1. This is an appeal from an order of Sinha J. dated 4-5-1949 allowing en application for stay of a suit pending arbitration proceedings.
2. On 9-9-1944 the appellant entered into a contract with the Dominion of India for the supply of bales of hay. The contract contained an arbitration clause which was clause 21 of the contract. That clause reads as follows:
'Any dispute or difference arising out of this contract, settlement of which is not hereinbefore provided for, shall be referred to the arbitration of the officer sanctioning the contract whose decision shall be final & binding'.
3. In a note appended to the contract there is a provision that in the case of contracts made by the Military Farms Department the District Commander concerned shall be the arbitrator under clause 21. It is conceded that the contract in question was a contract made with the Military Farms Department & therefore the Dist. Commander was the arbitrator named in the contract.
4. On the last day of limitation, the appellant brought a suit for damages for breach of contract. The resp. applied for a stay of the suit pending arbitration. The appellant objected to the stay being granted firstly on the ground that if a stay was granted his claim would be barred by limitation. The learned Judge very rightly pointed out that by filing the suit on the very last day of limitation the appellant took a very grave risk. It appears that the respondents were prepared to undertake not to raise this question of limitation before the arbitrators. But whether that undertaking is a valid one or not I need not consider.
5. It was also suggested before Sinha J. that a stay should not be granted, as the contract provided that a person deeply interested in the performance of the contract was to be the arbitrator. It must be remembered that the parties entered into this contract with their eyes open & the appellant well knew that in case of disputes the District Commander would be the arbitrator. Knowing that, I cannot see that the appellants can now complain that the dispute should be referred to the District Commander. Similar provisions are found daily in building contracts in which the architect who is really an agent of the building owner is named as the arbitrator & the courts have always granted a stay of suits pending references in these building matters.
6. It was further suggested that the suit should not be stayed because an allegation of fraud had been made in the plaint. It is quite clear that the plff. never pleaded that he was induced to enter into this contract by reason of any fraud played upon him. However he did complain in para 17 of the plaint that it had been represented to him that no sales tax would be payable on the hay sold. It is suggested that this representation was made with intent to deceive & that it did deceive the plff. Sales tax was found to be payable & the plff. suffered a loss of Rs. 1029/- . This claim for Rs. 1029/- is a very small item in the plff's total claim. There was a claim for damages of Rs. 1,14,000/- & as I have said, the issues relating to that claim do not involve fraud at all. Where the whole existence of a contract is challenged on the ground of fraud, courts have held that an arbitrator is not a suitable tribunal to decide such a question & where such an allegation is made the suit in which this question of fraud is raised should not be stayed. That was held in the case of Narsingh Prasad v. Dhanraj Mills', A. I. R. (30) 1943 Pat. 53 in which it was held that it Is not for an arbitrator to decide whether a contract as put forward by one of the parties contained forged clauses or interpolations or contained a clause which had been inserted as the result of fraud, mistake or such like. Such disputes go to the 'factum' & existence of the contract & should be decided & must be decided by the civil courts. Where the subsequent contract is impeached on grounds of raud, that question must be decided by the courts & having decided it any further question which might arise can & should be decided by arbitration.
7. Those observations can have no application whatsoever to this case because as I have said there is no allegation that the appellant was induced to enter into this contract as a result of fraud. All that is said is that as a result of a misrepresentation possibly fraudulent he entered into the contract, under the impression that no sales tax was payable. It is a small item in the claim & Sinha J. was not prepared to allow the suit to proceed & to stay the arbitration by reason of that small claim. It is impossible to say that Sinha J. was wrong in staying the suit & in not permitting it to proceed.
8. The last point taken before Sinha J. and taken before us is that the arbitration clause is void for uncertainty. It is urged that a reference to the District Commander is ambiguous. Does it mean the District Commander at the time when the contract was entered into or does it mean the District Commander at the time when the disputes arise & reference is made? It appears to me that the arbitration clause read with the note is perfectly clear. The disputes are to be referred to the District Commander that is the Officer commanding the District at the time the disputes arise & a reference is to be made. It appears to me that nothing could be clearer than this clause read with the note. Similar clauses have been held to be perfectly valid by single Judges of this Court. Sen J. in an unreported case 'Engineers Bureau v. Governor General in Council', held that a contract providing for arbitration by the Superintending Engineer for the time being was perfectby valid to clear. He held that the words meant that the dispute should be referred to the Superintending Engineer holding that office at the time when the disputes arise & have to be referred. A similar view was taken by Das J. in the case of 'Governor General in Council v. Associated Live Stock Farm,(India) Ltd.', 52 C. W. N. 288. There an arbitration clause in a contract read:
'Any dispute or difference arising out of the contract........shall be referred to the arbitration of the officer sanctioning the contract.'
Upon a suit for alleged breach of the contract the deft, applied for stay of the suit. The learned Judge held that a stay of the suit could not be resisted on the ground that the officer had lert India, as the arbitration clause did not show that any vacancy in the office of the arbitrator could not be filled up by the Court.
9. The case before Das J. was I think a vary much more difficult case than the case before us.
10. The case decided by Das J. was again followed in an unreported decision by my brother Banerjee J. sitting on the Original Side & it appears to me that these decisions cannot possibly be assailed.
11. Reliance was placed by the appellant upon a Bench decision of the Lahore H. C. in 'Governor General in Council v. Simla Banking and Industrial Co. Ltd', A. I. R. 1947 Lahore 215. In that case a clause in an agreement between the Govt., & the party provided that the decision of the Superintending Engineer of the Circle for the time being should be final as to any question, claim etc. arising between the parties. A suit having been filed by one of the parties it was contended in defence that the dispute must be referred to the arbitration of the Superintending Engineer. It was in evidence that the persons who held that office of Superintending Engineer of the Circle at the time when the cause of action arose & at the time of the institution of the suit had retired. The Court held that the words 'for the time being' were ambiguous & it was not clear whether they referred to the Circle or to the Superintending Engineer. Even if the expression 'Superintending Engineer of the Circle' was to be taken collectively it was not clear whether the person who held that office at the time of the institution of the suit or the person holding the office when the cause of action arose was to be the arbitrator. The words in the opinion of the learned Judges were too vague & indefinite & the agreement was unenforceable for want of certainty.
12. With very great respect to the two learned Judges who decided this case I am unable to agree. It appears to me that when parties refer disputes to the decision of the Superintending Engineer of the Circle for the time being, their meaning is clear. They agree to refer the disputes to the gentlemen holding the office of the Engineer of the Circle at the time the disputes are to be referred. The use of the words 'for the time, being' so far from creating ambiguity make the matter in my view beyond all question & therefore I cannot agree with the view of the learned Judges of the Lahore High Court.
13. That being so, 1 am bound to hold that Sinha J. was right in holding that the arbitration clause referring the disputes to the decision of the Dist. Commander could not possibly be said to be unenforceable on the ground of uncertainty.
14. In my view the learned Judge was right in staying the suit & that being so, this appeal fails & is dismissed with costs.
15. I agree.