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Kedarnath and Sons Vs. the India United Mills Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai High Court
Decided On
Case NumberO.C.J. Miscellaneous Award Petition No. 32/X of 1954
Judge
Reported in(1956)58BOMLR907
AppellantKedarnath and Sons
RespondentThe India United Mills Ltd.
DispositionPetition dismissed
Excerpt:
.....an acceptance of the benefit under protest may amount to acquiescence in the award especially if there is delay in taking proceedings to set aside the award. on an examination of the facts of the case the learned judge reached the conclusion that the interim award was bad as the contract between the parties was such that no court would have enforced specific performance of the same. the learned judge has not referred to section 55 of the sale of goods act presumbly because it must have been felt that in that case it was not necessary to do so, now, it is always unsafe to take one or two observations in a judgment and to treat them as if they gave the ratio decidendi of the case or to spell out with difficulty a ratio decidendi in order to be bound by it......raised various contentions and submitted, inter alia, that the claim of the respondents was for specific performance of the contract and should be rejected as they were not entitled to enforce the same in law and equity. they also contended that the respondents were in default and on that footing claimed damages from the respondents for loss of profit.3. the two arbitrators appointed by the parties were, after hearing the matter, unable to agree on their award and the matter was referred to an umpire who had been duly appointed.4. the material part of the award published by the umpire goes as follows:-whereas, in pursuance of a contract in writing, no. f. 362 dated 13/14th may 1953, the matters in difference thereunder between the two parties above named have been referred to two.....
Judgment:

Desai, J.

1. This is a petition under the Arbitration Act and the relief sought is that the award made by the Umpire may be remitted for reconsideration. Alternatively the petitioners have asked for such other order in relation to the award as may appear just to the Court. There is no express prayer asking for the setting aside of the award but learned Counsel for the petitioners has submitted before me that the award is bad for an error of law apparent on the face of it and should, therefore, be set aside. I shall not take a technical view of the matter but will proceed to examine the arguments urged on behalf of the petitioners on the footing that the relief sought is that the award should be set aside.

2. By a contract made on May 13/14, 1953, the respondents who are manufacturers of textiles contracted to sell and deliver to the petitioners 300 bales of piecegoods described in the contract. Delivery of the goods was agreed to be 'June/July 1953', After taking delivery of 64 bales the petitioners took up the position that they were not bound to take delivery of the rest of the goods and that the contract as to the balance stood cancelled. Correspondence ensued, and while it was going on the petitioners from time to time paid for and took delivery of 33 more bales leaving a balance of 203 bales. The parties under the terms of the contract being bound by an arbitral agreement the disputes between them were referred to arbitration of two persons in accordance with the rules of the Mill Owners' Association. In their particulars of dispute filed before the Arbitrators the respondents contended that the petitioners (dealers) had no genuine ground for complaint whatever and submitted :-

The party has so far paid for only 97 bales. The balance of 203 bales is still lying with us on their account. We request that the party be asked to take delivery of the goods after paying value plus overdue interest, godown rent and insurance charges.

In their particulars of dispute the petitioners raised various contentions and submitted, inter alia, that the claim of the respondents was for specific performance of the contract and should be rejected as they were not entitled to enforce the same in law and equity. They also contended that the respondents were in default and on that footing claimed damages from the respondents for loss of profit.

3. The two Arbitrators appointed by the parties were, after hearing the matter, unable to agree on their award and the matter was referred to an Umpire who had been duly appointed.

4. The material part of the award published by the Umpire goes as follows:-

Whereas, in pursuance of a contract in writing, No. F. 362 dated 13/14th May 1953, the matters in difference thereunder between the two parties above named have been referred to two Arbitrators appointed in accordance with the Arbitration Rules of the Bombay Mill Owners' Association under reference, dated 12-1-1954 and 2-2-1954 and subject to the conditions therein set forth; and whereas the Arbitrators in question, namely Mr. T.V. Baddeley and Mr. S.P. Jain, have disagreed in their award; and whereas I, the undersigned, was duly appointed by the said authority to act as Umpire in the dispute in question;

Now, I, the said Krishnaraj M.D. Thakersey having carefully considered all the evidence pertaining to the said reference, award as follows:-

That in terms of Clause 16 of the contract, the 83 bales not packed in June, were extended for delivery upto the end of July by which time the bales were ready for delivery, and the buyers are not entitled to cancel these bales;

That the goods under this contract are equal to the basis sample and are a fair tender; and

That the buyers shall pay for, excluding godown rent, overdue interest and insurance charges, and take delivery of 203 bales, i.e. 83 bales not packed in June but which were packed and ready for delivery in July, and also 120 bales packed in July.

