TMI Blog1980 (10) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that Yugoslavia has not ratified the protocol pursuant to which 1961 Act was enacted and, therefore, the respondent cannot maintain its application under s. 3 of the 1961 Act. Having examined the matter from all angles it is clear that both the learned single judge and the division bench of the High Court were in error in granting stay of the suit in this matter and, therefore, Civil Appeal is allowed and the stay of suit granted by the learned single judge and affirmed by the division bench of the Calcutta High Court is vacated. - C.A. 2407 OF 1968 - - - Dated:- 9-10-1980 - D.A. DESAI AND P. N. SHINGAL, JJ. For the Appellant : P. K. Chatterjee and P. K. Mukherjee For the Respondent : S. C. Majumdar, Arvind Kumar, S. Dasgupta, Mrs. L. Arvind and Miss Karabi Banerji JUDGMENT Protracted, time consuming, exasperating and atrociously expensive court trials impelled an alternative mode of resolution of disputes between the parties: arbitrate-don t litigate. Arbitration being a mode of resolution of disputes by a judge of the choice of the parties was considered preferable to adjudication of disputes by court. If expeditious, less expense resolution of disputes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interim ex parte injunction restraining the respondent from withdrawing the money due to it from the Bihar State Electricity Board. Pursuant to service of notice of motion taken out by the appellant, on August 8, 1963, the respondent appeared through one Ilija Kostantinovic, Manager of the respondent company posted at its office at 36, Ganesh Chandra Avenue, Calcutta, and moved an application purporting to be under s. 151 of the Code of Civil Procedure, contending, inter alia, that the sub-contract between the appellant and the respondent incorporates an agreement to refer all the disputes arising out of the sub-contract to arbitration and, therefore, the suit should be stayed. The clause spelling out agreement to refer disputes to arbitration was reproduced in the petition. It reads as under: "Any mutual disputes should be settled in mutual agreement, however, should they fail to reach an agreement in the way, both contracting parties accept the jurisdiction of the Arbitration by the International Chamber of Commerce in Paris with application of Yogoslav materials and economical law". After setting out the background of disputes between the parties, it was alleged in the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961, and after executing the same, the respondent purported to send a letter to the petitioner seeking to modify and/or delete the arbitration clause contained in the contract dated July 10, 1961, and also purported to send a cable to the petitioner. The petitioner never agreed to the modification and/or deletion of the arbitration clause as contained in the said contract or to the alleged arbitration clause suggested by the respondent". The petition for stay was set down for recording evidence. One Panich Stojan son of Nikola Panich, Project Manager, Barauni Thermal Project, an employee of the respondent company was examined on behalf of the respondent. No. oral evidence was offered on behalf of the appellant. The learned single judge by his order dated January 10, 1964, granted the petition of the respondent and stayed further proceedings in the suit filed by the appellant. The learned judge also vacated the ad interim injunction granted in favour of the appellant. The appellant preferred two appeals being Civil Appeal No. 110/64 against the order of the learned single judge granting stay of the suit of the appellant and Civil Appeal No. 111/64 against the order dated Februa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court should not enforce it in its discretionary jurisdiction in the facts and circumstances of the case as it would result in miscarriage of justice; 3. In view of the provisions contained in Arbitration (Protocol and Convention) Act, 1937, the Court could not invoke its inherent jurisdiction under s. 151, C.P.C. and the special Act would not assist the respondent because the present case is not covered by the provisions of the Act; 4. This being a foreign arbitration, s. 34 of the Arbitration Act, 1940, is not attracted and the Court would have no jurisdiction to grant stay of the suit filed by the appellant. The first contention is that there is no concluded arbitration agreement between the parties to refer the disputes arising out of the sub-contract dated July 10, 1961, to arbitration and in the absence of a mutually agreed arbitration agreement, the respondent is not entitled to a stay of the suit filed by the appellant either under s. 34 of the Arbitration Act or under s. 34 read with s. 151 of the Code of Civil Procedure. Undoubtedly, sub-contract marked Ext. A has been signed both by the Managing Director of the appellant company and by one Mr. Petrovije on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t before sub-contract Ext. A was signed by the parties at Belgrade, a draft of the intended subcontract was sent by the respondent to the appellant for its approval and the Managing Director of the appellant had raised a limited objection to the arbitration clause. On behalf of the appellant it was suggested that there would be no objection to the arbitration clause if arbitration was to be done in India. But as the original draft submitted on behalf of the respondent suggested arbitration by a foreign arbitral tribunal stationed in Paris, the same was objected to on behalf of the appellant and its amendment was sought. Undoubtedly, Managing Director of appellant signed Ext. A which incorporated the arbitration agreement as extracted herein-before. But the letter referred to herein was handed in presumably soon after the signing ceremony of subcontract Ext. A was over and was followed by the cable which not only referred to letter dated July 10, 1961, but also reiterated and repeated the objection to the arbitration clause. At one stage of the proceeding the respondent adopted a position that neither the letter nor the cable were received by it and they are not genuine documents. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the letter and the cable were received by the respondent. The letter and the cable would show that the arbitration agreement to refer disputes to a foreign arbitral in the draft was not acceptable to the appellant though the other terms were acceptable. The appellant repudiated the arbitration agreement soon after the agreement was signed when the Managing Director of the appellant was in Belgrade and took the follow up action by sending a cable reiterating and repeating the objection immediately after his return to India. Now, once it is admitted and established that the letter and the cable were received by the respondent, ordinarily if the contents of the letter and cable are not acceptable to respondent, a reply to that effect is naturally expected. Contention is that respondent accepted the change in arbitration clause proposed by the appellant sub silentio coupled with the subsequent conduct. It is a fact that the respondent did not write back saying that if the arbitration agreement was not acceptable to the appellant the sub-contract would not be acceptable as a whole to the respondent. On the contrary, after a specific objection only with regard to arbitration agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecution of the document would not furnish evidence of the truth of the facts or contents of the document. The truth or otherwise of the facts or contents so stated would have to be proved by admissible evidence, i.e. by the evidence of those persons who can vouch safe for the truth of the facts in issue. But in this case Bhikhubhai Gourishankar Joshi who filed an affidavit on behalf of the appellant has referred to the averments in the letter and the cable. He is a principal officer and constituted attorney of the appellant company. Once the receipt of the letter and the cable are admitted or proved coupled with the fact that even after the dispute arose and before the suit was filed, in the correspondence that ensued between the parties, the respondent did not make any overt or covert reference to the arbitration agreement and utter failure of the respondent to reply to the letter and the cable controverting the averments made therein would unmistakably establish the truth of the averments made in the letter. What is the effect of averments is a different question altogether but the averments contained in the letter and the cable are satisfactorily proved. It was, however, conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 35s. The landlord subsequently refused to grant the tenant possession unless he agreed to hire his furniture to the landlord for one year at a rental of 12 and to execute a document certifying, inter alia, that the letting was a furnished letting at a rent of 35s. a week. The tenant signed the document and entered into possession. Later the tenant applied to a rent tribunal to fix a reasonable rent for the premises as an unfurnished dwelling house under the Landlord and Tenant (Rent Control) Act, 1949. The tribunal accepted the tenant s evidence that the premises were originally let unfurnished and came to the conclusion that the document signed by the tenant did not constitute a valid agreement and did not modify or replace the earlier oral agreement and that the premises were not bona fide let furnished. The tribunal reduced the rent to 15s. a week. On an application by the landlord for an order of certiorary, motion for certiorary was refused and in so doing the subsequent written agreement was ignored and the previous oral agreement was accepted as genuine and binding. It would, therefore, be inappropriate to say that because the appellant has signed the sub-contract, every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his oral evidence and did not attach importance to his subsequent admission that Mr.utterly unsustainable. A finding of fact recorded by the High Court overlooking the incontrovertible evidence which points to the contrary and, therefore, utterly unsustainable cannot come in the way of this Court reaching a correct conclusion on facts and the examination of the evidence by this Court cannot be impeded by mere submission that this Court does not interfere with finding of fact. Assuming we are not right in reaching the conclusion that there was no concluded arbitration agreement between the parties and that the concurrent finding of fact recorded by the learned single judge and the division bench of the High Court in Letters Patent Appeal are binding on us, we may now examine the contention of law whether in the facts and circumstances of this case the High Court was right in exercising its discretion in favour of the respondent by granting stay of the suit filed by the appellant. If the application for stay filed by the respondent purported to be under s. 34 of the Arbitration Act, by a catena of decisions it is well settled that granting of stay of the suit is within the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to a foreign arbitral tribunal. So saying, stay was granted which would imply that the learned judge treated the application to be one under s. 34 of the Arbitration Act. While dealing with the contention of the appellant that in view of the fact that arbitration agreement refers to arbitration by a foreign arbitral tribunal, Arbitration Act, 1940, is not attracted, the Division Bench has assumed as was done in Michael Golodetz Ors. v. Serajuddin Co., that the Arbitration Act, 1940, invests in Court in India with authority to stay a legal proceeding commenced by a party to an