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SUPREME COURT OF INDIA
P. JAGANMOHAN REDDY AND S.N. DWIVEDI, JJ.
Damodar Vally Corporation, Appellant
Versus
K.K. Kar, Respondent.
Civil Appeal No. 851 of 1972,
Decided on 12-11-1973.
Arbitration Act 10 of 1940 - Sections 9 (b) and 33 - Contract Act, 1872 - Section 62 - Contract - Supply of Coal - Non-Performance of Contract - Imposed Penalties - Termination of Agreement - Whether contract was put an end to by final payment, and if it was whether arbitration clause contained in contract will perish with it Against this order - Whether arbitration clause between parties would cease to exist with termination of agreement - Whether oral evidence touching dispute in respect of alleged final settlement of claim would be admissible in proceedings - Whether there was or was not a final settlement on ground that if that was proved, it would bar a reference to arbitration inasmuch as arbitration clause itself would perish - Whether there has been a full and final settlement of a claim under contract is itself a dispute arising upon or in relation to or in connection with contract - Whether there has or has not been a settlement cannot be subject of an arbitration - Whether arbitration clause survives or perishes would depend upon nature of controversy - Whether there has been a breach by one side or other or whether on one or both parties have been discharged from further performance - Whether arbitration clauses in original contracts had ceased to have any effect and contracts stood finally determined as a result of settlement contracts - Whether original contracts were put an end - Whether there was or was not an accord and satisfaction - Whether there has been novation, rescission or substitution of contract - Whether there has been a settlement of all claims - Whether termination was valid or not and whether damages are recoverable for such wrongful termination does not affect arbitration clause – Held, First original contract had not been abrogated by settlement in respect of it, but third original contract and arbitration clause contained in it had ceased to exist as a result of last settlement as such arbitrator had no jurisdiction to arbitrate under that arbitration clause - In this case, there was a termination of contract due to non-performance, existence of contract has been assumed for purposes of such termination – Court think High Court was in error in directing dismissal of appellant s petition in toto - In that petition several other contentions were urged one of which was that appointment of J. N. Mullick as sole arbitrator should be set aside for non-conformity with provisions of Section 9 (b) of Act - It may also be observed that under proviso to that section Court is empowered to set aside any appointment as a sole arbitration made under clause (b) and either on sufficient cause being shown allow further time to defaulting party to appoint an arbitrator or pass such other order as it thinks fit - Subordinate Judge did not decide any of aforesaid matters, which he should have been allowed to do - Reasons for further consideration on this aspect were fully set out in petition which was placed before Court - After hearing learned counsel for respondent Court found no justification for giving any directions or for changing Court view that High Court was in error in dismissing petition under Section 9 (b) read with Section 33 of Act - Appeal partly allowed
Judgment
JAGANMOHAN REDDY, J.:- On an application under Sections 9 (b) and 33 of the Arbitration Act 10 of 1940 - hereinafter called the Act - challenging the propriety of a reference to the arbitration of the sole arbitrator, the Subordinate Judge, Alipore permitted the appellant to adduce evidence to establish whether the contract was put an end to by final payment, and if it was whether the arbitration clause contained in the contract will perish with it Against this order the respondent filed a revision in the High Court of Calcutta which while setting aside the order of the Subordinate Judge dismissed the application filed by the appellant. This appeal is by certificate against that decision.
2. In order to appreciate the significance of the question which has to be determined a few relevant facts may be stated. The respondent entered into a contract with the appellant to supply, certain quantities of coal at certain price but as he failed to do so in accordance with the terms of the contract, the appellant repudiated the contract, imposed certain penalties in accordance with the terms of the contract which he later waived and ultimately paid certain sums to the respondent which were due to him for the supply of coal. It is the case of the appellant that these payments including the return of the deposit amount finally settled the claims of the respondent. No doubt the respondent was asked to submit his bill along with a receipt stating that he received the payment in full and final settlement of all payments and that there was no other claim. But the respondent while submitting his bill did not give the receipt as desired. The amount of the bill was, however, paid, after receipt of which the respondent claimed further sums from the appellant including damages for repudiation of the contract. When the appellant did not agree to comply with the demands the respondent served a notice of his intention to refer the matter to the arbitration under the arbitration clause contained in the contract. By that notice he intimated the appellant that he has appointed J. N. Mullick as his arbitrator and requested the appellant to appoint its own arbitrator. The appellant did not agree to it, whereupon the respondent by a further notice intimated the appellant that the arbitrator nominated by him would be the sole arbitrator for adjudicating the dispute between the parties. Soon thereafter the sole arbitrator J. N. Mullick issued a notice to the appellant and consequently the appellant had to file an application under Section 9 (b) and 33 of the Act challenging the validity of the appointment of the sole arbitrator. In paragraph 16 of the petition the appellant stated :
"......all claims and demands as between the petitioner and the contractor standing fully paid and adjusted there was no dispute in the absence whereof the entire proceedings in the above case do not lie and the instant case is not maintainable under the Arbitration Act being outside its fold."
As stated earlier, the Subordinate Judge held that the appellant could adduce evidence that the contract had come to an end in order to determine that the arbitration clause perished with the contract.
3. On the pleas raised before the Subordinate Judge, the following questions were considered :
(1) Has the Court jurisdiction to decide the points in paragraph 16 of the appellant s petition?
(2) Whether the arbitration clause between the parties would cease to exist with the termination of the agreement; and
(3) Whether oral evidence touching the dispute in respect of the alleged final settlement of the claim would be admissible in the proceedings.
The Subordinate Judge answered these questions in the affirmative and held that the appellant could adduce evidence to establish that the contract had come to an end and that as a consequence the arbitration clause perished with it.
4. On these facts of the short question for determination is : where one of the parties refers a dispute or disput
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