TaxTMI 
TaxTMI 
2022 (5) TMI 703
X X X X Extracts X X X X
X X X X Extracts X X X X
....ict Judge, Sehore Camp, Astha, Madhya Pradesh, for the settlement of accounts of transportation of coal undertaken by them according to the agreement dated 01st October 1990 and the supplementary agreement dated 13th December 1991, with M.P. Rajya Tilhan Utpadak Sahkari Sangh Maryadit, Pachama, District Sehore, Madhya Pradesh (the first defendant). The General Manager and Managing Director of the said Sahkari Sangh were impleaded as second and third defendants. Collectively three defendants are referred to as 'the defendant', for short The plaintiff had also prayed for a grant of the amount due and payable by the defendant and the amount spent by the plaintiff on the security of the defendant's goods and all other amounts (sic) with interest @ 2%. Interest period was not specified. 3. The plaint, in brief, states that the plaintiff had transported coal on the delivery orders issued by the defendant from the coal mines to the defendant's plant. The plaintiff had no connection with the quality or any deficiency in the quality of the coal. The plaintiff, as per directions, had loaded the coal from the coal mines of Western India Coalfields Limited. The plaintiff's sole respon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ant and not for the coal which was not delivered. As per clause 11 of the agreement, shortage up to 1% per truck was the maximum limit, whereas the plaintiff had claimed that 1% shortage should be allowed even when there was no difference between the dispatched and delivered weight. The price of coal was deducted and recovered from the plaintiff when the shortage was in excess and beyond the 1% allowable limit. There were delays in the delivery of coal, sometimes extending to more than a month from the dispatch date. Accordingly, the defendant had made deductions on account of wrong and fraudulent acts due to which the defendant had suffered losses. The plaintiff was also liable to pay interest as the defendant had suffered due to blockage of funds. The defendant was not liable to pay any demurrage or rent charges for the plot and, in fact, such charges were never paid. The plaintiff had not delivered and kept huge quantity of coal for six to seven months after the coal was lifted from the coal mines. Other defences raised related to incomplete documentation and excess freight charges by the wrong declaration as to the place from where the coal was lifted. The letter dated 05th Jun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ff against the Defendants for settlement of accounts. In view of the pleadings made by the Plaintiff, documents produced on record and pleadings and documents of Defendant, it is prima facie clear that there is a dispute between both the parties is in respect of accounts. For the purpose of conducting enquiry regarding accounts after giving opportunity of hearing to both the parties, it is necessary in the interest that after appointing a Competent Chartered Accountant as Panch/ Commissioner in the present case he may be directed to submit report after conducting audit of Accounts. Since, the transaction took place between both the parties are much higher, therefore, it is necessary to handover the aforesaid work to a Chartered Accountant. Therefore, it is prayed that by allowing the present Application, and after appointing Sh. Sushil Kumar Mantri, Chartered Accountant, Sehore as Panch/ Commissioner as proposed by the plaintiff, kindly direct him to Submit Report before the Hon'ble Court after conducting Audit of the Accounts. Sehore, dated 23.12.1994 Sd/- illegible Plaintiff Through Counsel" The application was signed and moved by the plaintiff. It was not signed and m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Court. Sd/- (Satish Chandra Dubey) First Additional District Judge, Sehore (M.P.)" 9. On 28th March 1995, S.K. Mantri appeared before the court and applied for an extension of the date to submit the report, which time was extended. Another order dated 22nd April 1995 states that the panch decision was not submitted and that the panch must present the award within the stipulated period by giving notice to the parties concerned. Thereafter, the court passed a number of orders recording the presence of the parties and that they sought time to arrange the vouchers and the records. Time was also given to verify the papers, which were checked in the court in front of the parties' representatives. Order dated 18th May 1995 records that photocopy and laboratory analysis records had been placed on record. Order dated 19th May 1995 refers to the account summary submitted by the plaintiff regarding the pending bills and amounts for the previous years. Information in that regard was sought from the defendant. Therefore, it is clear that the proceedings remained pending before the court. The suit was not treated as disposed of and decided in view of the order dated 23rd Decembe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reparation of accounts, was overruled as this objection was not raised when S.K. Mantri was appointed as an arbitrator. Order dated 23rd December 1994 appointing S.K. Mantri as an arbitrator had attained finality as it was not challenged by the defendant. 