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Ramji Dayawahla and Sons Private Ltd. Vs. Invest Import - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. Nos. 110 and 111 of 1964 (Suit No. 1359 of 1963)
Judge
Reported inAIR1969Cal253,73CWN533
ActsConstitution of India - Article 133 (1); ;Code of Civil Procedure (CPC) , 1908 - Section 151; ;Arbitration Act - Section 34
AppellantRamji Dayawahla and Sons Private Ltd.
Respondentinvest Import
Appellant AdvocateSabyasachi Mukherji and ;Maya Ray, Advs.
Respondent AdvocateSomnath Chatterjee and ;A. Mitter, Advs.
DispositionApplication allowed
Cases ReferredUnion of India v. Nalini Ranjan Guha
Excerpt:
- bijayesh mukherji, j. 1. the unsuccessful appellant craves a certificate under article 133, sub-article (1) of the constitution for appeal to the supreme court.2. the appellant's is a suit, alleging breaches of contracts, one of which is written and the rest are parol, and claiming recovery of rs. 4,25,343.00. a.n. ray, j., stays the suit and all proceedings thereunder, because of the written contract's arbitration clause which bears:'any mutual dispute should be settled in mutual agreement; however, both the contracting parties accept the jurisdiction of the arbitration by the international chamber of commerce in paris with application of yugoslav materials and economical law.'the learned judge dismisses too the appellant's application for injunction restraining the respondent from.....
Judgment:

Bijayesh Mukherji, J.

1. The unsuccessful appellant craves a certificate under Article 133, sub-article (1) of the Constitution for appeal to the Supreme Court.

2. The appellant's is a suit, alleging breaches of contracts, one of which is written and the rest are parol, and claiming recovery of Rs. 4,25,343.00. A.N. Ray, J., stays the suit and all proceedings thereunder, because of the written contract's arbitration clause which bears:

'Any mutual dispute should be settled in mutual agreement; however, both the contracting parties accept the jurisdiction of the Arbitration by the International Chamber of Commerce in Paris with application of Yugoslav materials and economical law.'

The learned Judge dismisses too the appellant's application for injunction restraining the respondent from withdrawing from the Bihar State Electricity Board any money, without keeping a balance of Rs. 4,40,000. The appeals taken against the aforesaid two orders fail. Hence this application for the grant of a certificate, after consolidating the two appeals which have so failed.

3. The decision of the Court of appeal, presided over by G.K. Mitter, J., (then here) and myself, has since come into the reports: Ramji Dayawahla & Sons Pvt. Ltd. v. Messrs. Invest Import, (1965) 70 Cal WN 199, making it unnecessary to go over the facts again. It must, however, be mentioned that when the petition for a certificate reaches the stage of hearing, G.K. Mitter, J., is not in this Court, with the result that the Chief Justice assigns the matter to my learned brother and myself. And we hear it.

4. No doubt, the iudgment is a judgment of affirmance. But I am satisfied that the appeal does involve substantial questions of law. That apart, the whole of materials, we have had put before us, completely satisfy me too 'that the case is a fit one for appeal to the Supreme Court', within the meaning of Clause (c), sub-article (1) of Article 133 of the Constitution. I proceed to state why I am satisfied so.

5. Much the most important point is that which I dwelt on and decided in paragraph 48 of my judgment in the appeals, G.K. Mitter, J., agreeing:

'Here is a contract solemnly entered into between the appellant, an Indian company, and the respondent, a Yugoslav company, in aid of another contract entered into between the latter and the State of Bihar through its Electricity Board for erection of a thermal power station at Barauni. What a valuable possession for the nation such thermal power station means is plain to be seen. We do not, the Yugoslavs do, know the know-how of erecting a thermal power station. Hence they are here on the role of collaborators to help us make such an invaluable acquisition. And to get it built the authorities spare from their none too adequate resources the requisite foreign exchange for the appellant's managing director, Lalbhai, in order to enable him to proceed to Belgrade with a view to signing the contract which he does, his signature being 'only one centimetre away' from the contract's arbitration clause ..... this litigation has a special feature which distinguishes it from litigations founded on ordinary commercial transactions between two private persons. With foreign collaboration we so badly need, one member State of the larger Welfare State (which is India) is adding to the national wealth by having a thermal power station. It is, therefore, not only common sense but also common honesty that no attempt should be made, or if made countenanced, to flee the terms of the contract except in exceptional circumstances which we do not see upon the whole of the materials we have had put before us. It is a relief to find that law marches with common sense and common honesty.'

