TMI Blog1977 (7) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... and/or in connection with and/or in conseqeunce of or relating to this contract including matters relating to insurance and demurrage whether or not the obligations of either or both parties under this contract be subsisting at the time of such dispute and whether or not this contract has been terminated or purported to be terminated or completed shall be referred to the arbitration in accordance with the provisions for reference to arbitration contained in these bye-laws............ 3. Pursuant to the said contract the respondent No. 1 delivered certain quantities of mesta to the appellant and submitted bills for an aggregate sum of ₹ 20,319.37 p. on account of price of the Mesta sold and delivered. The said bills were submitted to the appellant through the said brokers the respondent No. 2 herein in terms of the said agreement. Between June 6 and August 29, 1968 the respondent No. 1 on several occasions demanded payment of the said price from the appellant through the said brokers. The appellant in their turn claimed reduction in price to the extent of an aggregate sum of ₹ 612.96 p. on account of shortage in weight and undercharges. The appellant submitted their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich date the appellant's solicitor again prayed for a further fortnight's time to file its rejoinder. The date for holding the arbitration was postponed from time to time till 14th Feb., 1969. 6. On 10th Feb., 1969 the appellant's solicitor informed the Bengal Chamber of Commerce Industry that the appellant had filed a suit upon the whole of the subject-matter of the reference and served a notice under Section 35 of the Indian Arbitration Act, 1940. Thereupon the reference was held in abeyance by the arbitrator. The respondent's solicitor Mr. B. M. Bagaria wrote to the solicitor for the appellant requesting them to supply a copy of the plaint but it was not supplied until March 15, 1969, 7. The application herein, for stay of the said suit, under Section 34 was made on 29th April, 1969. The said suit, as it appears from the plaint, had been filed by the company against the respondent No. 1 herein and against the said broker R. L. Saraf Co., the respondent No. 2 herein, inter alia, for a declaration that the respondent No. 2 had no claim against the appellants being the plaintiff in the said suit under or in respect of the said contract dated 16th March, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r such shortage in weight and for the Railway undercharges paid by the plaintiff to the extent of a sum of ₹ 612.96 p. In para. 7 it is pleaded that a large sum of money, much in excess of the claim of the respondent No. 1 against the respondent No. 2, were due and payable by the said broker being the respondent No. 2 herein to the plaintiff. Then reference was made to the crucial para, 8 in which another agreement had been sought to be pleaded in the following manner: Some time prior to 15th Oct., 1968 it was agreed by and between the plaintiff and the defendant No. 2 for self and on behalf of the defendant No. 1 that the bills of the defendant No. 2 being bills Nos. 1 and 2 aforesaid dated the 10th April, 1968 and 18th April, 1968 respectively will, after adjustment of the amount due to the plaintiff on account of short weight and quality claims as aforesaid will be paid by the defendant No. 2 to the defendant No. 1 out of the outstanding dues of the plaintiff from the defendant No. 2. The defendant No. 1 was and is bound by the said agreement in view of the terms and conditions aforesaid. The plaintiff states that the plaintiff in view of the said agreement, is deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame has been exercised capriciously or on erroneous principles. Secondly, Mr. Das contends that an arbitration reference cannot be defeated by adding a third party in the suit against whom no real relief has been claimed. It is contended that the broker has been added only with a view to defeat the arbitration agreement. The Court would be competent to examine the pleadings and to find out if the plaint is vexatious and has been filed to stop the arbitration proceedings or to take the case outside the ambit of the arbitration agreement. Thirdly, Mr. Das contends that even if the cause of action has been framed in tort the suit would be stayed; for the alleged tort arises directly or indirectly out of the contractual relationship of the parties. Fourthly, the entire question whether there has been a settlement or a novation or a discharge of the original contract by a subsequent contract can be referred to arbitration and the arbitrator is competent to decide the same. Fifthly, the Court can look into the subsequent event viz. (a) that no step had been taken as against the defendant No. 2 the broker, since the date of the order of the trial court whereby as against the