# U.P. Rajya Bhandaran Nigam Ltd. Lko. & Ors v. U.P. Purva Sainik Kalyan Nigam Ltd. Lko

- **Citation:** (2024) 8 ILRA 1008
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-08-05
- **Case number:** First Appeal No. 184 of 2013
- **Bench:** Rajnish Kumar
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/u-p-rajya-bhandaran-nigam-ltd-lko-ors-v-u-p-purva-sainik-kalyan-nigam-ltd-lko-52369
- **Pages:** 16

## Headnote

Civil Law-Law of Arbitration- Arbitration
and Conciliation Act, 1996 - Sections
37(1)(b), 34 & 43 - application under
Section 34 dismissed- Section 43 of
Act,1996 read with Limitation Act, 1963claim beyond limitation-Section 7(4) (c) of
the Act, 1996-respondent-claimant filed
its claim for unpaid wages before the sole
arbitrator-learned arbitrator allowed the
claim
and
counter-claim-no
arbitral
agreement between the parties-section
2(b) read with Section 7 of the Act, 1996definition
of
arbitration
agreement-
merely because an arbitration clause is
not in the arbitration, it cannot be said
that the dispute cannot be settled through
arbitration and it is without jurisdictionSection 4 of the Act, 1996-waiver of right
to object-Section 16 of the Act, 1996competence of Arbitral Tribunal to rule on
its jurisdiction- plea that the Arbitral
Tribunal does not have jurisdiction shall
be raised not later than the submission of
the
St.ment
of
defence-objection
regrading limitation to be taken at first
instance-both
parties
provided
equal
opportunity- no violation of Section 18 of
the Act,1996-Appeal dismissed. (Paras 17,
18, 19, 20, 21, 23, 25, 32 and 33)

HELD:
According to the aforesaid Section 7, the
Arbitration Agreement may be in the form of an
arbitration clause in a contract or in the form of
a separate agreement. The agreement shall be
in writing and arbitration agreement is in writing
if it is contained in a document signed by the
parties, an exchange of letters, telex, telegrams
or other means of telecommunication including
communication through electronic means which
provide a record of the agreement or an
exchange of St.ments of claim and defence in
which the existence of the agreement is alleged
by one party and not denied by the other.
Therefore merely because an arbitration clause
is not in the arbitration, it cannot be said that
the dispute cannot be settled through arbitration
8 All. U.P. Rajya Bhandaran Nigam Ltd. Lko. & Ors. Vs. U.P. Purva Sainik Kalyan Nigam Ltd.
 Lko.
1009
and it is without jurisdiction, if it can be inferred
in terms of Section 7 and the intention of parties
to settle their disputes through arbitration are
discernible form the same. (para 17)

The Hon'ble Supreme Court, in the case of
Mahanagar Telephone Nigam Ltd. Vs Canara
Bank & ors.(Supra), considering the provisions
of Section 7 of the Act of 1996 has held that the
arbitration agreement need not be in any
particular form. What is required to be
ascertained is the intention of the parties to
settle their disputes through arbitration. The
intention of the parties must be inferred from
the terms of the contract, conduct of the parties
and correspondence exchanged to ascertain the
existence of a binding contract between the
parties. If the documents on record show that
the parties were ad-idem and had actually
reached an agreement upon all material ter

## Text

_Characters 0–39,948 of 56,763. This is a partial read: ask again with offset=39948 for what follows._

1008 INDIAN LAW REPORTS ALLAHABAD SERIES

163. The discussion cannot conclude
without acknowledging the role of the Bar
and other stakeholders.

164. In the highest traditions of this
Court and the profession, the learned
Senior
Counsels
with
their
assisting
counsels, learned amicus curiae and learned
counsels on behalf of the respective
applicants have argued with ability and
scholarship.

165. This Court would like to record
appreciation of the assistance rendered by
Shri Ashok Mehta, learned Additional
Advocate General, assisted by Shri A.K.
Sand, learned Government Advocate and
Shri Paritosh Kumar Malviya, learned
AGA-I.

166. The Court also commends the
positive approach of the State Government
in the matter and its genuine concern for
providing all support to the disadvantaged
class of prisoners to enable them to realize
their rights to legal aid and to seek bail
from the competent courts.
----------
(2024) 8 ILRA 1008
APPELLATE JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 05.08.2024

BEFORE

THE HON'BLE RAJNISH KUMAR, J.

