TMI Blog1963 (2) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... the bought and sold notes contained a written condition that delivery of the goods was to be given against payment in cash positively on 10th October, 1960 against Mill's pucca delivery order. There is the usual Arbitration clause for reference of disputes under the contract to the arbitration of the Bengal Chamber of Commerce and Industry. On the 22nd March, 1961 the petitioner submitted certain disputes between the parties to the arbitration of the Bengal Chamber cf Commerce and Industry. On the 29th August, 1961 the respondent filed a suit in this Court being suit No. 1432 of 1961 (Bengal Jute Mill Cc., Ltd. v. Lalchand Dugar). On the 18th November, 1961 the petitioner made an application for stay of the suit and all further proceedings under Section 34 of the Indian Arbitration Act. It is this suit which has been stayed by an order dated 29th May, 1962. I regret to say that the learned Judge has given no reasons for making the order. With respect, I think that in such cases it is essential to set out the reasons. A stay of a suit, is in a way, an adjudication of the rights of the parties. Although such an order is discretionary, the Court must exercise a judicial discretio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods or the pucca delivery order within the stipulated time, the seller had committed a breach of contract and was liable to damages. It is admitted that a fresh contract, namely, contract No. 281 was entered into on the 12th October, 1960, but It is said that this has nothing whatsoever to do with the contract No. 280 of 1960 mentioned above. 2. It will be observed that the whole dispute hinges on the question as to the term as to payment. According to the seller the express stipulation for payment was payment in cash positively on the 10th October, 1960 against Mill's pucca delivery order. Both the bought note and sold note actually contain this condition. In spite of this, the case of the buyer is that the condition of payment was by crossed cheque on 10th October, 1960 and not by cash. The term actually appearing on the bought and sold note Is explained as follows T According to the buyer, the term as to payment was by crossed cheque against Mill's pucca delivery order. Although this was the contract between the parties, the seller in collusion and conspiracy with the broker Goenka caused it to be recorded in the bought note and sold note that payment was to be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated that the defendant falsely alleges that the provision as to payment was not by cash but by cheque and the defendant was ready and willing to pay by cheque and that the plaintiff had failed and neglected to tender pucca delivery order against payment by cheque. The plaintiff proceeds to state that the defendant had made a claim for damages caused by the plaintiff and referred the case to the Arbitration of Bengal Chamber of Commerce and Industry. The plaintiff finally states that It apprehended that if the bought note was left outstanding in the case then it might cause the plaintiff serious injury and therefore prayed that it be adjudged that the contract had been cancelled and became void, for declaration that the plaintiff was not liable to the defendant, for damages, for an injunction restraining the defendant, its agent and servants from enforcing or taking any steps to enforce the said contract against the plaintiff, for Receiver and costs. 4. In the plaint, of course the plaintiff has not pleaded fraud . In fact, fraud is not the case of the plaintiff but that of the defendant, Naturally, the defendant has taken no step in the suit as yet and has not filed a writt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34 of the Indian Act. It was contended there that the suit filed was misconceived. Pickford L. J. said as follows : It may be a very bad action; the Master thinks it is. The defendants, if they have a sufficiently strong opinion about it and if they have sufficient materials to do so, have the power to apply to stay the action or to dismiss It as being frivolous and vexatious, or on the ground that the claim discloses no cause of action, or that it is an abuse of the process of the Court. They have all those steps that they can take if they think fit. But that is not the point that we have to decide. We have to decide whether this is an action that ought to be brought within provisions of the Arbitration clause by being stayed and the dispute raised in it referred to arbitration within | that clause. In the same case, Bankes L. J. said as follows: If that is the nature of the claim, it seems to me plain that it does not come within the scope of the submission, and it is no answer to say that the plaintiff has mistaken his remedy and that he ought not to have brought this form of claim, and that he cannot substantiate it, or that if you look into it you will find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... properly framed or whether there is a cause of action. As has been pointed out in the cases above-mentioned, if there be any such infirmities in the plaint or if it is vexatious, it is open to the defendant to make an appropriate application under the Code of Civil Procedure, The next point taken is that no fraud has been pleaded in the plaint. This is a point without substance. The principle is, not, that the fraud should be pleaded in the plaint but that in connection with the dispute between the parties, an allegation of fraud should be made against the plaintiff. In order to find out whether such an allegation has been made, it is permissible to look, not only into the plaint but into the evidence and the correspondence. This has been laid down by Viscount Simon L. C. in Heyman v. Darwins, 1942 AC 356 where he says as follows: Turning now to the other question which I have called (a), what is the present dispute about? The answer has to be gathered from the affidavits filed in the application to stay, from the correspondence before writ exhibited to these affidavits and from the endorsement on the writ itself. 8. The next point that has been taken is that in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, without going into the details of the allegation of fraud, collusion and conspiracy, it seems to me clear that the existence or otherwise of the fraud, collusion and conspiracy will be the main point in issue in the suit as well as in the Arbitration proceedings. Doubtlessly, the first point to be considered would be as to whether there was a completed contract. That will involve the determination of the point as to whether the terms were changed or altered fraudulently. If it is found that there was a completed contract, then the point will arise to be determined as to whether the term as to payment required cash to be paid on a specified date or whether the payment could have been made by cheque. Both sides however allege that there was a contract, but there is a difference as to the terms. Where a contract is not denied but the terms are in dispute, or where it is said that a contract originally existed but it became void because of some supervening circumstance, and this is denied by the other side, it does seem that the dispute is one under the contract and therefore the Arbitration clause applies. If therefore there were no special circumstances which would justify the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciding whether stay should be granted or not. 9. This view has also been confirmed by the Supreme Court in Abdul Kadir Shamsuddin v. Madhav Prabhakar [1962]3SCR702 . In that case Wanchoo, J. pointed cut that it was not every imputation of dishonesty that would induce a court to refuse to make a reference to Arbitration and order a stay. Where however serious allegations of fraud are made against a party and the party which is charged with fraud desires that the matter should be tried in open Court, that would be sufficient cause for the Court not to order an Arbitration agreement to be filed under Section 20 of the Arbitration Act, The same is the position under Section 34. The imputation of dishonesty made in the instant case is quite serious. Any allegation that the seller company is capable of dishonesty manipulating the terms of a contract, in collusion and conspiracy with the broker, is bound to have serious repercussion in the market and it is quite-natural that it should desire that its name should be vindicated in open Court. 10. Lastly, it is argued that nowhere in the petition and affidavits is this desire on the part of the plaintiff set out. I do not think ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fferently, can he approbate some of the terms of a contract and reprobate at the same time a term of the same contract in writing? 19. In a Court of law governed by the Evidence Act, it would not be permissible, for it would offend Sections 91 and 92 of the Evidence Act, unless one or more of the provisos to Section 92 are attracted. 20. It is now necessary to advert to the provisos. Proviso (1). Any fact may be proved which would, invalidate any document, or which would entitle any person to any decree or order relating thereto; such as fraud, intimation, illegality, want of due execution, want cf capacity in any contracting party, want or failure of consideration, or mistake in fact or law. Proviso (1) can be divided into two parts, one part deals with the invalidation of a document, and the other part deals with the right to reform or rectify the document. The respondent does not seek to declare the bought note invalid on the ground of fraud or collusion. The respondent, again, does not seek to reform or rectify the term relating to payment embodied in the bought note, and thereafter asks for enforcement of the corrected contract. Hence, proviso (1) is no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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