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Juggilal Kamlapat Vs. N.V. Internationale Crediet-En-Handels Vereeninging 'Rotterdam' (08.08.1952 - CALHC) - Court Judgment

LegalCrystal Citation
SubjectArbitration;Contract
CourtKolkata High Court
Decided On
Case NumberAward No. 14 of 1952
Judge
Reported inAIR1955Cal65,58CWN731
ActsContract Act, 1872 - Section 62; ;Arbitration Act, 1940 - Sections 2, 13, 28 and 30; ;(Bengal) Rules of Arbitration of Bengal Chamber of Commerce - Rule 7; ;Code of Civil Procedure (CPC) - Order 7, Rule 7
AppellantJuggilal Kamlapat
RespondentN.V. Internationale Crediet-En-Handels Vereeninging 'Rotterdam'
Appellant AdvocateAmiya Kumar Basu and ;Banamali Das, Advs.
Respondent AdvocateAnil Chandra Mitra and ;P.R. Das, Advs.
Cases ReferredSpeak v. Taylor
Excerpt:
- .....await your decision whether we are entitledto claim from the sellers the difference betweenthe contract price and the price at which wehave been obliged to cover, and also costs andinterest for having had to keep letters of creditavailable.'6. after this reference to arbitration the respondent wrote to the petitioner a letter dated 16-5-1951 stating that the respondent had bought against the petitioner on the 9th of may at the rate of rs. 370-12-0 per 100 pieces c & p java main ports from messrs. blackwoods (india) limited. the petitioner replied on 17-5-1951 stating that any action taken by the respondent after the reference to arbitration was irregular. 7. the petitioners filed their counter statement on the 8th june setting out their contentions and stating that the arbitrator.....
Judgment:
ORDER

Bachawat, J.

1. This is an application to set aside an award made by the Bengal Chamber of Commerce.

2. By a contract dated 10-8-1950 the petitioner . Juggilal Kamlapat agreed to sell and the respondent a Dutch Company agreed to buy 500 bales of certain jute goods at Rs. 209/- per 100 bags C. & F. Jawa Main Ports, draft drawn at sight under an irrevocable letter of credit, shipment November/December 1950 equally, subject to export licence and subject to the terms and conditions of the Calcutta Jute Fabrics Shippers Association contract form in use for the time being. That contract form amongst other clauses contains an arbitration clause, a clause providing that theLetter of Credit must be despatched to the sellers within 7 days of the contract and a clause providing that each monthly shipment would be deemed to be a separate contract. Under the contract all increases in freight and duty were on the buyer's account.

3. The letter of credit was despatched to the sellers after great delay in the first week of December 1950, but nevertheless the buyers accepted and acted upon it. Meanwhile the export duty was enhanced. On 20-11-1950 the parties agreed that the buyer would accept a Bank guarantee for payment of the increased duty pending amendment of the Letter of Credit and letters dated the 14th, 18th and 19th December 1950 were passed in this connection. The amendment was received soon thereafter on or about 29-12-1950. The petitioner shipped 200 bales under the contract in the 3rd week of January 1951 and by letter dated 20-1-1951 informed the respondent that they were then unable to ship the balance goods on account of the default of their sellers and would arrange for their shipment as soon as they were ready. The price control legislation then in force was repealed in March 1951 and soon thereafter on 3-4-1951 the respondent's agents pressed the petitoner for delivery of the goods.

On the same day the petitioner requested the respondent's agents to extend the time of shipment until July 1951. The respondent's agents by their letter dated 13-4-1951 refused to extend the time and pressed for immediate shipment of the balance goods by S. S. Hoegh Silver Spray expected to sale from Calcutta on 24-4-1951. The petitioner by their letter dated 13-4-1951 stated that as desired by the respondent they were ready to ship the goods per S. S. Hoegh Silver Spray and were arranging accordingly. Shipping instructions were given by the respondent on 16-4-1951. In the meantime the freight had been increased and by their letter dated 24-4-1951 the respondent's agents requested the petitioner to send a separate debit note for the amount of the increase in freight and not to include it in the draft.

4. The petitioners did not ship the goods and by their letter dated 1-5-1951 wrote to the respondent's agents stating that the goods could not be loaded alongside the steamer as their May/December 1950 quota had expired and that under the circumstances the goods should be treated as lapsed. The respondent's agents by their letter of the same date asserted that the fact that the quota had expired could not be a reason for annulment of the contract because the petitioners had ample opportunity to ship before the end of March 1951 and also because they should have received a new quota for January/June shipment. The respondent's agents requested the petitioner to hand over delivery orders in respect of the balance goods in case they could not obtain a new quota.