First Appeal No. 184 of 2013

U.P. Rajya Bhandaran Nigam Ltd. Lko. &
Ors. ...Appellants
Versus
U.P. Purva Sainik Kalyan Nigam Ltd. Lko.
 ...Respondent

Counsel for the Appellants:
Rakesh K. Chaudhary
Counsel for the Respondent:
Amrendra Nath Tripathi, Nirmit Srivastava,
Pankaj Patel, Pratap Shanker, Suyash
Manjul, Vibhanshu Srivastava

Civil Law-Law of Arbitration- Arbitration
and Conciliation Act, 1996 - Sections
37(1)(b), 34 & 43 - application under
Section 34 dismissed- Section 43 of
Act,1996 read with Limitation Act, 1963claim beyond limitation-Section 7(4) (c) of
the Act, 1996-respondent-claimant filed
its claim for unpaid wages before the sole
arbitrator-learned arbitrator allowed the
claim
and
counter-claim-no
arbitral
agreement between the parties-section
2(b) read with Section 7 of the Act, 1996definition
of
arbitration
agreement-
merely because an arbitration clause is
not in the arbitration, it cannot be said
that the dispute cannot be settled through
arbitration and it is without jurisdictionSection 4 of the Act, 1996-waiver of right
to object-Section 16 of the Act, 1996competence of Arbitral Tribunal to rule on
its jurisdiction- plea that the Arbitral
Tribunal does not have jurisdiction shall
be raised not later than the submission of
the
St.ment
of
defence-objection
regrading limitation to be taken at first
instance-both
parties
provided
equal
opportunity- no violation of Section 18 of
the Act,1996-Appeal dismissed. (Paras 17,
18, 19, 20, 21, 23, 25, 32 and 33)

HELD:
According to the aforesaid Section 7, the
Arbitration Agreement may be in the form of an
arbitration clause in a contract or in the form of
a separate agreement. The agreement shall be
in writing and arbitration agreement is in writing
if it is contained in a document signed by the
parties, an exchange of letters, telex, telegrams
or other means of telecommunication including
communication through electronic means which
provide a record of the agreement or an
exchange of St.ments of claim and defence in
which the existence of the agreement is alleged
by one party and not denied by the other.
Therefore merely because an arbitration clause
is not in the arbitration, it cannot be said that
the dispute cannot be settled through arbitration
8 All. U.P. Rajya Bhandaran Nigam Ltd. Lko. & Ors. Vs. U.P. Purva Sainik Kalyan Nigam Ltd.
 Lko.
1009
and it is without jurisdiction, if it can be inferred
in terms of Section 7 and the intention of parties
to settle their disputes through arbitration are
discernible form the same. (para 17)

The Hon'ble Supreme Court, in the case of
Mahanagar Telephone Nigam Ltd. Vs Canara
Bank & ors.(Supra), considering the provisions
of Section 7 of the Act of 1996 has held that the
arbitration agreement need not be in any
particular form. What is required to be
ascertained is the intention of the parties to
settle their disputes through arbitration. The
intention of the parties must be inferred from
the terms of the contract, conduct of the parties
and correspondence exchanged to ascertain the
existence of a binding contract between the
parties. If the documents on record show that
the parties were ad-idem and had actually
reached an agreement upon all material terms,
then it would be construed to be a binding
contract. The meaning of a contract must be
gathered
by
adopting
a
common
sense
approach and must not be allowed to be
thwarted
by
a
pedantic
and
legalistic
interpretation. (Para 18)

It was only after the arbitration proceedings
were decided and the claim as well as the
counter claim were allowed, when Application
under Section 34 of the Act of 1996 was
preferred before the District Judge, this issue
was raised. Learned District Judge after
considering the pleadings of the parties and the
law held that the jurisdiction and existence of
Arbitration Clause is the preliminary issue, which
may have been raised before the High Court,
who has been pleased to appoint the Arbitrator
and moreover the judgment passed by the High
Court appointing the Arbitrator has not been
challenged before the Hon'ble Supreme Court
and when no appeal has been filed, this issue
cannot be allowed to be raised now for the first
time in this court, which has been entertaining
objection in petition under Section 34 of the Act
of 1996. This court is of the view that it has
rightly been held by the learned District Judge
because once the right of this plea was waived
and sole Arbitrator was got appointed by the
consent of the appellants and thereafter also
despite pleaded in the St.ment of claim no
objection was raised in the St.ment of defence,
rather the counter claim was preferred and
contested, this plea could not have been raised
and rightly rejected. (Para 23)

The Second argument of learned counsel for the
appellants-opposite parties is that the claims
raised by the respondent-claimant were beyond
limitation in view of Section 43 of the Act of
1996, according to which the provisions of
limitation Act 1963 are applicable, which
provides the limitation of 3 years for such claim,
is misconceived and not tenable for the reason
that this objection was not taken by the
appellants-opposite parties either before the High
Court or before the Arbitrator, rather the counter
claim was filed and contested before the learned
Arbitrator. Any such objection should have been
taken at the very first instance. Even otherwise this
objection is not available to the appellants-
opposite parties because they themselves raised a
counter claim, pursued the same and the counter
claim has also been allowed. The Delhi High Court,
in the case of M/s. Raj Kishan & Co. Vs National
Thermal Power Corp.; 2012 SCC OnLine Del 4799
has held that the plea of limitation is not open to
the petitioner to raise at this stage as the same
was never raised before the Arbitral Tribunal. (Para
25)

