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Shaw Wallace and Co. Vs. K.M. Subbier and Sons - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtChennai
Decided On
Reported inAIR1921Mad58; (1921)40MLJ166
AppellantShaw Wallace and Co.
RespondentK.M. Subbier and Sons
Cases ReferredThomas v. Fredericks and Tew
Excerpt:
.....by the court in so doing. the arbitration shall be conducted in accordance with the provisions of the indian arbitration act of 1899..it is conceded for the respondent that, in the absence of the last of the sentences above set forth, the meaning of the clause would be that any party can nominate both the arbitrators after the failure of the other to nominate an arbitrator within 7 days of the receipt of a notice by the former calling on the latter so to do. points out that such requests must be made in good faith and on reasonable grounds......absence of the last of the sentences above set forth, the meaning of the clause would be that any party can nominate both the arbitrators after the failure of the other to nominate an arbitrator within 7 days of the receipt of a notice by the former calling on the latter so to do. but it is contended that the last sentence attracts the provisions of the indian arbitration act, section 9(b) which required that the party serving notice on the other calling upon him to nominate should previously have ' appointed his arbitrator.' the appellant, in reply, relies on the words in section 9 'unless a different intention is expressed therein.' it is conceded by mr. v.v. srinivasa aiyangar the learned vakil for the respondent that so far as two arbitrators are contemplated by clause 12 in the.....
Judgment:

John Wallis, C.J.

1. This is an appeal from a judgment of Kumaraswami Sastri, J. dismissing a suit brought by the plaintiffs, Messrs. Shaw Wallace & Co., against the defendants to enforce an award on two grounds, (1) that the arbitrators were not duly appointed, and (2) that even if they were, they were guilty of technical misconduct, though acting bona fide, when they refused to adjourn the arbitration to allow of an application being made to set aside their appointment under Section 9 of the Indian Arbitration Act, 1899. The facts may be very briefly stated. The contract between the plaintiffs, who are referred to as the merchants, and the defendants, who are referred to as the dealers, contains a very wide Clause (5) protecting the merchants from responsibility for late shipment in consequence of events beyond their control and also an arbitration Clause (12) in the following terms:--' Should any dispute arise as to the interpretation of this contract or any matter in connection therewith or with the carrying out thereof the same shall be submitted at the option of the merchants either to the arbitrament of an arbitrator to be appointed by the Secretary or other officer or officers of the Madras Chamber of Commerce entitled to make such appointment according to the practice of the Madras Chamber of Commerce or to the arbitrament of two European merchants or their European assistants one to be appointed by each party or in the event of disagreement between such arbitrators of an umpire to be appointed by them. Should either party omit to nominate an arbitrator within 7 days of the receipt of a notice calling on him so to do the other party shall be at liberty to nominate both arbitrators. The arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act, 1899 save that the 1st and 2nd proviso to the 1st schedule thereto shall not apply. The decision of the arbitrators or of their umpire shall be conclusive and binding on both the parties. The arbitrators to state by whom the cost of arbitration is to be paid.'

2. On the 30th April, 1919 the plaintiffs wrote to the defendants asking them to join in a reference to the arbitration of the Chamber of Commerce of a dispute regarding the late shipment of 44 bales. The defendants through their Vakil returned an evasive answer on May the 7th, and after waiting another month, the plaintiffs purporting to act under Clause 12 of the contract wrote to the defendants on the 9th June calling on them pursuant to Clause 12 of the contract to nominate a European merchant or his assistant to act as arbitrator on their behalf, and notifying them, that in the event of their failing to do so within 7 days the plaintiffs would nominate both arbitrators. The defendants did nothing, and the plaintiffs nominated two arbitrators on the 27th June and informed the defendants by their solicitor's letter of the 1st July. The arbitrators then gave the defendants notice of the place and time of hearing (July 9th) and the letter was forwarded to the defendants by the plaintiff's solicitors on July 5th. On the 8th July the day before the hearing, the defendants wroteto the arbitrators taking exception to their appointment, and asking for an adjournment to enable them to apply to the High Court after the re-opening on the 14th July to set aside the appointment. The award sets out that in view of the fact that ample time had been given the dealers to appoint an arbitrator, the arbitrators had replied that they could find nothing in the correspondence which warranted the postponement of the hearing and that it would be held on the day fixed. They accordingly proceeded in the absence of the defendants and found that in the circumstances of the case the plaintiffs were protected by Clause 5 of the contract from responsibility for the late shipment.