5. The ground on which the petitioners challenge the validity of the award and the argument for the petitioners, in its briefest form, is that the claim of the respondents was for specific performance of the contract and that the contract being one for the sale of goods for the non-performance of which compensation in money was an adequate relief, the Umpire had no power or authority to direct the petitioners specifically to perform the contract by paying the price of the goods against delivery of the same. The argument was solely founded on a decision of Blagden J. inAhmed Abdul Baku Ebrahim v. Dhanraj Mills Ltd. (1944) O.C.J. Suit No. 56 of 1943, decided by Blagden J., on July 4, 1944 (Unrep.) where a contention of a somewhat similar nature appears to have found favour with the learned Judge. The argument so founded is that if the matter had been tried in Court, the Court would have refused to decree specific performance of the contract and there is, therefore, reason for holding that the Umpire had no authority to make an award granting specific performance of the contract, which was an error of law apparent on the face of the same.

6. The respondents by their affidavit in reply denied the correctness of the contentions raised in the petition. They pointed out that after the award was made the petitioners were called upon to pay for the 203 bales in accordance with the award of the Umpire. The petitioners from time to time paid for and took delivery of 22 bales leaving a balance of 181 bales. There was some correspondence and the petitioners ultimately agreed to take delivery of the 1.81 bales among other goods on or before December 31, 1954, and also agreed that this petition which had in the meantime been filed for setting aside the award should be dismissed. The terms agreed upon between the parties were reduced to writing and signed by the parties. It is that agreement on which the respondents have laid considerable stress in their affidavit in reply. The contention raised by the respondents on this part of the case is that the petitioners themselves have after the award paid for and taken delivery of 22 bales mentioned in the award and are now estopped from challenging the award since they have accepted the award, acted on the award and have actually asked for time to carry out the award, which time was granted on the terms and conditions recorded between the parties in the writing dated November 17, 1954.

7. The last mentioned defence of estoppel pleaded by the respondents rests on facts which are not disputable and not disputed, and learned Counsel for the petitioners had little to say in answer to the same. I think that this defence must in any event be upheld and will, therefore, proceed immediately to examine the same, and state my reasons for upholding the same.

8. The rule is firmly fixed that even if an award be bad, the party complaining of the same may preclude himself from impeaching it if he has acted on it and accepted the whole or part of the benefit it gave him. The phraseology often used in this connection is that in such a case an estoppel arises which affords a good defence to any attempt to challenge the validity of the award. I perceive that the real basis of reasoning which underlies that phraseology is this, and nothing more than this, that there may be conduct on the part of the person seeking the remedy which ought to preclude that person from having it; as for instance an act from which the inference ought to be drawn that the party has, with knowledge of the facts accepted the award which he seeks afterwards to get rid of, or has taken advantage and derived benefit from the award which it would be unfair and inequitable to permit him, after having received it, to treat as if of no consequence. The circumstances which may justify the application of the rule can be various, and many sorts of conduct might exist. There must, of course, be a foundation of substantial justice depending upon the acts and conduct of the party sought to be so precluded.

9. I should, however, like to add-it is germane to the application of the doctrine of estoppel or acquiescence to the case of an award-that a clear distinction has to be made between merely performing an award and accepting benefit under an award. The acquiescence or approbation or acceptance of the award that precludes the challenge to the validity of the award must be something more than mere performance of something directed to be done by the award. It must amount to knowingly accepting some benefit under it. The facts and circumstances of the case must show that there is an attempt by a party to assert the invalidity of the award after knowingly receiving some benefit under the award.