The learned District Judge after considering the
pleadings of the parties and the award has
recorded a finding that the Hon'ble Arbitrator
has committed no wrong in awarding interest at
the rate of 18% per annum from the date of
acceptance of final report. Moreover, costs, as
granted by the Hon'ble Arbitrator to both the
parties, and expenses of the witnesses also cannot
be said to be excessive because the Hon'ble
Arbitrator has very meticulously gone through the
record while awarding expenses of the witnesses
of both the parties. This Court after going through
the records and the findings recorded by the
Hon'ble Arbitrator and the learned District Judge
does not find any illegality or error in the findings
recorded by the learned Arbitrator and the District
Judge. Learned counsel for the appellants-opposite
parties also could not point out any error or
illegality in the said findings or as to how it is
against public policy. (Para 32)

The arguments of learned counsel for the
appellants-opposite parties that the award is not
1010 INDIAN LAW REPORTS ALLAHABAD SERIES
sustainable as the parties have not been treated
equally as different costs have been awarded to
both the parties, therefore there is violation of
Section 18 of the Act of 1996. Section 18 of the
Act 1996 provides that the parties shall be
treated with equality and each party shall be
given a full opportunity to present his case.
Therefore in view of Section 18 the equal
opportunity is required to be provided to both
the parties to present their case. Though this
plea does not appear to have been taken before
the learned District Judge while filing the
application under Section 34 of the Act of 1996,
however perusal of the award indicates that
equal opportunity has been provided to both the
parties before passing the award, which has not
been denied. Defence of the appellants-opposite
parties and the counter claim raised by him has
properly been considered and dealt with in the
award on the basis of pleadings, evidence and
material on record, therefore merely on the
basis of different costs awarded to both the
parties it cannot be said that the parties have
not been treated equally. The costs and interest
including the claim and counter claim have been
awarded according to the claims made by the
parties, therefore the other contentions of
learned counsel for the appellant-opposite
parties are not tenable and repelled accordingly.
(Para 33)

Appeal dismissed. (E-14)

List of Cases cited:

1. Yeswant Deorao Deshmukh Vs Walchand
Ramchand Lothari; 1950 Supreme Court Reports
852

2. The United Commercial Bank Ltd. Vs Their
Workmen; 1951 Supreme Court Reports 380

3. Kiran Singh & ors.Vs Chaman Paswan & ors.;
1954 AIR 340

4. Judgment and order dated 13th of January
2020 passed by Hon'ble Supreme Court in
K.Lubna & ors.Vs Beevi & ors.; Civil Appeal
Nos.2442-2443 of 2011

5. M/s. B and T AG Vs Ministry of Defence; 2023
LiveLaw (SC) 466

6. Mahanagar Telephone Nigam Ltd. Vs Canara
Bank & ors.; (2020) 12 SCC 767

7. U.O.I. Vs Pam Development Private Ltd.;
(2014) 11 SCC 366

8. M/s. Raj Kishan & Co. Vs National Thermal
Power Corp.; 2012 SCC OnLine Del 4799

9. M/s. Raj Kishan & Co. Vs National Thermal
Power Corp.; 2012 SCC OnLine Del 4799

10. National Insurance Co. Ltd. Vs Boghara
Polyfab (P) Ltd; (2009) 1 SCC 267

11.
Connecticut
Fire
Insurance
Co.
Vs
Kavanagh; (1892) A.C. 473

(Delivered by Hon'ble Rajnish Kumar, J.)

1. Heard, Shri Rakesh K.Chaudhary,
learned
counsel
for
the
appellants
alongwith Shri Aditya Pandey, Advocate
and Shri Vibhanshu Srivastava, learned
counsel for the respondents.

2. This First Appeal under Section
37(1)(b) of the Arbitration and Conciliation
Act, 1996 (here-in-after referred as Act of
1996) has been preferred against the
judgment and decree dated 16.09.2013
passed in Regular Suit No.17 of 2011;
U.P.Rajya Bhandaran Nigam Ltd. and
others Versus U.P. Purva Sainik Kalyan
Nigam Ltd. by the District Judge, Lucknow
and to set aside the award dated 16.01.2011
passed by the sole Arbitrator in Arbitration
Case No.28 of 2008; U.P. Purva Sainik
Kalyan Nigam Ltd. Versus the Managing
Director, U.P. Rajya Bhandaran Nigam
Limited and others by allowing the
application under Section 34 of the
Arbitration and Conciliation Act, 1996
(here-in-after referred as the Act of 1996).

3. Learned counsel for the
appellants submitted that there was no
8 All. U.P. Rajya Bhandaran Nigam Ltd. Lko. & Ors. Vs. U.P. Purva Sainik Kalyan Nigam Ltd.
 Lko.
1011
Arbitration Agreement between the parties
and it could not have been even by consent
of parties, therefore the arbitration could
not have been held and the judgment and
award passed by the sole Arbitrator is
without jurisdiction. He further submitted
that even the claims raised by the
respondent-claimant
were
beyond
limitation in view of Section 43 of the Act
of 1996, according to which the provision
of Limitation Act 1963 (36 of 1963) are
applicable which provides the limitation of
three years for such claims, therefore the
same could not have been considered and
the claim was liable to be dismissed on this
ground alone. He further submitted that the
impugned judgment and award made by the
sole Arbitrator is against the public policy
in view of Section 31(7) (a) and 31(8) of
the Act of 1996. Learned counsel for the
appellants further submitted that the award
is also not sustainable as the parties have
not been treated equally as different costs
have been awarded to both the parties,
therefore there is violation of Section 18 of
the Act of 1996. Learned counsel for the
appellants further submitted that on account
of theft, the appellants had suffered loss for
which the First Information Report was
also lodged. The correspondences show
that the action was taken by the respondent
against the Guards, therefore the bills were
rightly withheld, which could not have
been directed to be paid.

