Arbitration Agreement - Can be only enforced against the Parties thereto

The Supreme Court recently dealt with the question whether a guarantor for a loan, who is not a party to the loan agreement containing the arbitration agreement executed between the lender and borrower, can be made a party to a reference to arbitration in regard to a dispute relating to repayment of such loan and subjected to the arbitration award.

The broad principles that emerge from the Judgment is where there is no arbitration agreement between the parties, the impleading of such party appellant as a respondent in the arbitration proceedings and the award against it in such arbitration cannot be sustained.

The Supreme Court has observed that;

6. The following contentions are urged by the appellant : (i) The appellant was not a party to the tripartite loan agreements executed among respondents 1, 2 and 3 (that is the lender, the borrower and borrower's Managing Director-cum-Guarantor) containing the arbitration clause. He had merely given a short letter dated 27.10.1995 standing guarantee for a loan of Rs.75 lakhs sanctioned by the first respondent. As there was no arbitration agreement between the first respondent and appellant, the claim against the appellant could not be referred to arbitration, nor could any award be made against him. The awards against the appellant were therefore liable to be set aside under section 34(2)(a)(ii) of the Act.

(ii) The appellant had merely given a letter dated 27.10.1995 indicating his willingness to stand guarantee, but he did not execute the loan agreement or any deed of guarantee, as it was decided that the third respondent would be the guarantor instead of appellant. Consequently, the third respondent executed the loan agreement as guarantor as also a deed of Guarantee. Therefore, the appellant was not a guarantor and is not liable.

(iii) Even assuming without conceding that there was an arbitration agreement between the appellant and first respondent, and that he was liable in respect of the loan amount, there could be no award for interest against him as he had not agreed to guarantee the payment of interest.

Interpretation of Will : Contradictory Stipulations

A bench comprising Justice Markandey Katju and Justice T.S. Thakur has explained the law regarding the interpretation of contradictory stipulations in Wills. In our earlier post titled 'The Law relating to Wills' we had endeavored to explain the various principles of interpretation of Wills, which have been developed over the years by the Courts.

The present topic deals with the aspect of Contradictory Stipulations in Wills and its effect on the bequest. The Supreme Court has discussed the aforesaid concept in detail and have culled out the principles of interpretation invloved in such cases.

8. In (Kunwar) Rameshwar Bakhsh Singh's case (supra) the Privy Council held that where an absolute estate is created by a Will in favour of the devisee, other clauses in the Will which are repugnant to such absolute estate cannot cut down the estate; but must be held to be invalid. The following passage summed up the law on the subject: "Where an absolute estate is created by a Will in favour of the devisee, the clauses in the Will which are repugnant to such absolute estate cannot cut down the estate; but they must be held to be invalid."

9. In Radha Sundar Dutta's case (supra), this Court was dealing with a situation where there was a conflict between two clauses appearing in the Will. This Court ruled in favour of the earlier clause, holding that the later clause would give way to the former. This Court said:

"..........where there is a conflict between the earlier clause and the later clauses and it is not possible to give effect to all of them, then the rule of construction is well established that it is the earlier clause that must override the later clauses and not vice versa".