6. What I am on now is not the correctness or propriety of the decision of mine, agreed to by G.K. Mitter, J. Indeed, in a matter as this, that is not the test to go by. What I am on now is the importance of the topic raised, not yet closed, for all we know and are told, either by any decision of the highest Court of the land or by well settled general principles. See Sir Chunilal V, Mehta and Sons, Ltd. v. Century Spinning & ., : AIR1962SC1314 . I confess, the more I consider it, the more I am convinced that the question raised is one of great public importance, so that the foreign collaborators, with whose aid we are out to augment our national wealth and possessions, may know exactly where they stand. To my thinking, it will be a mistake to equate the transaction, this litigation evinces, with ordinary commercial transactions between two private individuals or bodies. That being so, what the country as a whole is in bad need of is an authoritative pronouncement from the highest Court of the realm. In my judgment, such consideration alone makes the case 'a fit one for appeal to the Supreme Court', within the meaning of Clause (c), sub-article (1), Article 133, of the Constitution.

7. Then, here are some of the substantial questions of law involved in the appeals:

(1) The construction of the arbitration clause in the contract.

(2) Which law rules the litigation on hand, with an agreement to submit any mutual dispute to foreign arbitration, --Section 34 of the Arbitration Act (10 of 1940) or Section 151 of the Procedure Code 5 of 1908, -- and what is the repercussion of one law as against the other on the question of onus to make out a case for a stay of the suit?

(3) Was the stay of the suit justified in absence of further and better evidence about what the foreign law: Yugoslav materials and economical law: is -- law, of which no knowledge can be imputed to us, and which has got to be proved, as facts are proved, by appropriate evidence (so lacking here)?

8. No doubt, questions as these have been dealt with in a certain manner in the judgment against which a certificate for appeal to the Supreme Court is now sought. But that is not what bulks large here. What bulks large is the grant of a certificate that, though the judgment is a judgment of affirmance, with the amount of the subject-matter of the dispute in the primary Court, and in dispute on appeal, having been not less than Rs. 20,000/-, -- indeed, the stake here is over Rs. 4 lakhs, -- the appeal does involve some substantial question of law. The questions of law formulated in the preceding paragraph appear to be substantial, by any standard, as between the parties: Raghunath Prasad Singh v. Deputy Commissioner of Partabgarh and the case of : AIR1962SC1314 supra. In Michael Golodetz v. Serajuddin & Co., : [1964]1SCR19 , the power under Section 34 of the Arbitration Act was taken as inherent in the Court. So, whether Section 34 simpliciter applies or not, apart from the Court's inherent power, appears to be still at large, the question of onus necessarily trailing behind. Section 34 applying, the respondent to the appeals gets a stay, on the foot of the arbitration agreement, unless the appellant satisfies the court the other way about:

that no stay Is called for. Section 151 applying, it will be for the respondent to the appeals to satisfy the court that to allow the suit to continue is to abuse the process of the court.

9. Thus, the ground covered so far warrants the issue of a certificate under Article 133, sub-article (1), of the Constitution. But there is said to be one formidable hurdle: that the judgment sought to be proceeded against does not finally determine the rights of the parties; it simply stays the suit, leaving the final determination to the International Chamber of Commerce at Paris. True it is that, in the absence of a final determination, we cannot issue a certificate the petitioner prays the Court for. But, it is argued, the stay means that the suit cannot be proceeded with. It is, in effect, taking off the plaint which becomes dead for all purposes. Here is, therefore, final determination of the right of the forum: the International Chamber of Commerce at Park instead of the Court. To that, the rejoinder is: no matter what the forum is -- and that is so immaterial --dispute still remains a dispute to be finally adjudicated upon, and finality there will be only when there is an award, not before.