4. On the basis of above learned
counsel for the appellant submitted that
since the arbitration proceedings are
without jurisdiction, therefor the impugned
judgment and award passed by the sole
Arbitrator and the judgment and order
passed by the District Judge on Application
under Section 34 of the Act of 1996 are not
sustainable and the same are liable to be set
aside. Learned counsel for the appellants
relied on Yeswant Deorao Deshmukh
Versus Walchand Ramchand Lothari;
1950 Supreme Court Reports 852, The
United Commercial Bank Ltd. Versus
Their Workmen; 1951 Supreme Court
Reports 380, Kiran Singh and others
Versus Chaman Paswan and others;
1954 AIR 340, Judgment and order
dated 13th of January 2020 passed by
Hon'ble Supreme Court in K.Lubna and
others Versus Beevi & others; Civil
Appeal Nos.2442-2443 of 2011 and M/s.
B and T AG versus Ministry of Defence;
2023 LiveLaw (SC) 466.

5. Per contra, learned counsel for
the respondents submitted that the Sole
Arbitrator was appointed with the consent
of the appellants and no objection in this
regard was taken before the Arbitrator. The
appellants
not
only
consented
for
appointment of Arbitrator but made a
counter claim also before the Arbitrator,
therefore the appellant cannot raise this
objection after disposal of arbitration
proceedings and it cannot be said that the
proceedings are without jurisdiction in
view of Section 7(4)(c) of the Act of 1996.
He further submitted that no denial of
notice for appointment of Arbitrator was
ever made, rather the claims were raised
and the Arbitrator was appointed by this
court with the consent of the appellants. He
further submitted that the claim of the
respondent was also admitted by the
appellants, therefore, the issues were made
only on counter claim. He further submitted
that the plea of limitation is also not
available to the appellants as it was not
taken at the threshold, when the Arbitrator
was appointed by this court with the
consent of the appellants for appointment
of the Arbitrator. Even otherwise the claim
was admitted and the counter claim was
also made and contested, which has also
1012 INDIAN LAW REPORTS ALLAHABAD SERIES
been allowed. He further submitted that
since the claim of the respondent was
accepted by the appellants and the Sole
Arbitrator while awarding the claim and the
counter claim provided for set off in the
award, therefore the appellants had done
the summer salt and taken the aforesaid
pleas. He further submitted that the cost has
been awarded according to the claims,
therefore the Hon'ble Arbitrator had rightly
provided for the set off and no deduction
has been made in the costs claimed by the
appellants. The claim and counter claim
have
been
awarded
after
affording
sufficient opportunity, in accordance with
law, therefore the plea of unequal treatment
is also misconceived and not tenable
including the other contentions.

6. On the basis of above, learned
counsel for the respondent submitted that
there is no illegality or infirmity in the
arbitration proceedings and the judgment and
award passed by the Sole Arbitrator as well
as the judgment and order passed on the
application under Section 34 of the Act of
1996 filed by the appellants. The appeal has
been filed on misconceived and baseless
grounds. It is liable to the dismissed. Learned
counsel for the respondent relied on
Mahanagar Telephone Nigam Limited
Versus Canara Bank and others; (2020) 12
SCC 767, Union of India Versus Pam
Development Private Limited; (2014) 11
SCC 366 and M/s. Raj Kishan &
Company Versus National Thermal Power
Corporation; 2012 SCC OnLine Del 4799.

7.

I
have
considered
the
submissions of learned counsel for the
parties and perused the records.