The petitioners by their letter dated 4-5-1951 informed the respondent's agents that they had not been allotted any new quota for January/June 1951 and that they could not keep the contract pending and the same should be treated as cancelled. They further stated that they were unable to agree to hand over delivery orders as the contract was on the basis of C & F Indonesian Ports The respondent agents by their letter dated 7-5 1951 informed the petitioner that they could not under any circumstances agree to the cancellation of the contract and that they would start buying against the petitioner as from the next day and would bill the petitioner for the difference in price and at the same time would submit the matter to the Bengal Chamber of Commerce for arbitration.

5. On 9-5-1951 the respondents referred thedispute to the arbitration of the Bengal Chamberof Commerce. The respondents enclosed copies ofentire correspondence with their statement. Thelast paragraph of their statement is as follows:

'We await your decision whether we are entitledto claim from the sellers the difference betweenthe contract price and the price at which wehave been obliged to cover, and also costs andinterest for having had to keep letters of creditavailable.'

6. After this reference to arbitration the respondent wrote to the petitioner a letter dated 16-5-1951 stating that the respondent had bought against the petitioner on the 9th of May at the rate of Rs. 370-12-0 per 100 pieces C & P Java Main Ports from Messrs. Blackwoods (India) Limited. The petitioner replied on 17-5-1951 stating that any action taken by the respondent after the reference to arbitration was irregular.

7. The petitioners filed their counter statement on the 8th June setting out their contentions and stating that the arbitrator could not assess any particular claim as the respondent had not disclosed the price at which they had been obliged to cover and that the reference was merely to elicit opinion and was not maintainable. The respondent filed their second statement on 18-6-1951. In that statement they referred to their letters of 16-5-1951 and their purchase against the petitioner on 9-5-1951. The petitioner filed their second counter statement on 9-7-1951. In that statement they stated that they could not recognise the letter of 16-5-1951 inasmuch as that letter was written when that matter had already been referred to arbitration. They also contended that in any event the amount claimed was inflated and that Rs. 38/- per 100 bags should be deducted from the purchase price.

8. On 16-5-1951 the Registrar of the Bengal Chamber of Commerce constituted a Tribunal of Arbitration for adjudicating upon the dispute. The papers were passed to that Tribunal on 12-7-1951. On the 3rd September the parties were given notice of arbitration on 6-9-1951 and were asked to bring their witnesses. The arbitration was held on 6-9-1951 and the parties attended with their witnesses. Under the Rules of Arbitration of the Bengal Chamber of Commerce the Tribunal had four months time for making their award as from the date of entering on the reference. That time having expired the Registrar of the Bengal Chamber constituted a second Tribunal on 29-9-1951 in accordance with Rule 7 of the Rules of Arbitration of the Bengal Chamber of Commerce. On13-10-1951 the Tribunal gave fresh notice of arbitration and on 17-10-1951 made an award adjudging that the respondents were entitled to their claim and directing the petitioner to pay to the respondent Rs. 148725/- in full settlement of the claim as also interest and costs.

9. The award is impeached on several grounds which are all set out in paragraph 26 of the petition.

10. The first ground taken is that the arbitration agreement was given a go-by to and/or superseded and is not subsisting by reason of the subsequent variations in the terms of the original contract and/or by reason of the fresh agreements subsequently made. Strictly this plea should be raised by an application under Section 30, Arbitration Act. I would have however given to the petitioner an opportunity to make such application if I found that there was any substance in this contention.

11. It is clear that there were extensions of the time of shipment fixed by the original contract. The petitioner undertook to ship the balance 300 bales within the extended time and strictly there were no longer separate contracts for each monthly instalment. There was an undertaking to ship by a named steamer although there was no such undertaking in the original contract. The original time for the opening of the Letter of Credit was not adhered to. There was a temporary arrangement for giving a Bank guarantee for the amount of the increased duty varying the contractual term for payment by Letter of Credit. With regard to the amount of the increased freight, the petitioner alleges that there was an agreement for giving a Bank guarantee whereas the respondent alleges that there was an agreement to pay by separate debit note. I am therefore satisfied that the original contract was modified in certain material particulars.

