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Raymon Engineering Works Ltd. Vs. Union of India (Uoi) - Court Judgment

LegalCrystal Citation
SubjectArbitration;Contract
CourtKolkata High Court
Decided On
Case NumberAward Matter No. 150 of 1970
Judge
Reported inAIR1972Cal281
ActsArbitration Act, 1940 - Section 34
AppellantRaymon Engineering Works Ltd.
RespondentUnion of India (Uoi)
DispositionApplication allowed
Cases ReferredCollins v. Cromic
Excerpt:
- .....of their not agreeing, of the said umpire, would be final and conclusive and the provisions of the indian arbitration act, 1940 and the rules thereunder and any statutory modification thereof would be deemed to apply to and to be incorporated in the contracts.'4. the said arbitration clause by express agreement formed part of each of the said three several contracts.5. in the suit the respondent has claimed various sums on account of claims in respect of wages escalator, materials escalator and sales tax in respect of the wagons manufactured and delivered by the respondent to the petitioner under the said three several contracts. the respondent in the plaint has pleaded that the petitioner through the railway board fraudulently and with the mala fide intention of gaining unfair and undue.....
Judgment:
ORDER

S.C. Ghose, J.

1. This application has been made by the Union of India inter alia for stay of the suit No. 4009 of 1969 (Raymon Engineering Works Ltd. v. Union of India) instituted in this Court by the respondent, Raymon Engineering Works Ltd.

2. The said suit was filed by the Raymon Engineering Works Ltd. inter alia for a declaration that letters dated 17th February, 1965, 27th February, 1965, and 18th November, 1965, mentioned in paragraphs 20 and 38 of the plaint are void, inoperative and not binding upon the plaintiff. The plaintiff has also prayed for delivery and cancellation of the said letters.

3. The plaintiff in the said suit has claimed also a decree for Rupees 32,33,391.08 P, alternatively an enquiry into the compensation and damages and decree for such sum as would be found due. The money part of the claim of the plaintiff in the plaint has been made on the basis of three several contracts entered into by and between the respondent and the petitioner whereby the respondent agreed to manufacture and supply railway wagons of diverse specifications on the terms and conditions mentioned in the said three contracts. The said contracts are contained in three several orders in writing bearing Nos. 61/RS(I)/954/l/258 dated the 14th April, 1961. No. 61/RS (I)/954/14/283 dated the 6th February. 1962 and No. 62/RS(I)/954/15/306 dated the 26th October, 1962, respectively. Each of the said contracts was subject to the terms and conditions contained in the Indian Railway Standard Conditions of contract known as A5-51 in so far as the said terms and conditions were not inconsistent with the conditions mentioned in the said contracts themselves. One of the terms or conditions of the said Indian Railway Standard Conditions of Contract provided as follows:

'In the event of any dispute arising under these conditions or in connection with the contract (except as to any matter the decision of which is specifically provided for in these conditions) the matter in dispute would be referred to two arbitrators, one to be nominated by the petitioner and one to be nominated by the respondent or in the case of the said arbitrators not agreeing then to an umpire to be appointed by the arbitrators in writing before proceeding on the reference and the decision of the arbitrators or in the event of their not agreeing, of the said umpire, would be final and conclusive and the provisions of the Indian Arbitration Act, 1940 and the rules thereunder and any statutory modification thereof would be deemed to apply to and to be incorporated in the contracts.'

4. The said arbitration clause by express agreement formed part of each of the said three several contracts.

5. In the suit the respondent has claimed various sums on account of claims in respect of Wages Escalator, Materials Escalator and Sales Tax in respect of the wagons manufactured and delivered by the respondent to the petitioner under the said three several contracts. The respondent in the plaint has pleaded that the petitioner through the Railway Board fraudulently and with the mala fide intention of gaining unfair and undue advantage and making unlawful gain induced and compelled the respondent to accept as condition for extension of due dates of delivery of the said wagons under the second contract by letters dated 17th February, 1965, and 27th February, 1965. The said conditions related to the giving up by the respondent its rights to claim additional sums on account of its claim for Wages Escalator, Material Escalator and Sales Tax in terms of the express contract between the parties.

