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HIGH COURT OF CALCUTTA
K. C. Das Gupta, R. S. Bachawat
RUNGTA SONS PRIVATE LTD. - Appellant
Versus
JUGOMETAL TRG. REPUBLIKE - Respondent
A. F. O. O. 72 Of 1958
Decided On : JANUARY 15, 1959
ARBITRATION - Stay of Suit - Arbitration Agreement - Rescission - Subsequent Arrangement - Whether Rescission of Arbitration Agreement - Whether Disputes Covered by Arbitration Agreement - Exercise of Discretion - Stay of Suit.
Fact of the Case:
The appellant, Rungta Sons Private Ltd., and the respondent, Jugometal Trg. Republike of Beograd, entered into a contract for the sale of iron ore. A dispute arose between the parties regarding the demurrage of a vessel. The appellant instituted a suit against the respondent and its local representative, Swetozar Babie, claiming damages for breach of contract. The respondent applied for a stay of the suit under Section 34 of the Indian Arbitration Act, contending that the dispute was covered by the arbitration agreement contained in the contract.
Finding of the Court:
The court held that the arbitration agreement contained in the contract had not been rescinded by an express oral agreement on 6-8-1957. The court also held that the disputes in respect of the balance goods and the claim for damages were covered by the arbitration agreement. The court further held that the learned Judge had not exercised his discretion on wrong principles in staying the suit.
Issues: 1. Whether the arbitration agreement contained in the contract had been rescinded by an express oral agreement on 6-8-1957. 2. Whether the disputes in respect of the balance goods and the claim for damages were covered by the arbitration agreement. 3. Whether the learned Judge had exercised his discretion on wrong principles in staying the suit.
Ratio Decidendi: 1. An arbitration agreement is not by law required to be in writing. 2. The terms of the new arrangement as pleaded in the letter and affidavit are in no way inconsistent with the continuance of the arbitration agreement. 3. The words "arising out of" are of fairly wide import. 4. The claim and the Counter claim in respect of the balance goods and the several disputes set out in the letters dated August 8 and 9, 1957 arose in the context and in the setting of the contract dated 20-11-1956 and directly arose out of that contract. 5. The prima facie leaning of the Court is to stay the suit if the disputes are covered by the arbitration agreement.
Final Decision: The appeal was dismissed with costs.
( 1 ) THIS is an appeal from an order made by G. K. Mitter, J. , allowing an application for stay of a suit under Section 34 of the Indian Arbitration Act. By a contract dated 20-11-1956, the appellant, Rungta Sons Private Ltd. , a company incorporated under the Indian Companies Act and carrying on business in Calcutta, agreed to sell 10000 Long tons of iron ore to the respondent, Jugometal Trg. Republike of Beograd, Yugoslavia, carrying on business outside India. The contract provides for shipment during January/april, 1957, payment under Letter of Credit to be opened by the buyer in favour of the seller with a validity of 60 days, to be extended, if necessary with a guarantee by the seller of a loading rate of 500 tons, the demurrage and despatch based on this loading rate to be on the seller's account. The contract contains the following arbitration clause:"any dispute arising out of this contract shall be settled by a court of arbitration which is to be made up as follows: One member to be appointed by the Buyer. One member to be appointed by the Seller. One member to be appointed by the first two members. Failing such mutual agreement as to the third member, he shall then be appointed by the-International Chamber of Commerce in Paris. The Seat of the arbitration shall be according to mutual' agreement. Failing such agreement the Seat of the arbitration shall be in Zurich, Switzerland".
( 2 ) ONLY 3,500 tons of ore were shipped during the period January to April, 1957, leaving a balance of 6,500 tons unshipped. The buyer had difficulty in procuring shipping space for the balance goods. The seller repeatedly complained that it might not be allowed to ship any iron ore after June, 1957, having regard to the changing policy of the Government of India, There were exchange of cablegrams between the buyer and the seller in May, June and July, 1957. The buyer requested the seller to load the ore by the vessel Commerz and contended that notice of readiness of the vessel was given to the seller on July 11, 1957. The seller contended that no proper notice had been given and the ore could not be loaded before July 25. A dispute arose between the parties as to the liability to pay the demurrage of the vessel from July 12 to July 25. The buyer contended that notice of readiness was again tendered on July 26. The seller contended that there had been no extension of the Letter of Credit and the notice of readiness was ineffective and inoperative. There were negotiations to resolves the deadlock. It is common case that some arrangement was arrived at between the seller and the buyer through its representative Swetozar Babie on or about August 6, 1957. The terms of the arrangement are in dispute. The seller's version of the arrangement is set out in its letter dated August 9, 1957 addressed to Swetozar Babie, According to the seller the parties then agreed that (1) The vessel Commerz would be available for loading on the loading berth at the latest by 10-8-1957; (2) The seller would load 6500 tons of iron ore therein; (3) The buyer would bear the demurrage of the vessel up to 25-7-1957; (4) Any claim for further demurrage might be decided by arbitration if the parties so like, but the reduction in freight would be taken into account in reduction of any liability for such demurrage; (5) The buyer would extend the Letter of Credit as regards both amount and period; (6) The buyer would furnish guarantee for all amounts payable to the seller and the seller would furnish guarantee for the demurrage, if any, payable by the seller; (7) The buyer would arrange for giving to the seller a clean bill of lading, capable of being negotiated under the Letter of Credit and (8), The buyer would furnish; the seller a copy of the Charterparty and subsequent modification thereof. The buyer's version of me arrangement is set out in the letter dated 9-8-1957, sent by Messrs. Orr, Dignam and Co. , to the seller and in the annexure to that l
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