8. The parties had entered into an
agreement on 10.08.2001 for providing
Security Personnel at Air Strip, Prithviganj,
Pratapgarh by the Kalyan Nigam i.e. the
respondent for protection of food grains
belonging to Rajya Bhandaran Nigam i.e.
the appellants. The said agreement was
renewed from time to time. According to
clauses 13, 14 and 16 of the said agreement
the Kalyan Nigam was liable to indemnify
the Bhandara Nigam for any loss and
damages caused to it on account of
negligence of the Security Guards deputed
by Kalyan Nigam. On 04.02.2002 the fact
of
theft
of
204
cover
tops
worth
Rs.4,85,724/- belonging to Bhandaran
Nigam came into the knowledge of
Bhandaran Nigam and it was informed to
Kalyan Nigam on 06.02.2002. The First
Information Report of the said occurrence
was lodged in the concerned Police Station,
who
submitted
the
final
report
on
18.04.2002, which was not accepted by the
learned Magistrate concerned and the
police was directed to re-investigate the
matter. After re-investigation, the final
report was again submitted by the Police
which was accepted on 16.05.2005 by the
Magistrate
concerned.
Accordingly
Bhandaran Nigam suffered a loss of
Rs.4,85,724/- due to negligence of Kalyan
Nigam employees. The claim of the
appellants is also that Bhandaran Nigam
had decided to shift their stock from Hawai
Patti, Prithviganj, Pratapgarh, but the
employees of Kalyan Nigam caused
obstruction in shifting of stock. Therefore
the Bhandaran Nigam had to employ the
guards
from
Industrial
Security
and
Training Force, who after great difficulties,
could shift the stock, therefore it had to
suffer
the
extra
expenditure
of
Rs.3,62,825/- due to illegal and wrongful
activities of Kalyan Nigam for shifting
their stock. As the Kalyan Nigam did not
indemnify
the
loss
suffered
by
the
Bhandaran Nigam, the wage bills submitted
by the Kalyan Nigam to the Bhandaran
8 All. U.P. Rajya Bhandaran Nigam Ltd. Lko. & Ors. Vs. U.P. Purva Sainik Kalyan Nigam Ltd.
 Lko.
1013
Nigam
on
01.05.2003,
02.06.2003,
01.07.2003, 01.08.2003, 01.09.2003 and
10.09.2003
for
the
total
sum
of
Rs.6,67,193.20 remained unpaid.

9. The respondent preferred
Arbitration Application No.28 of 2008;
U.P. Purva Sainik Kalyan Nigam Limited
through the Managing Director Versus the
Managing
Director,
U.P.
Warehouse
Corporation Limited, Lucknow and another
before this court for appointment of an
Arbitrator. This court, by means of the
order dated 05.12.2008, with the consent of
learned counsel for the appellant appointed
Sri K.L.Sharma, J. (Former Judge of this
Court) as Arbitrator in the matter subject to
his convenience and consent.

10. In pursuance of the aforesaid
order passed by this court and the consent
of the sole Arbitrator, he commenced the
proceedings after notice to the parties. The
respondent-claimant filed his claim for
Rs.6,67,193.23 as the unpaid wages of
security service rendered to the opposite
party no.2 since April 2003 till September
2003
claiming
that
the
respondents
provided the security personnel to the
opposite party no.2 in terms of the
agreement entered into between the parties
on 10.08.2001, but the wages of the
Security Personnel was paid upto March
2003 only, whereas Security Personnel
remained on duty till September 2003 and
wage bills dated 1st May, 2003, 2nd June,
2003, 1st July, 2003, 1st August 2003, 1st
September 2003 and 10th September 2003
were not paid by the opposite party no.2
despite repeated reminders and notices. It
was further alleged that the appellantopposite parties admitted the claim of the
respondent for a sum of Rs.6,67,193.23 and
alleging theft of 204 cover tops in their
legal notice made a counter claim of
Rs.8,08,959.95.
Since
the
appellantopposite party no.2 neither paid the
admitted amount of wage bills nor
nominated an Arbitrator to decide the
dispute the respondent-claimant moved an
Arbitration
Application
before
the
Lucknow Bench of Allahabad High Court
under Section 11 of the Act of 1996 and
consequently the Arbitrator was appointed
with the consent of appellant-opposite
parties.

11. The appellants-opposite parties
filed a joint statement of defence admitting
the claim of the respondent-claimant for
payment of the wages on account of the
security services rendered from April 2003
till the date of terms of the agreement i.e.
09.09.2010. However appellants-opposite
parties
made
a
counter
claim
of
Rs.8,48,969.95 also as against the claim of
Rs.6,67,193.23 made by the respondentclaimant and imposed the liability on the
respondent-claimant
to
return
Rs.1,81,776.72 to the appellants. The
appellants-opposite
parties
alleged
in
support of the counter claim, firstly that
204 cover Tops worth Rs.4,85,724/- were
stolen from the Hawai Patti, Prithvi Ganj,
Pratapgarh due to negligence of the
security personnel of the Kalyan Nigam
and secondly, the appellants have suffered
a loss of Rs.3,63,245.95 on account of the
hindrance and obstacles caused by the
security personnel by preventing the
shifting of food stocks from the site to
another site and for employing police force
and taking the security services from
Industrial Security force.

12. The respondent-claimant filed
a replication to the joint statement of
defence denying its liability for the alleged
theft claim and also the alleged losses
denying any negligence or hindrance etc.,
1014 INDIAN LAW REPORTS ALLAHABAD SERIES
caused by security personal employed by
Kalyan Nigam during the period from April
2003 till their actual dis-engagement.

13. On the basis of the pleadings of
the parties, documents placed on record and
after hearing the 9 points for determination
were made by the Tribunal, which are
extracted here-in-below:-

"(I) Whether the Annexure C-1 of
the statement of defence filed by the O.Ps.
is false, fake and fabricated document ? If
so, its effect ?
 (II) Whether the O.P. received
150 cover tops on 2.5.2002, 100 cover tops
on 22.5.2002 and 149 cover tops on
30.5.2002, at their Air Strip Prithviganj in
District Pratapgarh ?

