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Chhabildas Nandlal and Co. Vs. Damodar Khetsey and Co. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai
Decided On
Case NumberO.C.J. Suit No. 489 of 1942
Judge
Reported inAIR1943Bom199; (1943)45BOMLR387
AppellantChhabildas Nandlal and Co.
RespondentDamodar Khetsey and Co.
Excerpt:
indian arbitration act (x of 1940), section 34-stay of suit-arbitration clause- effect of-acceptance of contract but subsequent cancellation of it-repudiation of contract-reference to arbitration need not be urged till filing of suit.;on january 20, 1940, the plaintiffs ordered out goods through the defendants specifying shipment at sellers' option under a contract which contained an arbitration clause that any dispute arising out of the contract 'may at the instance of either party...be referred to arbitration.' thereafter difficulties having arisen about shipment the defendants intimated to the plaintiffs that unless the plaintiffs showed willingness to extend the time for shipment the defendants would treat the order as cancelled. nothing further was done for nearly a year, when the..........put upon the words the option given to either party appears to me to be absolutely nugatory. mr. desai referred me to woodall v. pearl assurance co [1919] 1 k.b. 593 and to the opening words of condition 11 of the insurance policy, which is set out at the bottom of p. 595. the material words are as follows :-if any question shall arise touching this policy or the liability of the company thereunder or the extent or nature of such liability or otherwise howsoever in connection herewith then the assured and all persons claiming through the assured may refer and shall be bound if the company shall so require to refer the same to arbitration.mr. desai submitted that on the true construction of those words the company were entitled to insist upon arbitration, but though the assured had an.....
Judgment:

Blackwell, J.

1. This is a notice of motion taken out by the defendants to stay this suit pursuant to Section 34 of the Indian Arbitration Act, 1940. Several points were raised by the plaintiffs in the affidavit of Tribhowandas Valjee Mehta, a munim of the plaintiffs, in their affidavit in reply dated June 17, 1942, but Mr. Desai for the plaintiffs has relied only upon, two points, (1) that there is no binding agreement to refer, and (.2) that the defendants were not ready and willing at the date of the filing of the suit to refer the matters to arbitration.

2. In paragraph 2 of the plaint it is alleged that on November 20, 1940, the plaintiffs placed an offer with the defendants for the purchase of twelve tons of, galvanised plain iron sheets of the size and price therein mentioned c.i.f. Bombay, shipment January and/or February at sellers' option subject to sellers' ability to obtain steamer space, the country of origin being America. The terms and conditions of the offer were set out on the back of the indent and they are to be found in exhibit A to the affidavit of Naranji Liladhar Kara, a partner in the defendant firm dated May 7, 1942. In paragraph 4 of the plaint it is alleged that the defendants accepted the offer and in paragraph 5 the plaintiffs alleged that on receipt of that letter there was a concluded contract.

3. Thereafter difficulties are alleged by the defendants to have arisen in connection with the shipment of the goods from America. The correspondence relating thereto is set out in exhibit (C) to the plaint beginning with a letter dated December 4, 1940, and ending with a letter dated January 28, 1941. The substance of that correspondence is this, that unless the plaintiffs intimated to the defendants their willingness to extend the time for shipment the defendants would treat the order as cancelled.

4. Thereafter nothing appears to have been done until December, 1941, when correspondence started between the respective attorneys which is set out in exhibit D to the plaint. By a letter of December 4, 1941, the plaintiffs' attorneys called upon the defendants to inform them whether the goods sold had been shipped and when they were expected to arrive, so that their clients might pay the price of the goods against the documents. In the defendants' solicitors' letter of December 16, 1941, it is expressly stated that the defendants had accepted the order. The request for extension of time to which I have already referred is then set out and it is stated that by their letter of January 24, 1941, the defendants informed the plaintiffs that they were constrained to consider the order as cancelled. Further correspondence took place and the plaintiffs' attorneys threatened legal proceedings. In a letter from the defendants' attorneys dated January 7, 1942, they state that if any proceedings should be taken against the defendants the defendants would defend those proceedings.

5. The suit was filed on March 27, 1942. The writ of summons was served on the defendants on April 9. Then by their attorneys' letter of April 14, 1942, which is exhibited to the affidavit of Naranji, Liladhar, the' arbitration clause, to which I shall presently refer, is set out and it is alleged that the defendants have been and are ready and willing to refer the dispute to arbitration, and the plaintiffs are called upon to submit the matter to arbitration. The plaintiffs' attorneys by their letter in reply dated April 15, 1942, part of exhibit B of the same affidavit, alleged that the defendants were not entitled to have the suit stayed under Section 34, a notice of motion in this behalf haying been threatened in the letter of- April 14 if arbitration were not agreed to. This motion was registered on May 13. The plaintiffs had taken out a summons for directions in this matter, but the defendants did not appear on the hearing thereof, and an order for a transfer to the commercial cause was made on April 16, 1942, and directions were given. That order was served upon the defendants on May 7, 1942. It is plain that the defendants have not taken any steps in the action which have precluded them from asking for a stay.

