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Jyoti Brothers Vs. Shree Durga Mining Co. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberSuit No. 2437 of 1955
Judge
Reported inAIR1956Cal280,60CWN420
ActsArbitration Act, 1940 - Section 2
AppellantJyoti Brothers
RespondentShree Durga Mining Co.
Appellant AdvocateA.C. Bhabra, ;R.C. Deb and ;S.C. Sen, Advs.
Respondent AdvocateG.P. Kar, Adv.
DispositionApplication dismissed
Cases ReferredBrindaban Chandra Dutt and Co. v. Biswsesswar Lal
Excerpt:
- .....added to obligation. if a seller says 'i can sell goods' that does not mean an immediate or present contract to sell.similarly, if a person says 'i can go to arbitration' that statement does not make an immediate contract to send disputes to arbitration. a mere pious wish or desire for arbitration does not make a contract for arbitration. an arbitration agreement has to be couched not in precatory but obligatory words. no particular form can be laid down as universal for framing an arbitration agreement but this much is certain, words used for the purpose must be words of choice and determination to go to arbitration and not problematic words of mere possibility.section 2(a) arbitration act defines an arbitration agreement to mean 'a written agreement to submit present or future.....
Judgment:
ORDER

P.B. Mukharji, J.

1. This is an application for stay of a suit under Section 34, Arbitration Act. The Arbitration clause in this case is in the following terms:--

'In the event of any dispute arising out of this contract the same can be settled by Arbitration held by a Chamber of Commerce at Madras. Their decision shall be binding to the Buyers and the Sellers'.

2. The suit which the plaintiff filed in this case is a suit claiming damages for breach of contract for non-delivery of the goods. The allegation is that the defendant agreed to sell and the plaintiff agreed to buy certain cargo loads of iron ore. The Arbitration clause that I have set out appears in this contracts.

3. Apparently if there is a valid Arbitration agreement in that clause quoted above, the disputes alleged in the plaint are unquestionably disputes which come within the ambit of that Arbitration clause. But the whole point is whether this is a valid Arbitration agreement at all. Before discussing the construction of this clause, it is necessary to refer to the fact that there are five different Chambers of Commerce in Madras and according to a decision of S. R. Das Gupta, J. in 'Karanji and Co. v. Indo-China Trading Co., Ltd.' 56 Cal WN 763 at p. 767 (A), such an Arbitration agreement is bad on the ground of being vague and indefinite in respect of the Arbitrator who is to arbitrate in the dispute.

In answer to this decision reference was made by the applicant to the decision of the Court of Appeal in 'India Hosiery Works v. Bharat Woollen Mills Ltd.' : AIR1953Cal488 where the effect of Sections 2, 8 and 20, Arbitration Act, among other sections, was considered by the Court of Appeal. The applicant contended before me that the decision in 'Karanji's case (A)' should not be followed because it did not construe the effect of Section 2(a) and Section 8, Arbitration Act and that the failure to name or even specify a definite arbitrator did not make an arbitration agreement invalid because of the express saving in Section 2(a), Arbitration Act using the words 'whether an arbitrator is named therein or not' in defining an arbitration agreement.

Although the decision of the Court of Appeal was two years after the decision of 'Karanji's case (A)', I do not find there any reference to 'Karanji's case (A)'. It is, however, unnecessary for me to decide this particular point, whether 'Karanji's case (A)' was rightly decided or not, because apart from the question that there are five different Chambers of Commerce in Madras, there is a more fundamental point in this case which vitiates, in my judgment, the validity of this alleged Arbitration agreement.

4. I know of no reported decision where any Arbitration clause used the word 'can' as in this case. The Arbitration Clause in this case can at best mean that the dispute 'can' be settled by Arbitration. But that does not mean that the dispute shall be settled by Arbitration. It only means this that after the dispute has occurred, the parties may go to Arbitration as an alternative method of settling the dispute instead of going to the Courts. But that means that after the dispute has arisen, the parties will have to come to a further agreement that they shall go to Arbitration.

In other words, the clause at best means that it is a contract to enter into a contract. It denotes the possibility of Arbitration in the event of a future dispute. I do not consider a contract to enter into a contract to be a valid contract in law at all. I am, therefore, of the opinion that this is not a valid submission to Arbitration. The word 'can' by the most liberal interpretation only indicates a possibility. A legal contract is more than a mere possibility. It is possibility added to obligation. If a seller says 'I can sell goods' that does not mean an immediate or present contract to sell.