10. The collocation of the words 'Judgment, decree or final order' in Article 133, sub-article (1) of the Constitution goes to show that, other things being there, an appeal lies only from a judgment, decree or order which is final. Necessarily, no appeal lies from a judgment, decree or order which is not final, that is to say, which is preliminary or interlocutory: just what is pointed out in Mohammad Amin Brothers Ltd. v. Dominion of India, AIR 1950 FC 77, in the context of Section 205, Sub-section (1), of the Government of India Act, 1935 (25 & 26 Geo. V, Ch. 42), where the same words occur. But what is the test of finality? No one test is there. No one test can be there: vide the majority judgment in Mohonlal Maganlal Thakkar v. State of Gujarat, : 1968CriLJ876 . The test will vary according as the real question, which is the burden of the judgment, decree or order, varies.

11. Some 78 years ago from today, with a view to ascertaining whether the stamp of finality was there or not, the nature of the proceedings and the real question before the Court were looked into. Such was the case of Rahimbhoy and Hibibhoy v. Turner, (1890) 18 Ind App 6, where in an accounting suit the defendant denied his liability to account to the plaintiff. The High Court affirmed his liability and directed an account. But then only accountability was decreed; and accounts had yet to be taken. So long they were not taken, the decree could not very well be final. Still, Lord Hobhouse, delivering the judgment of the Board, held:

'The real question in issue was the liability, and that has been determined by this decree against the defendant in such a way that in this suit it is final. The Court can never go back again upon this decree so as to say that, though the result of the account may be against the defendant, still the defendant is not liable to pay anything. That is finally determined against him, and therefore in their Lordships' view the decree is a final one within the meaning of Section 595* of (the then) Code.' Thus, because of the nature of proceeding and of the real question before the Court, a preliminary accounting decree becomes a final decree, the arithmetical result of accounts being relegated as only a consequence of the liability, the cardinal point of the suit. Lord Macnaghten, another member of the Board, put the matter thus, in the course of arguments at the bar:

'Final decree' in Section 595 does not mean last decree, but decree determining rights finally.'

12. Or take another Privy Council decision rendered some four years later: Syed Murjhar Husein v. Bodha Bibi, (1894) 22 Ind App 1. By a will one Ibn Ali had given the property in suit to certain persons, also defendants, who conveyed it to the plaintiff. The subordinate Judge decided against the plaintiff on the question of Ibn Ali's will. A finding as to that defeated the suit, and made it unnecessary for the subordinate Judge to give judgment on the other issues. The plaintiff appealed. The High Court held the opposite: Ibn Ali had made a valid gift. Result: a remit there was, under Section 562 of the then Code, of the case to be disposed of on the other issues. Leave to appeal to the Privy Council was prayed for, but refused on the ground that the order of remand was no final order. Lord Hobhouse again, delivering the judgment of the Board, held;

' ..... the will of Ibn Ali is the cardinal point of the suit; and as after the decision of the High Court that can never be disputed again, their order is final, notwithstanding that there may be subordinate inquiries to make.' Thus, going by the same test: the nature of the proceedings and of the real question before the Court, an order of remand, with the suit remaining very much a live suit, some issues, subordinate though, still to be decided, is treated as final.

13. Now, translate the ratio of thesej two Privy Council decisions to the case on hand. Whether the rights of the parties will be determined by the Court in the ordinary way or by arbitration in a way, which is not the Court's way of determining rights, is finally determined against the petitioning appellant. The Court can never go back upon this determination. The result of the award, when the arbitrator makes one, is only a consequence of such determination. The award may well be regarded as the last determination in point of time. But that does not matter. What matters is determining the rights of the parties finally on the all-important question of forum: the established Court of the land, with all it means, or a domestic tribunal like the arbitrator, and in a foreign country too, with also all it means.

14. Do the later authorities referred to at the bar show anything different? Such authorities, in so far as they are material for the point at issue, fall under three broad classes:

One, if the judgment, decree or order, as respects which a certificate for appeal is sought, does not finally dispose of the rights of the parties, but leaves them to be determined by the Courts in the ordinary way, the suit or proceeding still remains a live suit, or proceeding, and no finality attaches to such judgment, decree or order: Firm Ramchand Manjimal v. Firm Goverdhandas Vishandas Ratancliand, (1920) 47 Ind App 124=(AIR 1920 PC 86), Abdul Rahaman v. D. K. Cassim & Sons, AIR 1933 PC 58=60 Ind App 76, AIR 1950 FC 77, Thacker's Press & Directories Ltd. v. Metropolitan Bank Ltd., : AIR1963Cal515 , and Pankaj Kumar Pakhira v. Nanibala Pakhira, : AIR1963Cal524 .