6. Similarly it is alleged in the plaint the petitioner fraudulently and with mala fide intention of gaining unfair and undue advantage induced the respondent to accept conditions mentioned in the Railway Board's letters dated 16th February, 1965, and 18th November, 1965, for extending the due dates of delivery under the 3rd contract, by fraud, undue influence and/or coercion. Particulars of such fraud, undue influence and/or coercion have been set out in paragraph 21 of the plaint. The respondent seeks to avoid the said modification of the terms of the said contract in so far as it relates to the respondent's claim on account of Wages Escalator, Materials Escalator and Sales Tax as specified in the above mentioned letters on the aforesaid grounds of fraud, undue influence and/or coercion.

7. It appears from the affidavit-in-opposition filed by Manish Chandra Roy affirmed on 31st August, 1970, that Union of India filed a suit against the respondent being suit No. 842 of 1969 for a declaration that the respondent is holding number of wheel sets and other components for manufacturing wagons as well as 1973 Tons of Steel and a prototype wagon for and on account of the Union of India and for return of the same and also for damages suffered by the Union of India under a similar contract between the parries. Union of India has also filed another suit being suit No. 3042 of 1969 against the respondent for the recovery of Rupees 3,86,991.10 p. in respect of another contract. Both the aforesaid suits filed by the Union of India are in respect of contracts consisting similar arbitration clauses.

8. From the nature of affidavit evidence it seems to me that the claims in the suit No, 4009 of 1969 are in respect of contracts which contained valid and subsisting arbitration agreement and the subject-matter of the suit including the plaintiff's claims that the modifications of the terms relating to claims on account of Wages Escalator, Materials Escalator and Sales Tax mentioned in the aforesaid letters were void and not binding upon the plaintiff are matters agreed to be referred under the arbitration clause set out in the earlier part of this judgment. The said clause is a valid and subsisting arbitration clause and binding upon the respondent as well as the petitioner who are parties to the said arbitration agreement. There is nothing on record to show that at the commencement of the suit No. 4009 of 1969 the petitioner in the instant case was not ready or willing to do everything that was necessary to be done for the conduct of the arbitration in terms of the arbitration agreement between the parties. It is apparent also that the disputes which have arisen are matters agreed to be referred under the arbitration clause mentioned above.

9. Two grounds have been urged in opposition to this application by Mr. Rudra. First, the most important dispute between the parties involved in the suit is as to whether the plaintiff was induced to agree to abandon its claims on account of Wages Escalator, Materials Escalator and Sales Tax in terms of the contract between the parties by fraud or undue influence and/or coercion perpetrated and /or exercised by the petitioner. The said issue as to fraud or undue influence and /or coercion should be decided by the Court and should not be allowed by the arbitrators to decide.

10. Secondly, Mr. Rudra contended that the suit No. 842 of 1969 and suit No. 3042 of 1969 of the Union of India on similar contracts are pending ha this Court. The subject-matters of the said suits are similar and if the present suit be stayed, there will be a possibility of giving inconsistent decisions by two tribunals of competent jurisdiction, one this court and the other, the arbitrators on similar questions of fact and law. On that ground, also this suit should not be stayed.

11. Mr. Rudra referred to various decisions. I shall deal with the said decisions hereinafter.

12. The first decision mentioned by Mr. Rudra is Pramada Prasad Mukherjee v. Sagarmal Agarwalla, : AIR1952Pat352 . In the said case it was observed that 'when the suit is independent of the contract, the allegation of fraud in the plaint is enough to oust the jurisdiction of the arbitrators and stay should be refused. Even if the contract be admitted and the application arising on the breach of the contract be repudiated on the ground of fraud, stay should be refused if a prima facie case of fraud is made out'. Similar was the view of Harries, C. I. in Narsingh Prasad Boobna v. Dhanrai Mills, ILR 21 Pat 544 at p. 569 = (AIR 1943 Pat 53).

