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Shahadara (Delhi) Saharanpur Light Railway Company Ltd. Vs. Union of India (Uoi) - Court Judgment

LegalCrystal Citation
SubjectArbitration;Contract
CourtKolkata High Court
Decided On
Case NumberMatter No. 889 of 1977
Judge
Reported inAIR1978Cal460
ActsArbitration Act, 1940 - Section 34
AppellantShahadara (Delhi) Saharanpur Light Railway Company Ltd.
RespondentUnion of India (Uoi)
DispositionApplication dismissed
Cases ReferredLalchand Dharamchand v. Alliance Jute Mills Co. Ltd.
Excerpt:
- .....the arbitration act, 6. there was an agreement for the grant of the licence. pursuant to the said agreement a licence was granted to the plaintiff under which the plaintiff had operated the said tramways and light railways. the said agreement provided inter alia, as follows : 'if any doubt or difference shall arise between the government and the promoters of the company concerning anything herein contained or any matter in any way connected therewith or with these presents or the construction thereof or the rights, duties and liabilities of any person or persons in connection with these presents or as to the incidence of expense as between the government and the company under any of the clauses of this agreement then and in every such case the matter in doubt or difference shall be.....
Judgment:
ORDER

Sabyasachi Mukherji, J.

1. This is an application under Section 34 of the Arbitration Act, 1940 for stay of the Suit No. 214 of 1977.

2. The said suit was instituted on/or about 16th of April, 1977 by the Shahadara (Delhi) Saharanpur Light Railway Company Limited (in voluntary Liquidation). The basis of the claim of the said suit is that the plaintiff was operating a tramway under the Indian Tramways Act, 1886 and/or a light railway under the Indian Railways Act, 1890 between Shahadara (Delhi) Railway Station and Saharanpur. The length of the said system was about 92.5 miles equivalent to 148 kilometers. For operating the said system the plaintiff prepared and built extensive earth work on which the said tramway and/or railway tracks were based of which the average width was about 10 ft. stretching for the said 148 kilometers. The said earth work on which the tramway and/or railway tracks was placed was of a permanent character and the plaintiff had incurred huge expenses in the execution.

3. It is also the case of the plaintiff that as part of the said system the plaintiff had also built and/or constructed extensive buildings, railway stations, sidings, sanitary equipments and other things all of which have been dismantled and/or sold by the plaintiff since the plaintiff's voluntary liquidation.

4. The plaintiff company had gone into voluntary liquidation by a resolution dated 10th of Dec. 1970. The plaintiff further stated that it was a permanent licensee under the defendant in respect of the said system for value paying to the defendant 50% of its surplus profits.

5. The defendant being the Union of India as the owner of the Northern Railway Administration took over the said earth work of the aforesaid dimensions in or about May/June, 1974 and thereafter and as a result thereof it is the claim of the plaintiff that the defendant is bound to make compensation to the plaintiff for the taking over of the said earth work which the plaintiff assessed at Rs. 33,29,698/-. The plaintiff has, therefore, claimed the said amount on the basis of Section 60 of the Easements Act and under the provisions of Section 70 of the Contract Act, 1872 and the further alternative on the ground of unjust enrichment. This is the suit which is sought to be stayed by the present application under Section 34 of the Arbitration Act,

6. There was an agreement for the grant of the licence. Pursuant to the said agreement a licence was granted to the plaintiff under which the plaintiff had operated the said tramways and light railways. The said agreement provided inter alia, as follows :

'If any doubt or difference shall arise between the Government and the Promoters of the Company concerning anything herein contained or any matter in any way connected therewith or with these presents or the construction thereof or the rights, duties and liabilities of any person or persons in connection with these presents or as to the incidence of expense as between the Government and the Company under any of the clauses of this Agreement then and in every such case the matter in doubt or difference shall be referred to two Arbitrators one to be appointed by each party or by the Umpire of such Arbitrators in case they differ in opinion but if either party shall refuse or neglect to appoint on Arbitrator for one month after notice in writing from the other of an Arbitrator being or having been appointed by him then the Arbitrator so appointed may make a final decision alone which shall have the same force and effect as the award of two Arbitrators or their Umpire duly appointed.'

7. It was, therefore, urged that in view of the fact that the disputes in the suit were connected with the licence the said suit should be stayed. It is, however, difficult for me to accept this contention. The agreement containing the arbitration clause was an agreement which had been entered into with the promoters of the plaintiff company and the Government of U. P. The agreement was not with the Company itself after it had been formed.

