Skip to content


Hope (India) Limited Vs. Mining and Allied Machinery Corpn. Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberMatter No. 864 of 1977
Judge
Reported inAIR1979Cal39,82CWN1018
ActsArbitration Act, 1940 - Sections 2 and 5; ;Sale of Goods Act, 1930 - Section 64A
AppellantHope (India) Limited
RespondentMining and Allied Machinery Corpn. Ltd.
DispositionApplication dismissed
Cases ReferredJames v. James
Excerpt:
- .....ingots of different varieties and sizes at agreed rate of rupees 1,500/- per metric ton under the terms and conditions set out in the general conditions of contract for purchase, according to the respondent. the said purchase order which is dated 24th june, 1975 reads as follows:--'your offer under reference for supply of the following stores is hereby accepted on the terms and conditions detailed below and overleaf.sl. no.material code no.description of storesquantity unitunit raters. p.total amountrs. p. supply of ingots. 1.size --5' x 4' cl-iii20 mtrs. 1500/-rs. 30,000.002. ' --do-- cl-iiia15 mtrs. 1600/-rs. 22.500.003. ' --do-- cl-iv200 mtrs. 1500/-rs. 3,00,000.004. ' 5' x 4 1/2' cl-iv765 mtrs. 1500/-rs. 11,47,500.00 total1000 mt note :(1) rates are inclusive of excise duty (2).....
Judgment:
ORDER

Sabyasachi Mukharji, J.

1. In this application under Section 33 of the Arbitration Act two questions fall for consideration. The first question, is, what is the clause of the arbitration agreement between the parties and the second question is, whether the authority of the arbitrator named in the clause submitted on behalf of the respondent should be revoked. It is not necessary to set out in very much detail the facts of the case. But it appears that the respondent is a Government of India undertaking and the petitioner is a private limited company. Previously it was Pench Steels Limited and subsequently it was amalgamated with the petitioner company. By and under the purchase order dated the 24th June, 1975 executed by and on behalf of the respondent and accepted on behalf of the said company by the petitioner the respondent had agreed to purchase and the petitioner had agreed to sell 1000 metric tons of ingots of different varieties and sizes at agreed rate of Rupees 1,500/- per metric ton under the terms and conditions set out in the general conditions of contract for purchase, according to the respondent. The said purchase order which is dated 24th June, 1975 reads as follows:--

'Your offer under reference for supply of the following stores is hereby accepted on the terms and conditions detailed below and overleaf.

Sl. No.Material Code No.Description of storesQuantity UnitUnit Rate

Rs. p.Total Amount

Rs. p.

Supply of ingots.

1.Size --5' x 4' CL-III20 MTRs. 1500/-Rs. 30,000.002. ' --do-- CL-IIIA15 MTRs. 1600/-Rs. 22.500.003. ' --do-- CL-IV200 MTRs. 1500/-Rs. 3,00,000.004. ' 5' x 4 1/2' CL-IV765 MTRs. 1500/-Rs. 11,47,500.00 Total1000 MT Note :(1) Rates are inclusive of Excise duty (2) Chemical Composition as per Schedule enclosed.

TotalRs. 15,00,000.00(Total Rupees Fifteen Lakhs only).

Single TenderSale Order No. Imported/Indigenous (SSI/Others)Particulars of machine : Indent No. Nil dated 21-6 1975.

1. Price: F. O. R. (Final destination).

2. Sales Tax and Surcharge: Extra, where applicable. STD Form will be issued to you after payment. Suppliers Sales Tax No. WB/ CENTRAL:

3. Delivery @ 200 MT each month commencing from July, '75.

4. Mode of despatch: By Road freight paid at your risk.

5. Consignee: M/s. Netaji Industrial Works (On behalf of MAMC Ltd.) P. O. Baliatore, Dist. Bankura.

6. Inspection: place: At your premises prior to despatch of each Lots by D. I. (Met)

7. Payment: 100% Payment against CR V (For details, Please see SI. No. 5 overleaf)

8. Special Payment Clause: Through Bank (For Details, kindly see Clause No. 6 overleaf) 100% payment will be made by our Sr. A/O (Mat) within 90 days of the submission of your bill to him for each lot duly supported with (1) A receipted challan duly signed by M/s. Netaji Industrial Works.

(2) Certificate form D. I. (Met) for each lot. 9. Special Conditions: (Advance Sample/ Price Preference /Packing etc.)'

