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Prabartak Commercial Corporation Vs. Ramsahaimull More Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberSuit Nos. 59 and 60 of 1958
Judge
Reported inAIR1963Cal137
ActsArbitration Act, 1940 - Section 30; ;Arbitration Rules - Rules 1(2) and 1(5)
AppellantPrabartak Commercial Corporation
RespondentRamsahaimull More Ltd.
DispositionApplication allowed
Cases ReferredIn Ganga Dhar v. Indar Sing
Excerpt:
- .....contracts is permissible under the rules, there must be two separate references for the two separatecontracts and two courts must be constituted to adjudicate upon the disputes and consequently there would be two separate awards but that was not done in this case.8. as regards the second, third and fourth objections mentioned above mr. modak relied on two unreported decisions of s. d. das gupta, j., in (1) award case no. 253 of 1953, askaran kissenlal v. kanyalal dugar, dated 18 august 1953; and (2) award case no. 115 of 1955, meghraj sampatlal v. khanna and sons, dated 4 january 1956, in support of his contention that where two separate disputes relate to different arbitration agreements between the same parties in any event there will have to be two separate courts for in such a.....
Judgment:
ORDER

U.C. Law, J.

1. This is an application that the Award dated 13 March 1957 made in Award Case No. 92-G of 1952 filed in the said Award Case be declared null and void and/or be set aside.

2. By exchange of Sold Note and corresponding Bought Note both bearing No. 1185 and dated 10 September 1951, the petitioner sold and the respondent bought 6,00,000 bales of Heavy Cees at Rs. 205/- per hundred bags, delivery during months of October, November and December 1951 at 2 lakhs bags per month. The petitioner failed to deliver whereupon on 12 November 1951 by a Settlement Bought Note No. 1332 the petitioner bought back from the respondent 2 lakhs of Heavy Cees in settlement of October delivery at Rs. 238/- per hundred bags and on 28 November 1951 it bought back from the respondent under another Settlement Bought Note No. 1382 further 2 lakhs bags in settlement of the November delivery at Rs. 247/- per hundred bags. Under all the aforesaid contracts each month's delivery was to be treated as distinct and separate contract and each ofthe contracts contained an arbitration clause in the standard form prescribed by the Indian Jute Mills Association.

3. Pursuant to the above two settlement contracts the respondents submitted to the petitioner two Difference Bills being No. G/D 3971A dated 13th November 1951 for Rs. 73,298-8-9 pies in respect of Contract No. 1332 and No. G/D 3994 dated 30 November 1951 for Rs. 93,289-2-9 pies in respect of Contract No. 1382 for payment, but the petitioner failed and neglected to do so in spite of demand. Disputes having thus arisen between the parties the respondent on 25 February 1952 made one application for arbitration to the Bengal Chamber of Commerce but in their statement included two distinct and separate claims against the petitioner which arose out of two different contracts being Contract No. 1332 and No. 1382 hereinbefore mentioned. The claim in Contract No. 1332 was Rs. 73,298-8-9 with interest at 9 per cent per annum from 10 January 1952 and the claim under Contract No. 1382 was Rs. 93,289-2-9 with interest 9 per cent per annum from 10 January 1952 for which two separate difference bills had been duly submitted but not paid. The respondent had also enclosed one cheque for Rs. 800/-on account of the fees of the arbitration proceedings with their application dated 25 February 1952. Thus it appears that two distinct claims were made by the respondent in one application to the Bengal Chamber of Commerceand Industry which the Tribunal of Arbitration treated asone reference and marked as Case No. 92-G of 1952.