Two, when such judgment, decree or order does not finally determine the rights of the parties, but does not leave them either, to be determined by the courts in the ordinary way, e.g., by stay of the suit because of an arbitration agreement (as here), the suit is still alive, and no finality can attach to such judgment, decree or order, the order of stay being only interlocutory: Gaya Electric Supply Co., Ltd. v. State of Bihar, AIR 1951 Pat 619.

Three, the particular purpose for which the judgment, decree or order is made has to be considered separately. Once that is done, it will be found that a judgment, decree or order may be final for one purpose and interlocutory for another or final as to part and interlocutory as to part. The test is not whether the whole of the controversy is finally over or not The test is whether the controversy raised before the High Court (e.g. the question of jurisdiction) is finally over or not: Ramesh v. Gendalal Matilal Patni, : [1966]3SCR198 , : 1968CriLJ876 , and Southern Headways (P) Ltd. v. P.M. Veeraswami, : AIR1964Mad194 (FB).

15. To classify the decisions so is to find that the matter before us falls under the second class. So, the reasons of the Patna decision, Gava Electric Supply Co.'s case. AIR 1951 Pat 619 supra, need to be looked into a little closely. But before that is done, it may be noted that the very decision of the Patna High Court granting a stay under Section 34 of the Arbitration Act 1940, State of Bihar v. Gaya Electric Supply Co., : AIR1951Pat157 . to appeal from which a certificate was prayed for and refused, in the case under review now. AIR 1951 Pat 619, was since reversed by the Supreme Court in Gaya Electric Supply Co. Ltd. v. State of Bihar, : [1953]4SCR572 , and the subordinate Judge's order refusing to grant a stay was restored. Not that it affects the ratio of AIR 1951 Pat 619. It does not. But it is perhaps well to be posted with this.

16. Now, to the reasons of the Patna decision. AIR 1951 Pat 619. The reasons are three: One, the suit still remains alive (the stay notwithstanding), because a further order is necessary to determine the rights of the parties on the matter in dispute, with a view to terminating the suit one way or the other. Two, the case of the plaintiff company, whose suit has been stayed, is that time is of the essence of the contract, keeping thereby the arbitration clause away -- a matter on which the Subordinate Judge has to record a finding. Ergo, the suit is still a live suit. Three, it may well be that, because of the stay, nothing is left in the suit and the Subordinate Judge is bound to dismiss it Even then, the order of stay is an interlocutory order, determine as it does not finally the rights of the parties.

17. The first and third reasons merit, if I may say so, with the greatest respect, a common reply. And the reply is, on the line of two Privy Council decisions referred to in paragraphs 10 and 11 ante: the Rahimbhoy (1890) 18 Ind App 6 and Muzhar Husein (1894) 22 Ind App 1 cases, that the distinction between the final order and the last order has to be kept in view. What their Lordships of the Patna High Court are emphasizing is the last order, after the arbitrator has made the award. But what about the order, determining that the arbitrator has. and the Court has not, the jurisdiction to deal with the litigation -- an order upon which neither the Court nor the parties can go back? The question of such jurisdiction is finally decided in favour of the respondent and against the petitioner. It can never be disputed again. And the difference between a suit being tried in a Court in the ordinary way and being adjudicated upon by an arbitrator is considerable. The further order to be made by the Subordinate Judge will only be a consequence of such determination resulting in the award So the suit, neither active nor continuing, is practically dead as a suit. If the word 'dead' is open to objection, let it be said that it is suspended, which indeed it is. And such suspension connotes its termination for all practical purposes. (Cf. Shorab Merwanji Modi v. Mansata Film Distributors, : AIR1957Cal727 and Chakravartti, C.J.'s observations, though on a stay under Section 10 of the Civil Procedure Code 5 of 1908). Regarding the second reason, when will the Subordinate Judge record a finding that the arbitration agreement does not bind the plaintiff-company, time having been of the essence of the contract? During the continuance of the stay? And if he holds so. will he go on with the suit in the teeth of the order of the High Court granting a stay? Or will he do so, after the award is made? Why stay then before a decision on the binding character of the arbitration agreement is come to? Such are the difficulties which make me very slow to go by the second reason, if I may say so, with great respect and in greater humility.

