2002(4) ALL MR 345
IN THE HIGH COURT OF JUDICATURE AT BOMBAY

S.A. BOBDE, J.

Shri. Pramod Chimanbai Patel Vs. M/S. Lalit Constructions & Anr.

Arbitration Petition No.131 of 2002

25th June, 2002

Petitioner Counsel: Mr. KIRIT J. HAKANI, P. G. VORA ,YATIN N. SHAH
Respondent Counsel: Mr. SUNIL JAYAKAR, Ms. N. P. KARNIK

Arbitration and Conciliation Act (1996) Ss.7, 9 - Arbitration agreement - What is - Agreement in writing, but signed by only one party - Held, unilaterally signed arbitration agreement cannot be accepted as valid - Word "Parties" in S.7(4)(a), was used with specific intention to mean both the parties - It would be of no avail to resort to S.13 of General Clauses Act 1897.

General Clauses Act (1897), S.13.

The only question relevant for deciding the controversy in the present case is whether the arbitration agreement, if in writing, must be signed by both the parties. It must be signed by both the parties. The other categories of agreements in writing contemplated by sub-section (4) i.e. letters, telex, telegrams or other means of telecommunication which provide a record of the agreement or a statement of claim and defence clearly contemplate that such documents would be arbitration agreements in writing only when they are exchanged between the parties. The purpose is clear enough. The exchange signifies an active assent by both parties and a demonstrable meeting of minds of both parties as to the arbitration agreement. Having regard to this context, in clause (a) when Parliament says "document signed by the parties" it intends a document signed by both the parties. Though the acceptance of promises and obligations by conduct of parties is known to law, in cases where one party signs the documents and delivers it to the other party and the other party does not refute it but acts on it; it would be difficult to apply such a method of acceptance to a unilaterally signed separate arbitration agreement. It would not be possible to know whether the other party who has received such an agreement has accepted and acted on it untill the very invocation of arbitration clause. Moreover, if such unilaterally signed arbitration agreement is accepted as valid, it could enable a party to unilaterally sign an arbitration agreement after having decided on its scope and the terms of submissions to arbitration bind the other party. The provision in question has been enacted to eliminate all such controversy regarding the existence of an arbitration agreement between the parties. In order to achieve that purpose, Parliament has clearly intended by saying so in clear words that the agreement would be an agreement in writing if it is contained in a document signed by the parties. Parliament did not use the words in plural accidentally. It did so deliberately. Having come to the conclusion that the word "parties" was used with the specific intention to mean both the parties, it would be of no avail to resort to section 13 of the General Clauses Act, 1897. [Para 7,10]

AIR 1951 Mad. 907 - Rel on.

Cases Cited:
M/s. Sundaram Finance Ltd. Vs. M/s. NEPC India Ltd., AIR 1999 SC 565 [Para 4]
Sambata Vs. Narayana, AIR 1951 Madras 907 [Para 10]
AIR 1984 Bom. 319 [Para 10]


JUDGMENT

JUDGMENT :- This petition is filed under section 9 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as the "Act", for an injunction restraining the respondents from directly or indirectly removing, using, dealing with and/or disposing of the RCC finished pipes for the value of Rs.35,21,175/- without paying the claim of the petitioner. In the alternative, the petitioner has prayed a mandatory injunction directing respondent no.2 Maharashtra Jivan Pradhikaran to withhold a sum of Rs.35,21,175/- out of the amount payable to respondent no.1 by respondent no.2.

2. The petitioner entered into an agreement at Exh.'A' with the respondent under which the respondent has agreed to take on lease from the petitioner certain machinery for manufacture of RCC pipes. The execution of this agreement is not questioned by the learned counsel for respondent no.1. The parties are mainly at issue in respect of Exh.'B' which is a letter dated 28-12-2001 purportedly addressed by respondent no.1 to the petitioner. The contention of the learned counsel for respondent no.1 is that para 3 of this letter which is said to contain the arbitration clause is inoperative. According to the respondent, this letter is fabricated on certain blank letter-heads which have been signed by the respondent. I have perused the original letter dated 28-12-2001 i.e. Exh.'B' which, according to the respondent, is fabricated. There is an unusually long gap between the last sentence of that letter and the signature. That apart, prima facie, it appears unnatural that this letter should be written after a period of about two years from the original agreement for the purpose of introducing a new clause which provides that if the respondent fails to pay the money before a certain date, the petitioner would be entitled to recover the same by retaining and selling the RCC pipes lying at site at M.J.P. Compound, Masod Road, Rajura Naka, Amravati. It also appears rather unusual that an arbitration clause is introduced after a period of about two years of the coming into existence of the contract, though it is not impossible. There appears to be a reasonable doubt as to the authenticity of the document containing the arbitration clause. Moreover, the respondent has filed several affidavits of several persons to support his contention that the respondent had handed over blank signed letter-heads to the petitioner. Notable among these affidavits is the affidavit of Mr. Anil Pranlal Patel who has stated on oath that he was formerly employed by the petitioner and was entrusted with the affairs of management of the said proprietary firm of the petitioner. He has stated on oath that certain blank letter-heads were obtained by the petitioner from respondent no.1 in para 8 of his affidavit.

