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Ladha Singh Bedi Vs. Raja Sree Sree Jyoti Prosad Singha Deo Bahadur - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKolkata
Decided On
Reported inAIR1940Cal105
AppellantLadha Singh Bedi
RespondentRaja Sree Sree Jyoti Prosad Singha Deo Bahadur
Cases ReferredCourt. In Printing Machinery Co. Ltd. v. Linotype and Machinery Ltd.
Excerpt:
- .....from 1st january 1932 (para. 4) with an option of renewal for another term of 35 years. (para. 9, clause 9). minimum royalty was fixed at rs. 1000 a year, payable in two half yearly instalments of rs. 500 on 1st july and 1st january, the first of such payments being made due on 1st july 1932 (para. 5, clause 1). the rate of royalty was fixed at 4 annas a ton of coal raised. (para. 5, clause 2). para. 6 deals with the manner in which the coal raised was to be measured. para. 7 contains the lessee's covenants and para. 8, the lessor's covenants. there are as many as 22 clauses in para. 7, that is, as many as 22 covenants by the tenants. clause 1, para. 7 xuns thus:the tenants for themselves and their assigns and to the intent that the obligations may continue throughout the term.....
Judgment:

R.C. Mitter, J.

1. The question in this appeal, preferred by the defendants, is whether Suit No. 8 of 1938 pending in the Court of the Subordinate Judge at Asansol should be stayed or not under the provisions of para. 18, Schedule 2, Civil P.C. That suit was instituted by the plaintiff-respondent for the recovery of rent, royalty and cesses (with interest) payable from 1st July 1932 to 1st January 1938 on the basis of an indenture of lease executed by the parties on 30th July 1937. It is unnecessary at this stage to recite all the prayers made in the plaint. In the plaint the plaintiff has made the case that though the indenture was executed on 30th July 1937 the defendant was put in possession in 1932 and became liable to pay rent, royalty and cess from 1st July 1932 in terms of express covenants made in the said indenture. The said indenture of lease is on the record. By it the defendant was given a lease for 35 years commencing from 1st January 1932 (para. 4) with an option of renewal for another term of 35 years. (Para. 9, Clause 9). Minimum royalty was fixed at Rs. 1000 a year, payable in two half yearly instalments of Rs. 500 on 1st July and 1st January, the first of such payments being made due on 1st July 1932 (para. 5, Clause 1). The rate of royalty was fixed at 4 annas a ton of coal raised. (Para. 5, Clause 2). Para. 6 deals with the manner in which the coal raised was to be measured. Para. 7 contains the lessee's covenants and para. 8, the lessor's covenants. There are as many as 22 clauses in para. 7, that is, as many as 22 covenants by the tenants. Clause 1, para. 7 xuns thus:

The tenants for themselves and their assigns and to the intent that the obligations may continue throughout the term hereby created hereby covenant with the landlord as follows:

(1) To sink pits and properly to fit the demised lands with machineries, pumps, buildings, etc. so as to be able to and raise reasonable quantity of coal from the demised area from the first of January 1938.

2. There is the usual forfeiture clause, namely, if the lessee fails to perform any of 'his covenants the lessor would be entitled to determine the lease and to re-enter. Clause 6, para. 9 is important. It runs thus:

If any question, difference or dispute shall arise between the parties hereto or any person, persons or corporation claiming under them respectively concerning the rents and royalties hereby reserved or the measurements of any coal got or left in the demised mines or touching the construction of any clause herein contained or the rights, duties or liabilities of the parties hereunder or in any other way touching or arising out of these presents the same shall be referred to the determination of two arbitrators one to be appointed by each party or of an umpire to be appointed by each party or by such, arbitrators before proceeding in the reference in accordance with the Arbitration Act or any statutory re-enactment or modification thereof for the time being in force.

