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W. Wood and Sons Ltd. Vs. Bengal Corporation and anr. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberSuit Nos. 386 and 1298 of 1954
Judge
Reported inAIR1956Cal238,60CWN578
ActsArbitration Act, 1940 - Section 34; ;Arbitration (Protocol and Convention) Act, 1937 - Section 3
AppellantW. Wood and Sons Ltd.
RespondentBengal Corporation and anr.
Appellant AdvocateSankar Ghose, Adv.
Respondent AdvocateA.C. Mitra and ;Ajay K. Basu, Advs.
DispositionApplication dismissed
Cases ReferredWeir v. Johnson
Excerpt:
- .....filing a written statement or taking any other steps in the proceedings, apply to the court to stay the proceedings, and the court, unless satisfied that the agreement or arbitration has become inoperative or cannot proceed, or that there is not in fact any dispute between the parties with regard to tile matter agreed to be referred, shall make an order staying the proceedings.'12. the argument on this section put briefly is that although the indian arbitration act requires readiness and willingness, section 3, arbitration (protocol and convention) act of 1937 does not insist on that requirement and that is the effect of the words 'notwithstanding anything contained in the indian arbitration act, 1940' appearing in that act.the non-obstante expression in that section emphasises the.....
Judgment:
ORDER

P.B. Mukharji, J.

1. This is an application to stay all proceedings .in Suit No. 1298 of 1954 pending in this Court between Bengal Corporation and W, Wood & Sons Ltd. The Notice of Motion was taken out by W. Wood & Sons Ltd. on 23-8-1954. The application is made under the Arbitration Act, 1940 and the Arbitration (Protocol and Convention) Act of 1937 as adapted.

2. The Arbitration clause on the strength of which this application is sought to be made is in these terms :

'All quastions of differences whatsoever which may at any time hereafter arise between, the parties hereto or their respective representatives touching this agreement or the subject-matter thereof or arising out of or in relation thereto respectively and whether as to construction or otherwise, shall be referred to a single Arbitrator in accordance with and subject to the provisions of the Arbitration Acts 1889 to 1934 or any re-enactment cr statutory modification thereof for the time being in force.'

3. This Arbitration clause appears as Clause 9 in the Agreement between W. Wood & Sons Ltd. and Bengal Corporation dated 19-10-1951 by which . the Bengal Corporation agreed to purchase from W. Wood & Sons Ltd. expanding hinges, hatches and locks and suitcase components in sufficient quantities to enable the Corporation every year for a term of five years to construct at least 5,000 complete revelation suitcases.

4. This action is a commercial cause instituted in this Court on 30-4-1954 by the Bengal Corporation against W. Wood & Sons Ltd. for the recovery of the sum of Rs. 60,000/- as damages for breach of contract on the allegation that the goods supplied by W. Wood & Sons Ltd. were unfit for the purpose for which they were purchased and were unmerchantable. There is also a Plea in the plaint for damages for breach of warranty, expressed or implied.

5. The subject-matter of this action certainly comes within the ambit and purview of the Arbitration clause. What is contended, however, is that there should be no stay of this action because of certain events which have taken place.

6. In so far as this is an application under Section 34 of the Arbitration Act, 1940 for stay of legal proceedings, it is incumbent upon the applicant to show that the applicant was 'at the time when the proceedings were commenced and still remains ready and willing to do all things necessary to the proper conduct of the Arbitration'.

It is contended on behalf of the respondent-plaintiff that the applicant has not been so ready and willing at all in the events that have happened.

7. It is, therefore, necessary to brieny set out the events. As early as 24-3-1953, the applicant wrote to the plaintiff that they had lailed to carry out their obligations under tne Agreement and, therefore, a demand was made to resort to Arbitration in England under the terms of Clause 9 of the Agreement between the parties. A suggestion was made in that letter that both parties should agree to a single Arbitrator to be appointed by the President of the Law Society of England and Wales.

There was little response from the side of the plaintiff, with the result that the applicant approached the President of the Law Society who in the circumstances declined to act as a single Arbitrator unless the parties agreed, persuasion was thereafter exercised by the applicant through the good offices of the Indian High Commission in London to induce the plaintiff to agree to Arbitration.

Such persuasion failed, one of the reasons for the failure being that the plaintiff claimed to go to Arbitration under the Indian Arbitration Act on the ground that an arbitration in England would be unhelpful, because all the defective components and parts were lying in Calcutta and it was necessary for Arbitrators to inspect them at site and make a decision. The applicant did not agree to come under the Indian Arbitration Act.

As will be seen from the Arbitration clause, the arbitration intended thereunder was obviously an arbitration under the English Acts as the years of the Statutes referred to therein will unmistakably show. That, in short, is the effect of the correspondence from March, 1953 to November, 1953 as . annexed to the affidavit of Sanyal, the constituted Attorney of the applicant affirmed in these proceedings on 19-5-1955.