The said purchase order was preceded by an offer dated 20th June, 1975 from the petitioner. According to the purchase order the price was inclusive of excise duty, but sales tax extra where applicable. The said purchase order attracted the general conditions of contract for purchase which provided for the arbitration of any question, dispute or difference arising in connection with the contract by the Managing Director of the respondent or such other person as might be appointed by him, it being no objection that the Arbitrator was an employee of the respondent or that in course of such employment he had to deal with matters relating to the said contract or had occasion to express his views on all or any of the matters in dispute or difference. The case of the petitioner was that thereafter on the 4th July, 1975 the petitioner wrote a letter in reply to the letter dated the 25th June, 1975 stating that the purchase order had not been received and on receipt the petitioner would send their order of acknowledgement subject to the usual terms and conditions. This letter however, is disputed by the respondent. On 12th July, 1975 the petitioner acknowledged the receipt of the purchase order. This is material and the said letter reads as follows:--

'This is to acknowledge your order No. P/62099082/VPC dated 24-6-75 and thank you for the same. We want to draw your attention to the following points:

(1) There is a difference in the Order No. as quoted in the Purchase Order (i. e.) P/62099082/VPC and in the Order No. referred in the amendment letter of Ref. No. P/62099/VPC/2161 (i. e. P/62099083/VPC).

(2) The length of the Ingot is not mentioned in the purchase Order.

(3) The Max. Sulphur and Phosphorus content of the steels as required by you is .040. But as per IS 1875-1971 the Sulphur and Phosphorus content should be .050 Max.

Please note that we have already discussed these points with your Mr. Sur of Calcutta Office and we like to request you to kindly look into this and make the necessary amendment as early as possible to offer you our best service.

Thanking you once more' According to the petitioner, on the 21st July, 1975 there was certain discussion for further amendment of the purchase order and the respondent issued on the 19th/24th July, 1975 formal further amendment to the purchase order. The petitioner states that the petitioner had issued on the 14th July an acknowledgement of the purchase order which contained an arbitration clause which is different. The said arbitration clause is to the following effect :-- 'If any dispute or disputes arise between the seller and the buyer concerning this order it should be referred to Arbitration in Calcutta under the reference of Tribunal of Arbitration of Indian Chamber of Commerce in Calcutta and any award or awards made shall be final and binding on both parties.' The case of the petitioner is that this condition was contained in the formal acknowledgement of the purchase order and it was sent to the respondent.

2. Disputes and differences have arisen between the parties. The respondent has claimed that the respondent was entitled to return of Rs. 1,56,000/- from the petitioner on the ground that the Excise Duty had been reduced from Rs. 200/- to Rs. 50/- and, therefore, the benefit of the reduction should accrue to the respondent and on that account the respondent was claiming Rs. 1,22,250/-because of reduction of Excise Duty from Rs. 200/- per metric ton to Rs. 50/- per metric ton. The respondent was further claiming that on account of Sales Tax a sum of Rs. 33665,34 had been charged from the respondent which was the liability , under the terms and conditions of the contract between the parties, of the petitioner. As there have been disputes on these points, a cheque for Rs. 1,56,000/- was given by the petitioner in favour of the respondent and it was agreed that the said cheque would be kept in abeyance for about 5 months and in the meantime these disputes would be settled or adjusted. As these disputes have not been settled within the time mentioned above, the respondent referred the disputes to the arbitration according to their term of arbitration and appointed one Shri S. L. Ganguli as the arbitrator. The first question, therefore, is whether there was an order or letter of acknowledgment containing the arbitration clause as contended by the petitioner.

