1. These are two appeals under Clause 10 of the Letters Patent against a judgment of Falshaw J., given on 14-9-1948 in appeals preferred by the Governor General in Council against orders of a Subordinate Judge at Delhi making two awards rules of the Court and passing decrees in accordance therewith.
2. A preliminary point has been taken that these appeals are not competent. The argument is based upon Clause (2) of Section 39, Arbitration Act. Clause (1) provides that an appeal shall lie from certain orders passed under the Act. There is no dispute that the appeals before the learned single Judge were competent. Clause (2), Section 39, is as follows :
'(2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.'
3. It is claimed that although these are appeals under the Letters Patent, they are nevertheless second appeals and therefore are not competent. This point had arisen before in the Lahore High Court in -- 'Hanuman Chamber of Commerce Ltd., Delhi v. Jassa Ram Hira Nand',reported in AIR 1948 Lah 84 (A) when a Bench of that Court held that an appeal of the same nature as the present is competent. The opinion expressed by Mahajan J., was in these words :
'The expression 'second appeal' has seldom been used in respect to appeals which arise within this Court and which are very commonly described as 'inter-Court appeals'. I am, therefore, of the opinion that Sub-section (2) of section 39 does not take away the right that has been conferred on a litigant under Clause 10 of the Letters Patent of tnis Court. It seems to me that this sub-section only refers to two kinds of appeals that are mentioned in the Code of Civil Procedure, namely those a right to which is conferred by Section 100, Civil Procedure Code, and those the right to which is given by Sections 109 and 110 of the Code.'
This view, however, has not been followed by other High Courts. The most recent pronouncement is of the Bombay High Court in --'Madhavdas Devidas v. Vithaldas Vasudeodas', reported in AIR 1952 Bom 229 (B). The learned Judges there referred to the decision in -- 'Harmman Chamber of Commerce v. Jassa Ram (A)', which was followed by this High Court in -- 'Banwari Lal v. Hindu College, Delhi', AIR 1949 EP 165 (C), and expressly dissented from that opinion. The learned Judges also referred to the view expressed by the Madras High Court in --'Radhakrishnamurthy v. Ethirajulu Chetty and Co.', AIR 1945 Mad 184 (D) also contrary to that given in -- 'Hanuman Chamber of Commerce (A)' and -- 'Banwari Lal's cases (C)'. It is very desirable that there should be a concurrence of judicial opinion on an important point such as this. I do not mean to say that this High Court must follow other High Courts' opinion against its conscience, but in the present state of the authorites, I think it is proper that the question should be re-examined by this Court and finally decided and I consider, therefore, that this matter should go to a Full Bench.
4. The decision seems to turn upon whether the expression 'second appeal' appearing in Section 39(2), Arbitration Act, is to be given a technical meaning as an appeal covered by Section 100, Civil P. C. I myself do not understand the necessity for giving to the expression 'second appeal' such technical meaning. The words 'second appeal' do not in fact appear in Section 100 at all although they form a marginal note to the section. The words 'second appeal' do appear in S, 101 and certain following sections. There can be no doubt that the Letters Patent of this High Court is to be regarded as general law as contrasted with the special law of Section 39, Arbitration Act, and the general right of appeal given by Clause 10, Letters Patent, must give way if by Section 39 it is provided that no such appeal lies. The purpose of Section 39 is very obvious. It is consistent with the general scheme of the Arbitration Act, namely to minimize the amount of proceedings in Court and facilitate quick settlement of disputes, which is the primary justification for arbitration procedure. It is not necessary, however, for me to attempt any further opinion on the matter. It will be dealt with in due course by a Full Bench.
5. As the case has been argued before us exhaustively on its merits, I think we should give our decision. In my opinion, if the appeals are competent, they should be allowed. If the Pull Bench decides that the appeals are not competent, then, of course, they will have to be dismissed. I proceed now to give my reasons why the appeals, if, competent, should be allowed.
6. The facts of the matters are as follows. One award was in favour of the Sunshine Metal Works of Delhi and was for an amount of Rs. 54,000/-and the other was in favour of Mohindra Supply Company for an amount of Rs. 47,250/-. The awards arose out of claims for damages preferred by the two firms in respect of contracts entered into by them with the Supply Department of the Government of India for supplying what is called solidified fuel. In the case of the Mohindra Supply Company the contract also provided for the supply of Tommy Cookers but no dispute in regard to this item of supply arose. The contract in the case of the Sunshine Metal Works was executed on 3-5-1943 and in the ease of Mohindra Supply Company on 14-8-1943, and in each instance 1,00,000 lb3. of solidified fuel were contracted to be supplied by the firm. Each contract was in writing and was made subject to what is called the General Conditions of Contract contained in W.S.B. 133.