defendant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was binding upon the defendants and it was contended that it formed part and parcel of the original agreement. It was held that the two agreements could not be treated as one agreement and the arbitration clause in the first agreement did not cover disputes arising under the second agreement and on that basis the principle in Turnock v. Sartoris (supra) was applied and stay was refused. The Bench in the above decision in the case of Rungta Sons (P.) Ltd. (supra) applied the principles in Uttam Chand Saligram v. Jewa Mamooji, ILR 46 Cal 534: (AIR 1920 Cal 143) where Rankin, J. decided: Where the original contract for sale of goods is followed by a settlement contract whereby the buyer sells back the goods to the seller and the claim by the buyer for the consequential money difference is disputed by the seller the dispute arises out of the contract and it is open to the buyer to found his claim upon the submission contained in the original contract. In that case the Bench went so far as to hold that the dispute as to whether there was a subsequent arrangement in substitution of the original contract could be covered by the arbitration clause if the scope of the arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he could claim damages for breach of contract. Such claim for damages is a dispute or difference which arises between himself and the appellant and is 'upon' or 'in relation to' or 'in connection with' the contract. 16. In our case also similar expressions appear in the arbitration agreement. In this case the arbitration agreement is wide enough to bring within its ambit even the dispute as to whether or not the substituted agreement was entered into by and between the parties. Here in this case the appellant has set up the said agreement which has been totally denied and disputed by the respondent No. 1 and as such the dispute in connection therewith is a matter which arises 'out of the original contract and is undoubtedly a matter 'connected with' and 'related to' the said contract. In para. 2 of the plaint the appellant itself has relied on the terms and conditions for the purpose of showing that the broker had the authority to represent the respondent No. 1 in entering into such an 'agreement. In other words, in order to find out whether such an agreement as pleaded in para. 8 of the plaint was entered into or not, one has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of that case Sinha J, held that the suit filed before him was frivolous and vexatious and was intended merely to delay and defeat the arbitration proceedings. In deciding the said point Sinha J. relied on a passage of the Supreme Court decision (Jawahar Lal Barman v. Union of India). The said passage dealt with the object of the legislature in enacting S. 32 and S. 33 of the Arbitration Act. In the same judgment Sinha J, relied on a passage from the judgment of Das J, In the case of Khushi Ram Banarasi Das v. Hanutmal, (1949) 63 Cal WN 505 which reads as follows But if the matter is one of discretion, I do not see why, if an apparently illusory demonstrably frivolous plea is set out disputing the formation, existence or validity of the arbitration agreement, the Court should not, as a matter of discretion determine whether any such issue has been legally raised and, if so, decide that issue on the application itself and if necessary set down the issue for trial on evidence, 18. Sinha J. further observed that the decision in Khushi Ram Banarasi Das v. Hanutmal ((1949) 53 Cal WN 505) (supra) has been approved by the Supreme Court in Anderson Right Ltd. v. Moran, . On that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was pleaded and framed, it was further observed that if the suit as pleaded was a suit independent of the contract then the Court would have no power to stay the suit though the Court would toe satisfied that the frame of the suit was merely a means of avoiding the consequence of alleging the true nature of the claim. The Bench applied the principle laid down in Monroe v. Bognor Urban District Council, (1915-3 KB 167). The Court did not consider in that case whether the suit, as framed, was maintainable or not The only question which was considered was whether the suit, as framed, was within the ambit of the arbitration clause. The Bench held in that case that the claim was framed not under the contract containing the arbitration clause but that was really a claim based on tort and implied contract and, that (being so, it was held that the trial Judge was wrong in making an order staying the suit and the appeal was allowed. The application for stay was dismissed. In my opinion, the above case is distinguishable from the facts of the case before us, 22. The next case cited by Mr. Jain is Ghewarchand v. Shiva Jute Bailing Ltd. . That was a case where the suit was based wholly o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nversion thereof. 