18. Thus, the matter before us cannot be governed by the Patna authority, AIR 1951 Pat 619, though, on a threefold classification made of the authorities cited before us. It falls under the second class on the basis of that decision.

19. The case on hand does not fit the first class as well It does not, because, of the two essential requirements to get into this class, at least one is lacking here. The two such requirements are--

First: the order etc. does not finally dispose of the rights of the parties.

Second: it leaves such rights to be determined by the courts in the ordinary way.

Now, to leave the rights of the parties before us to be determined by the International Chamber of Commerce at Parfa (as here) is certainly not to leave them to be determined by the court in the ordinary way. It is however said on behalf of the respondent that, no matter what the case is, whether granting a stay or refusing a stay, the governing principle is the same. Is it? You then equate an established court of the land, trying a suit in the ordinary way, when the parties have so many safeguards for a proper trial, as also a right of appeal and further appeal, with an arbitrator, seized of an authoritarian power, so to say, when the parties have very limited safeguards in exceptional cases. I shall not, therefore, equate the two unequals, and Bay that the principle which holds good lor one holds good for the other. In any event, the cases, on the basis of which the first class of the three-fold classification is there, have nothing to do with the stay of a suit, because of an arbitration agreement. And a case is an authority for the proposition it decides. None of these cases decide the proposition debated before us.

20. Now, come to the third class which the case on hand fits. Go by the 'purpose' test laid down by the majority decision in Mohanlal's case, : 1968CriLJ876 supra. If you see the litigation whole, co-relating the order of stay to the controversy in its entirety, certainly the order is interlocutory. If. however, you look at the stay order only, without co-relating it to the whole of the controversy in the suit -- and that is the way you should look at it, as enjoined by the majority decision in Mohanlal's case, : 1968CriLJ876 the order is final, deciding once for all the arbitrator's jurisdiction, and the Court's lack of jurisdiction, to decide the dispute.

21. True it is that, of the three cases, on the foot of which the third class of the classification has been made, two (the Madras Full Bench case, : AIR1964Mad194 and : [1966]3SCR198 supra), relate to writ petitions under Article 226 of the Constitution -- petitions which foster proceedings, not in continuation, as in appeal or revision, but independent, of the original proceedings before the inferior tribunal. But the other one, (Mohanlal's case, : 1968CriLJ876 is in revision: criminal revisional jurisdiction of the High Court. What is more, the guilt or innocence of Mohanlal in the trial under Section 205/114 of the Penal Code had yet to be decided, as here the liability of the respondent is yet to be decided. Still the question of the lodging of a complaint under Section 476 of the Code of Criminal Procedure against Mohanlal under Section 205/114 of the Penal Code, it is held, was finally decided, as indeed it was, once the nature of proceedings and of the real question before the Court (just the test laid down by Lord Hob-house: paragraphs 10 and 11) is remembered. Ordinarily, a Criminal Court takes cognizance of offence, and not offenders, and can, therefore, summon any person to stand his trial under any section, according as evidence led before it warrants. But where the complaint is through the machinery of Section 476, Section 195 coming in too hi appropriate cases, the discretion of the Criminal Court receiving such complaint is fettered. It can try only such offence, for which and such person, against whom the complaint has been made, and the bar of Section 195 (where necessary) removed. Necessarily, therefore, the lodging or non-lod'ing of such complaint has finality attached to it; the finality is whether the person will be tried at all or not, after removal of the bar, which existing, no Criminal Court can try him ever. Acquittal or conviction of the person complained against, in the trial, is a different matter altogether and irrelevant too. Removal of bar, cognizance by the Criminal Court, and trial. Conversely, no removal of bar, no cognizance by the Criminal Court, and no trial ever. What can it be but final? By parity of reasoning, the order of stay, disabling the normal Court to function in the ordinary way, and relegating the parties to a 'non-Court', has finality attached to it, irrespective of the decision one way or the other, later, by such 'non-Court'.

