above name or
        propose another name within 15 days."

On the next date of hearing viz. 5.7.1991, the appellant was represented by G
counsel but there was no counsel or other representative on behalf of the
respondent. No name of any Arbitrator had been proposed by the respon-
dent either. In the circumstances, the learned District Judge appointed Shri
R.B. Lal Shrivastava, I.AS. (Retired), as Arbitrator and directed him to
submit his award after hearing the parties and examining the documents H
    952                   SUPREME COURT REPORTS (1992) SUPP. I S.C.R.

A   by U.11.1991.

           On 6.7.1991, the respondent filed an application under section 33 of
    the Arbitration Act. In this application, the respondent put forward an
    objection that the lease deed dated 12.1.1983 was inadmissible in evidence
B   as it had not been registered under the Registration Act. The respondent
    also applied for stay of the arbitration proceedings. The District Judge
    rejected the stay application on 27.9.1991 but the application under section
    33 remains pending. Eventually, the Arbitrator made an award dated
    1.11.1991. The respondent filed an application for setting aside the award
    which is also pending before the learned District Judge.
c
           The respondent preferred two appeals before the High Court. The
    first was an appeal against the order of the learned District Judge dated
    5.7.1991 appointing the Arbitrator (Miscellaneous Appeal No.481 of 1991).
    The other was an appeal against the order dated 27.9.1991 refusing to stay
D   the proceedings before the Arbitrator notwithstanding the pendency of the
    application under section 33 of the Arbitration Act. These two appeals
    were disposed of by the High Court on 13.1.1992 and it is from this
    common order that the present appeals have been filed by the appellant.

          We have heard the appellant who appeared in person as well as
E counsel for the respondent. We are of opinion that the High Court erred
    in setting aside the order of the District Judge appointing Mr. Shrivastava
    as an Arbitrator. The application filed by the applicant before the Court
    was under section 8 read with section 20 of the Arbitration Act. In other
    words, there was a prayer in terms of section 20 of the Act. The appellant
F   had mentioned in his application that there was an arbitration clause in the
    agreement between the parties; that disputes in respect of the contract
    between the parties had arisen inasmuch as the appellant claimed damages
    to the tune of Rs.4. 76 lakhs which was not accepted by the respondent; that
    the respondent had not also taken any steps to appoint an arbitrator in
    terms of the arbitration clause and that, in the circumstances, the court
G   should be pleased to appoint an arbitrator on the basis of the agreement
    and refer the dispute between the appellant and the respondent to the
    arbitrator for making an award. The appellant's averrnent in paragraph 1
    of his application that the respondent had taken from the applicant three
    godowns on rent for a period of five years on the basis of the written
H   agreement between the parties dated 12.1.1983 which was Annexure 'A' to
   EVEREST CO.OWNERS v, M.P. HOUSING CORPN. [RANGANATIIAN, J.J         953

the application was admitted by the respondent. In paragraph 2 of its reply, A
the respondent also stated that whatever agreement there was between the
parties that was all in writing and there was no other verbal or oral
understanding. The respondent did not allege either that the agreement
was not binding between he parties or that the document ought to have
been registered and was inadmissible without such registration. So far as B
the claim for damages is concerned, the joint inspection report on which
the appellant relied was not denied; it was only stated that the respondent's
officials had signed the agreement under "local influence'. Though there
was an allegation that the respondent had paid a sum of Rs. 1,q'l,562.96 to
the appellant, the averment was that this was an amount paid by way of
enhanced rent under pressure by the appellant. In fact, the various aver- C
ments in the reply clearly show that there was a factual dispute between
the parties regarding the extent of damages to the godowns anil the extent
of liability of the respondent in this regard. In our opinion, all the facts
necessary to warrant the appointment of an Arbitrator under Section 20 of
the Arbitration Act clearly emerged out of the averments in the application D
and the reply.

