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1959 (1) TMI 30

peal from an order made by G.K. Mitter, J., allowing an application for stay of a suit under Section 34 of the Indian Arbitration Act. By a contract dated 20-11-1956, the appellant, Rungta Sons Private Ltd., a company incorporated under the Indian Companies Act and carrying on business in Calcutta, agreed to sell 10000 Long tons of iron ore to the respondent, Jugometal Trg. Republike of Beograd, Yugoslavia, carrying on business outside India. The contract provides for shipment during January/April, 1957, payment under Letter of Credit to be opened by the buyer in favour of the seller with a validity of 60 days, to be extended, if necessary with a guarantee by the seller of a loading rate of 500 tons, the demurrage and despatch based on this loading rate to be on the seller's account. The contract contains the following arbitration clause: "Any dispute arising out of this contract shall be settled by a court of arbitration which is to be made up as follows: One member to be appointed by the Buyer. One member to be appointed by the Seller. One member to be appointed by the first two members. Failing such mutual agreement as to the third member, he shall then be appointed by .....

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nge for giving to the seller a clean bill of lading, capable of being negotiated under the Letter of Credit and (8), The buyer would furnish; the seller a copy of the Charterparty and subsequent modification thereof. The buyer's version of me arrangement is set out in the letter dated 9-8-1957, sent by Messrs. Orr, Dignam and Co., to the seller and in the annexure to that letter. According to the buyer the parties had then agreed that (1) the seller would accept notice of readiness to load the vessel effective as and from 25-7-1957 and would immediately commence loading thereon of the balance tonnage of iron ore remaining due for shipment under the contract; (2) the seller would furnish to the buyer an irrevocable banker's guarantee to the satisfaction of the buyer to the extent of £ 4000 and would pay unconditionally against such guarantee all demurrage accrued subsequent to 25-7-1957; (3) the seller would be responsible for obtaining from the Reserve Bank of India the necessary permission under Foreign Exchange Control Regulations to implement its obligations under the guarantee; (4) the buyer would pay the demurrage for the period 11-7-1957 up to 24-7-1957 both day .....

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cree for ₹ 18,733/- as pleaded in paragraph 3 of the plaint and ₹ 97,500/- for damages as pleaded in paragraph 11 and for an enquiry into the damages pleaded in paragraph 12 of the plaint and for consequential reliefs. The application for stay of the suit was made by both defendants on 16-11-1957. 3. The first prerequisite of the court's power to stay a suit under Section 34 of the Indian Arbitration Act is the existence of an arbitration agreement. Mr. Deb contends that the arbitration agreement contained in the contract dated 20-11-1956 has been abrogated and superseded by an express oral agreement on 6-8-1957 and consequently there is no existing arbitration agreement. For the respondents Mr. Ginwalla contends that in view of Section 2(a) of the Indian Arbitration Act an arbitration agreement is "by law required to be in writing" and consequently proof of a subsequent agreement to rescind the arbitration agreement is barred by proviso (4) to Section 92 of the Indian Evidence Act. I am unable to accept Mr. Ginwalla's contention. I am of the opinion that an arbitration agreement is not by law required to be in writing. It is true that the Indian Arbit .....

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ed in the letter dated 8-8-1957, and the affidavit of Tribeni Prosad Rungta affirmed on 6-12-1957, did not amount to an implied rescission of the arbitration agreement contained in the parent contract. The terms of the new arrangement as pleaded in that letter and affidavit are in no way inconsistent with the continuance of the arbitration agreement. On the contrary Clause 4 of the terms indicates that the arbitration agreement continues to exist. There being no new arbitration agreement the arbitration could only take place under the arbitration agreement contained in the parent contract. The issue whether the arbitration agreement was rescinded by an express oral agreement on 6-8-1957 does not really arise on the affidavits filed in the proceedings for stay of the suit. Assuming for a moment that such an issue does arise we are satisfied on the materials before us that there was no such oral agreement, and we decide that issue against the appellant. The assertion that there was no oral rescission of the arbitration agreement on 6-8-1957 is an afterthought. We do not consider it necessary that the matter should be tried on oral evidence. In an application under Section 34 of the I .....

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that contract. Some arrangement was arrived at between the parties on 6-8-1957 in course of working out the rights and the obligations of the parties under the contract, There is a dispute about the terms of the new arrangement. That dispute directly springs out of the parent contract. In the plaint the seller bases its claim for damages upon the new arrangement and raises the further dispute that the new arrangement is a substituted contract and that the earlier contract has been abrogated and superseded in respect of the balance goods. The buyer asserts that the new arrangement is a modification of the earlier contract. The dispute whether the new arrangement amounts to a modification or rescission of the contract is a dispute arising out of the contract. If and in so far as the plea in paragraph 8 of the plaint amounts to a plea of rescission of the arbitration agreement, that plea has already been negatived. I have already decided that the arbitration agreement has not been rescinded. I may add that in an application under Section 34 of the Indian Arbitration Act the Court may in the exercise of its discretion decide an issue as to the continued existence of the arbitration agr .....

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se cases the Court found that the subsequent arrangement could not be treated as part of the original agreement. Here accepting the buyer's version or the J matter, the terms of the subsequent arrangement are merely modifications of the original contract and the two together form one agreement comprising the original terms including the arbitration clause and its subsequent modifications. In such a case the arbitration clause applies to the disputes arising out of the contract and its subsequent modification. It does not matter that the modification confers some new right and imposes some new liability which do not find any place in the parent contract. In each case the question is whether the new terms can be treated as modifications of and parts and parcels of the original contract. If they can be so treated, as for example, where the time for delivery of goods under a contract of sale containing an arbitration clause is extended by a subsequent agreement, the disputes between the parties arising out of the modified contract may be referred to arbitration under the arbitration clause in the parent contract. In Uttam Chand Saligram v. Jewa Mamooji ILR Gal 534 : (AIR 1920 Cal 1 .....

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