agreement against any other party thereto in respect of any matter agreed to be referred,, even when the agreement is to submit it to a foreign arbitral tribunal. It further. however, held that even if s. 34 is not attracted, the Court can in exercise of the inherent jurisdiction for doing justice between the parties, stay further proceeding of the suit which would imply that the Court exercised its jurisdiction under s. 151, C.P.C. Both the Courts practically overlooked the basic difference in the approach which the Court will have to adopt if the application is to be treated under s. 34 of the Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances from the evidence on record which, when properly evaluated, would unmistakably indicate that this is not a fit case in which the Court should decline to adjudicate upon the dispute brought before it by granting stay in favour of the respondent: (i) The entire main contract including the work of erecting the boilers entrusted to the appellant under the sub-contract Ext. A, dated July 10, 1961, was executed and carried out in India and the whole of the evidence both for and against the appellant is in India; (ii) The amount claimed in the suit is so disproportionately small in relation to the huge cost of arbitration to be held at Paris in France that forcing the appellant to incur the costs to realise a small sum would be denial of justice; (iii)Restrictions on availability of foreign exchange is a relevant consideration, a fact of which Court can take judicial notice; (iv) The Court should not lend its assistance by granting the stay to one who insists on arbitration not as a matter of principle but with a view to thwarting, stiffing or exhausting the other side; (v) In all cases of arbitration by a foreign arbitral tribunal there is always a rider that in case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason of the existing legislation, the condition that it should only be enforced if the Court thought it a proper case for its being so enforced". In Owners of Cargo Ex "Athenee" v. Athenee, the Court of Appeal affirmed the extracted passage from Lord Moulton s judgment. In that case the action was brought by the receivers of a part cargo of onions, which it was alleged were damaged in course of carriage from Alexandria to Hull, and the President of the Admirality Division declined to stay the action. The Court of Appeal in the appeal at the instance of the defendants declined to interfere with the order refusing the stay on the ground that the balance of convenience and the substantial advantage which the plaintiffs have by suing in U.K. (and which they lose by not being able to proceed in rem against this ship) and many other advantages such as in respect of proof of loss, a matter which any commercial tribunal would wish should be decided, if possible, having regard to the evidence obtained at the time by inspection of the vessel and so on, and in these circumstances the arbitration clause in the contract was not given effect to. Reverting to the circumstances relied upon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the landlord for recovering possession of certain premises from the tenant. When the matter was pending in the High Court, evidence was tendered to point out that since the institution of the action in the trial court the landlord has recovered another accommodation and that if the subsequent development is taken into consideration landlord has no present need of the accommodation in possession of the tenant. The High Court admitted evidence on this point and took into consideration the fact that the landlord has since the institution of the suit obtained possession of another accommodation and on this finding non-suited the appellant. An objection was taken on behalf of the landlord before this Court that the High Court was in error in taking into consideration subsequent events and this contention was negatived. In the very nature of action for eviction on the ground of personal requirement, the Court has not only to be satisfied that the requirement was present at the date of institution of the action but continued to exist at the time of decree and has to mould the decree accordingly. Even if subsequent events as have a bearing on the contention canvassed before the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 ? This casual approach is none-tooconvincing. Foreign exchange for a visit for few days cannot be equated with heavy requirement of foreign exchange for engaging counsel, taking witnesses and transporting documents from India to Paris so as to substantiate a claim of Rs. 4,25,343. And the judicial approach is not whether the appellant would get necessary foreign exchange but the approach is should this valuable national asset of foreign exchange be frittered away for resolving a petty matter which can be conveniently resolved even in this country. The next circumstance canvassed is that the Court should not lend its assistance by granting the stay of the suit to one who insists on arbitration not as a matter of principle but with a view to thwarting, stifling or exhausting the other side. Respondent insists that by staying the suit the appellant should be forced to go to arbitration if it desires to vindicate its claim. Is this approach dictated by some principle or was the respondent aware of the fact that looking to the quantum of claim the appellant would not undertake the hazardous and expensive adventure of going to foreign arbitration tribunal stationed at Paris and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by a German Company. The cargo was, by terms of the bill of lading, shipped in apparent good order and condition and was to be delivered at the port of London in like order and condition. The plaintiffs, an English company, purchased the cargo and became the holders of the bill of lading, thereby