3. The parties to a contract are at liberty to make any agreement they like as to the appointment of arbitrators and as to what is to be done if one of the parties omits to appoint an arbitrator as provided in the contract. Because, however, contracts may fail to provide what is to be done in such an event, Section 9 of the Indian Arbitration Act, which substantially reproduces a section of the Common Law Procedure Act, 1854 and of the English Arbitration Act, enacts that ' where a submission provides that the reference shall be to two arbitrators, one to be appointed by each party, unless a different intention is expressed therein' then Clause (b), ' if one party fails to appoint an arbitrator within 7 days after the other party having appointed his arbitrator, has served the other party with a written notice to make the appointment, the party who has appointed an arbitrator may appoint that arbitrator to act as sole arbitrator in the reference. ' This section in my opinion has no application where, as in the present case, the parties by their contract have provided that a different course should be adopted in the event of one of the parties failing to nominate because the section is not to apply where a different intention is expressed in the contract. In the present case the contract provides : ' Should either party omit to nominate an arbitrator within 7 days of the receipt of a notice calling on him to do so the other party shall be at liberty to nominate both arbitrators', in other words, in the event of a dispute arising, either party to the contract is to be at liberty in the first instance to call upon the other to nominate an arbitrator within 7 days of the receipt of the notice calling upon him to do so, and if the other party fails to do so then to nominate both arbitrators himself. Not only is he to appoint both arbitrators but the nomination of both is to be after the failure of the other party to appoint. There is therefore no room for the application of the section which provides that ' unless a different intention is expressed, ' a party desiring arbitration is first to appoint his own arbitrator then to give notice to the other party to appoint an arbitrator and on his failing to do so, appoint the arbitrator he had himself appointed to be the sole arbitrator. That is an entirely different procedure which is excluded by the terms of thecontract with the result that Section 9 which was intended to supplement and not to override the contract of the parties has no application to the present case. Where the contract provides otherwise an appointment cannot be made under Section 9 Clause (b) and it, also, follows that the proviso enabling the court 'to set aside any appointment made in pursuance of Clause (b)' has no application. Similarly in Gumm v. Hallet (1872) L.R. 14 Eq. 555 it was held, with reference to the corresponding Section 13 of the Common Law Procedure Act, 1854, that it had no application to a contract which provided that either party should appoint one arbitrator and a third be chosen by the two so appointed. The learned Judge appears to have been influenced by the proviso in Clause 12 of the contract that the arbitration is to be conducted in accordance with the provisions of the Indian Arbitration Act, but this is not to be read as varying the express provision of the contract as to the appointment of arbitrators especially, as under the Act itself the provisions of Clause (b) of Section 9 do not apply where a different intention is expressed in the contract.

4. As regards the second ground, in holding that the refusal of the arbitrators to grant an adjournment to allow of the High Court being moved to set aside the appointment under the proviso to Section 9 which as we have seen has no application to the case, the learned Judge has relied upon the decision of the Court of Appeal in In re Palmer and Co. and Hosken and Co. (1898) 1 Q.B. 131 In that case the arbitrators had refused an adjournment to enable one of the parties to apply to the court to direct the arbitrators to state a special case for the opinion of the Court on an important point of law which had arisen in the course of the arbitration. Under Section 19 of the English Arbitration Act, which is not reproduced in our Act, the Court has power at any stage of the proceedings to direct such a case to be stated, and the Court of Appeal were of opinion that this section impliedly conferred upon the parties a right to apply to the court to direct a case to be stated which the arbitrators were bound to respect. They accordingly held that it was prima facie misconduct on the part of the arbitrators to refuse to state a case themselves or grant an adjournment for the purpose of enabling the parties to apply to the Court, but Lindley M.R. added, that, even in such a case, if the application for a special case or an adjournment were frivolous and made merely for the purposes of delay, an arbitrator would be perfectly right to refuse it and would be upheld by the court in so doing. That case relates to misconduct in the course of the arbitration itself, and is no authority for the proposition that arbitrators are bound to postpone the hearing whenever one of the parties announces his intention of questioning their appointment in spite of the fact that the appointment had been made in strict: accordance with the terms of the contract. Even if we assume that if there had been an appointment under Clause (b) of Section 9, it might have been the duty of the arbitrators when the case came on for hearing to grant an adjournment to allow of an opportunity of moving to set aside the appointment under the proviso to the section, if the parties had not had a reasonable opportunity of so moving before the hearing of the arbitration and unless they were of opinion that the application was merely made for purposes of delay, the duty would only arise when there had been an appointment under Clause (b) which could be set aside, under the proviso, which as I have already held, is not the present case. Further the defendants had been informed on July 1st of the appointment of the arbitrators and on July 5th that the hearing had been fixed for the 9th, and it is not shown that they could not have moved the vacation court before the hearing if so minded.