3. After the service of summons the defendant appeared and prayed for time on two occasions to file his written statement. His ground was that his wife was seriously ill and that he had no time to consult his lawyers. The Court acceded to his requests and granted him time till 3rd May 1938 to file his written statement. On 3rd May however he filed a petition for stay of the suit. The said petition purported to be under Section 19, Arbitration Act. The Section mentioned is inapplicable but in our judgment the heading cannot control the substance of the matter. The said petition consists of two paragraphs. In para. 1 tha arbitration clause of the lease was set out. Para. 2 is a pithy one. It merely says that the defendant

was always ready and willing to refer the matter to arbitration and is still ready and willing to do all things necessary for the proper conduct of the arbitration and there is no reason why the matter should not be referred in accordance with the submission.

4. The prayer is for stay of the suit. No statement is made that any difference had arisen between the parties before suit and no indication is given as to the nature of the dispute. This application and the lease were the only materials before the lower Court when it made the order refusing to stay the suit. In this Court the defendant filed an affidavit in which he has given some indication of his case. In this affidavit there is no statement that disputes and difference had arisen between the parties before the institution of the suit. Later on the defendant filed, we are told under protest a written statement. The defence as disclosed in the said written statement is of a two-fold nature - two alternative defences : (1) that the real agreement between the parties was that minimum royalty was to be paid from 1st January 1938. Before that no payment whatsoever was to be made by him. Paras. & and 5, Clause (1), do not embody the real intention of the parties and the defendant whose knowledge of English was imperfect was misled by the lessor to sign the lease in that form. This defence has as its basis either fraud or misrepresentation on the part of the lessor alternatively; (2) para. 5, Clause (1), conflicts with para. 7, Clause (1) and on proper construction of the lease the liability on the part of the lessee to pay royalty commenced only from January 1938.

5. Both these points are controverted by the respondent's advocate. On the second point he says that there is no conflict between these two clauses, as Clause (1) of para. 7 is the lessee's covenant and it means, says he, that the lessee must not delay beyond 1st January 1938 in sinking pits, etc. He says that by that clause the lessor guarded his rights to receive more than the minimum royalty after 1st January 1938, for if the lessee made delay in developing the mine beyond the said term the lessor would have the option to forfeit the lease and turn the lessee out. It is not necessary for us in this appeal to decide on the merits of the defence as disclosed in the written statement and we do not think it proper at this stage of the litigation to express any opinion on the question of construction or on the other defence. We are concerned in this appeal only with the question as to whether the suit ought to be stayed under para. 18 of Schedule 2, Civil P.C.

6. The reasons given by the learned Subordinate Judge in his order are difficult to follow. He says in the first instance that the Arbitration Act has no application and the application for stay which has been made under Section 19 of the said Act is a misconceived one. We have already said that this is giving more importance to form than to substance. The defendants prayed for leave to amend the heading of this application but that prayer was refused. The learned Judge then said that the clause for arbitration in the lease is a meaningless one as that clause provided for arbitration in accordance with the Arbitration Act of 1897 which was not applicable at all. Here also we do not agree with the learned Judge. The clause in question does not Speak of arbitration under the Arbitration Act of 1897. The words used are simply 'Arbitration Act'. The overriding intention as can be gathered from para. 9, Clause (6) of the lease is that in the matters specified therein the parties intended that their differences should be settled by arbitration by a tribunal of their own choice. That general intention is to be given effect to and that can only be done by taking the words 'Arbitration Act' to mean 'statutory provisions relating to arbitration'. This construction will include arbitration under Schedule 2, Civil P.C. The third reason of the Subordinate Judge is that as the suit includes a claim which is for the most part antecedent to the date on which the lease was executed (this date was 30th July 1937) the suit ought not to be stayed. We do not also follow this reason.