13. In Abdul Kadir Shamsuddin Bubere v. Madhav Prabhakar Oak, : [1962]3SCR702 , the Supreme Court held that where serious allegations of fraud were made against a party and the party charged with fraud desired that the matter should be tried in open court, that would be a sufficient case for the Court not to order an arbitration agreement to be filed and not to make reference. But in the instant case the party charged with fraud is the petitioner. Therefore, this case does not help Mr. Rudra.

14. In Bengal Jute Mills Co. Ltd. v. Lalchand Dugar, : AIR1963Cal405 it was held by a Division Bench of this Court that whether a contract containing an arbitration clause or not was denied, the defendant in a suit based on such a contract alleged fraud, collusion and conspiracy on the part of the plaintiff, the suit should not be stayed. It was laid down that it was the right of the party charged with fraud or other serious misconduct to have his character vindicated in open court. Such was the decision also of the Supreme Court in Printers (Mysore) Pvt. Ltd. v. Pothan Joseph, : [1960]3SCR713 (See paragraph 8 of the said judgment).

15. In Basantlal Jagatramka v. Dominion of India, : AIR1952Cal340 , relied on by Mr. Rudra it was decided that where the whole existence of the contract was challenged on the ground of fraud an arbitrator was not a suitable tribunal to decide such a question. Thus where such an allegation is made in a suit, such suit should not be stayed. That case, in my opinion decided that where the existence or validity of the main contract containing an arbitration agreement is challenged, the arbitrators have no jurisdiction to decide the said question. The said question must be decided by a Court and the suit wherein such an issue is involved should not be stayed. That case also does not in my view help Mr. Rudra.

16. The next case relied on by Mr. Rudra is the case of Eastern Steam Navigation Co. Ltd. v. Indian Coastal Navigation Co. Ltd., 46 Cal WN 933 = (AIR 1943 Cal 238). That case decided that if a charge of fraud of misconduct is made against any of the parties to a suit and the (sic) has to make such charge a fact in issue then if that party desires that such charge should be investigated not by a domestic tribunal like arbitrators, but by a court of law in public, the suit should not be stayed.

17. The last case relied on by Mr. Rudra is the case of Bilasrai and Co. v. Tolaram Nathmall, (1948) 52 Cal WN 858 lays down that where the contract is void, on the plea of fraud or mis-representation the Court should not stay the suit as it ousted the jurisdiction of the arbitrators. That is not the case here. In the instant case the party charged with perpetration of fraud has applied for stay of the suit. It must be noted here that the fraud as pleaded in the plaint does not specify any person who perpetrated the fraud; Union of India, or for that matter, the Railway Board, is not a person in that sense.

18. In England now, under Section 24(2) and (3) of the Arbitration Act 1950, if a dispute involving a charge of fraud arises under an arbitration agreement the Court has the power to order that the agreement ceases to have effect and to refuse the stay of an action brought in breach of the agreement. In India that is not the position and we are governed by the position prevailing in England prior to the enactment of the said statutory provision. In the instant case the charge of fraud is levelled against the petitioner who however desires to have the disputes tried by the Arbitrators.

19. For the reasons stated above and on the basis of the aforesaid authorities I am unable to accept the contention of Mr. Rudra that the allegation of fraud as pleaded by the plaintiff is a sufficient cause why this suit should not be stayed. This contention of Mr. Rudra must, therefore, fail.

20. The second contention of Mr. Rudra in regard to the possibility of conflicting decisions must also fail. No particulars have been pleaded to show that the same issue of fact or law arises in different proceedings mentioned in paragraphs 37 and 54 of the said affidavit of Manish Chandra Roy. There is nothing to show that identical or even similar facts are involved in this suit being suit No. 842 of 1969 and the other suits viz. suit No. 1866 of 1969 and No. 3042 of 1969. Thus in my opinion the ratio decidendi in Taunton-Collins v. Cromic, (1964) 2 All ER 332 does not apply to the facts and circumstances of the instant case. Thus both the contentions of Mr. Rudra fail.

21. This application must succeed. There will be an order in terms of prayer (a) to the petition.

22. The costs of the application must abide by the result of the arbitration proceedings.


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