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HIGH COURT OF CALCUTTA
S. C. GHOSH
RAYMON ENGINEERING WORKS LTD. - Appellant
Versus
UNION OF INDIA - Respondent
Award Matter 150 Of 1970
Decided On : JANUARY 7, 1972
ARBITRATION - STAY OF SUIT - FRAUD - ALLEGATION OF FRAUD - EFFECT - ARBITRATION ACT, 1940, S. 34.
Fact of the Case:
The respondent, Raymon Engineering Works Ltd., filed a suit against the petitioner, Union of India, seeking a declaration that certain letters were void and inoperative, delivery and cancellation of the said letters, and damages for breach of contract. The contracts in question contained an arbitration clause providing for the resolution of disputes by arbitration.
Finding of the Court:
The court held that the arbitration clause was valid and subsisting and that the disputes between the parties were matters agreed to be referred to arbitration. The court further held that the allegation of fraud made by the respondent was not a sufficient ground to oust the jurisdiction of the arbitrators and stay the suit.
Issues: 1. Whether the allegation of fraud made by the respondent was a sufficient ground to oust the jurisdiction of the arbitrators and stay the suit. 2. Whether there was a possibility of conflicting decisions in different proceedings involving similar issues of fact or law.
Ratio Decidendi: 1. The court held that the allegation of fraud made by the respondent was not a sufficient ground to oust the jurisdiction of the arbitrators and stay the suit because: (a) the party charged with fraud was the petitioner, who desired to have the disputes tried by the arbitrators; (b) the fraud as pleaded in the plaint did not specify any person who perpetrated the fraud; and (c) in England, under Section 24(2) and (3) of the Arbitration Act 1950, the Court has the power to order that the agreement ceases to have effect and to refuse the stay of an action brought in breach of the agreement, but in India that is not the position and we are governed by the position prevailing in England prior to the enactment of the said statutory provision. 2. The court held that there was no possibility of conflicting decisions in different proceedings involving similar issues of fact or law because no particulars had been pleaded to show that the same issue of fact or law arose in different proceedings.
Final Decision: The court allowed the petitioner's application for stay of the suit and ordered that the disputes between the parties be referred to arbitration.
( 1 ) THIS application has been made by the Union of India inter alia for stay of the suit No. 4009 of 1969 (Raymon Engineering Works Ltd. v. Union of India) instituted in this Court by the respondent, Raymon Engineering Works Ltd.
( 2 ) THE said suit was filed by the Raymon Engineering Works Ltd. inter alia for a declaration that letters dated 17th February, 1965, 27th February, 1965, and 18th November, 1965, mentioned in paragraphs 20 and 38 of the plaint are void, inoperative and not binding upon the plaintiff. The plaintiff has also prayed for delivery and cancellation of the said letters.
( 3 ) THE plaintiff in the said suit has claimed also a decree for Rupees 32,33,391. 08 P, alternatively an enquiry into the compensation and damages and decree for such sum as would be found due. The money part of the claim of the plaintiff in the plaint has been made on the basis of three several contracts entered into by and between the respondent and the petitioner whereby the respondent agreed to manufacture and supply railway wagons of diverse specifications on the terms and conditions mentioned in the said three contracts. The said contracts are contained in three several orders in writing bearing Nos. 61/rs (I)/954/l/258 dated the 14th April, 1961. No. 61/rs (I)/954/14/283 dated the 6th February. 1962 and No. 62/rs (I)/954/15/306 dated the 26th October, 1962, respectively. Each of the said contracts was subject to the terms and conditions contained in the Indian Railway Standard Conditions of contract known as A5-51 in so far as the said terms and conditions were not inconsistent with the conditions mentioned in the said contracts themselves. One of the terms or conditions of the said Indian Railway Standard Conditions of Contract provided as follows:"in the event of any dispute arising under these conditions or in connection with the contract (except as to any matter the decision of which is specifically provided for in these conditions) the matter in dispute would be referred to two arbitrators, one to be nominated by the petitioner and one to be nominated by the respondent or in the case of the said arbitrators not agreeing then to an umpire to be appointed by the arbitrators in writing before proceeding on the reference and the decision of the arbitrators or in the event of their not agreeing, of the said umpire, would be final and conclusive and the provisions of the Indian Arbitration Act, 1940 and the rules thereunder and any statutory modification thereof would be deemed to apply to and to be incorporated in the contracts. "
( 4 ) THE said arbitration clause by express agreement formed part of each of the said three several contracts.
( 5 ) IN the suit the respondent has claimed various sums on account of claims in respect of Wages Escalator, Materials Escalator and Sales Tax in respect of the wagons manufactured and delivered by the respondent to the petitioner under the said three several contracts. The respondent in the plaint has pleaded that the petitioner through the Railway Board fraudulently and with the mala fide intention of gaining unfair and undue advantage and making unlawful gain induced and compelled the respondent to accept as condition for extension of due dates of delivery of the said wagons under the second contract by letters dated 17th February, 1965, and 27th February, 1965. The said conditions related to the giving up by the respondent its rights to claim additional sums on account of its claim for Wages Escalator, Material Escalator and Sales Tax in terms of the express contract between the parties.
( 6 ) SIMILARLY it is alleged in the plaint the petitioner fraudulently and with mala fide intention of gaining unfair and undue advantage induced the respondent to accept conditions mentioned in the Railway Board's letters dated 16th February, 1965, and 18th November, 1965, for extending the due dates of delivery under the 3rd contract, by fraud, undue influence and/or coercion. Pa
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