(III) Whether there was alleged
fheft of 204 cover tops from the site of Air
Strip, Prithviganj on or before 4.2.2002 ? If
so, its value?

(IV) Whether the alleged theft of
cover Tops was due to the negligence of
the Security Staff ? If so, its effect and
liability ?
 (V) Whether the security staff of
the claimant created any obstacle or
hindrance in the shifting of the stores by
the staff of the O.P.? If so, whether the O.P.
suffered expenditure/loss of Rs.3,63,245.95
due to the delayed shifting?
 (VI) Whether the claimant is
liable to pay the value of the allegedly
stolen cover Tops according to para 16 of
the contract of security services dated
10.8.2001 executed between the parties? If
so, its effect?
 (VII) Whether the claimant is
entitled to get interest on unpaid wages of
security staff with effect from April 2003?
If so, at what rate and at what amount and
for what period?
 (VIII)Whether the claimant is
entitled to costs of the arbitral proceedings?

(IX) To what relief is the
claimant entitled?"

14. After affording opportunity of
evidence
and
hearing,
the
learned
Arbitrator allowed the claim as well as the
counter claim. Being aggrieved, the same
was challenged under Section 34 of Act of
1996 before the District Judge, Lucknow
by the appellant-opposite parties. The
District
Judge,
after
considering
the
grounds raised by the appellant-opposite
parties, pleadings and evidence on record
and affording opportunity dismissed the
application/objection. Hence this appeal
has been filed.

15. The first ground taken by learned
counsel for the appellants -opposite parties
is that since there was no arbitral agreement
between the parties, therefore the whole
arbitration
proceedings
are
without
jurisdiction and not sustainable in the eyes
of law. It is not in dispute that the
agreement dated 10.08.2001 entered into
between the parties does not contain the
arbitration clause, whereas the contention
of learned counsel for the respondent is that
since there was no objection in the various
correspondence made in this regard and
counter claim was also raised and the
learned Arbitrator was appointed by this
court by means of the order dated
05.12.2008
passed
in
Arbitration
Application No.28 of 2008 with the consent
of the appellants and thereafter not only the
claim was admitted, but a counter claim
was also filed and decided and no such plea
was ever raised, therefore it cannot be
taken at this stge.

16. Section 2(b) of the Act of 1996
defines
the
arbitration
agreement,
8 All. U.P. Rajya Bhandaran Nigam Ltd. Lko. & Ors. Vs. U.P. Purva Sainik Kalyan Nigam Ltd.
 Lko.
1015
according to which, Arbitration agreement
means an agreement referred to in section
7. Section 7 of the Act of 1996 provides the
Arbitration Agreement, which is extracted
here-in-below:-

" 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
[including
communication through electronic means]
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."

17. According to the aforesaid Section
7, the Arbitration Agreement may be in the
form of an arbitration clause in a contract
or in the form of a separate agreement. The
agreement
shall
be
in
writing
and
arbitration agreement is in writing if it is
contained in a document signed by the
parties, an exchange of letters, telex,
telegrams
or
other
means
of
telecommunication
including
communication through electronic means
which provide a record of the agreement or
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. Therefore merely
because an arbitration clause is not in the
arbitration, it cannot be said that the dispute
can not be settled through arbitration and it
is without jurisdiction, if it can be inferred
in terms of Section 7 and the intention of
parties to settle their disputes through
arbitration are discernable form the same..

18. The Hon'ble Supreme Court,
in the case of Mahanagar Telephone
Nigam Limited Versus Canara Bank and
others (Supra), considering the provisions
of Section 7 of the Act of 1996 has held
that the arbitration agreement need not be
in any particular form. What is required to
be ascertained is the intention of the parties
to settle their disputes through arbitration.
The intention of the parties must be
inferred from the terms of the contract,
conduct of the parties and correspondence
exchanged to ascertain the existence of a
binding contract between the parties. If the
documents on record show that the parties
were ad-idem and had actually reached an
agreement upon all material terms, then it
would be construed to be a binding
contract. The meaning of a contract must
be gathered by adopting a common sense
approach and must not be allowed to be
thwarted by a pedantic and legalistic
interpretation. The relevant portions of
paragraph 9 are extracted here-in-below:-

 "The
existence
of
a
valid
arbitration agreement
1016 INDIAN LAW REPORTS ALLAHABAD SERIES

9. A valid arbitration agreement
constitutes the heart of an arbitration. An
arbitration
agreement
is
the
written
agreement between the parties, to submit
their existing, or future disputes or
differences,
to
arbitration.
A
valid
arbitration agreement is the foundation
stone on which the entire edifice of the
arbitral process is structured. A binding
agreement for disputes to be resolved
through arbitration is a sine qua non for
referring the parties to arbitration.

9.1. Section 7 defines "arbitration
agreement" and reads as follows:

..............................