12. In my judgment however it cannot be possibly said that the modifications rescind the original contract dated 10-8-1950 in its entirety or that the arbitration clause' contained therein is no longer subsisting. Mere alteration or modification of the terms of a contract cannot amount to its rescission. Lord Atkinson in -- 'Morris v. Baron & Co.', 1918 AO 1, at page 31 (A), observes thus :

'Moreover, rescission of a contract, whether written or parol, need not be express. It may be implied, and it will be implied legitimately, where the parties have entered into a new contract entirely or to an extent going to the very root of the first inconsistent with it.'

In the same case at page 38 Lord Parmoor observes thus:

'It is clear that these terms are an alteration ofthe September contract, but this in itself wouldnot be sufficient to support the plea of rescission. It is necessary further to enquire whetherthe conditions have been so changed in theiressential character that there is a substantialinconsistency such as to lead to the inference thatthe parties did intend to rescind the earliercontract of September. It is not possible to laydown any general principle, but where thealteration is such that the conditions of the earlier contract cannot be restored without placing one of the parties under a permanent and substantial disability there is a strong prima facie probability of an intention to rescind.'

13. Lord Dunedin expressed the view that there might be rescission of the original contract by a subsequent arrangement dealing with the same subject matter and containing executory clauses enabling the parties to sue upon the second arrangement alone even if the original contract did not exist. The test laid down in this case and specially the observations of Lord Atkinson was followed in -- 'British and Benningtons Ltd. v. N. W. Cachar Tea Co. Ltd.', 1923 AC 48 (B). In the latter case the original contract provided that delivery was to be made in Bonded Warehouse in London and there was a subsequent arrangement whereby the buyer agreed to accept delivery of the goods at another place with an allowance. It was held that this variation could not possibly be held to have rescinded the earlier contract.

14. In the present case the modifications do not go to the very root of the first contract and do not change its essential character. The facts do not warrant the inference that the parties intended to rescind the contract, dated 10-8-1950. The April arrangement was entered into in response to pressing demands for delivery under that contract and with a view to implement it. The arrangement has no independent contractual force, no meaning and content separately from and independently of the original contract.

15. The effect of the alterations or modifications is that there is a new arrangement; in the language of Viscount Haldane in 1918 A. C. 1 at p. 17 (A),

'a new contract containing as an entirety the old terms together with and as modified by the new terms incorporated.'

The modifications are read into and become part and parcel of the original contract. The original terms also continue to be part of the contract and are not rescinded and/or superseded except in so far as they are inconsistent with the modifications. Those of the original terms which cannot make sense when read with the alterations must be rejected. In my view the arbitration clause in this case is in no way inconsistent with the subsequent modifications and continues to subsist.

16. The petitioner strongly relies upon the case of -- 'Luchmi Narain v. Hoare Miller and Co.', AIR 1914 Cal 294 (C). That was a suit for price of 300 bales of jute sold and delivered. There was a contract for sale of 500 bales of jute and this contract contained an arbitration clause. Subsequently there was an extension of the time of delivery up to 25-12-1912 subject to inspection at the press house before delivery. There was a subsequent letter from the buyer dated 13-1-1913 giving 3 more days for delivery. 300 bales were delivered after 21-1-1913 and a suit was instituted for the recovery of the price of these goods : Chaudhuri J. declined to stay the suit. He held that there was a new arrangement as a result ofthe introduction of the new term but he does not rest his decision upon that fact alone. He points out that the goods were delivered after the extended time and on the record there was nothing to show under what arrangement that delivery was effected. It was possible that the arrangement under which the delivery was made was wholly outside the correspondence and consequently Chaudhuri, J. held that the claim was not covered by the arbitration clause. That decision is therefore merely an instance of exercise of discretion under Section 34, Arbitration Act.

17. The petitioner also relies upon the cases of -- 'Turnock v. Sartoris', (1889) 43 Ch. D. 150 (D), and on -- 'Ramdas Dwarkadas v. Orient Pictures', AIR 1942 Bom 332 (E). In those cases subsequent to the contract containing the arbitration clause the parties entered into an arrangement giving rise to new rights and obligations independently of the old contract. It was held that the disputes under the subsequent arrangement could not be referred under the arbitration clause contained in the first contract. There was no arbitration clause in the subsequent arrangement and the arbitration clause in the first contract was not broad enough to cover the disputes arising under the subsequent arrangement. On the facts in those cases it could not be held that the subsequent arrangement was merely a modification of and part and parcel of the original contract. Those decisions are clearly distinguishable.

