M/S Libra Enterprises Through Its ... vs Dugdh Utpadak Sahkari Sangh Ltd. ...

1. Heard Sri Apoorva Tewari, learned counsel for the petitioner and Mr. Sudeep Kumar who appears for respondent no. 1.

2. The petitioner is aggrieved by an order dated 14.10.2008 passed by the opposite party no. 2 in an Appeal No. 44 of 2005 filed by the opposite party no. 1 against the Award dated 09.02.2005 passed by the Additional Milk Commissioner.

3. It has been submitted by learned counsel for the petitioner that the petitioner is a firm registered under the Partnership Act and carries on the business of supply of milk to various institutions. The Dugdh Utpadak Sahkari Sangh Ltd. Motiganj, Bulandshahr is primary level cooperative society affiliated to PCDF and is a supplier of milk to PCDF, which ultimately is sold to the consumer under the brand name of "Parag". The petitioner and opposite party no. 1 entered into an agreement on 05.04.2003, whereby the petitioner was to purchase milk and milk products from the opposite party no.1 for purpose of supplying it to various institutions in Delhi. In the agreement entered into between the parties, there was an arbitration clause 22 which stated that in case of any dispute regarding the contract, the same shall be referred to the Milk Commissioner, U.P., Lucknow for arbitration and the decision of the Milk Commissioner, Lucknow or his nominee, shall be binding and acceptable to both the parties. A dispute arose regarding the prices of milk and the parties under the arbitration clause approached the Milk Commissioner for decision of the dispute. The Milk Commissioner appointed the Additional Milk Commissioner as an arbitrator. Upon nomination of the Additional Milk Commissioner as the sole arbitrator, the opposite party no. 1 submitted its claim before the arbitrator and the petitioner also submitted its reply disputing the same and also set up a counter claim for refund of the excess amount charged on the petitioner as price of milk. The sole arbitrator passed an Award on 09.02.2005.

4.The arbitrator in his award partially allowed the claim of the opposite party no. 1 to the extent of Rs. 1, 86, 564/- and rejected the claim of opposite party no. 1 to the extent of Rs. 33,54, 082/- and directed refund of excess amount charged from it of Rs. 3,86,839/- to the petitioner.

5.The opposite party no. 1 thereafter preferred an Appeal before the opposite party no. 2 being Appeal No. 44 of 2005 assailing the Award primarily on the ground that the opposite party no. 1 had not been afforded an opportunity to lead oral evidence in respect of its claim. The opposite party no. 1 did not raise any challenge to the jurisdiction of the arbitrator. However, at the time of final hearing of the Appeal, the opposite party no. 2 directed the opposite party no.1 to disclose as to whether the petitioner was a member of opposite party no. 1. It was admitted by the opposite party no. 1 that the petitioner was not a member of the Cooperative Society, not being a member of the Cooperative Societies was held by the Tribunal to be sufficient ground to come to a conclusion that the arbitration was wrongly referred by the Milk Commissioner to the sole arbitrator.

6. It has been submitted by learned counsel for the petitioner that on the one hand, the opposite party no. 1 out of its own volition and without any coercion or duress entered into a contract with the petitioner which contained an arbitration clause. It subjected itself to arbitration and set-up its claim. It also did not challenge the jurisdiction of the arbitrator in the appeal that was filed by it. On the other hand, at the time of argument, a plea was raised that the arbitration could not have been resorted to and the Registrar could not have referred the matter to the sole arbitrator as the petitioner was not a member of the Co-operative Society. The opposite party no. 1 should not have been allowed to resile from the terms of the contract already entered into between the parties.

7. Sri Sudeep Kumar who appears for respondent no. 1 says that Clause 22 of the agreement entered into between the parties could not have been read by the Registrar-Milk Commissioner as a reference under Section 70 and could not have been referred to the Arbitrator at all. Since the Arbitrator and Milk Commissioner had not jurisdiction, the petitioner not being a member of the Society, the arbitration could not have taken place. Only because the opposite party no.1 submitted itself to the said arbitration, consent could not confer jurisdiction upon it. The Award was without jurisdiction and it was open for the opposite party no. 1 to have challenged it in the Co-operative Tribunal.

8.The said award could not have been challenged before the District Judge under Section 34 of the Arbitration and Conciliation Act, 1996, because if the award clearly stated that it had been rendered in pursuance of the reference made under Section 71 read with Rule 229 and 230 of the Cooperative Societies Rules, 1968, The District Judge would have outrightly rejected the Appeal. The opposite party no.1 could not be rendered remedy-less against such an award which was without jurisdiction in the first place. Therefore, it approached the Cooperative Tribunal under Section 97. The appeal was rightly entertained and allowed.

9. Learned counsel for the petitioner on the other hand, has argued that there is an admission on the part of the opposite party no. 1 that award could not have been passed by the Additional Milk Commissioner under Section 70 of the Act. If such is the plea and argument raised, the appeal could also not have been entertained because it was not an appeal under a statutory remedy, but it was an appeal against an award passed under the Arbitration and Conciliation Act and the opposite party no. 1 should have been relegated to remedy under the Arbitration and Conciliation Act, 1996.

10. This Court has perused the arbitration agreement entered into between the parties and the arbitration clause therein. It clearly refers to arbitration but it does not refer to arbitration under the Co-operative Societies Act and the Rules framed thereunder. The Registrar made a wrong reference under Section 71 read with Rules 229 and 230 of the Rules. The award, thus, cannot be sustained and it has been rightly set aside.

11.At the same time, the counsel for the petitioner's argument that the opposite party no.1 cannot be permitted to resile from the terms of the contract entered into voluntarily between the parties cannot be overlooked.

12.The matter is remanded to the Registrar. The Registrar shall appoint an independent person to conduct the Arbitration under the 1996 Act, as amended from time to time within a period of six weeks from the date a certified copy of this order is produced before him. The Arbitrator shall endevour to decide the Arbitration referred to him in accordance with the limit prescribed under the 1996 Act.

13.The writ petition stands disposed of.

Order Date :- 13.8.2019 Asheesh