Similarly, if a person says 'I can go to arbitration' that statement does not make an immediate contract to send disputes to arbitration. A mere pious wish or desire for arbitration does not make a contract for arbitration. An arbitration agreement has to be couched not in precatory but obligatory words. No particular form can be laid down as universal for framing an arbitration agreement but this much is certain, words used for the purpose must be words of choice and determination to go to arbitration and not problematic words of mere possibility.

Section 2(a) Arbitration Act defines an Arbitration agreement to mean 'a written agreement to submit present or future differences to Arbitration whether an Arbitrator is named therein or not'. It is quite true that it may be a present or future difference that is intended to be the subject of Arbitration. But nevertheless it is essential in my opinion for an Arbitration agreement to be a present agreement to submit present or future differences.

The Agreement must be a present agreement and a concluded agreement according to the test of an ordinary contract. If it fails in that test, then there is no submission and no Arbitration agreement at all. If in law it is not an agreement at all, it is no answer to say that this clause appears as one of the terms and conditions of the contract in Clause 11 as 'other conditions'. An invalid contract does not become valid by describing it as a 'condition'. Here the Arbitration clause which is Clause 11 is;

'In the event of any dispute arising out of this contract the same can be settled by Arbitration held by a Chamber of Commerce at Madras'. On a proper construction of this clause, I have come to this conclusion that it means that after a dispute has arisen, the parties have further to agree that their dispute shall be referred to Arbitration and I suppose then to decide also which Chamber of Commerce at Madras. But the Arbitration clause as it stands is not an Arbitration agreement and is not a present contract to submit disputes to Arbitration.

5. It is contended on behalf of the applicants that the word 'can' here can also be construed as a kind of an option given to either of the contracting parties and reliance was placed on the decision of the Court of Appeal in 'Kedarnath Atmaram v. Kesoram Cotton Mills Ltd.' ILR (1950) 1 Cal 550 (C) where the clause was, 'all matters, disputes etc. shall at the option of the Mills, be referred to the Arbitration of the Indian Chamber of Commerce'. It was held that although it was the option of the Mills, it was a good contract to submit disputes to Arbitration and came within the meaning of the statutory definition of the words 'Arbitration agreement' in Section 2, Arbitration Act. That decision also refers to another case in 'Brindaban Chandra Dutt and Co. v. Biswsesswar Lal' : AIR1938Cal10 where also the Arbitration agreement used the words:

'If any dispute arises etc., it shall be optional to you (Seller) to refer the dispute in respect of Japanese goods to the Arbitration of Japanese Commercial Museum'.

These decisions were cited to show that an option could belong to any of the contracting parties to go to Arbitration and the fact that it belongs to any one of them does not invalidate the contract for arbitration. This doctrine of option was called in aid to rescue the word 'can' in this Arbitration clause.

In my judgment these cases and the doctrine of option cannot save the present arbitration clause. The first insuperable difficulty is that all the contracts of Arbitration in these two cases just mentioned use the word 'shall'. That means arbitration there, was a clear and unequivocal obligation and there was a binding concluded contract between the parties to go to arbitration. Therefore, the contract was a present contract to submit future differences and clearly, therefore, came within the meaning of the words 'Arbitration agreement' in Section 2(a), Arbitration Act. That benefit is not available to the applicant on the present Arbitration clause before me.

The second difficulty is that even if option is assumed, then it has to be assumed as the option to any one of the parties. In that case such a serious right to enforce Arbitration should be more clearly expressed because it is an ouster of an ordinary person's right to come to the Courts. Such right cannot be lost by ambiguous and equivocal words. The usual language to express that would be the language of the two cases just mentioned, namely, 'at the option of' so and so.

The Arbitration clause in the instant case does not express whose option it is to call for Arbitration. If it is the option of one party as against the other, then that option must in my view be clearly recognised in the language of the Arbitration agreement. If it is the option of both, that is, both must, agree to go to Arbitration before Arbitration can be enforced, then the present Arbitration clause becomes a contract to enter into a contract and, therefore, bad.

From the business point of view, it does not seem to me at all unreasonable that two business men would agree to this course of action, namely, that they will not force an Arbitration against an unwilling party, but if both the parties agree, they would decide to have their disputes settled by Arbitration and accept their decision as final.

6. I, therefore, dismiss this application withcosts.


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