3. I have noticed before that the petitioner is contending that there was an acceptance of the order of acknowledgement dated 8th July, 1975. The said order of acknowledgement is in the brief of documents (P. D. 5) appearing at page 41, which is marked as Ext. A. The said order of acknowledgement contains the arbitration clause which contemplated arbitration according to the rules of the Tribunal of Arbitration of the Indian Chamber of Commerce in Calcutta. The main factual dispute in this application, is whether such an order of acknowledgement was made by the petitioner or was communicated to the respondent. This point was set down to be tried on evidence and the parties have tendered both documentary and oral evidence on this point. On behalf of the petitioner two persons have given evidence, namely, one Shri G. Sridharan who stated that he was the Executive Director of the petitioner company. He tried to prove that the document in question was sent by the petitioner. He further stated that the petitioner company was not aware of the terms and conditions mentioned in the general conditions of contract as contended by the respondent. In answer to Q. 15 in examination-in-chief he stated that the document of 8th July 1975 was the order of acknowledgement sent by them to the respondent and the original was sent under certificate of posting. (See in this connection his answer to Qq. 15 to 39. Qq. 55 to 103 and Qq. 137 to 140). The certificate of posting, which, is included in Ext. B, has not been satisfactorily proved to establish that the certificate of posting was in respect of the alleged order of acknowledgement. Indeed learned Counsel for the petitioner at the time of argument did not place any reliance on this Ext. B which indicated that there was a certificate of posting on 12th July, 1975 in respect of the alleged order of acknowledgement. On this point Shri Sridharan's testimony is contradicted by the testimony of Vidyaprakash Chadha and he on the other hand, has stated in his evidence (see Qq. 3 to 17) that no order of acknowledgement was received as such but the contract was concluded by the supply order dated 24th June, 1975. In answer to Q. 18 Shri Chadda has stated that the general conditions of contract were in the knowledge of the petitioner. According to him the offer was based on the discussion that the respondent had with two of the officers of the petitioner where Shri Chadda says, he was present. One of the representatives was Sri Sridharan and he had seen the terms and conditions and then only he agreed, according to Shri Chadda, to submit the offer in their office. There was no cross-examination on this point nor was any suggestion made that Shri Sridharan was not present at the time when the conditions were shown. Further, in view of the answers given by Shri Sridharan in respect of the letter dated 19th July, 1975 in answers to Qq. 63 to 75 and Qq. 86 to 89 and Qq. 96 and 97 it is not possible to accept the version of the petitioner that the order of acknowledgement was sent containing the terms of the arbitration. Quite apart from this, if the contract was concluded by the purchase order dated 24th June, 1975, then there was no occasion to send an order of acknowledgement containing terms different from those contained in the purchase order. There is no evidence apart from that that these alleged different terms were agreed to by the respondent Or even were brought to the notice of the respondent. The alleged terms of the order of acknowledgement in this background of the transaction between the parties seem to be contrary to the probability of the situation. For these reasons and in the background of the fact that there is no positive evidence to establish that the order of acknowledgement was sent to the respondent or the respondent had received the same or that the alleged terms contained in the said order of acknowledgement were brought to the notice of the respondent, I am unable to accept the position that the terms of the bargain between the parties were such which contained the arbitration clause as contended by the petitioner. The fact that counsel for the petitioner could not press for the acceptance of the evidence of the certificate of posting corroborates this position. Counsel for the petitioner, however, urged that the non-production of the register containing the receipt of the letters by the respondent should lead to an adverse presumption against the respondent and it should be held that the respondent had not produced the same because the same would not have corroborated the version of the respondent of non-receipt of the order of acknowledgment. The register at the highest would have given negative piece of evidence. There was no evidence as such that the said register had included such an entry of other receipts. In my opinion, this factor by itself in the background of the other factors which I have mentioned before, would not be of much relevance. Then reliance was placed on the fact that certain bills had been paid without raising any objection and the bills had referred to the acceptance of the order of acknowledgement by a particular number. This also in my opinion, in view of the evidence of Jagdish. Prasad Sharma, who has explained how bills were passed in the office of the respondent, cannot be of much significance. In the aforesaid view of the matter I am, therefore, unable to accept the submissions made on behalf of the petitioner that the arbitration clause was the one as contended by the petitioner. I hold therefore, that the arbitration clause was to the following effect:--

'In the event of any question, dispute or difference arising under these conditions or any special conditions of contract or in connection with this contract (except as to matters the decision of which is specially provided for by these or the special conditions) the same shall be referred to the sole arbitrator of a person appointed to the arbitrator, (sic) by the Managing Director of the Corporation. It will be no objection if the arbitrator is an 'Employee of the Corporation that he had to deal with matters to which the contract relates or that in the course of his duties as a corporation employee, he has expressed views on all or any of the matters in dispute or difference. The award of the arbitrator shall be final and binding on the parties to the contract'

4. It was, then, contended on behalf of the petitioner that the authority of the arbitrator should be revoked. It was urged that the points involved in the present disputes are whether the respondent was entitled to a rebate of Excise Duty on account of reduction of Excise Duty from Rs. 200/- per metric ton to Rs. 50/- per metric ton and secondly whether the petitioner was liable to charge from the respondent the Sales Tax that were payable in respect of the same. Counsel for the petitioner urged that the right of the parties in respect of the reduction of Excise Duty would be governed by proper interpretation of Section 64-A of the Sale of Goods Act, 1930 which reads as follows:--

'64-A. (1) Unless a different intention appears from the terms of the contract, in the event of any tax of the nature described in Sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after making of any contract for the sale or purchase of such goods without stipulations to the payment of tax where tax was not chargeable at the time of the making of the contract or for the sale or purchase of such goods tax-paid where tax was chargeable at that time,--

(a) if such imposition or increase so takes effect that the tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition; and

(b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction.