The contracts themselves, however, contained a number of clauses. Taking that of Sunshine Metal Works, it is headed by description of the commodity described as solidified fuel, units of one pound, quantity to be supplied being 1,00,000 lbs., and the price to be paid is given as RSection 1/2/- per pound. Then follows a paragraph numbered 1 which reads as follows: 'l. Particulars governing supply: (a) Specification:
Conforming to specification No. R.I.A.S.C.85, copy already with you.(b) Maker's name or brand:-- Own make.(c) Country of origin:-- India.'Then follows paragraph 2 headed 'Delivery Schedule and Despatch Instructions'* and under thisline appears the Roman figure II:'II. Date of Delivery:-- (Date to be tendered)Item No. Unit Quantity Day Month year2 lb. 1,00,000 30 6 43'(one lakh) or earlier if possible.'Then follows Roman figure III:
III. Packing and marking: 'The Store is required to be packed in new or well-cleaned hermetically sealed four gallon tins of the Kerosene oil type and each tin shall contain 30 lbs. nett. Two such tins shall be repacked in a strong, trade wooden case iron-hooped, steel strapped or wired. The packing shall be sufficiently strong to withstand rough handling during transit by road, rail or sea, and shall conform to the requirements of the Railway and pamphlet No. 14.' Then follows Roman figure IV headed 'Place of Delivery' with certain terms of delivery which are not material. Then follows Roman figure V headed 'Inspection' and then Roman figure VI dealing with payment. Then follow certain other conditions which also are not material. This document signed 'for the Chief Controller of purchase (Supply)' is on a typed sheet of paper. On a similar typed sheet of paper is the contract of Mohindra Supply Company and the only difference which need be noticed between the two is that in paragraph 2 again headed 'Delivery Schedule and Despatch Instructions', the Roman figure under this paragraph begins with 'I' and the words 'Packing and Marking appear under the figure 'II'.
7. The questions raised under the two contracts so far as the solidified fuel is concerned are practically identical and it is enough to give the facts so far as the Sunshine Metal Works isconcerned. This firm, purporting to act in accordance with the contract, tendered 49,980 lbs. of solidified fuel. This tender was rejected on 16-5-1944 with a note of the Inspector 'Burning time low'. I may perhaps mention that in the case of the fuel tendered by the Mohindra Supply Company there was not a refusal on this ground. Thereafter 48,000 lbs. of solidified fuel were tendered by the Sunshine Metal Works which were rejected on 17-6-1944 with an endorsement of the Inspector 'Rejected on account of consignment being packed in second-hand containers and tins not provided with press in lids'. It appears that the Sunshine Metal Works protested that under the terms of the contract second-hand containers were permissible. The Inspector was asked by the Supply Department to make a fresh inspection having regard to the terms of the contract and on 28-7-1944 the 48,000 lbs. were again rejected for the following reasons endorsed on the inspection form:
'Tins are rusty and are not in first class condition. Tins not provided with press in lids.'
There was some suggestions afterwards of an undertaking given by the Sunshine Metal Works to remedy the defects, but the case of the firm is that the goods were properly packed and that their tender had been wrongly rejected. On 6-12-1944 the firm wrote asking that the matter be referred to arbitration. On 12-12-1944, a reply was sent from the Directorate General of Supply appointing Mr. P.S. Sood, Assistant Director Textiles, arbitrator on behalf of the Governor General but without prejudice to the right of the Government to contend that the matter was one in respect of which the decision of the Inspector was final and that the arbitrators were not competent to adjudicate upon it. On 19-2-1946 an application was filed on behalf of Government in the Court of Mr. Tara Chand, Sub-Judge, 1st class, Delhi, under Section 33, Arbitration Act. This application referred to clause 21 of the General Conditions of Contract which was the arbitration clause of that contract and which exempted from the scope of arbitration 'any matters the decision of which is specially provided for by those conditions'.
The application claimed that the rejection of the stores was within the sole discretion of the Inspector whose decision was final, and that therefore no arbitration could be conducted relating to this rejection. On 20-2-1946, an application was filed again by Government, asking for temporary injunction to restrain the arbitration proceedings. By order made on 27-2-1946 the learned Judge rejected this application mainly on the ground that the proceedings were taken by Government after the arbitration had been going on for more than a year. On 19-3-1946 the award was made by the arbitrators in favour of the Sunshine Metal Works for the amount stated in the beginning of this judgment. Objections were filed to this award and the companion award in favour of Mohindra Supply Company and by order dated 8-4-1947 the objections were dismissed and the awards in both matters were made rules of the Court.
8. The two appeals against this order, as already indicated, were allowed by Falshaw J. who set aside the awards and the orders of the Court below making them rules of the Court.
