UNION OF INDIA versus D. M. REVRI & CO.

Citation: [1977] 1 S.C.R. 483 · Decided: 02-09-1976 · Supreme Court of India · Bench: P.N. BHAGWATI · Disposal: Appeal(s) allowed

Cited by 6 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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483 
lJl'ilON OF)NDIA 
v. 
D. M. REVRI & CO. 
September 2, 1976 
[P. N. BHAGWATI AND S. MURTAZA FAZAL ALI, JJ.] 
Arbitration Act, 1940--Contract between lay parties not to be thwarted by 
narrow pedantic and legalistic interprf?tation-Intendment of parties regardinfi 
validity of arbitrator's appointment. whether material. 
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B 
The respondent partnership firm, entered into contract with the· appellant 
for the supply of- East German sugar. Provision for arbitration was made in 
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clause ( 17) of the contract, and the arbitrator was to be_ nominated by the 
Secretary in the Ministry of Food & Agriculture. In the present dispute, before 
an arbitrator was nominated, the Ministry of Food & Agriculture was bifurcated 
into two separa.te Ministries and the subject-matter of the contract was allotted 
to the ~finistry of Food. The respondents took the stand that there was no 
longer any Secretary in the non-existent ~finistry of Food and Agriculture and 
clause (17) of the contract was a dead-letter. The appellant's proposal to 
amend clause (17) to suit the changed circumstances, was rejected by the res-
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pondents. Thereafter, the two Ministries were reintegrated into a }.finistry of 
Food & Agriculture and two Secretaries were put incharge of the two depart-
ments. The Secretary, Food Department, on a request from the appeIIant under 
clause (17), appointed an arbitrator. The respondents served on the appellant 
a notice under C.P.C. Sec. 80 but instead of proceeding to sue the appellantsf 
they submitted to the jurisdiction of the. Arbitrator without protest until award 
was made. The appellant's application to the Sub Judge, Delhi, for passing a 
decree in terms of the award· was resisted by the respondents who sought to 
set aside the award, challenging the validity of'. the Arbitrator's appointment and 
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contending that the arbitration agreement under clause (17) was made by only 
one of the partners, and was not binding on the others. The Sub-Judge rejected 
their objections and made the award a rule of the court. An appeal to the 
High Court was allowed on the ground that on bifurcation of the ~finistries 
clause (17) of the contract became dead, and could not be revived on their 
re-integration. 
Allowing the appeal, the Court, 
HELD : 
There_ were, after integr3tion, two· Secretaries in the ~Iinistry of 
Food & Agriculture, but the argument that this event rendered the arbitration 
- agreement vague and uncertain, is ba<Sed on a highly technical and doctrinaire · 
approach and is opposed ·to plain common sense. A contract is a commercial 
document between the parties and must be interpreted in such a manner as to 
give it efficacy rather than tel, invalidate it. It would not be right while inter· 
preting a contract entered into between two lay parties, to apply strict ru1es of 
constrnction which are ordinarily applicable to formal documents. The mean~ 
ing of such a contract must be gathered by adopting a common sense approach 
and it must not be allowed to be thwarted by a narrow pedantid and legalistic 
interpretation. The Secretary in the Mini~trY of Food and Agriculture in charge 
of the Department of Food, would be the Secretary in the lfinistry of Food 
and Agriculture concerned with the subject matter of the contract and under 
clause (17), he would be the person intended by the parties to exercise the 
power of nominating the arbitrator. Furthermore, the respondents did not 
raise any objection to the appointment of the arbitrator and participated in the 
arbitration proceedings without protest, indicating the clear intendment of the . 
parties that the Secretary in the Ministry of Food & Agriculture concerned ·with 
the subject matter of the contract should be the person entitled to--nominate 
the arbitrator. [488 B-E, 4lW- A-El 
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484 
SUPREME COURT REPORTS 
[1977) 1 S.C.R. 
CIVIL APPELLATE JURISDICTION.: Civil Appeal No. 135 of 1972. 
Appeal by Special Leave from the Judgment and Order dated, 
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12-8-71 of the Delhi High Court in F.A.O. No. 47-D of 1964. 
Gobind Das and Girish Chandra, for the Appellant. 
Bakshi Shiv Charan Singh and Harbans Singh, for the Respon-
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dents. 
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The Judgment of the Court was delivered by 
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BHAGWATI, J., This appeal, by special leave, is directed against a 
judgment of the High Court of Delhi setting aside an award made by 
an arbitrator on the ground that he was not a validly appointed arbi-
trator and hence had no jurisdict

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