6. I come now to the first point raised by Mr. Desai, viz. as to whether there is or is not a binding agreement to refer. That depends upon the meaning to be attributed to the first part of condition 14 of the terms and conditions in the contract. The material words are as follows :-

Any complaint, claim, dispute, doubt or question (not otherwise settled by mutual consent) arising out of this indent, may at the instance of, either party hereto be referred to arbitration to two European merchants with power, in the event of disagreement, to appoint an Umpire.

Mr. Desai contends that that merely gives an option to either party to refer to arbitration without involving any obligation upon the other to go to arbitration. I do not agree with this contention. The words in question appear to me to amount to an agreement between the parties that if either of them desire that any dispute arising out of the indent should be submitted to arbitration, it will be submitted to arbitration. If this be not the proper construction to put upon the words the option given to either party appears to me to be absolutely nugatory. Mr. Desai referred me to Woodall v. Pearl Assurance Co [1919] 1 K.B. 593 and to the opening words of condition 11 of the Insurance Policy, which is set out at the bottom of p. 595. The material words are as follows :-

If any question shall arise touching this policy or the liability of the company thereunder or the extent or nature of such liability or otherwise howsoever in connection herewith then the assured and all persons claiming through the assured may refer and shall be bound if the company shall so require to refer the same to arbitration.

Mr. Desai submitted that on the true construction of those words the company were entitled to insist upon arbitration, but though the assured had an option to go to arbitration the company were not bound to agree to the exercise of that option if it were exercised by the assured. I am quite unable to accede to this argument. If it be sound the option given to the assured in that case would be nugatory. Similarly in the case before me if Mr. Desai's argument is sound, if either party desires to exercise the option, which the parties have agreed that both shall have, that must be treated as valueless and useless. I hold that that is a binding agreement to refer to arbitration.

7. I come now to the next point argued by Mr. Desai, viz. that the defendants were not ready and willing at the date of the filing of the suit to submit the disputes to arbitration. This is not a case in which the defendants had ever denied the factum of the contract. In the letter of December 16, 1941, from the defendants' attorneys, to which I have already referred, they expressly admitted that they had accepted the order. The attitude taken up by the defendants has been that while admitting that a binding contract had been concluded, they had, in the event which supervened, become entitled to cancel it. That is a dispute which arises out of an admitted contract and depends upon the evidence adduced in relation to it. Therefore any argument based upon the denial of the existence of the contract cannot in my opinion hold water.

8. Next Mr. Desai argued that because the defendants were taking up the attitude that they had the right to cancel the contract they could not take advantage of the arbitration clause contained in it if the plaintiffs insisted upon holding them liable under the contract. I do not agree. There was no obligation upon the defendants to claim arbitration before the plaintiffs filed this suit. The plaintiffs did not, as they might have done, ask the defendants whether they desired to go to arbitration before filing this suit. They filed the suit notwithstanding the arbitration clause which I hold to be binding upon them. Mr. Daphtary for the defendants referred me to Anglo Persian Oil Company v. Panchapakesa Aiyar I.L.R. (1923) Mad. 164, where the Appeal Court held that the mere fact that the defendant, who was threatened with legal proceedings for breach of a contract containing an arbitration clause, did not, before the institution of the suit, insist on the arbitration clause, but relied on it for the first time after the suit was filed, was no ground for not granting his application for stay of proceedings under the Arbitration Act. With respect I agree with the reasoning of that decision.

9. I see no reason whatever why this suit should not be stayed. The nature of the dispute between the parties appears to me to be eminently suitable for determination by commercial arbitrators, and seeing that the parties have, by an arbitration agreement, which I hold to be binding upon them, agreed to submit any dispute arising out of the contract to arbitration, I think I ought to give effect to that agreement. Consequently, I stay this suit.

10. The plaintiffs must pay the costs of this notice of motion. When this matter was before me on June 30, and I gave the defendants leave at their, own costs to amend the notice of motion, I stated that the plaintiffs were to have the costs of the adjournment and that I should quantify those costs when the motion came on again before me. I quantify the costs which the plaintiffs are to have as the costs of the adjournment at Rs. 60. The costs which they would ordinarily have to pay to the defendants on this motion, the plaintiffs having failed, would be Rs. 175, but as the defendants, on the quantification which I have now made, will have to pay Rs. 60 to the plaintiffs, treating the costs as set off, the order which I make is that the plaintiffs should pay to the defendants Rs. 115 on this notice of motion.


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