24. The said Bench took into consideration the said previous Bench decision in Ghewarchand v. Shiva Jute Bailing Ltd. (supra). Several other decisions of this Court had also been referred to as also the Supreme Court decision in Gaya Electric Supply Co. Ltd. v. State of Bihar (supra) and ultimately after reviewing the various authorities the said Division Bench applied the principle decided in Woolf v. Collis Removal Service (1948-1 KB 11) (supra) and upheld the decision of the trial Court and dismissed the appeal. The Bench observed in that case that the overwhelming character of the agreement was that the arbitration clause which embraced disputes or differences arising out of or pertaining to the terms or the infringement of any term or condition, in the ultimate analysis, would resolve into the question whether the goods were carried from the mill premises to different places within the port limit of Calcutta or whether there was any dispute which arose within the terms and conditions of carriage. 25. In my opinion, this is also another case where the claim in damages for defamation arises out of and in connection with the non-payment of the bills of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry; and that he was lower in rank than the other officer viz. the Chief Engineer and, as such, the Allahabad Bench did not think it desirable that an enquiry against the Chief Engineer should be entrusted in the hands of the then Deputy Chief Engineer. The Bench also took the view that, in any event the said 'part of the case should not have been allowed to be proceeded with in arbitration. Accordingly, on the basis of the concession that the claim in contract was fully covered by the arbitration agreement, the suit in respect thereto was stayed and the appeal was allowed in part and the claim for damages for defamation was sent back to the Civil Judge to be tried before him. In that case the Allahabad Bench did not follow the principle laid down in Woolf v. Collis Removal Service, (1947-2 All ER 260) (supra). In the above case before Allahabad Bench the arbitration clause provided as follows: In the event of any question or dispute arising under these conditions or in connection with the contract (except as to any matter the decision of which is specially provided for by these conditions) the same shall be referred to the award of arbitrator who shall be......... 29. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the terms of the contract relating to payment in order to decide the dispute as to whether the said letters contained any defamatory statement or not. If a plea of justification is taken in the action for libel as it would appear from the correspondence between the parties forming the parts of the records herein, it would be a relevant consideration for going into the terms and conditions of the contract whether such letters could be written for the purpose of realisation of the dues of the defendant No. 1 for stay. 33. The point was also considered by the Court of Appeal in England in the case of Astro Vencedor Compania Naviera SA of Panama v. Mabanaft G m b H, (1971) 2 All ER 1301. There the question was whether the claim for damages for wrongful arrest of a ship came within the scope of the arbitration clause and whether the Umpire had jurisdiction to deal with it. Both the Courts below and the appeal Court held in the affirmative. The reason was that the claim for wrongful arrest, although a claim in tort had sufficient close connection with the Charterers' claim under the contract against the owners. There also it was held that the arrest was made to enforce that claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enough to cover all matters, questions, disputes, differences and/ or claims arising out of and/or concerning and/or in connection with and/or in consequence of or relating to this contract . Even apart from the above, reading the agreement as a whole it would appear that its scope was wide enough to cover even a cause of action in tort provided that such claim in tort would directly or indirectly have a nexus or relationship with the contract containing the arbitration clause. Under such circumstances, the suit should be stayed even though the suit has been framed in tort. In my opinion, the claim in tort as pleaded in the plaint arose in course of the respondent attempting to realise the price of goods sold and delivered to the appellant under the contract and in course of making such attempt all that they had done was to refer the matter to the Association of which both were members with a view to realise their dues. The nature of the contract was such that the payment must necessarily have to be made through the broker This was one of the transactions where the broker, it seemed, did not co-operate with the result, that the respondent might be apprehending that without the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not