BANWARI LAL KOTIYA versus P.C. AGGARWAL

Citation: [1985] SUPP. 1 S.C.R. 567 · Decided: 08-05-1985 · Supreme Court of India · Bench: V.D. TULZAPURKAR · Disposal: Appeal(s) allowed

Judgment (excerpt)

567 
BANWARI LAL KOTIY A 
v. 
P.C. AGGARWAL 
May 8, 1985 
[V,D. TULZAPURKAR AND RANGANATH MISRA, JJ.) 
Arbitration Act, 1940, sections 2(a) and (e) and 20, scope of-Need for 
fresh assent of both the parties for the actual reference when arises-Actual 
reference when becomes consensual and not unilateral, explained-Interpretation 
of Bye.laws 247 of the Delhi Stock Exchange. 
The appellant is a share broker and a member of the D~lhi Stock 
Exchange-an exchange recognised by the Central Government under the 
Securities 
Contracst Regulations) 
Act, 
1956. 
The respondent, a non 
member. 
had 
dealings in shares and securities with the appellant as 
principal to principal between 14th July to 27th September, 1960, in respect 
whereof Contract Notes (ex. P.1 to P. 31) in the prescribed form wher~ issued 
by the appellant and were signed by the respondent. Each one of the 
Contracts contained an arbitration clause couched in very wide terms requiring 
· the parties thereto to refer all their disputes or claims to arbitration as provided 
in the Rules, Regulations and Bye~laws of the Exchange. 
Under these transactions a sum of Rs. 5923 became due and payable 
by the respondent to the appellant but since the respondent raised a dispute 
denying the claim, the said dispute was referred to the arbitration of two 
arbitrators Mr. Prem-Chand and Mr. P.S. Khambete (both members of the 
Exchange) the former being the non1ince of the appellant and the latter being 
A 
B 
c 
D 
E 
the appointee of the Exchange on the respondent's failure to nominate his 
F 
arbitrator when called upon to do so. The arbitrators held their proceedings 
in which the respondent participated though he inter alia raised a contention 
that he was not a party to the reference and would not be bound by the Award 
that might be made on the basis of such unilateral reference. The Arbitrators 
made their Award on 18th April. 1961, allowing the claim of the appellant with 
costs against the respondent. In response to the notice of filing the Award in 
the Court, the respondent filed objections to the Award on several grounds 
G 
such as denial of the existence of the agreement of reference, that he was not a 
member of the Exchange, that the Contract Notes had not been signed by him, 
that the arbitrators had mis-conducted themselves and the proceedings, that 
the Award had been improperly 'procured etc. Negativing all the objections, 
the Sub-Judge Delhi recorded the findings that the Contract Notes bore the 
signatures of the respondent and as such under the arbitration clause contained 
B 
in each one of them read with the relevant Bye-laws there was a valid 
Agreement for Reference to arbitration made the Award_ a rule of the Court and 
passed a decree in favour of the appellant on 7.9.1962. 
A 
8 
c 
D 
E 
F 
G 
H 
568 
suPIUIME COURT REPORTS 
(1985) SUPPL, s.c.R.. 
In the first appeal preferred to the High Court, a learned Single Judge 
of tho Delhi High Court entertained a doubt as to whether the respondent could 
be said to be a party to the actual Reference to arbitration even though each 
of the Contract Notes containing the arbitration clause was signed by the 
respondent, since the respondent had not joined in nominating bis arbitrator 
despite service of notice asking him to do so, and whether on that account the 
Reference could be said to be unilateral, referred the same to a larger Bench 
on 5.1.1971. The Full Bench answered the que,tion in favour of the respon-
dent, relying on certain observations made by the Supreme Court in Seth 
ThawardtJ1 Pheruma/ v. Union of India reported in (1955) 2 SCR P.48 and took 
the view that notwithstanding the fact that respondent had signed the Contract 
Notes and had thereby become consenting party to the arbitration agreement 
the actual reference to arbitration of the two arbitrators required the assent 
of both the parties and since to such reference the respondent had not given 
his consent it was a unilateral reference to arbitration and as such the .resut. 
tant Award would not be binding on tl1e respondent. Hence the appeal by 
special leave. 
Allowing the appeal, the Court 
HELD: 1.1 The question whether fresh assent of both the parties for 
the actual reference is necessary or not must depend upon whelher arbitration 
agreement is a bare agreement or it is an arbitration agreement as defined in 
section 2(a) of the Act. 
If it is the latter, then, clearly the actual reference to 
arbitration would b

Excerpt shown. Read the full judgment & AI analysis in Lexace.