4. On 8 March 1952 the Registrar of the Tribunal of Arbitration, in Case No. 92 G of 1952 wrote to the petitioner that the respondent had applied for arbitration ina dispute regarding their claim for payment of difference in price of 2 lakhs bags of Heavy Cees October 1951 portionand 2 lakhs bags of Heavy Cees November 1951 portion under contract No. 1185 of 10 September 1951 and alsoforwarded the respondent's letter dated 25 February 1951with the accompanying papers containing their claims andcontention. By the said letter the Registrar also asked for the petitioner's statement of case in duplicate at an early date together with a deposit of Rs. 450/- on accountof fees and the original Sold Note. By a notice dated 8April 1952 the Registrar informed the petitioner thathe had 'duly constituted a Court to adjudicate upon thedisputes in this case'. Thereafter the petitioner filed its statement of case before the Arbitrators stating that they were doing so without prejudice to their rights and contentions and particularly that the purported Arbitrators andthe Court constituted in the said reference had no jurisdiction to adjudicate upon the dispute between the parties. The petitioner's contention before the Arbitrators amongst others, was that each month's delivery was to be treatedas a distinct and separate contract and accordingly two separate applications should have been made by the respondent and there should have been two separate references in respect of October 1951 and November 1951 portions of the said Contract No. 1185 and two courts constituted to adjudicate upon the disputes between the parties : and it thus challenged the jurisdiction of the said Tribunal to proceed with the reference. The Arbitrators not having done so it appears, that the petitioner by their solicitor's letters dated 23 November 1956 and 6 December 1956 requested the Tribunal to state a special case to this Court for its opinion on the question of law as to whether there should be separate references in respect of separate disputes under different contracts and as to whether in the facts and circumstances of the casethere should be one reference or separate referencesby the claimant and offered to pay all costs of and incidental to such special case and if necessary to deposit such costs in advance with the Arbitrator and/or with the Chamber. The Tribunal, however, did not state a case to this Court and proceeded with the arbitration proceedings and held their sittings. There were in ail two sittings -- one held on 6 December 1956 and another on 20 February 1957. The minutes of the proceedings show that the sittings were held in Case No. 92-G of 1952 when the disputes in respect of and covered by both the settlement contracts No. 1332 dated 12 November 1951 and No. 1382 dated 28 November 1951 were dealt with and tried together by the Arbitrators. In the said reference the Arbitrators made two separate awards on 12 March 1957; one in respect of Contract No. 1332 dated 12 November 1951 for October portion and the other in respect of Contract No. 1382 dated 28 November 1951 for November portion. Both the awards were against the petitioner and the respondent was awarded two different sums in respect of the said two contracts with separate costs under each award. The petitioner did not accept those awards and has now brought two applications by each of which it prays that the awards to which it relates be declared null and void and be set aside.

5. The objections taken by the petitioner are set out in the petition, Mr. Modak appearing for the applicant has, however, confined himself to some of them which may be summarised as follows :

(1) it is obligatory upon the respondent to make separate applications and/or to refer disputes for October and November 1951 delivery separately for arbitration, as each month's delivery for all intents and purposes is a separate contract between the parties. Here however a combined application for arbitration of separate disputes arising out of separate contracts was made which was not permitted under the Rules. (When I say Rules I mean the Rules of the Bengal Chamber of Commerce and Industry and I will not repeat the phrase).

(2) There should be separate references for separate contracts but that was not done in this case.

(3) If the disputes relate to two separate contracts under the Rules there must be two separate references and two Courts should be constituted and consequently there must be two separate awards but that was not done in this case although the disputes referred to two separate contracts.

(4) The Rules do not provide more than one award in one reference except an interim award as provided in Section 27 of the Arbitration Act and Rule XXVI. Therefore there cannot be more than one award in one reference unless it is otherwise agreed between the parties; but no such agreement exists between the parties in this case and therefore the making of two awards in one reference is bad.

6. Lastly it is contended that the Arbitrators exceeded, their jurisdiction because they did not comply with the rules or procedure which the parties agreed to between them. Under Rule 1(5) the procedure agreed upon was that there should be separate references relating to separate contracts but that was not done in this case and this deviation amounted to a legal misconduct.

7. As regards the first objection Mr. Modak in his argument submitted that even if a combined application for arbitration of two separate disputes arising out of two separate contracts is permissible under the Rules, there must be two separate references for the two separatecontracts and two courts must be constituted to adjudicate upon the disputes and consequently there would be two separate awards but that was not done in this case.

8. As regards the second, third and fourth objections mentioned above Mr. Modak relied on two unreported decisions of S. D. Das Gupta, J., in (1) Award Case No. 253 of 1953, Askaran Kissenlal v. Kanyalal Dugar, dated 18 August 1953; and (2) Award Case No. 115 of 1955, Meghraj Sampatlal v. Khanna and Sons, dated 4 January 1956, in support of his contention that where two separate disputes relate to different arbitration agreements between the same parties in any event there will have to be two separate courts for in such a case each dispute has to be treated as a separate reference.

9. Mr. Modak further relied on (1958) 1 All ER 494, London Export Corporation Ltd. v. Jubilee Coffee Roasting Co. as supporting his contention that where the award has been made by the Arbitrators in breach cf the agreed procedure which in this case is the procedure contained in Rule 1(5), the appellant is entitled to have it set aside, as such deviation amounts to a legal misconduct.

10. The respondent has relied on the decision of Bachawat, J., reported in 59 Cal WN 715, J. Agarwala and Sons Ltd. v. Kanoria General Dealers Ltd., the unreported appellate court decision of P. B. Chakravartti, C. J. In Appeal No. 36 of 1955, D/- 16-4-1956 (Cal) from the above decision of Bachawat, J. and the unreported Supreme Court decision in Civil Appeal No. 786-787 of 1957, D/-15-2-1961 (SC) in appeal from the above appellate Court decision of the Calcutta High Court dated 26 April 1955.