8. The agreement recites as follows : 'An Agreement made this Eleventh day of October, one thousand nine hundred and five between the Government of the United Provinces of Agra and Oudh and hereinafter called 'the Government' of the one part and Sir Thomas Acquin Martin Knight, Rajendra Nath Mookerjee, Charless Woo-lard Waish and Harold Partick Martin, all of Calcutta and carrying on business there as Engineers and Contractors under the style or firm of Martin and Co. and hereinafter called 'the Promoters' for and on behalf of a Company about to be formed and to be called the Shahadara (Delhi) Saharanpur Light Railway Company Limited hereinafter called 'the Company' of the other part whereas the Promoters have recently made certain proposals to the Government for a concession of the right to construct and work a Steam Tramway (a) ..... fromShahadara on the East Indian Railway to Saharanpur of the approximate length of 95 miles and (b) for a branch of the above Tramway from Baraut to Meerut of the approximate length of 30 miles and the Government granted such concession with the approval of the Government of India upon the terms and conditions set forth in an agreement dated the 12th day of April 1904 and made between the same parties as these presents and scheduled to Notification No. 339/187-R. of 1904 of the Government dated the 18th April 1904 and whereas modifications and alterations of the said terms and conditions have since been agreed to and it has now been agreed that the said agreement of the 12th of April 1904 shall be considered as cancelled and that these presents shall be taken and read in substitution therefor.'

9. An agreement of this nature with the promoters of a Company cannot be enforced against the company (see in this connection observations made in the case of Natal Land etc. Co. Ltd. v. PaulineColliery Syndicate Ltd., 1904 AC 120). The aforesaid view was reiterated in the case of Sobhag Mal Lodha v. Edward Mills Co. Beawar, 42 Com Cas 1 at p. 26 : (1971 Tax LR 178) (Raj).

10. On behalf of the respondents it was contended that such an agreement with the company could be presumed in the facts of this case. Reliance in this connection was placed on certain observations in Palmer's Company Precedents, 17th Edn. page 207.

11. My attention was also drawn to the observations of Jessel M. R. in the case of Re: Empress Engineering Co. 16 Ch D 125 at p. 128. There, Master of Rolls observed, that acts might be done by the company after its formation which would make a new contract of the same effect as the old one entered into by the promoters before its formation. There is no evidence in this case that 'such a thins had, in fact, happened. Therefore even though such a contract might have been possible but the same must be entered into between the new company after it had been formed on the basis of the agreement with the promoters and there is no evidence to that effect, If that is the position, then in my opinion, it cannot be accepted that there was anv binding contract between the parties to the suit which entitled the applicant to enforce the arbitration clause In this suit.

12. It was, then, contended that the nature of the suit was such that the disputes in the suit were not covered by the arbitration clause. I have set out before the arbitration clause. The arbitration clause is of a very wide amplitude. It covers any matters connected with the licence. On behalf of the respondents, reliance was placed on the observations of the Division Bench of this Court in the case of Johurmull Parasram v. Louis Dreyfus Co. Ltd., AIR 1949 Cal 179. There the contract was for supply of goods with arbitration clause. The suit was filed on the ground of frustration and fraud. It was held that the claim for damages was based on tort and implied contract and the suit could not be stayed.

13. On the other hand, counsel for the petitioner, drew my attention to the observation of Mr. Justice Ghose in the case of Lalchand Dharamchand v. Alliance Jute Mills Co. Ltd., : AIR1973Cal243 . It is true that the clause of the arbitration in the instant case is quitewide. It covers any dispute connected with the licence. Whether a particular dispute is connected with a particular transaction or not would depend upon the facts and circumstances of the case. In a way it is true that disputes have arisen because the Company started functioning pursuant to the licence. In that way one can say that the disputes have connection with the licence. But the disputes as such are independent of the rights and obligations of the parties under the licence. Thus, where a dis-pute, though not arising under the con-tract, is inextricably connected with or indisputably linked up with the contract which contains an arbitration clause, it can be said that the dispute is connected with the contract. In this case these disputes which have arisen for non payment of compensation claimed by the plaintiff have nothing to do with the contract or with the grant of the licence. In spite of the amplitude of the arbitration clause, in my opinion, the disputes in the present case cannot be said to be covered by by arbitration clause.

14. It was, lastly, contended that in view of Section 40 of the Government of India Act, 1858 this contract had not been entered into in accordance with the requirements of law. Section 40 of the Government of India Act, 1858 provides as follows:--

'XL. Powers to sell and purchase, and to enter into Contracts, vested in Secretary of State in Council.--

The Secretary of State in Council, with the concurrence of a Majority of Votes at a Meeting, shall have full Power to sell and dispose of all Real and Personal Estate whatsoever for the time being vested in Her Majesty under this Act, as may be thought fit, or to raise Money on any such Real Estate by way of Mortgage, and make the proper Assurances for that Purpose, and to purchase and acquire any Land or Hereditaments, or any interests therein, Stores, Goods, Chattels, and other Property, and to enter into any Contracts whatsoever, as may be thought fit, for the purposes of this Act; and all Property so acquired shall vest in Her Majesty for the Service of the Government of India; and any conveyance or Assurance of or concerning any Real Estate to be made by the Authority of the Secretary of State in Council may be made under the hands and Seal of Three Members of the Council.'

On the other hand, it was urged on behalf of the petitioner that the document in question being 30 years old should be presumed to have been properly executed and it was also submitted that Section 40 dealt with the question of transfer of property and did not cover execution of contracts like the present one. In the view I 'have taken on the other aspects of the matter, it is not necessary for me to consider this question any further.

15. For the reasons mentioned hereinbefore, this application fails and is accordingly dismissed. Cost of this application will be the cost in the suit.

16. There will, however, be a stay of operation of this order for a fortnight.


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