In this case the subsequent arrangements are merely modifications of the original contract. The correspondence expressly refers to the Sale Note. The modifications are incorporated into and become part of the original contract. The original terms continue to exist except in so far as they are inconsistent with the modifications. The arbitration clause contained in the original contract is in no way inconsistent with the modifications and continues to subsist.

18. In my view therefore the charge made in paragraph 26(a) fails.

19. In paragraphs 26(b) and 26(c) a charge is made that Rule 7 of the rules of arbitration of the Bengal Chamber of Commerce is illegal and opposed to Section 28, Arbitration Act and therefore the constitution of a second Tribunal under that Rule is ultra vires and the second Tribunal had no legal authority to arbitrate upon the disputes between the parties. I have dealt with this contention in my judgment in -- 'In re Arbn., Laduram 'Kedia v. Dhunichand Sanehi,' Arbitration Case No. 45 of 1952 (Cal) (F). For the reasons given in that judgment I am of the opinion that there is no substance in this contention. The charge made in these sub-paragraphs therefore fails.

20. In sub-paragraphs (d), (e) and (f) of paragraph 26 a charge is made that the arbitrators did not properly apply their mind and failed to appreciate the real point in dispute and therefore bad misconducted themselves. There is no material whatsoever to support this allegation. Indeed if I recollect rightly counsel for the petitioners did not address any argument on these several charges.

21. In paragraph 24 (g) a charge is made that the arbitrators made a gross mistake in awarding damages to the respondent although the respondent made no claim for damage in the original letter of reference dated 9-5-1951. This charge is foundedupon the peculiar language of the prayer of the respondent in their statement before the BengalChamber of Commerce which was as follows:

'We await your decision whether we are entitled to claim from sellers the difference between contract price and price at which we have been obliged to cover and also costs, and interest for having had to keep Letters of Credit available.'

22. It is contended that the respondent asked for a mere declaration of their rights and that no award for payment of the difference in price could be given as this was not asked for. The wording of the prayer is no doubt unhappy but the arbitrators were entitled to look at the substance of the matter and to find out the real relief asked for. Even a court of law is entitled to find out what relief is really prayed for and to grant it although the language used by the claimant is imperfect and even to grant a relief not specifically asked for where the justice of the case so requires. By way of illustration reference may be made to the decisions in 'Dinanath Kar v. Jitendra Nandan : AIR1935Cal744 ; 'Abdul Vakil v. Secy. of State,' AIR 1943 Oudh 368 (H). In my view the arbitrators had jurisdiction to award payment of the difference in price.

23. It is next contended that the arbitrator could not award a specific sum of money as no specific sum was mentioned or claimed in their statement. It is true that Rule 7 of Order 7 of our Civil P. C. enjoins that where the plaintiff seeks recovery of money the plaint must state the precise amount claimed. The arbitrators however, are not bound by this technical rule of pleadnig. Where no specific sum is claimed and the particulars of the claim are not given in the statement the arbitrators may be guilty of misconduct if they make an award for a definite sum of money without calling for particulars of the claim and without giving opportunity to the other party to meet the specific case. In this case, however, no such charge is or can be made. In the second statement the respondent gave full particulars of their claim and the petitioners had full opportunity to meet the specific case.

24. In the affidavit in reply it is alleged that there was no pre-existing dispute with regard to the quantum of damage prior to the date of the reference before the Bengal Chamber and it is contended that the arbitrators had no jurisdiction to decide the quantum of damage.

25. In support of this contention strong reliance is placed by the petitioner's counsel upon the case of -- 'Mathuradas Govardhandas v. Khusiram Benarshilal', 53 Cal W.N. 873 (I). In that case the buyers claimed a small sum by way of difference on 7-10-1946. Before the arbitrators they however claimed a much larger sum on the basis that the time to deliver the goods had been extended until 31-10-1946. The latter claim was never asserted before the reference. In that con-text Mr. Justice Chatterjee made the followingobservation:

'In order to make out the jurisdiction of the Tribunal of Arbitration the appellants must show that the subject-matter of the reference was some dispute between the parties and that the particular dispute had arisen actually before the matter went before the Arbitrators. We hold that the appellants have failed to satisfy this condition precedent. At no stage was any demand made for Rs. 14,000/-. It is not a question of quantum of damages merely with regard to the breach of the contract, as Mr. Choudhury on behalf of the appellants wanted to put it. It is a different cause of action altogether. The claim that was referred in the two bills was the only claim which was before the parties. The claim that was made in the letter of reference was never communicated to the respondents.