7. Such being the nature of the judgment of the learned Subordinate Judge we ourselves have to decide, in the light of the arguments advanced before us and the circumstances of the case, whether the suit ought to be stayed. We are to see if any ground exists for holding that the matter should not be referred to arbitration, and whether in the exercise of our discretion the suit is to be stayed. If the difference in the suit is one which comes within the submission the defendant to the action is prima facie entitled to have the suit stayed, for the Court would ordinarily give effect to the agreement of the parties that their differences should be composed by a domestic tribunal of their choice. The stay of a suit under para. 18 of Schedule 2 as also under Section 19, Arbitration Act, is made by the Court only with a view that the parties may go to arbitration in accordance with their agreement. The stay of a suit will be refused when there are impediments to arbitration, as for instance when the arbitrator named by the parties in their submission is dead or refuses to act. On an analogous principle the stay of a suit will have to be refused if there could not be an arbitration at all. An arbitration presupposes a dispute or difference between the parties and if there is no dispute or difference there is no occasion for an arbitration and a pending suit between the parties ought not to be stayed in such a case. This is a principle well established. But the contention of the respective parties to this appeal centres on the question as to whether the difference between them should be shown to have existed from before the suit or not. On the record there is no indication that the demand for royalty for the period was made by the plaintiff and refused by the defendant before suit. In the petition for stay made in the lower Court there is no statement that difference had arisen between the parties before the suit was brought. While the appeal was pending here the defendant's case was a growing one. Neither in the affidavit filed in this Court, nor in the written statement which indicates a development on this affidavit is the fact stated that differences and disputes had arisen between the parties before the suit. On the facts we hold that there is nothing on the records of this ease to show that there, was any difference between them before the suit was instituted, and when the matter was pending in the lower Court there was no indication on what points the parties were at difference at any stage.

8. Mr. Ghose appearing for the respondent submits that as there is no indication that there was any dispute or difference before suit the stay applied for ought to be refused. In supporting this proposition he relies upon the observations made by the House of Lords in L. & N.W. Ry. & G.W. Joint Rys. v. Billington (1899) A.C. 79. In that case Section 5 of an Act of Parliament authorized the Railway Company to charge a reasonable sum, by way of addition to tonnage rate, for services rendered to a trader. The Act further provided that any differences between the parties arising under the said Section was to be determined by an arbitrator to be appointed by the Board of Trade. The Railway Company in pursuance of the power so conferred on it had given four days time to traders to unload their wagons and after the said period the traders were required to pay 6d. a day as demurrage charges for detention of each wagon. The defendant took more than four days to unload his wagons. He knew of these conditions but all along had protested to the right of the company to levy the said charges. The Railway Company sued the defendant in the County Court to recover a certain sum for these charges. The defence was that the suit could not go on but the company's claim could only be settled by an arbitrator to be appointed by the Board of Trade. The finding of the County Court Judge was that no difference had arisen between the parties before the action had been commenced either on the question as to whether four free days were sufficient or not for unloading or whether 6d. a day was a reasonable charge or not. In the course of his judgment, the County Court Judge found that the defendant knew of those conditions, protested against the right of the company to levy these charges, but never questioned either the reasonableness of the free period allowed by the company for unloading wagons or the reasonableness of the rate of charges. The question before the Court was not whether the action was to be stayed or not. The question was of wider scope, namely whether the action was maintainable or not. As the greater must be taken to include the less, the principles formulated by the House of Lords in deciding the question before it could, in our judgment, be applied where the question relates to stay of action. In the said case the House of Lords overruled the Queens Bench Division. Lord Halsbury L.C. made the following observations:

A condition precedent to the invocation of the arbitrator on whatever grounds is that a difference between the parties should have arisen; and I think it must mean a difference of opinion before the action is launched either by formal plaint in the County Court or by writ in the superior Court. Any contention that the parties could, when they are sued for the price of services, raise for the first, time, the question whether or not the charges were reasonable and that therefore they have a right to go to an arbitrator, seems to me to be absolutely untenable.

9. The noble Lord then drew an analogy from an arbitration out of Court. He said that before the arbitrator could enter upon the reference, it must be shown that a. difference had arisen between the parties-before the submission and that the arbitrator would have jurisdiction only to adjudicate upon the particular difference which had arisen before the submission. If fresh differences arise after the arbitrator had entered upon the reference, he, the arbitrator, cannot adjudicate upon them without a fresh submission. Lord Ludlow made the following observations:

One matter on which I desire to say a word is this, that this difference is a difference which ought to have arisen before action brought and that it is too late afterwards to raise a difference which can be brought within the meaning of the Section.