10. The view I take of the matter is that what the petitioners did after the award was something more active than mere performance of the award. They acquiesced in the award by knowingly acceptingbenefit under it. It is well established that even an acceptance of the benefit under protest may amount to acquiescence in the award especially if there is delay in taking proceedings to set aside the award. Moreover, the petitioners did not stop after admittedly taking delivery of the 22 bales after the publication of the award but entered into an agreement with the respondents, recorded in the writing dated November 17, 1954, whereby they obtained from the respondents further time for payment of the price of the balance of the goods against delivery and further agreed to get this petition dismissed on or before November 26, 1954. Now, as I have already observed, learned Counsel for the petitioners had little to say in answer to this plea of acquiescence and estoppel, and all that was urged before me was that the only remedy of the respondents was to adopt proceedings for recording the compromise noted in the agreement contained in the writing of November 17, 1954. In my opinion there is little substance in this argument. In a petition to set aside an award, it is open to the respondent to show that subsequent to the petition the parties agreed to treat the award as binding and also to show that the petitioner has subsequent to his petition agreed to withdraw the same or get the same dismissed. It is not necessary in such a case for the respondent to take out a separate Notice of Motion as contended on behalf of the petitioners. It is open to the respondent to raise such a defence in his affidavit in reply, and if the facts are not in dispute, the Court will entertain the objection, and will not insist on a separate Notice of Motion being taken out for recording the compromise. The compromise recorded in the writing of November 17, 1954, is not denied. Nor is it denied that the petitioners took delivery of 22 bales after the publication of the award and paid the price for the same. Therefore, in my judgment, this petition must fall on the ground that the petitioners by their subsequent conduct are now precluded from impeaching the award.

11. Even so I have to examine the ground on which the petitioners challenge the validity of the award and must, therefore, pass now to consider the question of the error of law said to be apparent on the face of the award. I have already briefly stated that ground and the argument urged in support of the same. As already observed by me the argument is founded on an unreported decision of Mr. Justice Blagden. In that case there was a dispute between buyers and sellers of certain piecegoods and the dispute was referred to arbitration in accordance with an arbitral clause in the contract and the arbitration was to be in accordance with the rules of the Mill Owners' Association, Bombay. The arbitrators without hearing the buyers on the merits of the case made an interim award purporting to give effect to one of the clauses of the contract. The interim, award directed the buyers to take delivery of the goods without rejecting the contentions of the buyers on the merits of the case. This was rightly held by the learned Judge, if I may respectfully say so, to amount to misconduct on the part of the Arbitrators. The learned Judge in his delightful judgment then proceeded to consider another argument urged before him and which was to the effect that the Arbitrators had no power to direct that a contract shall be specifically performed if it was clear that non-performance of it could be adequately compensated in money. On an examination of the facts of the case the learned Judge reached the conclusion that the interim award was bad as the contract between the parties was such that no Court would have enforced specific performance of the same. In doing so, he observed:

But I think it is quite clear that the Arbitrators cannot order specific performance at any rate of a contract which the Court could not specifically enforce...

The present contract is one for the sale of goods partly by sample and partly by description and; if it was open to the vendors to deliver goods in performance of it at the time they wished to deliver they could fulfil their contract by delivering any goods corresponding to the sample and answering to the description, so that the Court could not enforce specific performance, because it could not be certain which particular bales of shirtings it was dealing with. It is also noticeable that in the Sale of Goods Act the power to order specific performance only applies to specific or ascertained goods, and even that power is subject to the provisions of Chapter II of the Specific Relief Act, see Section 58 of the Sale of Goods Act. Such being the powers given to Courts and there being nothing in the Arbitration Act, 1940, to show that Arbitrators shall have all the powers which the Courts have, I cannot see how the Arbitrator can have the power to order specific performance of a contract of this nature.

