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The Pench Valley Coal Co. Ltd. Vs. the Indian Cable Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberAward Case No. 57 of 1974
Judge
Reported inAIR1975Cal284
ActsArbitration Act, 1940 - Section 34; ;Code of Civil Procedure (CPC) , 1908 - Order 37, Rule 3
AppellantThe Pench Valley Coal Co. Ltd.
RespondentThe Indian Cable Co. Ltd.
DispositionApplication dismissed
Cases ReferredCouncil v. Associated Live
Excerpt:
- .....of delivery of the goods and as there were disputes as to the quality and time for delivery of the goods, the disputes that the applicant was raising were covered by the arbitration agreements and as such the suit under order 37 filed by the respondent/plaintiff should be stayed. the first question that requires consideration in this case, is, whether the suit is in respect of the matter agreed to be referred to arbitration under the clauses of the contracts mentioned hereinbefore. counsel for the respondent contended that the suit was only a suit on the negotiable instruments and his client had accepted the negotiable in-struments, namely, the hundies in this case in discharge of the right to get payment and his cause of action was based on the said negotiable instruments and as such.....
Judgment:
ORDER

Sabyasachi Mukharji, J.

1. This is an application under Section 34 of the Arbitration Act, 1940. The application relates to a suit filed under Order 37 of the Code of Civil Procedure. In the suit the plaintiff has claimed a decree for Rupees 1.07.604.64 P. against the applicant. The claim is bused on certain hundies drawn and accepted by the applicant in respect of certain goods delivered against the challans by the plaintiff. That the hundies were drawn and accepted in discharge of delivery of the goods is apparent from the hundies - negotiable instruments - themselves which are annexed to the plaint. The suit was filed on the 5th February, 1974, and this application was made under Section 34 of the Arbitration Act, 1940, or, the 12th March, 1974. It is the case of the applicant that the goods which were delivered by the plaintiff-respondent were defective and damaged and there was also failure to deliver the goods in time as a consequence whereof the applicant had suffered damages and in respect of which the applicant is entitled to claim the damages. The goods were delivered under certain contracts and that position is undisputed. These written contracts contained arbitration clauses to the following effect :--

'If any dispute or differences shall arise between the buyer and the seller concerning this order it shall be referred to arbitration in Calcutta under the rules of the Tribunal of Arbitration of the Indian Chamber of Commerce in Calcutta and any award or awards made shall be final and binding on both the parties.'

It is the case of the applicant that as the suit related to the hundies which were given in discharge of the obligations for payment in respect of delivery of the goods and as there were disputes as to the quality and time for delivery of the goods, the disputes that the applicant was raising were covered by the arbitration agreements and as such the suit under Order 37 filed by the respondent/plaintiff should be stayed. The first question that requires consideration in this case, is, whether the suit is in respect of the matter agreed to be referred to arbitration under the clauses of the contracts mentioned hereinbefore. Counsel for the respondent contended that the suit was only a suit on the negotiable instruments and his client had accepted the negotiable in-struments, namely, the hundies in this case in discharge of the right to get payment and his cause of action was based on the said negotiable instruments and as such the arbitration clauses did not cover or did not contemplate any dispute in respect of the suit filed by the plaintiff on the negotiable instruments given in discharge of the boliga-tion for payment. In support of this argument counsel for the respondent drew my attention to the decision of the Supreme Court in case of Commr. of Income-tax, Bombay South, Bombay v. Ogale Glass Works Ltd., : [1954]25ITR259(SC) where the Supreme Court observed that when it was said that a payment by negotiable instrument was a conditional payment, what was meant was that such pyment was subject to a condition subsequent that if the negotiable instrument was dishonoured on presentation, the creditor might consider it as waste paper and resort to his original demand. In my opinion the proposition that negotiable instrument gives a cause of action independent as such and oforiginal consideration cannot be disputed, but that proposition, in my opinion, has no relevance in determining the present controversy before me. Reliance was also placed on the decision of the Supreme Court in the case of Ramlal Onkarmal Firm v. Mohanlal Jogani Rice & Atta Mills, : [1965]3SCR103 and on the observations at pages. 1681 and 1682 of the report. This case in my opinion held the similar proposition and is not quite germane to the point in issue before me. Looking at the arbitration clauses it appears to me that the clauses were wide enough to include a dispute arising in respect of a discharge of the obligation for payment. Therefore, even if there has been a discharge of the obligation for payment by the negotiable instrument and acceptance thereafter by the buyer if dispute is raised regarding the delivery of the goods, in respect of which the negotiable instruments were given then in view of the amplitude of the arbitration clauses such disputes are covered by the arbitration agreements. Therefore, in this case when the applicant/defendant is contending that the goods delivered were defective and were not in time and as such the discharge of obligation for payment in this case was made wrongfully and was liable to be refunded, the disputes regarding the same is in my opinion referable and concerning the order of the contracting parties and in that view of the matter I am of the opinion that it should be held that the disputes are covered by the arbitration agreements.

2. It was, secondly, contended that is order to be entitled to a stay under Section 34 not only should there be an arbitration agreement properly entered into by the party to the legal proceeding, but the party seeking or asking for a stay must have to do all things necessary to go in for arbitration at all material times. It was urged that prior to the institution of the suit there was no dispute raised by the applicant/defendant regarding the suit or regarding the contract or payment or discharge, and it was for the first time that after the suit bed been filed that this alleged dispute had been sought to be raised in the manner proposed to be done. Reliance was placed in this connection on the decision of this Court in the case of Shalirmr Paints v. Om Prokash, : AIR1967Cal372 , and the observations of A. N. Sen, I. appearing at pages 375 and 376 of the report. In that case the learned Judge found that the party in question had not evinced indication of readiness or willingness to come in for arbitration-There in reply to the notice of demand in the correspondence that preceded the institution of the suit, there was no indication that the disputes were covered by the arbitration clauses. In that view of the matter the learned Judge found in the facts and circumstances of the case that though there was arbitration agreement in respect of the subject-matter of dispute, the applicant was not entitled to a stay. In the instant case, it is true that there is no letter or indication of any dispute having been raised prior to the institution of the suit. It is also true that before the institution of the suit there is no letter or claim from the applicant/defendant raising any question of controversy about the delivery of the goods or quality of the goods, yet it has to be borne in mind that the plaintiff/respondent also did not send any letter of formal demand. There was no occasion for the applicant to raise any dispute prior to the institution of the suit. As a matter of fact, it is not necessary that dispute should be raised before the institution of the suit. In this connection, reliance may be placed on a decision of this Court in the case of Governor-General in Council v. Associated Live-Stock Farm (India) Ltd., AIR 1948 Cal 230. Therefore, in the aforesaid view of the matter, I am also unable to accept this objection on behalf the respondent in this case.

3. There is, however, another aspect of the matter and which in my opinion is decisive in this case. As mentioned hereinbefore this is a suit under Order 37 of the Code of Civil Procedure. Under Rule 3, Order 37 of the Code of Civil Procedure, the applicant is not entitled to defend the suit unless leave is obtained upon application made within 10 days from the service of writ of summons. This application is belated from that point of view. This is an application for stay and indeed one of the conditions for application for stay is that no step should be taken in the suit. But in my view the harmonious way of looking at provisions like these in respect of stay under Order 37 where controversy or dispute arises and if an application for stay has to be made under Section 34 of the Arbitration Act, is to hold that the application must also be made as contemplated by Rule 3, Order 37 of the Code of Civil Procedure. Otherwise, this will be a method to defeat the provisions of Order 37. The only harmonious way to look at these parallel provisions of the Arbitration Act and the Code of Civil Procedure is to see that in an application covering Section 34 where there is scope of application for stay, that must also fulfil further limitation for leave to defend under Order 37 of the Code. Viewed from that position, this application is belateu and therefore fails and accordingly is dismissed.

4. Costs of this application will be cost in the suit.

5. Observations of mine, however, will not in any way prejudice the rights of the applicant in any application made or to be made for leave to defend.

6. Interim order, if any, is vacated but this will continue for a period of ten days.


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