2007 Supreme(SC) 1354

2007(7) Supreme 224
Supreme Court of india
(From Calcutta High Court)
S.B. Sinha & H.S. Bedi, JJ.
The Empire Jute Co. Ltd. and Ors. — Petitioners
versus
The Jute Corporation of India Ltd. and Anr. — Respondents
Appeal (civil) 4877 of 2007
[Arising out of SLP(C) No. 862 of 2007]
WITH
Civil Appeal No. 4878 OF 2007
[Arising out of SLP(C) No. 1343 of 2007
AND
Civil Appeal No. 4879 OF 2007
[Arising out of SLP(C) No. 1602 of 2007
Decided on : 12-10-2007

important point
Section 5 of the Act takes away the jurisdiction of the Court and the provision must be given effect to.

Headnote:(a)Arbitration and Conciliation Act, 1996 – Section 7 – The Arbitration Agreement is of wide amplitude by reason whereof not only the dispute relating to quality of the jute sought to be supplied by the respondent No.1 may be gone into, the construction, meaning and operation and effect of the contract or breach thereof, if any, would have also fallen for determination of an Arbitrator.(Para 14)

       (b)Arbitration and Conciliation Act, 1996 – Section 5 – It is now well settled that when there exists an arbitration agreement, the writ court ordinarily would not exercise its discretionary jurisdiction to enter into the dispute. (Para 15)

       (c)Arbitration and Conciliation Act, 1996 – Section 5 – High Court opining that the arbitration clause should be taken recourse to for the purpose of computation of the quantum of the carrying cost – Payability of carrying cost would depend upon construction of clause 2.0 read with clause 5.0 of the sale contract. (Para 16)

       AIR 1965 SC 1288 – Referred.

       (d)Arbitration and Conciliation Act, 1996 – Section 5 – The power of judicial review vested in the superior courts undoubtedly has wide amplitude but the same should not be exercised when there exists an arbitration clause – High Court having taken recourse to the arbitration agreement in regard to one part of the dispute should not have proceeded to determine the other part itself – Instead of exercising its jurisdiction, the parties ought to have been left to avail their own remedies under the agreement.(Para 18)

       (e)Arbitration and Conciliation Act, 1996 – Section 5 – Section 5 of the Act takes away the jurisdiction of the Court and the provision must be given effect to – There are disputed questions of fact as well as law at hand which are required to be determined by the Arbitrator – Therefore, all disputes between the parties should be directed to be resolved upon taking recourse to the arbitration agreement contained in clause 9.0 of the Sale Order. (Paras 23 and 24)

       AIR 1976 SC 127; (2005) 8 SCC 242 – Relied upon.Facts of the case:

       First Appellant is owner of a jute mill. In exercise of power conferred upon it under Section 3 of the Essential Commodities Act, Government of India made an Order in the year 2000 known as ‘Jute and Jute Textile Control Order, 2000’. By reason of the said order, powers were conferred on the Jute Commissioner to regulate stock of raw jute, fix price and control production thereof. In exercise of the power conferred upon him under the said Order, the Jute Commissioner issued Production Control Orders (PCO) to various jute mill owners directing them to manufacture ‘B’ Twill Gunny Bags of specified quality upon compulsory purchase of raw jute from the Corporation. Non-compliance of the directions was to result in application of penal provisions.

       Indisputably, the Jute Commissioner sent the particulars of the said Production Control Order to the Jute Corporation of India Ltd. for the purpose of issuing necessary sale contract in order to enable the Jute manufacturers to take delivery of the requisite quantities of raw jute specified in the production control Order which the jute manufacturers were required to compulsorily purchase from the Corporation.

       Indisputably, again the Commissioner in exercise of its power conferred under Section 3(3) of the Control Order fixed the price of 50 kg B-Twill jute bags for the delivery in the month of December 2002 provisionally at Rs. 1712.77p per hundred bags. The price for the said bags was arrived at upon taking into account hundred percent JCI in raw jute linkage i.e. the mills should compulsorily purchase raw jutes only from the Jute Corporation of India.

        The quality of raw jute supplied by the respondent under the contract of sale was said to be of much inferior quality. However, factum of entering into a sale contract by the appellant with respondent No.1 is not in dispute. Admittedly, appellants did not purchase raw jute from the respondent No.1 for the period of October 2003 to April, 2004. For fulfilling its undertakings, allegedly, they had to purchase raw jute on credit from the open market.

        Apprehending that no further raw material would be allotted to it, and/or punitive action will be taken against them, a writ petition was filed by the appellant before the Calcutta High Court.

       The Division Bench directed the parties to settle the amount through Arbitration in terms of agreement in regard to the quantum of the carrying charges payable by the appellant to the respondents.

       Findings of the Court:

       High Court having taken recourse to the arbitration agreement in regard to one part of the dispute should not have proceeded to determine the other part itself.

       Result : Appeals allowed.