11. The first question for consideration is whether it is permissible to constitute one Court for the adjudication of two separate disputes arising under two different contracts under the Rules.

12. Bachawat, J. In 59 Cal WN 715 held that the Bengal Chamber of Commerce and Industry has jurisdiction to entertain a single application for arbitration of two distinct disputes where the disputes are referable to the Chamber under two distinct arbitration agreements between the same parties and to constitute a singleCourt for the adjudication of such dispute. In arriving at this conclusion it appears that the learned Judge relied inter alia on the judgments of Rankin, J. reported in 24 Cal WN 775: (AIR 1920 Cal 808 (2)), Bal Mukund Ruiav. Gopiram Bhotica and of P. B. Mukharji J., reported in : AIR1953Cal621 , Gulzarilal Kanoria and Co. v. Busi and Stephenson Ltd. In both these cases however there were separate references with regard to the disputes and as such separate awards were justlymade. This aspect of the matter which distinguished this case from the case before Bachawat, J. was notnoticed by or brought to the notice of the learned Judge. In appeal No. 36 of 1955 (Cal) from the order of Bachawat, J. this point was left open by Chakravartti, C. J. who made these observations :

'The question is whether a single court can be constituted for the adjudication of two disputes referable to arbitration under separate agreements contained in separate contracts. Bachawat, J. has held that even such a Court can be constituted but I do not think that for the purpose of this case it is necessary for us to decide that question. If the question of a defect in the constitution of the Court is not a question of jurisdiction in the facts of this case but is a question only of the regularity ofthe procedure in constituting the Court the appellantsmust be held to be concluded by their own conduct for reasons I have stated. In my view at least in the facts of this case the defect in the constitution of the Court assuming there was a defect was only an irregularity.'

Later on in his judgment the Chief Justice further observed :

'It is not necessary for us to decide the general, question as to what is the true interpretation of the Rules of the Tribunal of Arbitration of the Bengal Chamber of Commerce. If the question is ever raised at the proper stage in any proceedings before the Tribunal it will then be decided. But for the purpose of the present case it is not necessary to embark upon that enquiry.'

13. Discussing the unreported decision of S. R. Das Gupta, J. In Award Case No. 253 of 1953, D/- 18-8-1953 (Cal.), referred to above Chakravartti, C. J. observed :

'I do not still feel pressed by its authority because the question of waiver or estoppel which was the basis of the decision of the Privy Council in Donold Campbell v. Jesraj Giridhari Lal, AIR 1920 PC 123 was not raised or adverted to. By holding what we are holding in this case we are by no means saying that if the constitution of a single court appointed for the adjudication of two separate disputes is challenged in proper time we may not hold that the constitution has been irregular although we must not be understood as saying that such would be our decision. We are dissenting from the decision of S. R. Das Gupta, J., only to the extent that he appears to have considered the defect as a fundamental defect of jurisdiction the effect of which could not be removed by submission or by other conduct. The question of waiver or estoppel as I have already stated was not considered by the learned Judge but his decision must be taken as impliedly holding that the defect in the constitution of a single court appointed for the adjudication of two disputes would be a fundamental defect. It is only to that extent that we differ from the learned Judge with respect and that is sufficient for the purpose of the present case.'

14. Thus it will be noticed that the decision of Bachawat, J., was affirmed by the appellate court on the peculiar facts of that case. The grounds were that in view of the order of S. R. Das Gupta, J. there was no longer any room for the objection raised to the constitution of the court of arbitration; and that the appellants having participated in the arbitration proceedings and having taken no steps for the revocation of the authority of the Arbitrators to exercise their jurisdiction had objected in spite of the observation repeatedly made by the Registrar and no question as to the jurisdiction of the court having in fact ever been raised they could not have the award set aside on the ground of defect in the constitution of the court and lastly that no prejudice had been caused.

15. I might here observe that in the casa before me no point of waiver has been taken by the respondent in their affidavit-in-opposition.

16. The matter then went up in appeal to the Supreme Court. It appears that the only point that was canvassed before the Supreme Court was that the court cf arbitration had no jurisdiction to decide in regard to two contracts on the reference which was made to it and that there was a lack of jurisdiction. The Supreme Court observed that-

'Apart from the fact that the objection to the constitution of the Court was never taken either before theArbitrators or at the earlier stage of the proceedings in the High Court all that was required to be done even according to the appellants was that there had to be two letters like the one dated September 7, 1953 each giving a separate case number and making reference to one of the two contracts. In our opinion, it was wholly unnecessary and failure to issue two letters could not affect the jurisdiction of the Arbitrators. The High Court has rightly rejected the objection of the appellants.'

