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HIGH COURT OF CALCUTTA
S. C. Lahiri, B. K. Guha
RAM CHANDRA RAM NAG RAM RICE AND OIL MILLS LTD. - Appellant
Versus
HOWRAH OIL MILLS LTD. - Respondent
Civil Revn. 1487 Of 1956
Decided On : JULY 2, 1957
ARBITRATION - Arbitration agreement - Signature of both parties not necessary - Acceptance of terms by conduct sufficient - Dispute regarding contract includes claim under contract - Section 8(2) of the Indian Arbitration Act, 1940 not applicable where arbitration clause provides for appointment of arbitrators by each party - Section 35 of the Indian Arbitration Act, 1940 bars arbitration proceedings during pendency of suit.
Fact of the Case:
Plaintiff sued defendant No. 1 for the recovery of a sum of Rs. 4233-11-6 alleged to be due to it as the balance of price of goods sold and supplied to defendant No. 1 on the basis of various contracts entered into on diverse dates in the year 1942. Defendant No. 1 filed an application for stay of the suit u/s 34 of the Indian Arbitration Act alleging that the contracts under which goods were sold contained an arbitration clause.
Finding of the Court:
The court held that the arbitration clause in the bought and sold notes constituted an arbitration agreement within the meaning of Section 2(a) of the Indian Arbitration Act, 1940, as the plaintiff accepted the terms of the sold notes by parting with its goods upon them. The court further held that the dispute regarding the balance of price due to the plaintiff was covered by the arbitration clause as it included all claims arising under the contract. The court also held that Section 8(2) of the Indian Arbitration Act, 1940 was not applicable as the arbitration clause provided for appointment of arbitrators by each party and not by consent of all parties. Lastly, the court held that Section 35 of the Indian Arbitration Act, 1940 barred arbitration proceedings during the pendency of the suit.
Issues: 1. Whether the arbitration clause in the bought and sold notes constituted an arbitration agreement within the meaning of Section 2(a) of the Indian Arbitration Act, 1940? 2. Whether the dispute regarding the balance of price due to the plaintiff was covered by the arbitration clause? 3. Whether Section 8(2) of the Indian Arbitration Act, 1940 was applicable to the case? 4. Whether Section 35 of the Indian Arbitration Act, 1940 barred arbitration proceedings during the pendency of the suit?
Ratio Decidendi: 1. The court held that the arbitration clause in the bought and sold notes constituted an arbitration agreement within the meaning of Section 2(a) of the Indian Arbitration Act, 1940, as the plaintiff accepted the terms of the sold notes by parting with its goods upon them. The court relied on the decisions of the East Punjab High Court in Firm Mangal Chand v. Firm Pyare Lal and the Supreme Court in Jugal Kishore Rameshwardas v. Mrs. Goolbai Hormusji to hold that it is not necessary for an arbitration agreement to be signed by both parties, and that acceptance of the terms by conduct is sufficient. 2. The court held that the dispute regarding the balance of price due to the plaintiff was covered by the arbitration clause as it included all claims arising under the contract. The court noted that the plaintiff based its claim entirely upon the contract and that the terms of the contract relating to the payment of price were set out in the plaint. 3. The court held that Section 8(2) of the Indian Arbitration Act, 1940 was not applicable to the case as the arbitration clause provided for appointment of arbitrators by each party and not by consent of all parties. 4. The court held that Section 35 of the Indian Arbitration Act, 1940 barred arbitration proceedings during the pendency of the suit.
Final Decision: The court discharged the Rule with costs to opposite party No. 1.
( 1 ) THE plaintiff which is a limited Company has obtained this Rule against an order of the District Judge of Howrah affirming on appeal an order made by the First Subordinate Judge of Howrah under Section 34 of the Indian Arbitration Act of 1940. The plaintiff sued for the recovery of a sum of Rs. 4233-11-6 alleged to be due to it as the balance of price of goods sold and supplied to defendant No. 1 on the basis of various contracts entered into on diverse dates in the year 1942. According to the plaintiff, the defendent No. 1 is the buyer of goods and defendant No. 2 acted as the agent of defendant No. 1. The suit was originally filed on 21-7-1945, in the court of the 1st Subordinate Judge of Gaya and registered as Money suit No. 90 of 1945. After passing through various stages the suit was ultimately taken up for hearing on a preliminary issue as to whether the 1st Subordinate Judge of Gaya had territorial jurisdiction to entertain the suit. By an order dated the 22nd July, 1954, the Subordinate Judge of Gaya came to the conclusion that he had no territorial jurisdiction to entertain the suit and he accordingly returned the plaint for presentation to die proper court. Thereafter on 2-8-1954, the plaintiff refiled the plaint in the Court of the Subordinate Judge of Howrah. The defendant No. 1 filed an application for stay of the suit u/s 34 of the Indian Arbitration Act alleging that the contracts under which goods were sold contained an arbitration clause. Both the courts below have granted that prayer and against that order the plaintiff has obtained the present Rule.
( 2 ) MR. Mukherjee appearing in support of the Rule has raised various points before us. The first point raised by Mr. Mukherjee is that it cannot be said that there was any arbitration agreement between the plaintiff and the defendant No. 1 and consequently the courts below acted without jurisdiction in making an order of stay under Section 34 of the Indian Arbitration Act. The contract in this case was entered into by the delivery and acceptance of bought and sold notes to the buyer and seller respectively. The bought notes delivered by the broker to me defendant No. 1 have been produced by them but the sold notes, though produced by the plaintiff in the Gaya Court, have not been produced in the Howrah Court, and both the Courts have drawn an adverse inference against the plaintiff for the non-production and have held that the sold notes, if produced would have shown that they are the counter parts of the bought notes which have been produced by the defendant No. 1. The bought notes which have been produced by the defendant No. 1 contain an arbitration clause which runs as follows:"all disputes regarding the contract are to be settled by two Arbitrators one nominated by buyers and one nominated by sellers respectively in accordance with the Indian Arbitration Act in Calcutta". The bought notes which have been produced by the defendant No. 1 also show that they are signed by the broker only and so it may be inferred that the sold notes were similarly signed by the broker only. From this fact Mr. Mukherjee at one stage sought to argue that the acceptance of these bought and sold notes by the buyer and seller respectively at best created a contract between the buyer and the broker on the one hand and the seller and the broker on the other, and that it did not create any privity of contract between the buyer and the seller. When, however, it was realised that this argument would strike at the very foundation of the plaintiff's claim against the defendant No. 1, it was abandoned. It was, however, still argued that the contract did not create an arbitration agreement between the plaintiff and the defendant No. 1 within the meaning of the Arbitration Act. Reliance was placed on the definition of "arbitration agreement" as given in Section 2 (a) of the Indian Arbitration Act, and it was argued that in order to constitute an arbitration agreeme
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