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1977 Supreme(Cal) 300
High Court Of Calcutta
Sankar Prasad Mitra, Salil Kumar Datta
THE ABU ROAD ELECTRICITY AND INDUSTRIES CO.LTD. - Appellant
Versus
INDUSTRIAL GASES LTD. - Respondent
Appeal 215 Of 1972
Decided On : 08/22/1977
ANINDYA MITRA, MILAN K.BANERJI, PRATAP CHATTERJI, SUDIPTA SARKAR
An arbitration agreement can be incorporated into a contract by clear and specific reference, even if the arbitration clause is not germane to the subject-matter of the contract.
Headnote:
ARBITRATION - AGREEMENT - INCORPORATION - GENERAL SALE CONDITIONS - NOTICE - REASONABLE SUFFICIENCY - DISCRETION OF COURT - STAY OF SUIT - GROUNDS FOR REFUSAL - LIMITATION - SECTION 37 OF THE ARBITRATION ACT, 1940.
Fact of the Case:
The appellant, Abu Road Electricity and Industries Co. Ltd. (AREI), entered into a contract with the respondent, The Industrial Gases Ltd. (TIGL), for the supply of a 400 K.W. diesel generating set. The contract was made through correspondence, and the revised offer by TIGL contained an endorsement that the contract was subject to its standard terms, an extract of which was reproduced on the back. The extract contained a provision for arbitration of disputes arising out of the contract. AREI raised various claims against TIGL in a suit filed at Sirohi. TIGL filed an application under Section 20 of the Arbitration Act, 1940, in the Calcutta High Court for a stay of proceedings and for reference of the disputes to arbitration in accordance with the arbitration agreement contained in the contract. The trial court allowed the application and directed that the arbitration agreement be filed in the court.
Finding of the Court:
The Calcutta High Court held that there was a valid and enforceable arbitration agreement between the parties, incorporated into the contract by clear and specific reference. The court found that there was sufficient notice of the arbitration clause, which was clear and unambiguous and in wide terms to cover the disputes. The court also held that the arbitration clause was not vague or uncertain, and that the provisions of the extract given overleaf the offer did not vary in material aspects or were inconsistent with the provisions of the general sale conditions. The court further held that the appellant had constructive and reasonable notice of the general sale conditions, including the arbitration clause, as forming the terms of the contract. The court also found that there were no substantial grounds against reference to arbitration and that the appellant would not suffer irreparable prejudice or denial of justice by participating in the arbitration proceeding in Calcutta.
Issues: 1. Whether there was a valid and enforceable arbitration agreement between the parties? 2. Whether there was sufficient notice of the arbitration clause? 3. Whether the arbitration clause was vague or uncertain? 4. Whether the provisions of the extract given overleaf the offer varied in material aspects or were inconsistent with the provisions of the general sale conditions? 5. Whether the appellant had constructive and reasonable notice of the general sale conditions, including the arbitration clause, as forming the terms of the contract? 6. Whether there were substantial grounds against reference to arbitration? 7. Whether the appellant would suffer irreparable prejudice or denial of justice by participating in the arbitration proceeding in Calcutta?
Ratio Decidendi: 1. An arbitration agreement can be incorporated into a contract by clear and specific reference, even if the arbitration clause is not germane to the subject-matter of the contract. 2. The requirement of notice of an arbitration clause is satisfied if the party receiving the document knew that there was writing or printing on it, or if the party tendering the document did what was reasonably sufficient to give the other party notice of the conditions. 3. An arbitration clause is not vague or uncertain if it provides for the appointment of arbitrators or surveyors to decide the disputes, and if it defines the qualifications of the arbitrators or surveyors. 4. Variations in material aspects or inconsistencies between the provisions of an extract of general sale conditions and the general sale conditions themselves do not render the arbitration clause unenforceable, as long as the arbitration clause is clear and unambiguous. 5. A party has constructive and reasonable notice of the general sale conditions, including the arbitration clause, if the contract expressly refers to the general sale conditions and the party had the opportunity to obtain copies of the general sale conditions. 6. Substantial grounds against reference to arbitration include irreparable prejudice or denial of justice to one of the parties, such as when the arbitration is to take place in a jurisdiction where the party has no business contacts or representation. 7. The court will not interfere with the forum provided in the arbitration clause for the settlement of disputes arising from the contract, unless there are compelling reasons to do so.