9.2. The arbitration agreement
need not be in any particular form. What is
required to be ascertained is the intention of
the parties to settle their disputes through
arbitration. The essential elements or
attributes of an arbitration agreement is the
agreement to refer their disputes or
differences
to
arbitration,
which
is
expressly or impliedly spelt out from a
clause in an agreement, separate agreement,
or documents/correspondence exchanged
between the parties.

9.3. Section 7(4)(b) of the 1996
Act, states that an arbitration agreement can
be derived from exchange of letters, telex,
telegram or other means of communication,
including through electronic means. The
2015 Amendment Act inserted the words
"including
communication
through
electronic means" in Section 7(4)(b). If it
can prima facie be shown that parties are ad
idem, even though the other party may not
have signed a formal contract, it cannot
absolve him from the liability under the
agreement [Govind Rubber Ltd. v. Louis
Dreyfus Commodities Asia (P) Ltd., (2015)
13 SCC 477 : (2016) 1 SCC (Civ) 733] .

9.4. Arbitration agreements are to
be construed according to the general
principles of construction of statutes,
statutory instruments, and other contractual
documents. The intention of the parties
must be inferred from the terms of the
contract, conduct of the parties, and
correspondence exchanged, to ascertain the
existence of a binding contract between the
parties. If the documents on record show
that the parties were ad idem, and had
actually reached an agreement upon all
material terms, then it would be construed
to be a binding contract. The meaning of a
contract must be gathered by adopting a
common sense approach, and must not be
allowed to be thwarted by a pedantic and
legalistic
interpretation.
[Union
of
India v. D.N. Revri & Co., (1976) 4 SCC
147]

9.5. A commercial document has
to be interpreted in such a manner so as to
give effect to the agreement, rather than to
invalidate it. An "arbitration agreement" is
a commercial document inter partes, and
must be interpreted so as to give effect to
the intention of the parties, rather than to
invalidate it on technicalities.

9.6. In Khardah
Co.
Ltd. v. Raymon
&
Co.
(India)
(P)
Ltd. [Khardah Co. Ltd. v. Raymon & Co.
(India) (P) Ltd., (1963) 3 SCR 183 : AIR
1962 SC 1810] , this Court while
ascertaining the terms of an arbitration
agreement between the parties, held that :
(AIR p. 1820, para 30)

"30. ... If on a reading of the
document as a whole, it can fairly be
deduced from the words actually used
therein, that the parties had agreed on a
particular term, there is nothing in law
which prevents them from setting up that
term. The terms of a contract can be
express or implied from what has been
expressed. It is in the ultimate analysis a
question of construction of the contract."
(emphasis supplied)
8 All. U.P. Rajya Bhandaran Nigam Ltd. Lko. & Ors. Vs. U.P. Purva Sainik Kalyan Nigam Ltd.
 Lko.
1017

9.7. In interpreting or construing
an arbitration agreement or arbitration
clause, it would be the duty of the court to
make the same workable within the
permissible limits of the law. This Court
in Enercon
(India)
Ltd. v. Enercon
GmbH [Enercon (India) Ltd. v. Enercon
GmbH, (2014) 5 SCC 1 : (2014) 3 SCC
(Civ) 59] , held that a common sense
approach has to be adopted to give effect to
the intention of the parties to arbitrate the
disputes
between
them.
Being
a
commercial contract, the arbitration clause
cannot be construed with a purely legalistic
mindset, as in the case of a statute.

9.8. In this case, MTNL raised a
preliminary objection that there was no
arbitration agreement in writing between
the parties, at this stage of the proceedings.
We will first deal with this issue. The
agreement between MTNL and Canara
Bank to refer the disputes to arbitration is
evidenced from the following documents
exchanged between the parties, and the
proceedings:

9.8.1. The minutes of the meeting
dated 27-3-2001 was convened by the
Cabinet Secretariat, wherein all three
parties were present and participated in the
proceedings. The Committee on Disputes,
in the meeting dated 16-12-2008 expressed
the view that all the three parties should
take recourse to arbitration in view of the
different interlinked transactions between
them. Canara Bank suggested that to
expedite the arbitration, it should be
conducted under the Arbitration and
Conciliation Act, 1996. This was accepted
by MTNL, and no objection was raised.

9.8.2......................

9.8.3......................

9.8.4......................

9.9. The agreement between the
parties as recorded in a judicial order, is
final and conclusive of the agreement
entered into between the parties. [State of
Maharashtra v. Ramdas Shrinivas Nayak,
(1982) 2 SCC 463 : 1982 SCC (Cri) 478.
See also Chitra Kumari v. Union of India,
(2001) 3 SCC 208] The appellant MTNL
after giving its consent to refer the disputes
to arbitration before the Delhi High Court,
is now estopped from contending that there
was no written agreement to refer the
parties to arbitration.

