1966 (2) TMI 95 - HC - Indian Laws

Arbitration clause deemed unenforceable, suit dismissed under Section 20 of Arbitration Act.

Teamco Private Ltd. Versus T.M.S. Mani

The court allowed the appeal, set aside the trial court's order, and dismissed the suit. It held that the arbitration clause was vague and uncertain, ... - Issues Involved:1. Validity and enforceability of the arbitration agreement.2. Maintainability of the suit under Section 20 of the Arbitration Act.Detailed Analysis:1. Validity and Enforceability of the Arbitration Agreement:The primary issue in this appeal was whether the arbitration agreement contained in Clause 11 of the agreement dated 1-4-61 was vague and uncertain, thus unenforceable in law.Arguments by the Appellant:- The appellant contended that the arbitration clause was vague and uncertain regarding the number of arbitrators to be appointed and the manner of their appointment.- The term 'The Arbitrators' did not specify the number of arbitrators, only indicating that there must be more than one.- The clause also failed to specify the mode of appointing the arbitrators, whether by common consent or otherwise.- The appellant argued that such vagueness rendered the arbitration agreement unenforceable, citing Section 29 of the Indian Contract Act, which voids agreements that are not certain or capable of being made certain.Arguments by the Respondent:- The respondent argued that the arbitration clause was valid and enforceable, asserting that the clause implied that the number and manner of appointment of arbitrators would be agreed upon by the parties at a future date.- The respondent suggested that if the parties failed to agree, the arbitration would proceed according to the provisions of the Arbitration Act, specifically Rule 1 of the First Schedule, which provides for a sole arbitrator unless otherwise stated.Court's Analysis:- The court examined the language of the arbitration clause and found it to be vague and uncertain. The clause did not clearly convey the number of arbitrators or the method of their appointment.- The court held that Rule 1 of the First Schedule to the Arbitration Act, which provides for a sole arbitrator, could not apply as the clause expressed a different intention by using the term 'arbitrators,' indicating more than one arbitrator.- The court referenced previous judgments and legal principles, emphasizing that arbitration agreements must be clear and unambiguous to be enforceable.- The court concluded that the arbitration clause failed to express a definite meaning and thus did not constitute a valid arbitration agreement.2. Maintainability of the Suit under Section 20 of the Arbitration Act:The second issue was whether the suit under Section 20 of the Arbitration Act was maintainable, given that the respondent had previously issued a notice under Section 8 of the same Act.Arguments by the Appellant:- The appellant argued that the respondent, having elected to proceed under Chapter II of the Arbitration Act by issuing a notice under Section 8, was precluded from bringing an action under Section 20, which is in Chapter III of the Act.- The appellant cited legal provisions and a relevant judgment to support the argument that proceedings under Section 20 are an alternative to those under Chapter II and cannot be pursued simultaneously or supplementarily.Court's Analysis:- The court did not find it necessary to address this issue in detail, as it had already concluded that there was no valid arbitration agreement between the parties.- The court's decision on the first issue rendered the second issue moot.Conclusion:The court allowed the appeal, set aside the order of the trial court, and dismissed the suit. It held that the arbitration clause in the agreement was vague and uncertain, thus unenforceable, and there was no valid arbitration agreement to be filed in court under Section 20 of the Arbitration Act. The parties were directed to bear their own costs of the appeal and the proceedings in the court below.