13. The first appeal preferred by the defendant before the High Court has been dismissed vide the impugned judgment dated 19th September 1996. The High Court has affirmed the trial court's view that during the pendency of the suit, the matter was referred to arbitration in terms of Section 21 of the Arbitration Act. S.K. Mantri, Chartered Accountant, was appointed as an arbitrator with the parties' consent. The fee was payable to S.K. Mantri as per the prescribed arbitration schedule. The objection that S.K. Mantri was the Chartered Accountant of the defendant, was rejected as it could not be said that he had acted in an unfair manner. That apart, the objections were filed beyond the prescribed period of 30 days. 14. Defendant, namely, M.P. Rajya Tilhan Utpadak Sahkari Sangh Maryadit, Pachama, District Sehore, Madhya Pradesh and the General Manager and Managing Director of the Sahkari Sangh have accordingly filed this ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....before any matter involved in a suit pending in a Court can be referred to arbitration (a) there must be an agreement amongst all the parties interested that any matter in dispute between them in the suit shall be referred to arbitration; (b) if they come to such an agreement, then they have to make an application in writing to the Court concerned; and (c) thereafter, the Court has to pass an order referring the dispute to the arbitrator agreed upon between the parties. There can be no manner of doubt that if there is no agreement between all the parties who are interested in the case and if the application is not made on behalf of them all, the reference made by the Court is bad and the award based on such a reference is invalid in law. This view has been consistently taken by all the High Courts. In Negi Puran Singh v. Hira Singh and others, while dealing with provisions of Civil Procedure Code, 1882, similar to sections 21 and 23 of the Arbitration Act, Stanley, C.J. and Banerji, J., of the Allahabad High Court held that if there was no application signed by all the parties who were interested in the settlement of the suit, the reference and the award given, thereafter, would ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e court adjudication process by a private forum chosen by the parties. Normally reference can be made or even directed to the arbitrator only if a preexisting arbitration agreement subsists between the parties. In the absence of a preexisting arbitration agreement, the court has no power, authority or jurisdiction to refer unwilling parties to arbitration. Therefore, the word 'agree' in Section 21 of the Act refers to consensus ad idem between the parties who take a considered decision to forego their right of adjudication before a court where the suit is pending, and mutually agree to have the subject matter of the suit or part thereof adjudicated and decided by an arbitrator. 18. In the present case, the application dated 23rd December 1994 was moved by the plaintiff and it was not signed by the defendant. As per the heading, the application was for the appointment of a commissioner/arbitrator to conduct an 'enquiry' in respect of the accounts by a competent Chartered Accountant who shall act as a panch/Commissioner and submit a report after conducting an audit of the accounts. It was stated that the transactions between the parties are fairly large in number and, therefore, it ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....agreed to the appointment of an arbitrator as an alternative and substitute to court adjudication. If it was so, this should have been clearly stated to enable the parties to respond and make statement. At best it was restricted to the appointment of an expert/commissioner who would examine the accounts and submit his report. 21. The second portion of the order dated 23rd December 1994 states that in the application name of Sushil Kumar, Chartered Account, as panch has been proposed to which no party had any objection. Thereafter, the order records the direction of the court that the fee of the arbitrator 'shall be as prescribed in the schedule of the Arbitration Council of India and if the arbitrator demands a fee the same should be equally shared by both the parties'. The last portion does not incorporate and does not refer to any agreement or even concession given by the defendant agreeing to arbitration as an alternative to court adjudication and decision. The court had not disposed of the suit by referring the subject matter or a part of the subject matter of the suit to arbitration. In our opinion the said order is for issuing a commission as the court had accepted an applic....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Union Bank of India, (1992) 1 SCC 31 which has settled the law that a counsel should not act on implied authority unless there is an exigency of circumstances demanding immediate adjustment of the suit by agreement or compromise and the signature of the party cannot be obtained without delay. Reference was made to paragraph 37 in Gariwala case (supra), which reads as under: "37. We may, however, hasten to add that it will be prudent for counsel not to act on implied authority except when warranted by the exigency of circumstances demanding immediate adjustment of suit by agreement or compromise and the signature of the party cannot be obtained without undue delay. In these days of easier and quicker communication, such contingency may seldom arise. A wise and careful counsel will no doubt arm himself in advance with the necessary authority expressed in writing to meet all such contingencies in order that neither his authority nor integrity is ever doubted. This essential precaution will safeguard the personal reputation of counsel as well as uphold the prestige and dignity of the legal profession." 