5. In the circumstances I do not think there was any misconduct on the part of the arbitrators in refusing the adjournment. I think they were fully justified in holding no sufficient cause had been shown for granting it. In this view it is unnecessary to consider whether an objection of this kind would be a sufficient answer to a suit on the award when the award had not been set aside. The appeal must be allowed, the decree reversed and the suit decreed with costs throughout.

Ramesam, J.

6. This appeal arises out of an application filed by the appellants seeking to execute an award, under Section 15 of the Indian Arbitration Act, 1899. The award was passed by two arbitrators, appointed by the appellants. It is contended for the respondents that the appointment was not validly made. The decision of this contention depends on the construction of Clause 12 of the contract between the parties, which runs as follows :--' Should any dispute arise as to the interpretation of this contract or any matter in connection therewith or with the carrying out thereof, the same shall be submitted,...to the arbitrament of two European merchants or their European assistants one to be appointed by each party. Should either party omit to nominate an arbitrator within 7 days of the receipt of a notice calling on him so to do, the other party shall be at liberty to nominate both arbitrators. The arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act of 1899... ' It is conceded for the respondent that, in the absence of the last of the sentences above set forth, the meaning of the clause would be that any party can nominate both the arbitrators after the failure of the other to nominate an arbitrator within 7 days of the receipt of a notice by the former calling on the latter so to do. But it is contended that the last sentence attracts the provisions of the Indian Arbitration Act, Section 9(b) which required that the party serving notice on the other calling upon him to nominate should previously have ' appointed his arbitrator.' The appellant, in reply, relies on the words in Section 9 'unless a different intention is expressed therein.' It is conceded by Mr. V.V. Srinivasa Aiyangar the learned vakil for the respondent that so far as two arbitrators are contemplated by Clause 12 in the place of the sole arbitrator referred to in Section 9(b) a ' different intention ' is expressed but not, in so far as Section 9(b) required the previous 'appointment of his arbitrator ' by the party calling on the other to make his appointment. I am unable to agree with this contention. The words 'shall be at liberty to nominate both the arbitrators' do, in my opinion, express a different intention and are inconsistent with any obligation on the part of the nominating party to appoint an arbitrator before calling on the other party to do so. In this view it is unnecessary to consider the cases of Thomas v. Fredericks and Tew v. Harr(1847) 10 Q.B. 775's (1847) 11 Q.B. 7 relied on by the respondent. I therefore, hold that the arbitrators were validly appointed.

7. It is next contended by the learned vakil for the respondent that the arbitrators were guilty of misconduct in that the refused the respondent's request that the arbitration proceedings may be adjourned to enable him to apply to the court to set aside the appointment of the arbitrators under the proviso to Section 9 of the Act. In support of this position, he relied on the case of Inre, Palmer and Co. and Hosken and Co. (1898) 1 K.B. 131 That case is a decision on Section 19 of the English Act (52 and 53 Vict. C. 49) on which the Indian Act is based. That section provides that arbitrators ' shall if so directed by the Court or a Judge, state in the form of a special case for the opinion of the court, any question of law &c.; ' It imposes a duty on the arbitrators and impliedly confers on the parties to an arbitration the right to apply to the court for an order directing the arbitrators to state in the form of a special case for the opinion of the court any question of law arising in the course of the reference. The learned Judges (Lindley, M. R. and Chitty, L.J.) who decided the case infer from this right a further duty on the art of the arbitrators to delay the award until the party can apply to the court for an order directing a special case and hold that, if the arbitrator refuses to comply with request to delay his award, he is guilty of misconduct. Chitty, L.J. points out that such requests must be made in good faith and on reasonable grounds. In this case the proviso to Section 9 imposes no duty on the arbitrators. Moreover, the appointment of the arbitrators in this case was made not under Section 9(b) but under Clause 12 of the contract between the parties which displaced Section 9(b) and the proviso does not apply. It cannot be said that there is any reasonable ground for moving the court to set aside the appointment of the arbitrators. I therefore hold that the arbitrators are not guilty of misconduct in proceeding with the arbitration, and that the award is valid.

8. In the result, the appeal will be allowed with costs throughout.


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