1. Dispute over insurance proceeds from captured shipments — conflict between sale contract and subsequent agency — arbitration under Indian Arbitration Act. (Para 1 , 2 )
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1919 Supreme(SC) 75
Privy Council
Sir John Edge, Lord Parmoor , Justice Viscount Finlay, JJ.
Donald Campbell and Company -Appellant
Versus
Jeshraj Girdhari Lal -Resopndent
On appeal from the High Court at Calcutta. Privy Council Appeal No. 39 of 1918
Decided On : 05-11-1919
A dispute arising from an agency relationship created after the cancellation of a sale contract is governed by a general arbitration clause. Procedural defects in appointing a sole arbitrator under the Arbitration Act are waived if the party objects to the jurisdiction but not the appointment itself.
Headnote:(A) Arbitration Act, 1899 - Section 9 - Dispute arising from agency after cancellation of sale contracts - Jurisdiction of arbitration - Appointment of sole arbitrator - Waiver of procedural defect - Where a general agreement provides for different arbitration venues based on the nature of the dispute, a dispute arising from an agency relationship created after the cancellation of a specific sale contract falls under the general arbitration clause rather than the specific contract's arbitration clause.
(B) A failure to provide the statutory written notice required for the appointment of a sole arbitrator under the Arbitration Act is waived if the party, knowing the arbitrator is acting as a sole arbitrator, objects to the proceedings on other grounds, such as jurisdiction, but fails to challenge the appointment itself.
Facts of the case:
The parties had a general agreement defining business terms. One clause stipulated that disputes under specific trade association rules be arbitrated in one city, while all other disputes be referred to arbitration in another city under the Arbitration Act. Subsequent contracts for the sale of goods were made subject to the trade association rules. Due to war, shipments were disrupted and the contracts were treated as cancelled. A dispute arose regarding the recovery of insurance moneys, which was treated as a matter of agency. One party appointed a sole arbitrator under the Arbitration Act without serving the mandatory written notice to the other party. The other party protested the jurisdiction of the arbitration but did not object to the appointment process of the arbitrator.
Findings of Court:
The dispute was not one arising from the sale or purchase of goods but related to the agency relationship established after the sale contracts were cancelled. Therefore, the general arbitration clause applied. Regarding the appointment of the sole arbitrator, although the statutory notice was not given, the party waived this objection by participating in the proceedings and challenging the jurisdiction without mentioning the defect in the appointment.
Issues: Whether the dispute fell under the specific trade association arbitration clause or the general arbitration clause, and whether the failure to provide statutory written notice for the appointment of a sole arbitrator invalidated the award.
Ratio Decidendi: The court held that when a contract of sale is cancelled and the parties act under a subsequent agency relationship, disputes arising from that agency are governed by the general arbitration agreement. A procedural defect in the appointment of an arbitrator is waived if the party is aware of the appointment and fails to raise the specific objection, relying instead on other grounds.
Result: Appeal dismissed.
Legal Category Hierarchy
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practice and procedure
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arbitration
- jurisdiction
- appointment of arbitrators
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arbitration
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commercial law
- agency
- sale of goods (Para 2)
Table of Contents
Viscount Finlay :-
This is an appeal against the refusal of the High Court in Bengal to set aside an award. Two questions arise.
(1) Whether, on the terms of the agreements between the parties, the arbitration was properly held in Calcutta instead of being held in London as on a dispute under a contract for the sale of jute.
(2) Whether the arbitrator was properly appointed as sole arbitrator under the Indian Arbitration Act.
The appellants are merchants and commission agents carrying on business in London, and the respondents are dealers in jute carrying on business in Calcutta. A document dated the 2nd June, 1914, was drawn up defining the "terms and conditions of business" between the respondents and the appellants. The respondents are described therein as the "shippers" and the appellants as the "importers", and the document deals with purchases of jute to be made by the appellants from the respondents and. with agency business to be conducted by the appellants for the respondents. The fifth clause provides that all contracts for the sale of purchase of jute were to be made upon and subject to the terms and conditions as set forth in the usual London Jute Association Contract No. 3 in force for the period of shipment, Clause 12 makes provision for arbitration in the following terms :
"Arbitration. - Any dispute between the Shippers and Importers which may arise upon a contract or contracts for the sale or purchase of jute made upon or subject to the rules of the London Jute Association as mentioned in clause 5 hereof, shall be decided by arbitration according to the rules of the London Jute Association.
Any other dispute between the Shippers and Importers which may arise out of or in connection with this Agreement shall be referred to arbitration in Calcutta in the usual way under the provisions of the Indian Arbitration Act before two arbitrators and their umpire."
The main question in dispute on this appeal is whether the present is a case which fell within the former or within the latter of these provisions for arbitration.
On the 8th July, 1914, the appellants and the respondents entered into a contract of that date for the purchase by the appellants from the respondents, on the terms of the London Jute Association Contract No. 3 of 250 bales of jute for shipment in July to Hamburg, at the price of £ 25 per ton c.i.f., "any dispute arising out of this contract to be settled by arbitration in London as soon as it may arise.'' There were eight other contracts in the same form. The terms of the London Jute Association Contract No. 3 referred to in these contracts provided in paragraph 6 (d) as follows :
"The contract to be considered cancelled for any portion not arriving, owing to loss of vessel or other unavoidable causes, but to be valid for any portion "that may be shipped or transhipped on seller's-account and arrive by any other vessel."
and in paragraph 13 as follows :-
"(a) Any dispute whatever arising out of, or in relation to, this contract or its construction or fulfilment, shall be referred to arbitration in London in accordance with the By-Laws of the London Jute Association."
The shipments under these nine contracts between the appellants and the respondents were made, as to 774 bales by the SS. "Rappenfel," and as to 681 bales by the SS. "Westmark", both German vessels. These vessels sailed from Calcutta on the 1st August, 1914, and drafts were drawn by the respondents upon the appellants for the price of the jute, and the documents were handed to the Eastern Bank, Calcutta. War broke out between England and Germany on the 4th August. The SS. "Rappenfels" was captured by a British cruiser and brought into Calcutta, where the jute was sold by the authorities. The SS. "Westmark" put into a Dutch port in the East Indies. The present case is concerned only with the jute which was on board the SS. "Rappenfels."
On the 2nd September, 1914, the appellants wrote to the respondents a letter with reference to the SS. "Rappenfels