8. Quite a different chapter began thereafter. The applicant not having succeeded in arranging for an arbitration, instituted proceedings in the Queen's Bench Division in February, 1954 to recover the price on two Bills of Exchange in respect of the said contract. An application was thereafter made by the applicant in those proceedings for leave to serve the Writ of Summons out of jurisdiction and was presented before the Master on 26-2-1954. The Master issued the Writ on the following day, 27-2-1954.

It is alleged that the Writ was served on the plaintiff here who war, the defendant there, on 23-3-1954. The plaintiff did not answer the Writ. The result was that on 30-4-1954 the Master gave leave to the applicant and signed judgment for the sum of 5,008-7 s-6 d together with costs. On the very same date when that Judgment was being signed in London, the plaintiff was instituting this action here in this Court. It is alleged by the plaintiff here that there is no proper service of the Writ of Summons of the English Proceedings, It is, however, not material for me in this application to decide whether such Writ was properly or duly served. ,

9. On these facts, the point now taken is that if the applicant has himself denounced the Arbitration Agreement by his conduct in taking legal proceedings in the Queen's Bench Division, then he cannot be said to be ready and willing. to go to Arbitration.

Obviously, even if the plaintiff in this suit, could not be persuaded to go to Arbitration, the applicant could easily have taken proceedings in. England under the English Arbitration Act for the appointment of an Arbitrator in accordance with the law as provided thereunder. He not having done so, the argument now made on behalf ofthe plaintiff is that there was no readiness and willingness on the part of the applicant to go to Arbitration or to enforce the Arbitration.

10. An action in a Court of law is inconsis- tent with readiness and willingness to go to Arbitration. The point is well settled, and it is un-necessary to discuss any authorities on the subject, and I shall be content by a reference to the passage in the 14th Edn. of Russell on the Law of Arbitration at page 66 where the law is stated to be :

'That a plaintiff by bringing an action in. respect of a matter agreed to be referred shows that he is not at the time when proceedings are commenced ready and willing to do all things necessary to the proper conduct of the Arbitra-tion and therefore is not entitled subsequently to apply for a stay.'

The authority of -- 'Weir v. Johnson', 1882 WN 159 (A), is quoted there. I think on the facts of this case it is impossible to contend that at the time when the suit was instituted here, namely, on 30-4-1954, the applicant who had by then already obtained judgment from the Queen's Bench Division in his action, could be said to be ready and willing to go to Arbitration. This application under Section 34, Arbitration Act, 1940, must, therefore, fail on the ground that the applicant was not ready and willing to go to Arbitration.

11. It was then contended on behalf of the applicant that although the applicant could not show readiness and willingness under the Arbitration Act, 1940, he could still come under Section 3, Arbitration (Protocol and Convention) Act, 1937 as adapted. That section provides :

'Notwithstanding anything contained in the-Indian Arbitration Act, 1940 or in the Code of Civil Procedure, 1908, if any party to a submission made in pursuance of an agreement to which the Protocol set forth in the First Schedule as modified by the reservation subject to which it was signed by India applies, or any person claiming through or under him, commences any legal proceedings in any Court against any other party to the submission or any person claiming through or under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time after appearance and before filing a written statement or taking any other steps in the proceedings, apply to the Court to stay the proceedings, and the Court, unless satisfied that the agreement or arbitration has become inoperative or cannot proceed, or that there is not in fact any dispute between the parties with regard to tile matter agreed to be referred, shall make an order staying the proceedings.'

12. The argument on this section put briefly is that although the Indian Arbitration Act requires readiness and willingness, Section 3, Arbitration (Protocol and Convention) Act of 1937 does not insist on that requirement and that is the effect of the words 'Notwithstanding anything contained in the Indian Arbitration Act, 1940' appearing in that Act.

The non-obstante expression in that section emphasises the main difference that while stay under Section 34, Indian Arbitration Act, 1940 is always discretionary with the Court by reason of tne use-of the word 'may' therein, sucti stay is an obligation and a mandate upon the Court under the Protocol Act by reason of the use or the word 'shall' in that Act provided of course certain conditions stated therein are present.

I shall assume without deciding that under the Protocol Arbitration the applicant can apply for a stay without himself being ready and willing as contended by the petitioner in this case. But even then by the very terms of Section 3, Arbitration (Protocol and Convention) Act, 1937, the applicant cannot be allowed to stay the suit in this case. I shall attempt to set out my reasons very briefly why the applicant cannot have a stay even under the Arbitration (Protocol and Convention) Act, 1937.

13. The first reason is that even in an application under Section 3 of this Act for stay of the legal proceedings, the Court has to be satisfied that the Agreement or Arbitration has not become (1) inoperative or (2) cannot proceed or (3) that the dispute is with regard to a matter agreed bo be referred. In my view, none of these conditions is present in this case.