9. If it is found that the rejection of the goods made by the Inspector was within his powers, there can be no doubt that, as under the terms of the contract itself such rejection was made final and binding, then by reason of the saving part of Clause 21 of the General Conditions of Contract termed W. S. B. 133 that rejection could not be the subject of arbitration. The power of the Inspector to reject is given in Clause 13 of W. S. B. 133 the material part of which is Sub-clause (iii) which reads as follows:
'(iii) Inspector.-- Final Authority and to certify performance--
(a) The Inspector shall have power before any stores or parts thereof are submitted for inspection to certify that they cannot be in accordance with the contract owing to the method of manufacture not being satisfactory, or
(b) to reject any stores submitted as not being in accordance with the particulars.
(iv) Inspection and rejection.--The whole of a consignment may be rejected if, on inspection, a portion up to 4 per cent, of the consignment (at the sole discretion of the Inspector) is found to be unsatisfactory.'
10. Sub-clause (v) may be mentioned. It deals with the consequences of rejection and provides 'inter alia' that following rejection the Secretary, Department of Supply, may terminate the contract and recover any loss sustained thereby from the contractor, and it is paragraph (d) of this sub-clause which provides that the Inspector's decision as regards rejection shall be final and binding on the parties.
11. Returning to Sub-clauses (iii) and (iv) the power of the Inspector applicable to the present case must be taken to be that stated in Sub-clause (iii)(b) namely his power to reject the solidified fuel submitted as not being in accordance with the particulars. The solidified fuel was rejected not because the fuel itself was in any way defective but because its packing was not in accordance with the terms of the contract. If therefore the packing can be said to fall within what are called 'particulars' the Inspector undoubtedly had sole discretion to reject the fuel on the grounds stated by him and his rejection must be taken to bo final.
12. Sub-clause (x) of Clause 1 reads as follows: '(x) The term 'particulars' shall mean the following: (a) Specification, (b) Drawing, (c) Sealed pattern denoting a pattern sealed and signed by the Inspector, (d) certified or sealed sample denoting a certified copy, of the sealed pattern or sample sealed by the purchaser for guidance of the Inspector, (e) Trade Pattern denoting a standard of the B.S.I, or other standardizing authority or a general standard of the Industry and obtainable in the open market, (f) Proprietary make denoting the product of an individual firm, (g) Any other details governing the construction, manufacture and/or supply as existing for the contract.'
(12a) In the case of many commodities the packing may well be an unimportant term of a contract for supply. In the case of other commodities the packing may be very important, and I think it may be assumed that in the case of solidified fuel packing must be a very important feature in a contract for supplying that commodity. In such event it would of course be open to the buyer namely Government to insist that packing should be taken to be a part of the commodity itself. The contract in the present case could well have been specified to be a contract for the supply of solidified fuel in containers of a particular description. If this had been done no difficulty would have arisen, for the containers even if they did not fall within the term 'specification' in Clause 1(x)(a) would clearly come within the meaning of Sub-clause (x) (g) of Clause 1; -
This, however, was not done. The contracts themselves described the goods to be supplied simply as solidified fuel. The description which heads the contracts makes no mention whatever of the containers or any other form of packing. Further under the heading 'particulars governing supply' there is no mention whatever of packing, and 'packing and marking' appear together under the second clause of the contract which is headed 'Delivery Schedule and Despatch Instructions'. This last fact makes the present case clearly distinguishable from a case disposed of by my learned brother -- 'Governor General of India in Council v. Messrs. Magason and Co.', (F.A.O. No. 8-E of 1947) in which there was a similar contract for the supply of chutney. In that case a consignment was rejected by the Inspector for defects of packing.
The judgment of my learned brother, however, shows clearly that in that contract under the heading 'Particulars governing supply' one of those particulars was that packing should be in accordance with the terms specified in the contract. Had this been so in the present instance, there would be no difficulty but as it was not, the decision which was relied upon by Mr. Justice Falshaw cannot govern the present case.
13. In the Form W.S.B. 133 there is a clause No. 9 which is headed 'Packing' and which makes the contractor responsible for proper packing, free supply of packing materials and proper mark-tog of each bale or package containing a packing note with certain details. It is not the case that the Inspector is the sole authority in all matters concerning the contract. I have already mentioned that following rejection it is the Secretary, Department of Supply, who is to terminate thecontract or allow re-submission or purchase elsewhere. Clause 11 of Form W.S.B. 133 provides that the time for and the date of delivery shall be deemed to be of the essence of the contract. On failure of delivery within the period prescribed, the Secretary, Department of Supply, becomes entitled at his option, (a) to recover damages fromthe contractor, (b) to purchase elsewhere and (c) to cancel the contract. It is clear that it is no part of the function of the Inspector to reject goods on the ground of late delivery; that is a matter entirely for the Secretary, Department of Supply. Clause 20 provides that on insolvency of the contractor or on committing any breach by him of the contract not specially provided for in W.S.B. 133, the Secretary, Department of Supply, has power to declare the contract at an end.
