TaxTMI 
TaxTMI 
2002 (11) TMI 661
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.... the same were considered by the defendant-petitioner and to resolve the controversy, paid a sum of Rs. 10,438.40p. in total settlement of all the claims of the contractor/plaintiff. However, at that point of time, the parties entered into another agreement dated 21-5-1991 discharging the arbitration clause contained in their earlier agreement dated 15-2-1988 and both the parties signed the said deed. Subsequently, plaintiff/non-petitioner filed an application under section 20 of the Act before the civil court praying that the dispute between the parties remained unresolved and thus it be referred to the arbitrator as per the terms of agreement dated 15-2-1988, which has been allowed vide impugned order dated 7-5-1994. Hence, this revision petition. 3. Mr. Dinesh Maheshwari, learned counsel for the petitioner, has submitted that once the arbitration clause in the earlier agreement dated 15-2-1988 had been discharged vide subsequent agreement dated 21-5-1991, it was not open for the civil court to refer the matter for arbitration under the earlier agreement dated 15-2-1988 as it stood superseded and the impugned order is liable to be set aside only on this ground. 4. On the contra....
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....jurisdiction of the court to appoint the Arbitrator under section 20 of the Act, though, parties cannot be permitted to oust the jurisdiction of the civil court by their private contract. Nevertheless, parties, by contract may agree to the extent that no cause of action shall arise until any matter in dispute between them is being determined by arbitration. 8. The question does arise where a party insists that full and final payment had been made and the earlier arbitration agreement, as a whole, stood discharged by another agreement, whether while entertaining the application under section 20 of the Act, 1940, the court should decide whether there is any controversy in existence regarding subsistence of the arbitration clause or may make reference to the arbitrator and ask him to decide as to whether the arbitration clause still exists. 9. The word "discharge" has been defined in the various dictionaries as under :- "to release, liberate, annul, unburden, disencumber, and dismiss, to extinguish an obligation." (Black's Law Dictionary) "to free, rid, or relieve a thing (or person) from debt with which it is discharged; to relieve of (an obligation or charge), to exonerate, to e....
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....15. For making reference under section 20 of the Act, a pre-requisite condition remains that there must be an arbitration clause in existence. If there is existence of arbitration agreement and difference exists in claim being made and refused, dispute must be referred to the arbitration. Parties' right to apply under section 20 of the Act may accrue only after a demand is made to refer the dispute to the Arbitrator provided there is an arbitration clause is in existence - Union of India v. L.K. Ahuja AIR 1988 SC 1172; Bhargabi Cold Storage v. Orissa State Electricity Board [1993] 2 SCC 618; and Chander Nath Ojha v. Suresh Jhalani [1999] 8 SCC 628. 16. In Dhanrajamal Gobindram v. Shamji Kalidas & Co. AIR 1961 SC 1285, the Apex Court held that first the court's judicial function is to consider whether arbitration agreement should be filed in court or not. They may involve dealing with objection to the existence and validity of the agreement itself. 17. In Damodar Valley Corpn. v. K.K. Kar AIR 1974 SC 158, the Hon'ble Supreme Court observed as under :- "...As the contract is an outcome of the agreement between the parties, it is equally open to the parties thereto to agree to brin....
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....make an subsidiary exercise visualized in situation and fill up the gaps or deficiencies in the working arrangement and make reference - Union of India v. Kishori Lal Gupta & Bros. AIR 1959 SC 1362 and Alimenta S.A. v. National Agricultural Co-operative Marketing Federation of India Ltd. AIR 1987 SC 643. 20. In Bharat Heavy Electricals Ltd. v. Amar Nath Bhan Prakash [1982] 1 SCC 625, the Hon'ble Supreme Court laid down that a dispute as to whether there was discharge of the contract by accord and satisfaction by endorsement that full and final payment to the satisfaction of the party aggrieved has been made, is a dispute arising out of the contract and is liable to be referred to the Arbitrator. Similar view had been reiterated in Ruby General Insurance Co. v. Pearey Lal Kumar AIR 1952 SC 119. 21. When contract subsists, though performance was put to end to by completion, repudiation, frustration, breach or otherwise, disputes arising out of the obligation under the contract will have to be set out. For that purpose, the only course will be submission to the decision of the person or persons whom they have chosen by the contract and in that eventuality only such persons shall hav....
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....s, (ii) whether the difference which has arisen is one to which the arbitration agreement applies, and (iii) whether there is a cause, shown to be sufficient, to decline an order of reference to the arbitrator. The word 'agreement' finding place in the expression 'where a difference has arisen to which the agreement applies', in sub-section (1) of section 20 means 'arbitration agreement'. The reference to an arbitrator on a petition filed under section 20 is not a function to be discharged mechanically or ministerially by the Court; it is a consequence of judicial determination, the court having applied its mind to the requirements of section 20 and formed an opinion, that the difference sought to be referred to arbitral adjudication is one to which the arbitration agreement applies. . . ." (p. 52) 25. In view of the above, the law on the issue can be summarized that for making a reference under section 20 of the Act, the court must examine as to whether the parties had introduced the arbitration clause in the agreement and that arbitration clause is still in existence as the parties by their free Will may revoke the contract as a whole by agreement or delete or introduce any clau....