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High Court Of Calcutta
SABYASACHI MUKHERJI
ARVIND EXPORTS PRIVATE LTD. - Appellant
Versus
KAMANI ENGINEERING CORPORATION LTD. - Respondent
Suit 331 Of 1978
Decided On : 09/07/1978
ARBITRATION - STAY OF SUIT - ARBITRATION CLAUSE - FRAUD - DELAY - COURT'S DISCRETION - ARBITRATION ACT, 1940, S. 34.
Fact of the Case:
Plaintiff filed a suit alleging fraud and misrepresentation in an agreement, challenging the validity of a subsequent agreement modifying the original agreement containing an arbitration clause. The defendant sought a stay of the suit, arguing that the dispute was subject to arbitration under the arbitration clause.
Finding of the Court:
The court held that the allegations of fraud and misrepresentation related to the subsequent agreement, not the original agreement containing the arbitration clause. The court also found that the defendant's inaction in not immediately referring the matter to arbitration did not amount to unwillingness to arbitrate.
Issues: 1. Whether the allegations of fraud and misrepresentation rendered the arbitration clause unenforceable. 2. Whether the defendant's delay in seeking arbitration constituted a waiver of its right to arbitrate.
Ratio Decidendi: 1. The court held that the allegations of fraud and misrepresentation did not render the arbitration clause unenforceable because they related to a subsequent agreement, not the original agreement containing the arbitration clause. 2. The court held that the defendant's inaction in not immediately referring the matter to arbitration did not amount to a waiver of its right to arbitrate because it had not had a reasonable opportunity to do so before the suit was filed.
Final Decision: The court granted the defendant's application for a stay of the suit, holding that the dispute was subject to arbitration under the arbitration clause.
( 1 ) THIS is an application for stay of suit No, 130 of 1978. There was an arbitration clause in the contract dated the 22nd Sept. 1972. The said arbitration clause was as follows:--"10. In the event of any dispute or differences arising between us during the continuance of this agreement or thereafter, the same shall be decided by Arbitration in Bombay in accordance with the provisions of the Arbitration Act, 1940 or any statutory modification thereof in force for the time being. "
( 2 ) THE plaintiff has instituted this suit on the 3rd Feb. 1978 alleging that by and under an agreement dated the 22nd Sept. 1972, namely the agreement which contained the arbitration clause, the plaintiff agreed to render its services as mentioned in the said agreement. Thereafter the plaintiff has set out the terms and conditions to the said agreement and the plaintiff has further alleged that in pursuance of the said agreement the plaintiff had duly started rendering services and that the plaintiff had maintained a separate account of the transactions under the agreement. The plaintiff has thereafter alleged that in or about July, 1974 the defendant through its directors and executive officers, viz. , Shri A. P. Kamani, Shri R. M. Neb-hani and Shri D, G. Shah had made representations to the plaintiff which have been set out in para 6 of the plaint. It is the allegation of the plaintiff that upon the representations being made on behalf of the defendant, the plaintiff was induced to reduce the rate of commission and the representations were made falsely and fraudulently and the plaintiff has stated that on the basis of the aforesaid representations there was an agreement to modify clause 6 of the original agreement and certain reduced sum was made payable to the plaintiff. The plaintiff has challenged the alleged modifications by the agreement dated 12th Sept, 1974. The plaintiff alleges that the said representations were false and the plaintiff was induced to enter into the agreement dated 12th Sept 1974 by reason of fraud and misrepresentation. The allegations of fraud have been set out in para 19 of the plaint. But the said allegations relate to the alleged agreement dated 12th Sept. 1974. The plaintiff thereupon bases its claim upon the agreement dated 9th Sept. 1972 unmodified by the agreement of Sept. 1974, and the plaintiff has claimed a sum of Rs. 8,72,289. 59, Indisputably the claims made in the suit are cover-ed by the arbitration clause mentioned hereinbefore. In the affidavit-in-opposition several grounds have been taken on the issue why the suit should not be stayed. In paragraph 10 the said grounds are tabulated. But before me mainly two grounds were urged which are as follows:--" (c) The suit involves serious questions of fraud and misrepresentation which should not be left to be decided through arbitration. " and" (e) The petitioner was not at the time of institution of the suit or at any point of time ready and willing to go to arbitration. The respondent by its letter dated Jan, 13, 1978 specifically asked the petitioner whether the petitioner wanted to refer the matter to arbitration and also to send in that event name of the petitioner's nominee as Arbitrator and intimated that if nothing was heard from the petitioner within 10 days it would be assumed that the petitioner was not willing to settle the disputes through arbitration. The said letter dated Jan. 13, 1978 was sent to the petitioner by registered post with acknowledgment due and was duly received by the petitioner. A copy of the said letter dated Jan. 13, 1978 along with the acknowledgment receipt is annexed hereto and marked with the letter "a". Thereafter formal letter of demand was sent by respondent's Advocate's letter dated Jan. 18, 1978. The respondent waited till the 2nd of Jan. 1978. But no reply to the letter of Jan. 13, 1978 was received from the petitioner nor did the petitioner send any name of Arbitrator or express its willing
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