reconcile how both the bills of different dates would mature on the same date viz. 4th July, 1968. That the specified date 4th July long expired but yet no gesture made towards payment of the bills. As we feel our position most uncertain in Tribunal case of the Bengal Chamber of Commerce Industry in view of the fact that during pending of the case the buyers may declare that they had paid the bills of the brokers who are also reticent over the matter. We have no alternative but to request you to please immediately call from the buyers and the brokers the actual position. Please also direct the buyers and the brokers to pay our bills together with interest without the least possible delay or to state the reason of withholding payment. Kindly take all possible steps so that the buyers and the brokers are compelled to pay our bills. Please treat this as most urgent. Yours faithfully, For Lalchand Dharamchand Sd./ Illegible. C.C. to The Secretary, The East: India Jute Hessian Exchange Ltd., Calcutta. Messrs. Alliance Jute Mills Co. Ltd. (Buyers), Calcutta. Messrs. R. L. Saraf Co. (brokers), Calcutta. 35. Copies of the said letter were sent to the Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter so that on hearing from you we may refer our case to arbitration. We have already reported you that the buyers have not yet declared whether any payment against our above bills has been made to the brokers and as such we apprehend that during pending of the arbitration case the buyers may declare that the cheque has been made but the brokers did not collect and whereby the trend of case may turn otherwise. It is, therefore, incumbent on your part at least to obtain an explanation from the buyers for withholding payment of our bills. We hope you will please acknowledge receipt hereof suggesting therein what we should do in the matter. Please treat this as urgent. Yours faithfully, For Lalchand Dharamchand Sd/- Illegible. 36. From the above letter, it would appear that the respondent was insisting upon the said Association's intervention in the matter. They have also intimated in what way they were apprehending in the matter of collection of the bill. 37. Thereafter on 10th Oct., 1968, the respondent referred the matter to arbitration and the arbitrator entered upon the reference as stated hereinabove. The subject-matter of the reference was nothing but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questing to take suitable action against your said members, further continuance of correspondence in the matter is useless, But we regret that you did not take any prompt action in the matter against your member. Thanking you. Yours faithfully, For Lalchand Dharamchand Sd/- Illegible. Enclo: As stated (3) Copy to: 1. The Regional Officer/F.M.C./P-29 Mission Row Extension, Calcutta with 3 enclosures. 2. Messrs. Alliance Jute Mills Co. Ltd., 3 Netaji Subhas Road, Calcutta. 3. Messrs. R. L. Saraf Co., 23/24 Radha Bazar Street, Calcutta. 38. The aforesaid letters which were the subject-matter of the claim in tort in the plaint have been set out not for the purpose of examining whether the allegations therein amounted to defamatory statements or not but for the purpose of considering how and in what matter the damages for defamation arose herein, or in other words whether the claim in tort has a close nexus with the contract entered into by and between the parties and containing the arbitration clause. 39. The Allahabad Bench decision in Gauri Shanker's case (supra) is distinguishable in several respects. The contract was put an end to. Thereafter, action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etters set out hereinabove amounted to contain defamatory statements or not and whether the plaintiff has suffered damages on account of such defamation or not are matters which are exclusively within the jurisdiction of the arbitrator to decide. It is undoubtedly a claim arising directly out of the contract. It is, no doubt, connected with and is related to the contract. The letters were written in course of realisation of the bills under the contract and, as such, the claim arises out of and is concerning the contract. In short, there is a close nexus between the claim in tort and the contract itself As observed above, the terms and conditions of the contract would be most relevant for the purpose of deciding the claim in tort. It necessarily follows that the claim in tort cannot be decided without recourse to the contract. That being the position, the suit cannot be allowed to be proceeded with and the matter must be decided in the forum which was agreed to by and between the parties. 41. In view of the conclusion arrived at by me on the points just now discussed, it is not necessary, in my opinion, to go into -several other points raised by Mr. Das as indicated above. Since ..... X X X X Extracts X X X X X X X X Extracts X X X X
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