9.10. An additional ground, for
rejecting the preliminary objection raised
by MTNL is based on Section 7(4)(c) of
the Arbitration and Conciliation Act, 1996.
Section 7(4)(c) provides that there can be
an arbitration agreement in the form of
exchange of statement of claims and
defence, in which the existence of the
agreement is asserted by one party, and not
denied
by
the
other.
[Savitri
Goenka v. Kanti Bhai Damani, 2009 SCC
OnLine Del 177 : (2009) 1 Arb LR 320] In
the present case, Canara Bank had filed its
statement of claim before the arbitrator, and
MTNL filed its reply to the statement of
claim, and also made a counterclaim
against Canara Bank. The statement of
claim
and
defence
filed
before
the
arbitrator would constitute evidence of the
existence of an arbitration agreement,
which was not denied by the other party,
under Section 7(4)(c) of the 1996 Act. In
view of the aforesaid discussion, the
objection raised by MTNL is devoid of any
merit, and is hereby rejected."

19. Section 4 of the Act of 1996
provides the waiver of right to object,
which is extracted here-in-below:-

"4. Waiver of right to object.-
A party who knows that-

(a) any provision of this Part from
which the parties may derogate, or
1018 INDIAN LAW REPORTS ALLAHABAD SERIES

(b) any requirement under the
arbitration agreement,

has not been complied with and
yet proceeds with the arbitration without
stating
his
objection
to
such
noncompliance without undue delay or, if a
time-limit is provided for stating that
objection, within that period of time, shall
be deemed to have waived his right to so
object."

20. Section 16 of the Act of 1996
provides the competence of arbitral tribunal
to rule on its jurisdiction. Sub Section (2)
of Section 16 provides that a plea that the
arbitral tribunal does not have jurisdiction
shall be raised not later than the submission
of the statement of defence, which is
extracted here-in-below:-

"16. Competence of arbitral
tribunal to rule on its jurisdiction.-(1)
The arbitral tribunal may rule on its own
jurisdiction,
including
ruling
on
any
objections with respect to the existence or
validity of the arbitration agreement, and
for that purpose,-

(a) an arbitration clause which
forms part of a contract shall be treated as
an agreement independent of the other
terms of the contract; and

(b) a decision by the arbitral
tribunal that the contract is null and void
shall not entail ipso jure the invalidity of
the arbitration clause.

(2) A plea that the arbitral
tribunal does not have jurisdiction shall be
raised not later than the submission of the
statement of defence; however, a party
shall not be precluded from raising such a
plea merely because that he has appointed,
or participated in the appointment of, an
arbitrator.

(3) A plea that the arbitral
tribunal is exceeding the scope of its
authority shall be raised as soon as the
matter alleged to be beyond the scope of its
authority is raised during the arbitral
proceedings.

(4) The arbitral tribunal may, in
either of the cases referred to in sub-section
(2) or sub-section (3), admit a later plea if it
considers the delay justified.

(5) The arbitral tribunal shall
decide on a plea referred to in sub-section
(2) or sub-section (3) and, where the
arbitral tribunal takes a decision rejecting
the plea, continue with the arbitral
proceedings and make an arbitral award.

(6) A party aggrieved by such an
arbitral award may make an application for
setting aside such an arbitral award in
accordance with Section 34."

21. The Hon'ble Supreme Court, in
the case of Union of India Versus Pam
Development Private Limited (Supra),
has held that Section 16(2) mandates that a
plea that the Arbitral Tribunal does not
have jurisdiction shall be raised not later
than the submission of the statement of
defence and the appellant having failed to
raise the plea of jurisdiction before the
Arbitral Tribunal cannot be permitted to
raise for the first time in the court and he is
deemed to have waived the right to
objection with regard to the lack of
jurisdiction of the Arbitral Tribunal. The
relevant paragraph 18 is extracted here-inbelow:-

18. In our opinion, the High
Court has correctly come to the conclusion
that the appellant having failed to raise the
plea of jurisdiction before the Arbitral
Tribunal cannot be permitted to raise for
the first time in the Court. Earlier also, this
Court had occasion to consider a similar
objection in BSNL v. Motorola India (P)
Ltd. [(2009) 2 SCC 337 : (2009) 1 SCC
8 All. U.P. Rajya Bhandaran Nigam Ltd. Lko. & Ors. Vs. U.P. Purva Sainik Kalyan Nigam Ltd.
 Lko.
1019
(Civ) 524] Upon consideration of the
provisions contained in Section 4 of the
Arbitration Act, 1996, it has been held as
follows: (SCC p. 349, para 39)

"39. Pursuant to Section 4 of the
Arbitration and Conciliation Act, 1996, a
party which knows that a requirement
under the arbitration agreement has not
been complied with and still proceeds with
the arbitration without raising an objection,
as soon as possible, waives their right to
object. The High Court had appointed an
arbitrator in response to the petition filed
by the appellants (sic respondent). At this
point, the matter was closed unless further
objections were to be raised. If further
objections were to be made after this order,
they should have been made prior to the
first arbitration hearing. But the appellants
had not raised any such objections. The
appellants therefore had clearly failed to
meet the stated requirement to object to
arbitration without delay.