10. The issue came up for consideration once again before a Constitution Bench of this Court in Ramkishore Lal's case (supra). In that case too the Court was concerned with the approach to be adopted in a matter where a conflict arises between what is said in one part of the testament vis-`-vis what is stated in another part of the same document especially when in the earlier part the bequest is absolute but the latter part of the document gives a contrary direction about the very same property. This Court held that in the event of such a conflict the absolute title conferred upon the legatee by the earlier clauses appearing in the Will cannot be diluted or taken away and shall prevail over directions contained in the latter part of the disposition. The following passage from the decision is instructive: "The golden rule of construction, it has been said, is to ascertain the intention of the parties to the instrument after considering all the words, in their ordinary, natural sense. To ascertain this intention the Court has to consider the relevant portion of the document as a whole and also to take into account the circumstances under which the particular words were used. Very often the status and the training of the parties using the words have to be taken into consideration. It has to be borne in mind that very many words are used in more than one sense and that sense differs in different circumstances. Again, even where a particular word has, to a trained conveyancer, a clear and definite significance and one can be sure about the sense in which such conveyancer would use it, it may not be reasonable and proper to give the same strict interpretation of the word when used by one who is not so equally skilled in the art of conveyancing. Sometimes it happens in the case of documents as regards disposition of properties, whether they are testamentary or non-testamentary instruments, that there is a clear conflict between what is said in one part of the document and in another. A familiar instance of this is where in an earlier part of the document some property is given absolutely to one person but later on, other directions about the same property are given which conflict with and take away from the absolute title given in the earlier portion. What is to be done where this happens? It is well settled that in case of such a conflict the earlier disposition of absolute title should prevail and the later directions of disposition should be disregarded as unsuccessful attempts to restrict the title already given. (See Sahebzada Mohd. Kamgar Shah v. Jagdish Chandra Deo Dhabal Deo (1960) 3 SCR 604. It is clear, however, that an attempt should always be made to read the two parts of the documents harmoniously, if possible. It is only when this is not possible, e.g., where an absolute title is given is in clear and unambiguous terms and the later provisions trench on the same, that the later provisions have to be held to be void."

The Legal Blog.in : Poll of the Week

Dear Readers,

The Legal Blog.in introduces "Poll of the Week" as a new feature. Every week we would be posting a Poll and you, the reader, has the option of voting.

You can vote only once on a particular Poll and the results of the votes shall be declared at the end of the week.

We start off this feature with a Poll : Who, amongst the following Sr. Advocates, is the Best lawyer practicing in the Delhi High Court. You can see the poll below and vote. Voting Closes at 11 p.m. on 11th November, 2010

In case of any comments, queries or suggestions please contact us.

Who, amongst the following Sr. Advocates, is the best Lawyer practicing in the Delhi High Court?
	Neeraj Kishan Kaul, Sr. Adv.
	Sandeep Sethi, Sr. Adv.
	Rajiv Nayar, Sr. Adv.
	Amarjit Singh Chandiok, Sr. Adv.
	Chetan Sharma, Sr. Adv.
	Amit S. Chadha, Sr. Adv.
	Arvind K. Nigam, Sr. Adv.
	Rajive Mehra, Sr. Adv.
	Sudhir Chandra, Sr. Adv.
	Others (Please leave a comment)
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Law Ministry gives Show Cause Notice to ASG A.S. Chandiok

Article Source : Hindustan TImes.com

The law ministry has pulled up its senior-most law officer in the Delhi High Court for having represented a private party last week. In a letter to additional solicitor general Amarjit Singh Chandiok, law secretary DR Meena has asked him to explain his appearance for a private power company, New Delhi Power Limited (NDPL).

Hindustan Times had first reported about Chandiok's appearance in the case on October 27, which even surprised the bench headed by chief justice Dipak Misra.

The bench headed by justice Misra had heard Chandiok for some time under the presumption that he was appearing for the government till he told them that he represented the NDPL. A shocked bench had later remarked: "All this while we were hearing you under the impression that you represented the government".

Chandiok, who also heads the high court bar association, said, “I have not received any letter from the ministry so far and I appeared only to assist the court. There is no wrongdoing."

This is for the second time in less than three months that the ministry has rebuked its law officers for acting independently without seeking permission.

In a letter to all the law officers on August 18, the ministry had reminded them that they were bound by the government rules of 1987 and they had no powers to take any decision without its nod.

Chandiok has come under criticism in the past also for accepting private briefs without the ministry's permission.

There have also been reports of law officers providing legal opinions to other government departments and public sector units without informing the law ministry.

The ministry is also understood to be upset with the law officers for freely airing their views to the media on sensitive legal matters being handled by them.

Find the original article here.

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