Arbitration reference upheld where a written clause existed and the company failed to prove lack of authority.

A written hire purchase agreement containing an arbitration clause was treated as sufficient for reference where the court found a valid and subsisting arbitration agreement and an existing dispute within its scope. Questions such as whether consideration had passed were held to concern the merits and were left to the arbitrator. The company's objection that the agreement was unauthorised and unsupported by a valid board resolution also failed, because it produced no resolution book or minutes and led no satisfactory evidence to disprove authority. An adverse inference was drawn from non-production of company records, and the reference order was sustained.

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Issues: (i) Whether the execution of the hire purchase agreement and the existence of a dispute brought the matter within section 20 of the Indian Arbitration Act, 1940 so as to require reference to arbitration. (ii) Whether the company could resist reference on the ground that the agreement was unauthorised and not supported by a valid resolution under section 292 of the Companies Act, 1956.

Issue (i): Whether the execution of the hire purchase agreement and the existence of a dispute brought the matter within section 20 of the Indian Arbitration Act, 1940 so as to require reference to arbitration.

Analysis: The written agreement was proved by execution and attestation, and it contained an arbitration clause covering disputes arising out of the agreement. The court's enquiry under section 20 was confined to whether a valid and subsisting arbitration agreement existed and whether a dispute had arisen regarding its subject-matter. Questions going to the merits of the dispute, including the plea that consideration had not passed, were matters for the arbitrator and not for decision at the stage of filing the agreement and making a reference.

Conclusion: The matter was rightly held referable to arbitration and the objection against reference failed.

Issue (ii): Whether the company could resist reference on the ground that the agreement was unauthorised and not supported by a valid resolution under section 292 of the Companies Act, 1956.

Analysis: The company did not produce its resolution book or minutes, though the existence or absence of authority was within its special knowledge. No satisfactory evidence was led to show that the general manager lacked authority to execute the agreement. In the circumstances, an adverse inference arose from non-production of the company records, and the plea of want of authority was not proved.

Conclusion: The challenge based on absence of a valid company resolution was rejected.

Final Conclusion: The revisional challenge to the orders directing reference of the disputes to arbitration was without merit, and the reference order was sustained.

Ratio Decidendi: In proceedings under section 20 of the Indian Arbitration Act, 1940, the court need only satisfy itself that a written and subsisting arbitration agreement exists and that a dispute has arisen within its scope; issues going to the validity of the underlying claim or matters peculiarly within the knowledge of a company, if not proved by it, cannot defeat the reference.

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