The transfer of rights and duties under the West Bengal Tramways Act (XXV of 1951) did not extinguish the arbitration clauses in the agreements between the appellant and the respondent because Section 5 of the Act provided an exception for sums payable to the Corporation, preserving its right to recover rents and the agreed-upon arbitration procedure.

Headnote:
ARBITRATION - AGREEMENT - CONSTRUCTION - TRANSFER OF RIGHTS AND DUTIES - EFFECT ON ARBITRATION CLAUSE - WEST BENGAL TRAMWAYS ACT (XXV OF 1951), SECS. 3, 4 AND 5.
Fact of the Case:

The Calcutta Tramways Co. Ltd. (appellant) and the Corporation of Calcutta (respondent) entered into various agreements for the construction, maintenance, and use of tramways in Calcutta. These agreements contained arbitration clauses for resolving disputes. In 1951, the West Bengal Tramways Act (XXV of 1951) was passed, transferring the rights and duties of the Corporation to the Government of West Bengal. The appellant argued that this transfer extinguished the arbitration clauses in the agreements.
Finding of the Court:

The Supreme Court held that the arbitration clauses in the agreements remained valid and enforceable despite the transfer of rights and duties under the Act. The Court interpreted Section 5 of the Act, which provided for the transfer of agreements, to include an exception for sums payable to the Corporation. This exception preserved the Corporation's right to recover rents and the agreed-upon arbitration procedure for resolving disputes related to those rents.
Issues: Whether the transfer of rights and duties under the West Bengal Tramways Act (XXV of 1951) extinguished the arbitration clauses in the agreements between the appellant and the respondent.
Ratio Decidendi: The Court held that the arbitration clauses remained valid and enforceable because: * Section 5 of the Act provided an exception for sums payable to the Corporation, preserving its right to recover rents and the agreed-upon arbitration procedure. * The substantive right to payment of rent and the procedural right to arbitration were interconnected and could not be severed. * To deny the arbitration clauses would deprive the Corporation of its agreed remedy and introduce incongruity, as the dispute would be between the appellant and the Corporation, but the arbitration would be between the appellant and a third party (the Government).
Final Decision: The Supreme Court dismissed the appeal, upholding the High Court's decision that the arbitration clauses in the agreements remained valid and enforceable.

Judgment

SUBBA RAO, J.: On or about October 2, 1879, the Corporation of the town of Calcutta incorporated under Bengal Act IV of 1876 entered into an agreement in writing with Dillwyn Parrish. Alfresh Parrish and Robinson Souttar, hereinafter called the grantees, whereunder the Corporation granted to the said grantees the right to construct, maintain and use certain tramways in Calcutta on payment of certain rents as provided in the said agreement. The agreement contained an arbitration clause which provided for referring any disputes arising under the said agreement to arbitration in the manner prescribed thereunder. The said agreement further provided in cl. 28 that the words "the said Corporation" would include the Corporation and its successors. Different agreements were entered into between the successors of the Corporation of Calcutta and the grantees from time to time, namely, on November 22, 1879, September 2, 1893, and December 9, 1899, and were confirmed by appropriate Acts. In all these agreements the appellant s predecessor-in-interest agreed to pay the rents to the respondent s predecessor-in-interest in respect of the tramways constructed, maintained and used by them. All the said agreements contained an arbitration clause similar to that contained in the first agreement. The Corporation of Calcutta is now the successor of the properties of the Corporation of the town of Calcutta constituted under the Bengal Act IV of 1876. It was constituted by Bengal Act II of 1888. The appellant i.e., the Calcutta Tramways Co., Ltd., is the successor or the assignee of the said grantees. On August 30, 1951, the State of West Bengal entered into an agreement with the appellant whereby the Government agreed to purchase the undertaking of the appellant as provided in the said agreement. The said agreement was subject to an Act being passed by the appropriate Legislature ratifying the agreement and giving effect to it. The Calcutta Tramways Act, 1951 (W. B. Act XXV of 1951) was passed and it came into effect on October 18, 1951. Under that Act the Government of West Bengal was practically substituted for the Corporation of Calcutta under the various agreements subject to a reservation that any sums payable under the said agreements shall be payable by the appellant to the Corporation. Disputes arose as regards the track rent payable by the appellant to the Corporation and the dispute was referred to arbitration in accordance with the terms of the arbitration clause. Though the parties appointed arbitrators in terms of the arbitration clause of the agreements, the appellant nominated its arbitrator without prejudice to its rights and filed on January 7, 1963, an application in the Original Side of the Calcutta High Court, inter alia, for the determination of the question whether there was a valid arbitration agreement between the appellant and the respondent and for other incidental reliefs. The application was heard by A. N. Ray, J., who held that there was an agreement between the appellant and the respondent and that the appellant was a party to the arbitration clauses contained in the relevant agreements, that the respondent could make a reference to arbitration in terms of the said agreements and that the reference to the arbitrators was valid, legal and effective. The appellant, by the special leave, has filed the present appeal against the said order of the High Court.

2. Mr. A. V. Viswanatha Sastri, learned counsel for the appellant, contended that all the rights of the Corporation of Calcutta under the various agreements stood transferred under the Tramways Act, 1951, and vested in the Government of West Bengal except only in regard to the sums payable to the Corporation and that, therefore, the Corporation could not rely, on the arbitration clauses of the agreements and refer the disputes arising in respect of the sums payable in terms of the said agreements to arbitration.

3. The point raised is in a small compass and turns

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