10. The action commenced before the County Court Judge was held to be maintainable by the House of Lords. The principle so formulated has been applied in India where the application is for stay of the action either under para. 18 of Schedule 2, Civil P.C., or under Section 19, Arbitration Act : Dawoodbhai Abdul Kader v. Abdul Kader Ismailji : AIR1931Bom164 . Mr. Roy who appears for the appellant contends that the passages cited; above from the judgment of the House of Lords have not the meaning which a firsts reading would suggest. He says that the passages mean that if there is no dispute or difference whatsoever between the parties, there cannot be stay of an action because in a case where there is no difference at all between the parties there is no occasion or necessity for arbitration. But if there is a difference there is necessity for arbitration, there is scope for the arbitrator - and it matters little whether the difference had arisen before or after the suit had been filed. In support of his contention he relies upon certain passages in the judgment of Rowlatt, J. in L. & N.W. Ry. V. Jones (1915) 2 K.B. 35 at pages 39-40. This judgment was pronounced by the Kings Bench Division and the observations which do support Mr. Roy's contention were obiter dicta. In that case an Act of Parliament similar to the Act which came under consideration in L. & N.W. Ry. & G.W. Joint Rys. v. Billington (1899) A.C. 79 was under consideration. The railway company had sued the defendant for 2-15-6. The County Court Judge held that the suit would lie but reduced the claim to 1-17s. It was the plaintiff company who preferred an appeal to the Kings Bench Division. 'There the company took up the position that it was not for the County Court Judge to decide whether the rate charged was reasonable or not, but that question could only be decided by the arbitrator to be appointed by the Board of Trade. The contention, if accepted, would have had the effect of depriving the County Court Judge of his judicial functions, for in that case he was simply to receive the plaint, and in spite of objections of the defendant to pass a decree forthwith for the sum claimed. That would reduce the trial of the action to a farce. The Kings Bench Division refused to accede to the said contention of the plaintiff company and held that if the suit was maintainable, the County Court Judge would be right in deciding whether the claim of the plaintiff was just and reasonable. The obiter dicta of the Court of the Kings Bench Division cannot in our opinion affect the plain words of the Lord Chancellor and Lord Justice Ludlow in L. & N.W. Ry. & G.W. Joint Rys. v. Billington (1899) A.C. 79.

11. The principle underlying para. 18 of Schedule 2, Civil P.C., and also Section 19, Arbitration Act, is to force by an indirect method a, contumacious party, who had agreed to arbitration, to go to arbitration. It follows (therefore that where the plaintiff is not aware before the institution of the suit, that there is a difference between him and the defendant or of nature of the difference, he cannot be said to have gone back upon his agreement to refer to arbitration or was attempting to go back upon it, by rushing to Court. The Court under these circumstances would, in our judgment, be justified in the exercise of its discretion in refusing to stay the suit. We therefore give effect to the contention of Mr. Ghosh on this part of the case. There is also another reason which induces us to refuse the prayer for stay. One part of the case of the defendant - the main part - as disclosed in his written statement rests on fraud and misrepresentation. If he is able to prove the facts alleged, a case for rectification of the lease would be made out. The question whether the lease will have to be rectified or not does not come within the scope of the arbitration clause. The main defence can be properly tried by the Court, and when the basis of the main defence is either fraud or misrepresentation charged to the plaintiff we think that the rights of the parties involved in the suit should be tried by the Court. For these reasons we dismiss the appeal and direct the Court below to proceed on with the suit. Hearing fee three gold mohurs. Let the record go down without delay.

Latifur Rahman, J.