(2) The provisions of Sub-section (1) apply to the following namely :

(a) any duty of customs or excise on goods,

(b) any tax on the sale or purchase of goods.'

It was, further, submitted that the rights of the parties in respect of the sales tax was also dependent upon the construction of the contract and in that view of the matter it was urged that such questions of law would be better decided in a Court of law and should not be left for the decision by the private arbitrator, as in this case. On behalf of the respondent it was submitted that the arbitrator chosen by the respondent was a law graduate. He was a Chartered Secretary and he was the Secretary of the respondent company. Learned counsel drew my attention to the observations in the case of Bonnin v. Neame (1910) 1 Ch 732 at p. 739 of report where learned Judge observed in connection with an application for stay of the suit that the principal points in dispute in that case appeared to be matters of law arising on the construction of partnership articles and this factor was considered to be an additional reason why discretion should be used against granting stay of the suit because of the arbitration clause. Reliance was placed on certain observations of mine in the case of Cekop v. Asian Refractories Limited, (1969) 73 Cal WN 192 where I had observed, relying on the aforesaid observations in the case of Bonnin v. Neame (supra) that if matters on construction of clauses of certain contract were involved that was a factor which should be taken into consideration in exercising discretion of the Court against grant of stay of the suit in an application under Section 34 of the Arbitration Act, 1940. In the case of Union of India v. Hind G and E Co., : AIR1973Cal215 the Division Bench of this Court had also occasion to consider the question and it held that where complex questions of law arose it was a proper exercise of discretion of court to refuse to grant stay of the suit in an application under Section 34 of the the Arbitration Act, 1940. It was, then, submitted that having regard to the facts and circumstances of the case and the nature of the disputes that have arisen, the authority of the arbitrator should be revoked because it would not be just in the facts and circumstances of this case to go to arbitration. Reliance was placed on certain observations of the Supreme Court in the case of U.P. Cooperative Federation v. Sunder Brothers, Delhi, : AIR1967SC249 . It has to be borne in mind that the procedure of revocation of the authority of an arbitrator is normally considered to be so awkward in form, so injurious if regarded as one to be generally adopted, and introduces so great a change into a highly useful and important branch of the law, that there is the strongest possible objection to it in any case which does not imperatively call for it. (See in this connection the observations in the case of James v. James (1889) 22 QBD 669 at p. 674 as quoted in Russell on Arbitration, 18th Edition. page 126). The principle seems to be that there can be a contract to submit both questions of law as well as questions of tact. Indeed in most of the contracts for arbitration some questions of law are embedded. If, however, the questions of law are of such complex nature that an adjudication by a private forum, where there is justified apprehension that the adjudication involves decision on such complex questions of law would not lead to proper justice between the parties, the Courts lean to exercise the discretion in favour of the revocation of the authority of the arbitrator and in such cases the question whether the arbitrator is legally literate or not is not a relevant factor. But simply because certain questions of law have arisen, that by itself, in my opinion is not sufficient ground to revoke the authority of the arbitrator as such. Now, in this case, as I have mentioned before, two main disputes have arisen. One was about the liability for payment of sales tax and the other about the rights of the parties to share in the reduction of the excise duty. Now, so far as the rights of the parties in respect of the sales tax is concerned, the principles of law are well settled. The seller is liable to pay the sales tax subject to the contract between the parties. The intention of the parties, in the circumstances of each particular case will be found out from the contract between the parties. In this case, in my opinion, this question of finding out the intention of the parties, so far as the payment of sales tax is concerned, in the light of the written contract between the parties, does not involve such a complex question of construction as to compel the Court to revoke the authority of the chosen arbitrator. In my opinion, the interpretation of Section 64-A of the Sale of Goods Act, 1930 in the background of the terms of the contract between the parties also does not raise such a complexity as to come to the conclusion that the authority of the chosen arbitrator, who is competent, in the background of the facts and circumstances of the case, to decide both as to the law and facts, should be revoked. Apart from the fact that the chosen arbitrator is one of the employees of the respondent, a fact which was known to the petitioner at the time of the contract between the parties, in my opinion, there is nothing which can be said to be a significant factor in considering the question of revocation of the authority of the arbitrator. But that by itself is not decisive of the question. Therefore, the circumstances in which the legitimate apprehensions may arise, as indicated in the last mentioned decision of the Supreme Court, in my opinion, are not present in this case. If that is the position, then there is no ground for revoking the authority of the arbitrator.

5. In that view of the matter, this application fails and is, accordingly, dismissed. Costs of this application will be cost in the arbitration.

6. There will, however, be a stay of the operation of this order for a fortnight as asked for.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //