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Maharajah Sir Manindra Chandra Nandy Vs. H.V. Low and Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata
Decided On
Reported inAIR1924Cal796
AppellantMaharajah Sir Manindra Chandra Nandy
RespondentH.V. Low and Co. Ltd.
Cases ReferredRussel v. Russel
Excerpt:
- .....the partners) to be observed and performed, the said firm were appointed managing agents of the maharajah's collieries for a period of 20 years and the said firm during the continuance of the said agreement were to have the sole, absolute and unfettered control of the management and working of the said collieries. the said firm during the continuance of the said agreement were to use their best endeavours to raise the largest possible amount of coal from the said collieries and to sell the same at the best available prices. the said firm were to be entitled to retain and be paid all working expenses, exclusive of freight payable in respect of the coal to be sold by the said firm. they were to be paid certain commission on all coal sold from the said collieries in the manner provided.....
Judgment:

C.C. Ghose, J.

1. These are two applications, one by the Maharajah of Kasisimbazar for the appointment of a receiver for the purpose of realizing certain outstanding payments due from customers in respect of coal supplied from the collieries of Maharajah during the time of the Managing Agency of the defendant Company and up to the termination of the said agency on the 4th February, 1914, and for the purpose of taking charge of all books, papers, records and documents relating to the said collieries and now in the possession of the Defendant Company, or, in the alternative, for an injunction to restrain the Defendant Company, their Directors, servants, and agents, from realizing the said outstandings and the other by the Defendant Company, for an order that all proceedings in this suit may be stayed to enable the matters in dispute and difference between the parties to be referred to arbitration in terms of certain agreement, dated the 1st April, 1917. The grounds in support of the one application have been used as grounds in opposition to the other, and by consent of parties the two applications have been heard together, it being understood that the user, by the Defendant Company of the materials in the Maharajah's application would not be construed against the Defendant Company as amounting to having taken a step in the proceeding within the meaning of Section 19 of the Arbitration Act. In this judgment I will deal with the application under the Arbitration Act.

2. The facts are as follows : - By an agreement made in writing and dated the 1st April, 1917, between the Maharajah on the one part and H.V. Low and J.H. Pattinson on the other part, it was provided that subject to the fulfilment of the terms and conditions therein contained and on the part of the firm of H.V. Low & Co. Ltd., (of which Low and Pattinson were the partners) to be observed and performed, the said firm were appointed managing agents of the Maharajah's collieries for a period of 20 years and the said firm during the continuance of the said agreement were to have the sole, absolute and unfettered control of the management and working of the said collieries. The said firm during the continuance of the said agreement were to use their best endeavours to raise the largest possible amount of coal from the said collieries and to sell the same at the best available prices. The said firm were to be entitled to retain and be paid all working expenses, exclusive of freight payable in respect of the coal to be sold by the said firm. They were to be paid certain commission on all coal sold from the said collieries in the manner provided for in clause 11 of the said agreement. By clause 12 of the said agreement, it was provided that the said firm should keep full and correct accounts of the raisings and despatches from the said collieries and should submit to the Maharajah monthly-statements within a fortnight after the expiry of the month and keep full and correct accounts of the sale of all coal from the Maharajah's collieries. It was also agreed that the said firm should make up quarterly accounts and statements, showing the amount of coal raised and sold, and the price realized in respect of the same during each quarter and should submit the said accounts to the plaintiff within one month from the expiration of a quarter and should, at the same time, remit to the plaintiff Maharajah the gross proceeds of all sales after deducting there from the working costs and commission payable to the said firm and all other payments which, by the terms of the said agreement, were to be at the expense of the Maharajah. By the said agreement, the said firm undertook to raise from the said collieries a minimum monthly quantity of not less than 22,500 tons of steam coal, namely, 10,000 tons from the Ekra cooliery and 12,500 tons from the other collieries and also undertook to sell not less than the said quantity of 22,500 tons of steam coal. Lastly, the said agreement contained the following clause about arbitration, namely, 'If any dispute shall at any time hereafter arise between the parties hereto touching or concerning these presents, or any matter or thing herein contained, the same shall be submitted to the arbitration of two arbitrators or their umpire in accordance with the provisions of the Indian Arbitration Act of 1899 or any statutory modification or re-enactment thereof for the time being in force.' In the year 1919, the Defendant Company was incorporated as a private Limited Company (the date of the incorporation is the 14th April 1919) and the Defendant Company took over the said managing agency agreement from the said firm with all the terms and conditions thereof and continued to work under the said agreement as the managing agent of the Maharajah's collieries. The Maharajah's consent to the transfer of the managing agency to the Defendant Company appears from a letter dated the 6th May 1919, from the Chief Secretary to the Maharajah to Messrs. H.V. Low & Co. It appears that accounts and statements have been rendered by the said firm afterwards by the Defendant Company and payments have been made by them respectively in accordance with such accounts. On the 27th June 1921 the Defendant Company forwarded to the Maharajah a statement showing the quantities of coal sold for 1921-22. This statement is Exhibit B, to the affidavit of J.H. Pattinson, sworn on the 8th March 1924. The Maharajah by his letter dated the 29th June, 1921, expressed his surprise that Ekra coal (Ekra being one of his collieries) should have been sold at Rs. 4-8 per ton, for the period 1921 to 1922 and he thereupon returned the said statement for corrections. On the 30th June 1921, a corrected statement was sent by the Defendant Company to the Maharajah. This last statement is Exhibit A 1, to the affidavit of Mr. Lyall, sworn on the 25th February 1924. The Maharajah's case is that the defendant Company informed him by the said statement that the coal from his collieries had been sold by the Defendant Company as his agents to certain Railway Companies, namely the Burmah Railways, the Madras and the Southern Maharatta Railway and the Ceylon Government Railway, at the following rates:

1922-23 1923-24 1924-25 per ton per ton per ton Ekra ... 8-12 9-8 10-4South-Bast Baraboni ... 9-8 10-4 11-0Begonia ... 9-8 10-4 11-0

3. The Maharajah states that these were equivalent to the rates for the same or similar coal sold to other Railways F.O.R. for rail-borne coal. The contracts with the said Railway Companies which were three in number were negotiated and arranged on behalf of the said Railways by one R.W. Church, who was Chief Mining Engineer to the Railway Board in or about the month of January, 1921. The said Mr. Church was, during the year 1923, extradited from England to India in connection with certain charges arising out of his dealings with the Defendant Company, in connection with the said three contracts with the said three Railway Companies and was placed on his trial before the Chief Presidency Magistrate, Calcutta. The trial was completed and the evidence therein was published; but the said Mr. Church died before the Chief Presidency Magistrate was able to give his decision. Church's death took place in or about the month of November 1923. It is alleged on behalf of the Maharajah that in the course of the trial of Church, evidence was given that by the contracts with the said three Railways the defendant Company agreed to supply to the said Railways F.O.B., Kidderpore certain quantities of coal from the Maharajah's collieries Ekra, South-East Baraboni and Begonia and from certain other collieries not belonging to the Maharajah during a period of 3 years, commencing from the 1st April 1922, and ending on the 31st March 1925. The total tonnage to be supplied from each colliery belonging to the Maharajah during each of the 3 years, was approximately as follows, namely:

Ekra ... ... ... 54,000 tons yearly.South-East Baraboni. 73,000 do.Begonia 12,500 do.

4. And the price at which the coal from the said three collieries was to be supplied to the said three Railways was Rs. 17-1 per ton during the first year, 17-13 per ton during the second year and Rs. 18-9 during the third year, such prices not to include any increase in railway freight and Port charges in force after January, 1921. In October 1923, Mr. Lyall, who is a Member of the Indian Civil Service, now on leave preparatory to retirement, was with the sanction of Government appointed by the Maharajah, General Manager of his estates. He proceeded to make enquiries about the Maharajah's properties and his attention was drawn to the evidence which had been adduced during the trial of the said Mr. Church. Mr. Lyall states in his affidavit that he ascertained that after deducting railway freight and Port and River charges actually incurred in respect of the coal so supplied and after deducting all charges and commissions provided for in the said managing agency agreement, the Defendant Company had been and were, unknown to the Maharajah, making a large profit in respect of the said contracts with the said Railways and that the Defendant Company had concealed from the plaintiff the said profit and had appropriated and retained and were appropriating and retaining the said profit to their own use and benefit, such profit being payable to the Maharajah in terms of the said managing agency agreement. Mr. Lyall further states that he caused the accounts in respect of the coal supplied from the Maharajah's collieries to the said three Railway Companies to be investigated by Messrs. Price, Water-house, Peet & Co. Chartered Accountants, and that it has been ascertained that after deducting railway freight, Port and other charges actually incurred and all other charges properly payable by the Maharajah in terms of the said managing agency agreement and after allowing the prices accounted for by the Defendant Company as aforesaid the Maharajah should have been paid by the Defendant Company in respect of the coal supplied to the said three Railways during the said first year at Rs. 17-1 per ton, a sum of Rs. 3,96,083-11-7. The statement of account prepared by the said Chartered Accountants is Exhibit 'B' the affidavit of Mr. Lyall sworn on the 25th February 1924. Accounts for the second year have not yet been investigated. On the 10th January 1924, Messrs. Sanderson & Co. wrote on behalf of the Maharajah to the Defendant Company drawing their attention to the fact that the Maharajah had in the circumstances mentioned above been deprived of the said sum of Rs. 3,96,083-11-7, and asked for the payment of the said sum. This letter is replied to by the Defendant Company on the 31st January 1924, in which they repudiate the said statement of account prepared by the said Chartered Accountants as being grotesquely incorrect and they characterise Messrs. Sanderson's letter as gratuitously offensive. The Defendant Company declined to pay the said sum or any portion thereof. On the 4th February 1924, the Maharajah determined the said managing agency agreement and dismissed the Defendant Company from their offices as managing agents of the said collieries. The Maharajah Subsequently recovered possession of his collieries and assumed management thereof.

5. The Defendant Company contend that in terms of the said arbitration clause the disputes and differences which have arisen between the parties should be referred to arbitration and they accordingly nominated on the 20th February 1924, one A.H. Guznavi as their arbitrator and asked the Maharajah to nominate his arbitrator within 7 days. The Maharajah, however, had on the 13th February 1924, instituted the present suit for a declaration that the said managing agency agreement had been validly determined by him for misconduct of the Defendant Company for an account of coal sold by the Defendant Company on the footing of wilful neglect and default, for the appointment of a receiver and for other reliefs, and he declined to go to arbitration. The Defendant Company contend that this suit involves merely the taking of accounts from the year 1919 onwards, and the matters raised herein are such which can be and ought to be speedily determined by arbitration. In answer to the Defendant Company's application there has been put in an affidavit of Mr. G.C. Gooding, a member of the firm of Messrs. Sanderson & Co., on behalf of the Maharajah. Subsequently Mr. Lyall put in an affidavit in opposition on the 7th March 1924. There are two affidavits in reply by Mr. Pattinson one sworn on the 3rd March 1924, and the other on the 18th March 1924. On behalf of the Maharajah it has been argued that this is not a fit case to be referred to arbitration, but that it should be tried in Court. It is further argued that the real issue between the parties is whether the managing agency agreement has been lawfully determined by reason of the various acts of fraud and of misconduct committed by the said managing agents having regard to the matters set out in Mr. Lyall's affidavits of the 25th February 1924, and of the 7th March 1924. In other words, it is submitted that grave charges of fraud will have to be investigated and that in a case of this description an arbitration is not a suitable tribunal. On behalf of the Defendant Company it has been strongly pressed upon me that it is not the case of the Defendant Company that they sold the coal in question as agents of the Maharajah, but that it is their case that they sold the coal to the three Railways mentioned above as principals and that full particulars of the negotiations between the Defendant Company and the Chief Mining Engineer to the Railway Board were communicated to the Maharajah by a director of the Defendant Company named Arthur Jardine. The Defendant Company further state that a copy of a letter, dated the 29th November 1920 written by the Defendant Company, to the said Mining Engineer, was placed before the said Maharajah and that the Maharajah knew perfectly well that the Defendant Company would receive a commission for handling the said coal and that they would also get a certain amount of profit by performing the said contract with the said three Railways. The Maharajah denied that he had any knowledge of the fact that the said coal was being sold to the said three Railways at rates other than those which had been intimated to him by means of the said statement of the 30th June 1921, or that any intimation thereof was ever given to him by the defendant Company or that he ever knew that the Defendant' Company were making a profit on the sale of the said coal outside the limits of the said managing agency agreement. He further denies that the said Arthur Jardine ever communicated to him full particulars of the negotiations with the said Mining Engineer as alleged on behalf of the Defendant Company or that a copy of the said letter of the 29th November 1920 to the address of the said Mining Engineer was ever shown to him.

6. The Defendant Company urge that the charges brought by the Maharajah are so mixed up with matters of account that unless the disputes are decided speedily by means of arbitration, the Defendant Company would suffer irreparable loss and damage. They point out that the Maharajah, by reason of his rank, is entitled to claim exemption from appearance in Court under the provisions of Section 133, Civil Procedure Code and that should he claim such exemption in this suit and apply to be allowed to give evidence on commission, there would, in effect, be no trial of this suit in open Court.

7. I have scrutinized with care the various affidavits which were used before me and I have anxiously considered what my judgment should be. Now, under Section 19 of the Indian Arbitration Act, the Court has a discretion in the matter of staying actions which it is bound to exercise judicially and in accordance with certain well settled rules. The prima facie leaning of the Court is to stay the action and leave the plaintiff to the tribunal to which he has agreed but the Court may in its discretion, after considering all the circumstances of the case, refuse a stay on the ground that the matters in dispute between the parties involve the investigation of grave charges of fraud and may hold that in such circumstances arbitration is not the most suitable method of determining the questions raised between the parties. Sir Benod Mitter and Mr. S.C. Bose, who appeared for the Defendant Company, have strongly pressed upon me the case of Russel v. Russel (1880) 14 Ch. D. 471, and have argued that where fraud is charged the Court will, in general, refuse to send the case to arbitration if the party charged with fraud desires a public enquiry and that where it is the party who is making the charge who desires that the matter should be given publicity of a public trial, the Court is much less inclined to free him from the undertaking to go to arbitration into which he has seen fit to enter. I,-assent, if I may respectfully do so, to the proposition laid down in Russel v. Russel (1880) 14 Ch. D. 471, but it is to be observed that this very case virtually decides that, provided a prima facie case of fraud is made out, the action will be allowed to proceed, although it is the party alleging the fraud who desires the public enquiry. On this motion for stay of the action, I am not at liberty to offer any opinion whatsoever on the merits of the plaintiff's claim, but it is permissible for me to state that I am convinced that the plaintiff has a substantial and bona fide cause of action and that on the affidavits a sufficient prima facie case of fraud has been made out. In my judgment a question like this should not be sent to the determination of arbitrators and on this ground alone I would decline to stay the action. Mr. Pugh who appeared for the Maharajah argued that the relief claimed in this suit, namely, a declaration that the Defendant Company had been lawfully dismissed from their office as managing agents is not a matter for determination by arbitration and secondly that the Maharajah had never entered into an agreement with the Defendant Company in writing to go to an arbitration. In the view which I have taken it is necessary for me to go into the first question raised by Mr. Pugh, but I am bound to say that there is absolutely no substance whatsoever in Mr. Pugh's second contention, because to my mind the letter from the Chief Secretary to the Maharajah, dated the 6th May 1919, is a sufficient submission in writing. I desire to say that I am by no means satisfied that there will in substance be no trial in open Court even if the Maharajah should claim exemption from appearance in Court. Taking all the circumstances into consideration, the conclusion I have come to is that I must refuse the defendant Company's application for stay of the action and I accordingly refuse the same. The Defendant Company must pay the costs of this application.


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