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The Abu Road Electricity and Industries Co. Ltd. Vs. Industrial Gases Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberAppeal No. 215 of 1972
Judge
Reported inAIR1977Cal482,81CWN1101
ActsArbitration Act, 1940 - Sections 20, 20(4) and 34
AppellantThe Abu Road Electricity and Industries Co. Ltd.
Respondentindustrial Gases Ltd.
Appellant AdvocateAnindya Mitra and ;Pratap Chatterjee, Advs.
Respondent AdvocateMilan Kumar Banerjee and ;Sudipta Sarkar, Advs.
DispositionAppeal dismissed
Cases ReferredMichael Golodetz v. Serajuddin
Excerpt:
- salil kumar datta, j.1. this is an appeal against an order dated may 22, 1972 passed by salil kumar roy choudhury, j. directing that the arbitration agreement contained is the contract for supply of 400 k.w. diesel generating set by the respondent to the appellant be filed in this court. there was a further direction that disputes mentioned in the petition be referred to the arbitrators to be appointed in terms of the arbitration agreement contained in clause 29 of the general terms and conditions of the respondent and in default the parties would be entitled to apply to this court for appointment of an arbitrator.2. the appellant, the abu road electricity and industries co. ltd. is engaged in supply of electricity in abu road and neighbouring areas. for increasing its capacity for supply.....
Judgment:

Salil Kumar Datta, J.

1. This is an appeal against an order dated May 22, 1972 passed by Salil Kumar Roy Choudhury, J. directing that the arbitration agreement contained is the contract for supply of 400 K.W. Diesel Generating set by the respondent to the appellant be filed in this Court. There was a further direction that disputes mentioned in the petition be referred to the arbitrators to be appointed in terms of the arbitration agreement contained in Clause 29 of the general terms and conditions of the respondent and in default the parties would be entitled to apply to this Court for appointment of an arbitrator.

2. The appellant, the Abu Road Electricity and Industries Co. Ltd. is engaged in supply of electricity in Abu Road and neighbouring areas. For increasing its capacity for supply of electricity, it approached the respondent, who carries on business inter alia of import of machinery, for supply of generating sets.

3. The respondent, it appears, during 1962-63 offered to supply to the appellant 200 K.W. Diesel generating set in terms of its letters dated March 29, 1962, August 20, 1962 and November 2, 1963 as also other letters. As the appellant was interested is diesel generating set of 400 K.W. capacity, following further correspondent, the respondent made a revised offer for such set, to be imported from U.S.S.R., by its letter of April 10, 1964. While the letter contained inter alia terms of payment of delivery as also charges for erection or alternatively for providing one supervising engineer for supervising, installation, there was the following endorsemest on the front page in the said letter at the bottom in red print:

'All quotations and contracts are subject to Calcutta High Court jurisdiction and to our standard terms, an extract of which is reproduced on the back'.

4. The reverse pages of the said letter of April 16, 1964 contained 'Extract from General Sale conditions applying against orders and quotations.' Clause one of the said extract is as follows:--

'1. Purchaser's orders are accepted strictly on the understanding that purchaser accepts our general sale condition.........'

5. The extract has 13 clauses and at the bottom there is the following endorsement.

'Complete sale condition can be supplied on request.'

6. These clauses have been printed at pages 68-70 of the Paper Booh.

7. The offer was accepted by a telegram and confirmed by letter dated May 30, 1964 with slight variation and it was stated therein inter alia as follows:--

'...... we have now pleasure to place an order for 400 K.W. set as offered by you with all terms negotiated and confirmed between us by corresipondence till date which includes terms of payment to be the same for the order on c. i. f. basis or f.o.r. basis.'

8. In reply the respondent intimated by its letter of June 6, 1964 its acceptance of the order in following terms:--

'...... we have pleasure in accepting your order in terms of our offer, subsequent correspondence and as per our standard sales terms and conditions printed on the back of our letter head'.

9. There was no endorsement at the bottom of the said letter though on the reverse the extract of sale terms and conditions was there almost in similar terms as the other with further reference to the general terms of contract to which the contract was subject, such general terms being available on request.