26. The Kerala State Electricity Board (supra) decision rightly records that re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r of the contract or was an inevitable inference from the nature of the contract that all parties so regarded it. A contract is void at law only if some term can be implied in both offer and acceptance, which prevents the contract from coming into force. These principles are relevant when the dispute arises as to the existence of a pre-existing arbitration agreement. Albeit in the case of Section 21, the requirement is even stricter - the "parties interested agree...in writing before the court", which is an inflexible mandate which requires that the parties must agree, or affirm an agreement before the court to refer the subject matter as agreed to arbitration. 28. This Court in K.K. Modi v. K.N. Modi and Others, (1998) 3 SCC 573 after referring to Mustill and Boyd in their book on Commercial Arbitration, pointed out that there is an immense variety of tribunals differing fundamentally as regards their composition, their functions and sources from which their powers are derived. Tribunals, including those which derive their jurisdiction from the consent of the parties, apart from the arbitration tribunal, may be persons who are not properly called tribunals, but by mutual consent ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and its principles, whereas an expert decides on his own expert opinion, applying his own expertise. Russel on Arbitration, 21st Edition. 30. In Bharat Bhushan Bansal v. U.P. Small Industries Corporation Ltd, (1999) 2 SCC 166 reference was made to S.K. Chawla's Law of Arbitration and Conciliation Justice S.K. Chawla Law of Arbitration and Conciliation at Page 164to highlight that an expert primarily acts on his knowledge and experience supplemented if he thinks fit by: (i) his own investigations; and/or (ii) material (which need not conform to the rules of 'evidence') put before him by either party. On the other hand, an arbitrator primarily acts on the material put before him by the parties. Determination by an expert would involve less to thorough investigation. Reference is also made to Hudson's Building and Engineering Contracts, See Eleventh Edition, Volume 1, in Paragraph 6.065 which distinguishes a certifier and an arbitrator in a building contract observing that the certifier in a construction contract will often perform an administrative rather than a judicial function. Certifiers have been described as preventers of disputes in contradistinction with arbitrators, whose ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i-judicial manner. Commissioners are appointed by the court. Appointment may be with consent of the parties, or even when there is objection to the appointment. Preexisting agreement or the requirement that the parties agree before the court, as is mandatory in case of arbitration, is not necessary when a court directs appointment of a commissioner. In the case of a reference to a commissioner, all that the parties expect from the commissioner is a valuation/ examination of the subject matter referred, which he would do according to his skill, knowledge and experience, which may be without taking any evidence or hearing argument. Halsbury, Vol.1, Edn. 2 at Pg. 622 In light of the aforesaid decisions, we would like to introduce the principle of a 'facilitator' which a court may appoint, be it a commissioner or an expert, for a specific purpose and cause for ascertainment of a fact which may be even disputed. In some cases, the commissioner may even hear the parties and give his expert opinion based on the material or evidence produced by the parties before the commissioner, as in this case when the court appointed a Chartered Account who as an expert was required to give his opinion....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under this Act, where the court considers it necessary to get expert opinion to assist it on any specific issue involved in the suit, it may engage one or more experts and direct to report to it on such issue and may secure attendance of the expert for providing evidence, including production of documents on the issue. (2) The court may require or direct any person to give relevant information to the expert or to produce, or to provide access to, any relevant documents, goods or other property for his inspection. (3) The opinion or report given by the expert shall form part of the record of the suit; and the court, or with the permission of the court any of the parties to the suit, may examine the expert personally in open court on any of the matters referred to him or mentioned in his opinion or report, or as to his opinion or report, or as to the manner in which he has made the inspection. (4) The expert shall be entitled to such fee, cost or expense as the court may fix, which shall be payable by the parties in such proportion, and at such time, as the court may direct.] has been inserted in the Specific Relief Act, 1963. The provision states that without prejudice to the pr....