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HIGH COURT OF CALCUTTA
P. B. CHAKRAVARTTI, S. C. LAHIRI
W. WOOD AND SON LTD. - Appellant
Versus
BENGAL CORPORATION - Respondent
Award 336 Of 1954
Decided On : JANUARY 21, 1958
ARBITRATION - Stay of suit - Arbitration agreement - Readiness and willingness to go to arbitration - Arbitration (Protocol and Convention) Act, 1937, Section 3 - Whether an applicant for stay under Section 3 of the Arbitration (Protocol and Convention) Act can apply for a stay without himself being ready and willing to go to arbitration.
Fact of the Case:
The appellant, a manufacturer of suitcases, entered into a contract with the respondent firm, granting it an exclusive license to assemble and sell Revelation Suitcases in India. The contract contained an arbitration clause providing for the resolution of disputes through arbitration in accordance with the English Arbitration Acts. A dispute arose between the parties regarding the quality of the goods supplied by the appellant, and the respondent brought a suit against the appellant in India. The appellant applied for a stay of the suit under Section 34 of the Arbitration Act, 1940, and Section 3 of the Arbitration (Protocol and Convention) Act, 1937, arguing that the dispute was covered by the arbitration agreement.
Finding of the Court:
1. The appellant was not entitled to a stay under Section 34 of the Arbitration Act, 1940, as it had itself denounced the arbitration agreement by taking proceedings in Court and had not demonstrated readiness and willingness to go to arbitration at the time of the institution of the respondent's suit or at any time prior thereto. 2. The appellant could have obtained an order under Section 3 of the Arbitration (Protocol and Convention) Act, 1937, only if the Court was satisfied that the agreement had not become inoperative or the arbitration could proceed. However, the Court found that the decree obtained by the appellant in its suit on the bills of exchange implied a determination by the Court that it had performed its part of the contract and had committed no breach of warranty or condition, which rendered the arbitration agreement inoperative. 3. The Court also found that the dispute between the parties was no longer a dispute raised by the suit, which was covered by the arbitration agreement, but a dispute as to whether the judgment and decree of the English Court precluded the respondent from raising the particular dispute or making the claim it had made, which was not a matter agreed to be referred under the arbitration clause.
Issues: 1. Whether the appellant was entitled to a stay of the suit under Section 34 of the Arbitration Act, 1940. 2. Whether the appellant could obtain an order under Section 3 of the Arbitration (Protocol and Convention) Act, 1937.
Ratio Decidendi: 1. Section 34 of the Arbitration Act, 1940, requires that an applicant for a stay must prove his readiness and willingness to abide by arbitration at the points of time mentioned in the section. The appellant's suit in the Queen's Bench Division in England operated as an embarrassment to its application for a stay under Section 34. 2. Section 3 of the Arbitration (Protocol and Convention) Act, 1937, does not require that the applicant for stay should prove his own readiness and willingness to go to arbitration. However, the Court must be satisfied that the agreement has not become inoperative or the arbitration can proceed. 3. In the present case, the decree obtained by the appellant in its suit on the bills of exchange implied a determination by the Court that it had performed its part of the contract and had committed no breach of warranty or condition, which rendered the arbitration agreement inoperative. 4. The dispute between the parties was no longer a dispute raised by the suit, which was covered by the arbitration agreement, but a dispute as to whether the judgment and decree of the English Court precluded the respondent from raising the particular dispute or making the claim it had made, which was not a matter agreed to be referred under the arbitration clause.
Final Decision: The appeal was dismissed, and the appellant's prayer for a stay under the Arbitration (Protocol and Convention) Act was denied.
( 1 ) THREE points have been urged on behalf of the appellant in this appeal, two of them more or less ordinary and one out of the ordinary. On the first of them, the learned counsel for the appellant did not himself place much reliance, as he stated to us in the end.
( 2 ) THE appeal is against an order of P. B. Mukharji, J. refusing the appellant's prayer for staying a suit brought against it by the respondent, made on the ground that the dispute involved in the suit was covered by an arbitration agreement. The learned Judge has held that neither under Section 34 of the Arbitration Act, 1940, nor under Section 3 of the Arbitration (Protocol and Convention) Act, 1937, could the appellant have the stay prayed for. The former section was excluded, because the appellant could not be said to have been ready and willing to go to arbitration at the time of the institution of the suit. The second was excluded, because the Arbitration (Protocol and Convention) Act did not apply to the case at all and even if it applied, the suit could not be stayed under Section 3 of the Act, because the agreement had become inoperative and in the events which had happened, no arbitration could proceed. The three points urged on behalf of the appellant are directed against those three grounds given by the learned Judge in support of his decision.
( 3 ) THE facts are as follows : The appellant company is the manufacturer of a well-known make of suit-cases, known as Revelation Suit-cases, and it was expanding hinges, hasps and locks, patented by it, in the manufacture of its goods. On 19-10-1951, the appellant company entered into a contract with the respondent firm, whereby it granted the respondent an exclusive licence to assemble and sell Revelation Suit-cases in India and use for the suit-cases, so manufactured, the trade mark "revelation". The arrangement was for a term of five years, commencing on 1-9-1951 and one of the conditions of the contract was that the respondent would have to purchase from the appellant the expanding hinges, hasps, locks and other suit-case components which it would require for manufacturing the goods. It was not to sell or cause to be sold any expanding fittings, unless the same had been acquired from the appellant company and unless the same had been attached to and formed part of Revelation Suit-cases. The contract was to be interpreted in all respects according to the law of England and it contained an arbitration clause, reading as follows :"all questions or differences whatsoever which may at any time hereafter arise between the parties hereto or their respective representatives touching this agreement or the subject-matter thereof or arising out of or in relation thereto respectively and whether as to construction or otherwise shall be referred to a single arbitrator in accordance with and subject to the provisions of the Arbitration Acts, 1889 to 1934 or any re-enactment or statutory modification thereof for the time being in force. "
( 4 ) IN pursuance of that contract, the appellant company shipped certain goods to the respondent firm and drew two bills of exchange in respect thereof. The respondent took delivery of the goods and accepted the bills. Soon, however, it began to complain that, upon inspection, the goods had been found to be unfit for the purpose for which they had been purchased and unmerchantable. Some of them had been utilised in manufacturing suit-cases, but complaints were coming in as to gradual discolouration of the hasps as also the rusting of the rivets and the fibre, of which the body of the suit-cases was made, was hardening and cracking. The respondent's case was that having had no opportunity for inspecting the goods covered by the despatches, it has relied completely upon the skill and judgment of the appellant company and had taken delivery of the same, without being able to notice the defects which were then latent. Accordingly, it called upon the appellant
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