3. While it is not possible to arrive at a definite finding on the basis of the affidavits that Exh.'B' which incorporates the arbitration clause is a fabricated or a forged document, the overall circumstances cast a serious doubt on the veracity of that document. Having regard to the fact that it appears that prima facie, there is no arbitration clause and the petitioner does not appear to have approached this Court with clean hands regarding existence of such a clause, I am not inclined to grant any relief to the petitioner under section 9.

4. It may be noted that the Supreme Court in M/s. Sundaram Finance Ltd. Vs. M/s. NEPC India Ltd., (A.I.R. 1999 S.C. 565) has observed in para 20 as follows :-

"If an application is so made the Court will first have to be satisfied that there exists a valid arbitration agreement and the applicant intends to take the dispute to arbitration. Once it is so satisfied the Court will have the jurisdiction to pass orders under Section 9 giving such interim protection as the facts and circumstances warrant."

5. The next contention raised by Mr. Jayakar, learned counsel for respondent no.1, is that even otherwise, there cannot be said to be an arbitration agreement between the parties. The letter dated 28-12-2001 is a document which is signed by the respondent and not by the petitioner. The document not having been signed by both the parties is not an arbitration agreement within the meaning of section 7 of the Act. Section 7 of the Act reads as follows :-

"7. Arbitration agreement.- (1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in-

(a) a document signed by the parties :

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract."

There seems to be substance in this contention raised on behalf of the respondents.

6. Sub-section (1) contemplates an agreement by the parties i.e. both parties to submit to arbitration disputes that have arisen or may arise between them in respect of a defined legal relationship irrespective of whether their relationship is the outcome of a contract or not. Sub-section (2) provides that such an agreement may be in the form of a separate agreement, not part of a contract. Sub-section (3) requires the arbitration agreement to be in writing. The last sub-section lays down when an agreement must be taken to be in writing and enumerates three categories:

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

Sub-section (5) provides for incorporation of an arbitration clause in a contract by reference to a document containing the arbitration clause.

7. The only question relevant for deciding the controversy in the present case is whether the arbitration agreement, if in writing, must be signed by both the parties. I am of the view that it must be signed by both the parties. The other categories of agreements in writing contemplated by sub-section (4) i.e. letters, telex, telegrams or other means of telecommunication which provide a record of the agreement or a statement of claim and defence clearly contemplate that such documents would be arbitration agreements in writing only when they are exchanged between the parties. The purpose is clear enough. The exchange signifies an active assent by both parties and a demonstrable meeting of minds of both parties as to the arbitration agreement. Having regard to this context, I am of view that in clause (a) when Parliament says "document signed by the parties" it intends a document signed by both the parties.

8. Though the acceptance of promises and obligations by conduct of parties is known to law, in cases where one party signs the documents and delivers it to the other party and the other party does not refute it but acts on it; it would be difficult to apply such a method of acceptance to a unilaterally signed separate arbitration agreement. It would not be possible to know whether the other party who has received such an agreement has accepted and acted on it untill the very invocation of arbitration clause. Moreover, if such unilaterally signed arbitration agreement is accepted as valid, it could enable a party to unilaterally sign an arbitration agreement after having decided on its scope and the terms of submissions to arbitration bind the other party.

9. The provision in question has been enacted to eliminate all such controversy regarding the existence of an arbitration agreement between the parties. In order to achieve that purpose, Parliament has clearly intended by saying so in clear words that the agreement would be an agreement in writing if it is contained in a document signed by the parties. I am of view that Parliament did not use the words in plural accidentally. It did so deliberately.

10. Having come to the conclusion that the word "parties" was used with the specific intention to mean both the parties, it would be of no avail to resort to section 13 of the General Clauses Act, 1897 which reads as follows :-

"13. Gender and number,:- In all Central Acts and Regulations, unless there is anything in the subject or context;

(1) words importing the masculine gender shall be taken to include females; and

(2) words in the singular shall include the plural, and vice versa."

This section clearly enables the Court to infer a plural where the singular is used and vice versa. Nevertheless, a Court would do so only where there is nothing repugnant in the subject or context. It is well-settled that the function of an interpretation clause is not, as is often supposed to substitute one set of words for another or to apply the meaning of the term "under all circumstances", but clearly to declare what may be included in the term "when the circumstances require", that it should be so interpreted. All that section 13 means is that the word need not be construed singular under "all" circumstances, but merely indicates the intention of the Legislature that the word may be interpreted in plural wherever circumstances require that it should be so construed; vide Sambata Vs. Narayana (A.I.R. 1951 Madras 907 at page 920). An application vice versa would make no difference. In a similar context where this Court was called upon to construe the words "male heirs" as to include "a single male heir", this Court refused to do so, relying on the context and the general rule of interpretation of a statute that one may not vary the words of a statute "verbis legis non est recedendum" vide A.I.R. 1984 Bombay 319. Similarly, I see no reason to read "party" instead of "parties", used by Parliament.

11. Therefore, the arbitration clause relied on by the petitioner contained in the letter dated 21-5-1999 signed by the petitioner alone is not a valid arbitration agreement. There is no merit in this petition under section 9.

12. In the result, the Arbitration Petition is dismissed.

13. Mr. Hakani states that the ad-interim order has been operating in the petitioner's favour since 10-4-2002. The said ad-interim order shall continue for a period of four weeks from today.

14. Certified copy expedited.

15. P.S. to give ordinary copy of this order to the parties concerned.

Petition dismissed.