Final Decision: The appeal was dismissed, and the costs of the appeal were to abide with the result of the arbitration.
( 1 ) THIS is an appeal against an order dated May 22, 1972 passed by Salil Kumar Roy Choudhury, J. directing that the arbitration agreement contained is the contract for supply of 400 K. W. Diesel Generating set by the respondent to the appellant be filed in this Court. There was a further direction that disputes mentioned in the petition be referred to the arbitrators to be appointed in terms of the arbitration agreement contained in Clause 29 of the general terms and conditions of the respondent and in default the parties would be entitled to apply to this Court for appointment of an arbitrator.
( 2 ) THE appellant, the Abu Road Electricity and Industries Co. Ltd. is engaged in supply of electricity in Abu Road and neighbouring areas. For increasing its capacity for supply of electricity, it approached the respondent, who carries on business inter alia of import of machinery, for supply of generating sets.
( 3 ) THE respondent, it appears, during 1962-63 offered to supply to the appellant 200 K. W. Diesel generating set in terms of its letters dated March 29, 1962, August 20, 1962 and November 2, 1963 as also other letters. As the appellant was interested is diesel generating set of 400 K. W. capacity, following further correspondent, the respondent made a revised offer for such set, to be imported from U. S. S. R. , by its letter of April 10, 1964. While the letter contained inter alia terms of payment of delivery as also charges for erection or alternatively for providing one supervising engineer for supervising, installation, there was the following endorsemest on the front page in the said letter at the bottom in red print:"all quotations and contracts are subject to Calcutta High Court jurisdiction and to our standard terms, an extract of which is reproduced on the back".
( 4 ) THE reverse pages of the said letter of April 16, 1964 contained "extract from General Sale conditions applying against orders and quotations. " Clause one of the said extract is as follows:--"1. Purchaser's orders are accepted strictly on the understanding that purchaser accepts our general sale condition. . . . . . . . . "
( 5 ) THE extract has 13 clauses and at the bottom there is the following endorsement. "complete sale condition can be supplied on request. "
( 6 ) THESE clauses have been printed at pages 68-70 of the Paper Booh.
( 7 ) THE offer was accepted by a telegram and confirmed by letter dated May 30, 1964 with slight variation and it was stated therein inter alia as follows:--". . . . . . we have now pleasure to place an order for 400 K. W. set as offered by you with all terms negotiated and confirmed between us by corresipondence till date which includes terms of payment to be the same for the order on c. i. f. basis or f. o. r. basis. "
( 8 ) IN reply the respondent intimated by its letter of June 6, 1964 its acceptance of the order in following terms:--". . . . . . we have pleasure in accepting your order in terms of our offer, subsequent correspondence and as per our standard sales terms and conditions printed on the back of our letter head".
( 9 ) THERE was no endorsement at the bottom of the said letter though on the reverse the extract of sale terms and conditions was there almost in similar terms as the other with further reference to the general terms of contract to which the contract was subject, such general terms being available on request.
( 10 ) THE generating set was delivered to the appellant and it was installed by others though such job was to be done by the respondent's engineer according to agreement. According to the appellant it was entitled to various amounts from the respondent, including increase of customs duty paid by it, refund of price which was reduced by the respondent at the time of release of foreign exchange interests on amounts blocked towards L/c, loss for not starting the machine for lapses of the respondent, demurrage etc. in all for about Rs. 2 lakhs. The appellant