      The course of the proceedings before the Court also reinforce this
conclusion. On behalf of the respondent it is submitted that the appellant
has furnished a wrong translation of the note recorded by the District
Judge on 8.4.1991 which was in Hindi, the correct translation of which       E
should, it is said, read as follows:-

        'The applicant through Shri C.B. Sharma, Advocate, the
        non-applicant through Shri M.D. Sharma, Advocate, Ar-
        guments of Advocates of both sides heard According to                F
        the applican~ the Advocates for both parties accept that
        in agreement form there is provision for appointment of
        arbitrators. The counsel for the petitioner, Shri C.B. Shar-
        ma proposed two names. The list given to M.D. Sharma
        who expressed that he will give bis consent after estab-
        lishing contacts with his client or will propose names from          G
        bis side. For this purpose the case may be put-up on
        7.5.9:."

In our opinion even this, assuming it to be the correct translation of the
proceedings on that day,. does not aclvance the case of the respondent. It H
    954                   SUPREME COURT REPORTS [1992] SUPP. 1 S.C.R.

A will be seen that there is no mention in this note of any objection by counsel
    for the respondent that the agreement was inadmissible. The agreement
    itself was not denied and it is clear that it provides for the appointment of
    arbitrators and this was obviously so whether both parties agreed or not.
    The circumstances also make it clear that there were disputes between the
    parties regarding the extent of damages to the premises during the tenancy
B   by the respondent. Though there was no formal .prayer, requesting that the
    arbitration agreement be filed, there was clearly a valid application under
    Section 20.

       So far as the actual appointment of the arbitrator is concerned, the
C agreoment envisages the appoimment of the arbitrator by both parties.
     Indeed, this position was obviously accepted by the respondent. There is
     nothing to indicate that, on 8.4.1991, the respondent objected to any
     reference at all to arbitration. Its counsel only took time to suggest names
     on his part. Despite opportunities given, the respondent did not to suggest
D    any names nor did it appear and put forward and specific objection to the
     name proposed by the appellant. Having regard to the circumstances, the
     District Judge acted rightly in appointing Shri R.B.L. Shrivastava as ar-
     bitrator to adjudicate on the disputes between the two parties.

           Counsel for the rcopondent also relied upon the fact that an applica-
E tion hacJ been maJe under section 33 challenging the existence of the
     arbitration agreement. This application was filed on 6.7.1991, that is, one
     day after the appointment of the arbitrator by the District Judge. Another
     application also appears to have been presented by the respondent .on
     23.9.1991 under section 31(3) praying for the stay of the proceedings before
F    the Arbitrator. The applicati01: under section 31(3) has been dismissed
     because the respondent had not raised the objection during the pendency
     of the section 20 application and because the Court interpreted its own
     record dated 8.4.1991 as showing that both counsel had agreed to the
     appointment of an arbitrator by the Court. The arbitrator had been
     directed to file tbe award by 11.11.1991 and already, two months had
G    elapsed. In the circumstances, the Court saw no reason to grant stay of the
     arbitration proceedings. The application under section 33 itself has been
     kept pending as the parties asked the District Judge to decide only the
     question of stay. We are of opinion that the order dated 27.9.91 refusing
     to stay the proceedings cannot be interfered with under Article 136. The
H    High Court did not interfere with the order because the question of stay
   EVEREST CO-OWNERS v. '1.P. HOUSING CORPN. (RANGANATHAN, J.]           955


became academic in view of its decision setting aside the appointment of A
the Arbitrator. But even though we have disagreed with.ihat order and held
that the appointment of the Arbitrator was valid, we see. no reason to
interfere with order dated 27.9.91 refusing to grant stay of the arbitration
proceedings in the circumstances set out above.

       For the reasons stated above we are of opinion that these appeals        B
will have to be allowed. The order of appointment of the arbitrator by the
District Judge is upheld. The order refusing to stay the arbitration proceed-
ings is also upheld particularly in view of the fact that the arbitrator has
since made his award and the application for stay has now become infruc-
tuous. Both appeals are therefore allowed. There will, however, be no           C
order as to costs.

G.N.                                                       Appeals allowed.