If the applicant himself has sued upon the Agreement, then the contract Itself on which he has sued now stands merged in tne judgment obtained from the Court. Therefore, there is no Agreement or Arbitration which can be said to be still operative or which is still able to proceed. For what will happen before the Arbitrator supposing I stay the suit and allow the Arbitration to take place?

The first thing that the applicant need do then is to produce the judgment of the Queen's Bench Division before the Arbitrator and the Arbitrator will have no jurisdiction to re-open such decree or even to go behind it or even to decide the effect of that decree whether it is conclusive or res judicata or otherwise. These are questions which a Court alone can decide in this context of the present Arbitration clause.

In other words, the Agreement or the Arbitration has become 'inoperative' or 'cannot proceed'. It is the applicant who by his own act and conduct by bringing an action in the Queen's Bench Division has rendered the Agreement or the Arbitration inoperative or incapable of proceeding within the meaning of Section 3, Arbitration (Protocol and Convention) Act of 1937.

For what is the real dispute now? The real dispute now will no longer be the dispute that the plaintiff has raised in this action, but the point whether the judgment and the decree of the Court of the Queen's Bench Division precludes the plaintiff from raising this dispute or making this claim at all. The point is certainly not a matter agreed to be referred under the present Arbitration clause.

14. My second reason is that it is open to parties, subject respectively to the jurisdiction of different Contracting States who are signatories to the Protocol and Convention, to elect to come either under Arbitration under the National Statutes or under Arbitration under the Protocol. If by their Arbitration Agreement such parties choose Arbitration under National Statutes, such as the course which is chosen by the parties here, the agreement being that the parties should be governed by the English Arbitration Act mentioned in Clause 9 of the Agreement, there is then no further scope left for invoking the Protocol Arbitration any more.

To hold otherwise will be tantamount Co saying the nonsense that parties chose two different competitive Arbitration Tribunals to decide disputes under the same Contract. This conclusion becomes clear on the construction of the Words 'a submission made in pursuance of an agreement to which the Protocol set forth In the First Schedule ** applies' used in Section 3 of that Act. A reference to the First Schedule of that Act will at once show the meaning of those words. Clause 2 of the First Schedule says :

'The arbitral procedure, including the consi-tution of the Arbitral Tribunal, shall be governed by the will of the parties and by the law of the country in whose territory the arbitration takes place.'

Now plainly the Arbitral Tribunal there contemplated has to be governed by the 'will' of the Parties. It is obvious on the facts of this ease that there is no agreed will of the parties on such Arbitral Tribunal. It was contended by Counsel on behalf of the applicant that the will of the parties was the contract between the parties or, in other words, Arbitration under the English Arbitration Act.

Clearly that argument is erroneous for two reasons firstly because if that is the Arbitral Tribunal, then it is not a Tribunal under the Protocol and, secondly because the words 'will of the parties' in Clause 2 of the First Schedule cannot represent the contract between the parties because wherever the contract between the parties is intended, the First Schedule uses the word 'contract' and not 'will'.

For instance, in Clause 1 of the First Schedule the word 'contract' is used and not 'will'. I am fortified in this conclusion by this very cogent reason that Arbitration is always a matter on agreement between the parties and there cannot be two competitive kinds of arbitration, one under the National Statutes and one under the Protocol for disputes under the same contract.

If the Arbitration clause is so framed in a particular Contract as to allow such competitive Tribunals, the situation may be different although I cannot imagine who in his senses will eves like to do so. But where, as in this case, there is no ambiguity about what kind of Arbitration the parties intended under Clause 9 of the Present Agreement. I am of the opinion that no appeal to Protocol Arbitration can be entertained.

Before the Court stays any proceedings under Section 3, Arbitration (Protocol and Convention) Act, 1937, the Court must, In my view, be satisfied that there is a submission to Arbitration 'in pursuance of an agreement to which the Protocol .... applies'. That, to my mind, is basic. If the agreement be such to which the Protocol does not apply, then no question of stay under Section 3 of that Act arises.

I am satisfied on a construction of the Arbitration Clause in this case between the parties that by its very terms and language it is an agreement to which the Protocol does not apply. In fact, the parties chose to elect Arbitration under the English Arbitration Act. There is nothing in the Arbitration (Protocol and Convention) Act, 1937 to suggest that tne parties cannot contract out of Protocol Arbitration and submit to Arbitration under the National Statutes of any particular country.

The entire origin of ProtoccI Arbitration was to make possible arbitration between parties subject respectively to the jurisdictions of different Contracting States and where they had not agreed to come to the ju?isdiction of any one or other State. That basic reason is absent in this case by reason of the fact that both the English Seller and the Indian Buyer agreed to go to Arbitration under the English Arbitration Act.

15. For these reasons, I dismiss this application with costs.


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