12. I am of the same opinion and can add very little to what my learned brother has said. I should however like to point out that it is essential to consider what the real intention of the parties was in inserting Clause 6 of para. 9 of the lease. It provides that

if any question, difference or dispute shall arise between the parties...the same shall be referred to the determination of two arbitrators, one to be appointed by each party or of an umpire to be appointed by each party or of an umpire to be appointed by such arbitrators before proceeding in the reference in accordance with the Arbitration Act or any statutory re-enactment or modification thereof for the time being in force.

13. It appears to be clear that what the parties really intended was that their disputes and difference should be decided by persons of their own choice who should proceed in accordance with any statutory provision relating to arbitration including arbitration under Schedule 2, Civil P.C. It does not necessarily mean that the proceedings are only to be commenced under the Arbitration Act of 1897. Having regard to this position it is to be seen whether or not any dispute or difference has arisen which necessitate giving effect to the clause in question. So far as can be gathered none did arise until after the filing of the suit. In terms of the lease the defendant was liable to pay certain royalty. He failed to do so and the plaintiff instituted a suit for the recovery thereof. It cannot be contended that this amounted to dispute and difference. It was after the institution of the suit that the defendant filed an application purporting to be under Section 19, Arbitration Act, for the stay of proceedings, which of course has no application. Moreover, in his written statement the defendant pleaded fraud and misrepresentation. His defence (a) is that para. 5, Clause (1) of the lease is to be construed with para. 7, Clause (1) and according to the proper construction his liability to pay royalty would only commence from 1st January 1938; his alternative defence (b) is that para. 5, Clause (1) which made the lease to commence from 1st January 1932 had been inserted by the lessor fraudulently, the real agreement being that the lease was to commence from 1st January 1938. If these allegations of fraud could be proved they would be grounds for the rectification or cancellation of the lease. The question as to whether the lease has to be rectified or not is not within the province of the arbitrators but within the competence of the Court. In Printing Machinery Co. Ltd. v. Linotype and Machinery Ltd. (1912) 1 Ch. D. 566 the arbitration clause was couched in as wide a language as the clause in the lease we have before us. It ran in these terms:

Any dispute, difference or question which may at any time arise between all or any of the parties hereto touching the construction, meaning or effect of these presents, or any clause or thing herein contained, or the rights or liabilities of the said parties respectively, or any of them under these or othorwise howsoever in relation to these presents shall be referred to arbitration.

14. Questions having arisen with reference to the option to purchase given by the deed of 1901, the plaintiff company brought an action claiming by its writ (1) a declaration that the option was void and of no effect : (2) in the alternative, that is, if the option was not void, a declaration that in ascertaining the price to be paid for the demised premises on the purchase thereof under the option the value of a certain obligation should be taken on a particular footing; as an alternative to (2) rectification of the lease. The defendant company prayed for the stay of proceedings under Section 4, Arbitration Act, 1889, which corresponds to our Clause 18 of Schedule 2, Civil P.C. The Court refused the stay. The principle is stated by Warrington J. in the following terms:

In my judgment therefore the claim for rectification of the deed itself is not one which falls within the arbitration clause. Having come to that conclusion, is that a sufficient reason for refusing to stay proceedings in the action? Of course, it may be said that it is not a sufficient reason for staying proceedings so far as the other questions are concerned, because those questions do fall within the arbitration clause. But in my opinion in the present case it is a sufficient reason, and I think so from this consideration : one of the questions raised is a question of construction; and it is dependent on the result of that question of construction whether the claim for rectification will be raised or not. It seems to me that it would be absurd to give an arbitrator the duty of determining a question of construction, and then, supposing the arbitrator determined that question against the plaintiff company, to let the latter come back to the Court to determine whether the agreement should be rectified or not. A question which on the claim for rectification must be decided is the question of construction, for until you have arrived at what the written document means, you cannot say whether it is or is not in accord with; the antecedent agreement of the parties. It seems to me therefore that these two questions so hang together that if the one the claim for rectification-must be decided by the Court, then it is, to say the least of it, more convenient that the other questions also should be decided by the Court.

15. The same observations, in my judgment, would equally apply to the present case.


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