22. The conclusion come to, therefore, is that the appellate order of stay, to appeal against which, to the Supreme Court, the requisite certificate is prayed for is a final order.

23. Such then is the finding sufficient to dispose of the matter before us. But mention must be made of the other cases we have been referred to:

1. Md. Felumeah v. S. Mondal, : AIR1960Cal582 . An interim injunction in a writ rule, restraining the grant of a licence for a cinema, comes to be varied by a subsequent order, order-Ing a temporary licence to issue. That, it is held, amounts to final determination, rendered not any the less final by the temporary period of the licence, and has, therefore, the requisite finality to make it a judgment.

2. Shivaram Poddar v. Income-tax Officer. : AIR1963Cal281 : A writ petition challenging the issue of notice under Section 34 of the Income-tax Act 1922 fails in the primary Court and on appeal too. Still it is held not to be a final order because nothing whatever has been done in the proceedings commenced under Section 34. A view as this militates against the law laid down by the Supreme Court in : [1966]3SCR198 supra: whether or not the order is final will not depend on whether the controversy is finally over or not, but whether the controversy raised before the High Court is over or not. Clearly, therefore, this decision appears to have been impliedly overruled.

3. Farbenfebriken Bayer Aktiengessell-schaft v. Joint Controller of Patents & Designs, : AIR1963Cal433 : The patentee's application to go up to the Supreme Court, from an appellate decision of this Court, fails on two grounds. First, this Court, hearing appeals against the decision of the Controller, acts as persona designata and, therefore, no appeal lies to the Supreme Court, Second, something is left over, in that the Controller calls for a draft licence setting out the terras -- a matter which is yet to be finally determined. The first ground prevailing, the second one becomes an obiter dictum. Excise it. The decision remains as it is. That apart, the second ground merits reconsideration. I venture to think so, with great respect. To the same test again, laid down by the Privy Council in the Rahimbhoy (1890) 18 Ind App 6 and Muzhar Husein, (1894) 22 Ind App 1 cases, and by the Supreme Court in the Mobanlal case, : 1968CriLJ876 supra. There is no going back upon the first order of the Controller, the second order to be passed being only consequential of the first. No doubt, in the two Privy Council decisions, there were decrees. But a decree per se would not do. What was required under Section 595 of the 1882 Code was a final decree. And both the decrees were treated as just so. Going by the 'purpose' test, and without co-relating the first order of the Controller to the whole of the controversy, the first order does become a final order.

4, Bengal Jute Mills Co., Ltd. v. Lalchand Dugar, : AIR1963Cal405 : Here what is deplored by the Court of appeal is non-mention of reasons by the Judge in the Court of first instance, even though a stay of the suit, under Section 34 of the Arbitration Act 1940, is in a way an adjudication of the rights of the parties.

24. Union of India v. Nalini Ranjan Guha, : AIR1955Cal257 , the last case that remains to be noticed, deserves a separate treatment, because it too deals with arbitration, though in another context. The trial Judge refers all matters in difference between the parties to the arbitration of Mr. Kalyan Basu. So he does under Section 8 of the Arbitration Act 1940. The Union of India, aggrieved thereby, prays for a certificate to appeal to the Supreme Court. But two insuperable obstacles stand in the way. One, Mr. Basu unfortunately dies before the Union of India moves so. Thus, the arbitration complained against becomes infructuous. And still a certificate for appeal. Two, sub-article (3), Article 133, of the Constitution provides in the clearest possible terms that no appeal shall lie to the Supreme Court from the judgment, decree or final order of one Judge of a High Court. Necessarily, therefore, the application for a certificate, displaying 'complete muddleheadedness', fails. That is enough. In this background, the observation, that the trial Judge's order is not a final order too, must rank as an obiter dictum, the matter having not been examined in the light of authorities, as it would have been, but for the two 'patent objections', and others too, to such a misconceived application.

25. In the result, the application succeeds and be allowed in terms of prayers (a) to (f) thereof, save that prayers (b) and (c) be regarded as 'in addition to' one another instead of 'in the alternative'.

Certified for two Counsel.

S.K. Mukheejea, J.

26. I agree


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