A dispute implies an assertion of right by one party and repudiated thereafter by another. There was no such assertion of right and therefore there could be no repudiation with regard to the matter which was actually referred to arbitration. The jurisdiction of an Arbitrator depends not upon the existence of a claim or the accrual of a cause of action but upon the existence of a dispute.'

26. In my opinion the contention that there was no dispute with regard to the quantum of damages and that the arbitrator had no jurisdiction to decide the quantum must fail for the following reasons:

(a) The petition does not allege that there wasno dispute with regard to quantum of damage.Non existence of dispute is a question of factand if relied upon must be pleaded in thepetition.

(b) In paragraphs 13 and 15 of the petition the petitioner states that dispute and differences arose and the disputes were referred to arbitration on or about 9-5-1951. The dispute referred was whether the respondent was entitled to claim the difference between the contract price and the price at which they were obliged to cover. There is therefore an admission in the petition that the dispute with regard to the claim for the difference between the contract price and the price at Which the petitioner had been obliged to cover arose before the reference commenced.

(c) The correspondence shows that prior to the reference there was a dispute whether the petitioner wrongfully failed to ship the goods and whether their cancellation of the contract was wrongful and whether the petitioner was entitled to damages. There was therefore a dispute with regard to breach of contract and consequential damages. The jurisdiction of the arbitrator is therefore attracted and the arbitrator is, competent to assess the damages. The decision cited is already distinguishable. The claim before the arbitrator in that case was on the basis of a cause of action which was never assertedbefore the reference started. The present case is not that of assertion of a new cause of action before the arbitrator. The question is that of assessment of damages with regard to breach of contract previously asserted. The claim for a definite sum of money is not a condition precedent to the exercise of jurisdiction by the arbitrator. Indeed on a general submission the arbitrator should determine and assess even prospective damages arising after the date of the submission -- 'Smalley v. Blackburn Rail Co.', (1857) 27 LJEX 65 (J). -- 'Speak v. Taylor', (1894) 10 TLR 224 (K).

There is therefore no substance in the charge made in paragraph 26(g) of the petition.

27. In sub-paragraph (h) of paragraph 26 of the petition it is asserted that there is an error apparent on the face of the award. No argument had been addressed before me on this charge. This charge therefore fails.

28. In sub-paras, (i) and (k) of paragraph 20 there is a charge that the Arbitrators were biased. There is no evidence of any bias before me. This charge also fails.

29. Sub-paras. (J) of paragraph 26 makes a charge that the Arbitrators failed to appreciate that at the time of the breach the West Bengal Jute (Control of Prices) Act 1950 was in force and the respondent was entitled to recover damages on the basis of rates not exceeding the maximum controlled price and that in awarding the damages the Arbitrators had not deducted the duty, Port Commissioners' charges, freight, etc. During argument Mr. Mitra abandoned this point. This charge therefore fails. The petition for setting aside the award is therefore dismissed with costs.

30. There is an application by the Dutch Company for extension of time to make the award until 17-10-1951. It is not necessary to extend the time at all having regard to my judgment In -- 'Re: Arbitration Case No. 45 of 1952 (Cal) (P). Counsel for the petitioner, however, points out that the Court of Appeal might take a different view and I should therefore deal with the application on the merits. On the facts before me I have no doubt that the Bengal Chamber of Commerce was not guilty of any unreasonable delay and that there should be an extention of the time as a matter of course. I therefore make an order in terms of prayer (b) of the petition enlarging the time of award until 17-10-1951. The petitioner Dutch Company must pay to the respondent Messrs Juggilal Kamlapat the costs of this application.

31. With regard to the judgment on award matter counsel for the awardholder submits that I should pass judgment now and stay the execution of the decree for such time as I think fit. He does not insist upon security. I do not see any useful purpose in passing judgment and at the same time staying execution of the decree. I therefore adjourn the matter of judgment upon award-matter until 15-3-1953. Messrs. Juggilal Kamlapat undertake to file the appeal within three weeks from today and to take steps to have theappeal expedited. It is expected that the appeal will be disposed of before 15-3-1953.

32. The order to be drawn up expeditiously.


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