14. It seems to me that the function of the Inspector must be restricted strictly to the powers expressly given to him and if 'packing' in any particular case cannot be brought within the term 'particulars' then the Inspector can have no power to reject. This result it may well be was never intended by whoever was responsible for drawing up W.S.B. 133. It appears that a correction was made on 1-9-1943 by which a further sub-paragraph was added to Clause 9 of the Form giving express power to the Inspector to reject consignments of goods not packed and marked in accordance with the instructions. This correction of course cannot affect contracts such as the present entered into before the 1st of September 1943.
15. It has been contended on behalf of the Department that packing can properly be brought within the definition of 'particulars' under part (g) of Sub-clause (x) of Clause 1 of W.S.B. 133. Reliance is placed upon the word 'supply' which appears in (g) and it is contended that the word 'supply' means or at least includes the process of deliveryand therefore must include any detail material to the process of delivery and in particular the packing of the goods. The form W.S.B. 133 can hardly be said to be a work of art. It represents a set of conditions imposed by the Department upon contractors and I do not suppose for one moment that contractors understand it or attempt to understand it. The word 'supply' when used as a noun may connote either article itself or the process of bringing it to the purchaser. As the Department claims that in Sub-clause (g) the word 'supply' is used in the latter sense, it is of interest to see if this sense is required by the context wherever else the word 'supply' is used in the document as a noun. The conclusion, I think, must be that this sense is not required by the context elsewhere in the document.
In Clause 1(ii) the word appears in the context 'the contractor with whom the order for the supply is placed' and the substitution of goods for supply would, I think, do no violence to the meaning. In Clause 5(iv) it is said 'if neither a specification nor a drawing exists then the sealed pattern or certified sample thereof will govern supply in all respects' and in the following Sub-clause (v) the word 'supply' appears in a similar context. Here again, I am not able to accept that supply must be taken to include not only the article but also all things connected with process of delivery.
These examples, I think, are enough to show that when packing is not expressly included in the particulars stated in the contract it is not reasonable to bring packing within the category of particulars as a detail governing the supply as existing in the contract. I think, therefore, that on the terms of the contract, the packing was, something which had been placed outside the particulars and was a matter upon which the inspector was not competent to reject. There was no rejection by the Secretary, Department of Supply, on this ground. There was, therefore, no legal rejection of goods and the contractor was entitled to recover.
16. A further point has been made under Section 35 of the Arbitration Act. It is suggested that in view of the application filed on behalf of Government on 19-2-1946, the further proceedings of the arbitrator were invalid and the award made later on 19-3-1946 is invalid. It is to be remembered that the companion application filed on 20-2-1946 by which a temporary injunction restraining the arbitration proceedings was sought on behalf of Government was dismissed on 27-2-1946.
17. For an application or other legal proceeding to render further proceedings in an arbitration matter invalid it is necessary under Section 35, Arbitration Act that the application or legal proceeding shall cover the whole of the subject-matter of the reference. It is difficult therefore to place the application made on behalf of Government on 19-2-1946 under Section 35 of the Arbitration Act. The contention then raised was not as to the existence or validity of the arbitration agreement but a decision was sought that as the rejection by the Inspector was final under the contract, this rejection could not be challenged in arbitration proceedings. The point, therefore, was the scope of the arbitration agreement and not its existence or its validity.
There is authority -- 'A.M. Mair and Co. v. Gordhandas Sagarmull, AIR 1951 SC 9 (P) and -- 'Ruby General Insurance Co., Ltd. v. Pearey Lal Kumar', AIR 1952 SC 119 (G), that where recourse to the contract by which the parties are bound is necessary for the purpose of determining the matter in dispute between them, the matterwill come within the arbitrator's jurisdiction. Clearly, in the present instance it was necessary for the arbitrator to consider whether the dispute was or was not one specially excluded by these conditions.
18. Whether or not the application under Section 33 was competent, I do not think it satisfied the necessary condition of Section 35 of the Act. It raised only a point of jurisdiction of the arbitrator, and although a finding; of absence of jurisdiction might well be fatal to the whole arbitration, nevertheless the objection to jurisdiction was not a legal proceeding for the whole of the subject-matter of the reference. It is upon this ground rather than upon the absence of formal notice taken by Falshaw J., that I would agree with his conclusion that the proceedings of the arbitrator were not affected by the application purporting to be under Section 33.
19. If these appeals are competent, I consider that they should be allowed and the orders of the original Court restored.
20. I agree that the question as to whether the appeals are competent should be referred to a larger bench and that if the answer is in the affirmative the appeal should be allowed.