agreeing to be bound by its terms, one of which was that all questions and disputes should be determined in the U.S.S.R. At the Port of London the cargo was discovered, according to the plaintiff, to be contaminated and the damage was surveyed. The plaintiffs issued a writ claiming against the defendants damages for breach of the contract evidenced by the bill of lading. The only matter for evidence, so far as the plaintiffs case was concerned, that did not arise in England was the condition of the goods when shipped, as regards which the bill of lading contained the statement mentioned above. The defendants moved to set aside the writ for want of jurisdiction on the ground that by the contract the parties had agreed that all disputes arising under it should be judged in the U.S.S.R. and contended alternatively that all proceedings should be stayed. Willmer, J. in Admirality Division, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties because the bargain to substitute for the Courts of the land a domestic tribunal was bargain into which was written, by reason of the existing legislation, the condition that it should only be enforced if the Court thought it a proper case for its being so enforced. And that is where the discretion of the Court creeps in. Further, Russel on Arbitration, 19th Edn., p. 194, neatly sums up the relevant considerations for granting or refusing stay. It reads : "The principles established by the authorities can, I think, be summarised as follows : (1) Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign Court, and the defendants apply for a stay, the English court, assuming the claim to be otherwise within its jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not. (2) the discretion should be exercised by granting a stay unless strong cause for not doing so is shown. (3) The burden of proving such strong cause is on the plaintiffs. (4) In exercising its discretion the court should take into account all the circumstances of the particular case. (5) In particular, but without prejudice to (4), the following ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough its Electricity Board for erection of a thermal power station at Barauni. What a valuable possession for the nation such thermal power station means is plain to be seen. We do not, Yugoslavs do, know the know-how, of erecting a thermal power station. Hence they are here on the role of collaborators to help us make such an invaluable acquisition. And to get it built the authorities spare from their none too adequate resources the requisite foreign exchange for the appellant s managing director, Lalbhai, in order to enable him to proceed to Belgrade with a view to signing the contract, which he does, his signature being "only one centimetre away" from the contract s arbitration clause". Does it call for any comment or analysis that the division bench completely misdirected itself while examining the question of granting discretionary relief one way or the other ? Does it disclose exercise of discretion on sound judicial principles or the Court is carried away by the considerations wholly extraneous and irrelevant? Yugoslavs did not undertake construction of thermal power station actuated by any altruistic motive but guided by sound business considerations. One who comes here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the matter agreed to be referred, shall make an order staying the proceedings". India and Yugoslavia have ratified the protocol. The question, however, is whether s. 3 is attracted in this case. The important expression in s. 3 to be noted is: "if any party to a submission made in pursuance of an arbitration agreement to which the Protocol set forth in the First Schedule as modified by the reservation subject to which it was signed by India applies". This expression postulates an agreement to which the protocol set forth in the First Schedule as modified by the reservation subject to which it was signed by India applies and a submission made in pursuance of such agreement. Now, both India and Yugoslavia have ratified the protocol modified by the reservation subject to which it was signed by India. It may be assumed that arbitration agreement between the parties to this appeal is governed by the 1937 Act. Section 3 is, however, not attracted merely where an agreement as set forth in the First Schedule is subsisting between the parties but the next step ought to have been taken before proceedings can be stayed in exercise of the power conferred by s. 3, viz., submission made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned with s. 3 of the 1937 Act which is not amended. It must, therefore, receive the same interpretation which an identical provision received at the hands of this Court. Viewed from that angle, in this case while there is an agreement as contemplated by First Schedule to 1937 Act, there is no submission made in pursuance of such agreement and, therefore, the application of the respondent could not have been entertained under s. 3 of the 1937 Act. As far as the 1961 Act is concerned, Mr. Majumdar conceded that Yugoslavia has not ratified the protocol pursuant to which 1961 Act was enacted and, therefore, the respondent cannot maintain its application under s. 3 of the 1961 Act. The last submission is that this being an arbitration agreement to refer a dispute to a foreign arbitral tribunal, s. 34 of the Arbitration Act would not be applicable and hence the application of the respondent for stay of the suit is not maintainable. It is not necessary to examine this contention on its merits because we have assumed for the purpose of this appeal that s. 34 of the 1940 Act would be attracted even where the agreement is to refer a dispute to a foreign arbitral tribunal. Having exam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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