It will thus be seen that this case is distinguishable on facts from the case before me. Rule 1(5) upon which the present applicant before me strongly relies was not even referred to in the appeal before the Appellate Bench of this court and/or the Supreme Court. The Supreme Court only affirmed the judgment of the Appellate Court of the Calcutta High Court. Therefore, I shall have to refer to that judgment in order to come to a decision in this matter.

17. Turning now to the decision of Chakravartti C. J. It appears that the question whether a single Court can be constituted for the adjudication of the disputes referable to arbitration under separate agreements contained in separate contracts is still open for decision. The decision of S. R. Das Gupta J. In Award Case No. 253 of 1953, DA 18-8-1953, (Cal.) that

'the award made by a Court, when it was a single Court constituted for the adjudication of two disputes arising out of two contracts was without jurisdiction', is still good except that it has been dissented from by Chakravartti C. J. In so far as Das Gupta, J. held or impliedly held that the defect in the constitution of a single Court appointed for adjudication of two disputes arising out of separate contracts would be a fundamental defect.

18. I am inclined to follow S. R. Das Gupta, J. for more than one reason. First I shall deal with the material Rule which is Rule 1(5) upon which the applicant relies. It reads as follows:

'1(5). 'Reference' means any agreement to refer a difference or dispute (present or future) to the Tribunal. Any agreement to refer more than one difference or dispute between the parties which arises under separate contract shall be treated as a separate reference in respect of each contract.'

19. it will ba observed that there is no ambiguity in the language of this Rule. The language is clea--'shall be treated as a separate reference in respect of each contract'; therefore this Rule is mandatory. Question is : has that been done in this case, I think not. Under Rule 1(5) the procedure agreed upon was that there should be separate references relating to separate contracts. Although more than one difference or dispute between the parties arising under separate contracts, were referred to the Tribunal the said disputes had not been treated as separate reference in respect of each contract as provided in the Rule.

20. it cannot be controverted that the parties agreed that

'all disputes .......... .shall be referred tothe arbitration of the Bengal Chamber of Commerce under the Rules of its Tribunal of Arbitration for the time being in force and according to such Rules the arbitration shall be conducted' (vide : Term and Condition No. 13 at the back of the contract).

Therefore the parties expressly agreed between themselves that the procedure as laid down in the Rules would bethe procedure according to which the arbitration shallbe conducted. The Arbitrators are bound by the arbitration agreement which has justly been said to be thesource and fountain head of the jurisdiction of the Arbitrators. It appears however that the arbitration has notbeen conducted in this case according to the expressedagreed procedure between the parties. In my opinionthis deviation or breach on the part of the Arbitrators,by itself constitutes a legal misconduct. Where theaward has been made by the Arbitrators in breach ofthe agreed procedure the applicant is entitled to have it set aside not because there has been necessarily anybreach of natural justice but simply because the partieshave not agreed to be bound by an award made by theprocedure in fact adopted, (see (1958) 1 All LR 494).The procedure adopted was not merely an irregularity butwas in direct violation of the agreed procedure betweenthe parties which was binding on the Tribunal. PrejudiceI may here add has nothing to do with legal misconduct.This aspect of the matter was not canvassed before theAppellate Bench of this Court or before the SupremeCourt in the case of, 59 Cal WN 715, relied on by therespondent.

21. Turning now to the Rules of the Tribunal of Arbitration Rule 1(5) clearly forbids joint reference in respect of different disputes arising out of separate contracts between the same parties. It is implicit in the Rules 1(2) and 1(5) or is a necessary implication from those rules, that each of the separate disputes arising. out of separate contracts between the same parties must be decided in separate references by the Arbitrator appointed for determining a particular dispute. That not having been done in this case the Award is liable to be set aside as the Arbitrators had no right to hear both the separate disputes arising out of separate contracts in one reference and thus their Award was without jurisdiction.

22. The next point to be considered is whether there can be more than one award in one reference?

23. It has been well-established that unless otherwise agreed between the parties there must be one award in one reference. In Gould v. Staffordshire (1850) 5 Ex. 214 at page 223 and in Winter v. Munton, (1818) 2 Moo CP 723 it was held that in one reference there cannot be two awards in any event (see Russel 14 Edn. p. 69). In Ganga Dhar v. Indar Sing, AIR 1938 All 195 it was held that an award should be entire and complete and unless there is an agreement between the parties which authorises the Arbitrators to make several awards it is not competent to the Arbitrators to give an award piecemeal. I incline to the same view as expressed in the above cases, and hold that there can, be only one award in one reference unless the parties otherwise agree.

24. For these reasons the application is allowed. The award is set aside.

25. The respondent is to pay the costs of thisapplication.


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