12. Learned counsel for the petitioners has leaned heavily on this decision of Mr. Justice Blagden and urged that I should follow it. Indubitably this Court should ordinarily deem itself bound to follow the ratio decidendi of the judgment of a Court of co-ordinate jurisdiction. It is not, however, the concrete decision that has the force of authority but the abstract ratio which alone can have binding effect. That ratio decidendi as has so often been said is the general reason for the decision or the general ground on which it is based butdetached from the specific peculiarities of the particular case which gives rise to the decision. If I had felt that the ratio decidendi of the judgment relied on in support of the petition is that in a dispute between seller and buyer of goods available in the market the Arbitrators cannot in any case direct the defaulting buyer to pay the price of the goods against delivery, I would have seriously considered whether it was incumbent on me on theground of judicial comity to follow that decision. The learned Judge has not referred to Section 55 of the Sale of Goods Act presumbly because it must have been felt that in that case it was not necessary to do so, Now, it is always unsafe to take one or two observations in a judgment and to treat them as if they gave the ratio decidendi of the case or to spell out with difficulty a ratio decidendi in order to be bound by it. I have permitted myself to make these few observations because it was strenuously urged before me by learned Counsel for the petitioners that the ratio decidendi of the decision given by Mr. Justice Blagden was that in no case can an arbitrator in a dispute of the nature which arose between the parties direct a defaulting purchaser to pay the price of the goods and take delivery of the same. It was equally strenuously urged that the only relief which it is competent to an arbitrator to grant in such a case is compensation for breach of the contract. After a careful reading of the judgment I am convinced that the abstract ratio of that ease is that if a contract of sale giving rise to a dispute between buyer and seller of piecegoods is of such a nature that the Court if it were to try the matter will decline to enforce it in specie and will direct only compensation to be made by the defaulting buyer to the seller, the Arbitrator, if the matter is taken to him, has no power to enforce specific performance of the contract but must award only compensation for the breach of the contract; and if he holds otherwise that would be an error of law which will induce the Court to set aside the award. There is nothing in that judgment, however, which deals with the remedy of a seller of goods to sue for the price of goods in certain cases enumerated in Section 55 of the Sale of Goods Act, and obviously because in the case before the learned Judge it was not possible for the respondents to rely on that section as the Arbitrators had not even considered the merits of the case.

13. Now, it is clear on the facts of this case that if the matter had gone to Court, an issue would have arisen whether the respondents could claim to recover from the petitioners the price of the balance of the goods not lifted by the petitioners. What the decision of the Court, on that issue on merits would have been is not relevant to the enquiry before me. It is equally clear that- it was competent to the Umpire in this case to take the view that the respondents were entitled to make a claim for the price of the goods. It was certainly open to him to reach the conclusion that on the evidence before him it was established that the respondents could have sued for the price of the goods. Therefore, if after considering the evidence he reached the conclusion that the petitioners were bound to pay the price of the balance of the goods not lifted by them and directed them to make payment of the price against delivery of the goods, he was acting within his competence and this Court would not on this petition remit or set aside the award unless there was some error of law apparent on the face of theaward. I have already set out the material part of the award challenged in this petition. I am unable to see in that award any error of law ex-fade apparent. Nor am I able to acquiesce in the argument that the Umpire had no jurisdiction to make an award directing the petitioners to take delivery of the goods and pay the price of the same to the respondents or that by doing so he enforced specific performance of the contract. The claim made by the respondents in the arbitration proceedings was for price of goods and that is the relief which the Umpire has awarded. It was open to him to do so if hecame to the conclusion that the case fell within the purview of Section 55 of the Sale of Goods Act. A cause of action for price of goods against a defaulting buyer arises when property in the goods has passed or where the price is payable on a day certain irrespective of delivery. In the latter case the action is for the money and the seller relies upon his remedy and does not intend to make the performance a condition precedent. In the former case the action is upon what was formerly described as thein debitatus count for goods sold and delivered or the indebitatus count for goods bargained and sold. It is essential to note that in none of these cases, now expressly provided for in Section 55 of the Sale of Goods Act, the seller asks for the equitable relief of specific performance. His claim is simply on a debt or for money. The cause of action in any such, case is not and cannot be founded on Section 58 of the Act to which Blagden J. has made reference in the passage quoted by me. It may be observed that Section 58 provides the remedy of specific performance only for the buyer and does not give any correlative right to the seller.

14. Therefore, the contention that the Umpire had no power to make the award challenged by the petitioners must be negatived. The petition fails on both the grounds considered by me and must, therefore, be dismissed with costs. Counsel certified.


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