10. The generating set was delivered to the appellant and it was installed by others though such job was to be done by the respondent's engineer according to agreement. According to the appellant it was entitled to various amounts from the respondent, including increase of customs duty paid by it, refund of price which was reduced by the respondent at the time of release of foreign exchange interests on amounts blocked towards L/C, loss for not starting the machine for lapses of the respondent, demurrage etc. in all for about Rs. 2 lakhs. The appellant through its lawyer demanded payment of the said amount by his letter dated August 20, 1968. As the amount or any portion thereof was not paid, the appellant on or about Dec. 9, 1968 filed a suit being Suit No. 17 of 1969 before the District Judge, Sirohi praying for decree for Rs. 1,82,226 on the basis aforesaid against the, respondent on the above allegations. The respondent filed an application on March 21, 1969 in the said court under Section 34 of the Arbitration Act, 1940 for a stay of proceedings alleging that in respect of the disputes in suit arising out of the contract between them there was a provision for arbitration which was binding on the parties. On this application the Court granted a stay as prayed for on consent and we are told, the stay is still continuing till the proceeding before us is concluded.

11. On March 3, 1970 the respondent filed an application in this Court stating that, in view of the provisions for arbitration as contained in the general sale conditions in respect of the contract between the parties, the disputes were to be settled by arbitration, and so the arbitration agreement should be filed in the Court and reference be made to the arbitrators in accordance therewith.

12. The application was opposed by the appellant and affidavit-in-opposition affirmed on its behalf by R. C. Bramhabatt, one of its Managing Directors, on May 14, 1971 was filed stating inter alia that the appellant never had any knowledge of the general sale conditions prescribed by the respondent as alleged and no brochure containing the said general sales conditions was ever brought to the notice of the appellant. Further, the only general terms of which notice was given were those printed overleaf in the letter of March 29, 1962 (being pages 68-70 of the Paper Book) which, as we have seen, are similar to those printed overleaf of the respondent's letter of April 16, 1964 containing the revised offer. It was further stated that the arbitration clause had no application to the disputes raised and there was in existence no valid or binding arbitration agreement which also was vague, uncertain and unworkable. For the aforesaid reasons the application should be dismissed.

13. In the affidavit-in-reply, affirmed by Surendra Kumar Sangal on June 17, 1971 the respondent alleged that when Mr. Bramhabatt visited its office at Calcutta on November 20, 1962 he went through the general sale conditions, the printed copy whereof was taken away by him. It was reiterated that there was a valid and binding agreement for arbitration and the claims were covered by the said agreement. The application accordingly should be allowed.

14. S. K. Roy Choudhury, J. on hearing the respective contentions of the parties held that there was clearly an arbitration agreement between the parties which was incorporated in the contract by clear and specific reference as appearing in the correspondence reading as a whole. The entire correspondence had to be looked into as a whole which would indicate the intention of parties and the contract was to be construed in the background and circumstances of the case, and in law, the arbitration agreement was not to be signed by the parties but it was to be in writing. It was further held that there was sufficient notice of the arbitration clause which was clear and unambiguous and in wide terms to cover the disputes. In the premises the application under Section 20(4) of the Arbitration Act was allowed by the learned Judge by order dated May 22, 1972 and the arbitration agreement contained in the contract for supply of 400 K.W. Diesel Generating set of U.S.S.R. origin and letters of May 30, 1964 and June 6, 1964 were directed to be filed in this Court with further consequential directions in terms of Clause 29 of the general terms and conditions of sale of the respondent. The present appeal is against this order.

15. The general sale conditions relied on by the respondent, and annexed as Annexure 'A' of its petition under Section 20 are in relevant excerpts as follows:--

'The Industrial Gases Ltd., Post Box 853, Calcutta-1.

And

Its subsidiaries and associates.'

General terms and conditions applying to agreements, Orders/Indents/Quotations/ Offers for sale cf Plants, Machines and equipments. (Special terms and conditions applying to agreements, Orders, Indents, Quotations/Offers for sale of Gases and to contracts for erection or for supervision of erection can be had on request).

16. Purchaser's orders are accepted strictly on the understanding that purchaser accepts company's general conditions.

1. * * * * 29. Disputes of whatever nature arising under, out of, or in respect of the Order including any dispute arising under or out of re-sale under Clauses Nos. 6 and 24 hereof shall unless amicably settled be referred to the survey or arbitration of two merchants resident of Calcutta, one to be named by purchasers and one by the Company. The surveyors or arbitrators shall appoint an Umpire before entering upon the reference and in the event of their being unable to agree to any Umpire the Umpire shall be nominated by the Chairman for the time being of the Bharat Chamber of Commerce. In the event of either of the parties failing to nominate a Surveyor or an Arbitrator within fifteen days after being requested in writing to do so by the other party, the said other party shall have the power to nominate a Surveyor or Arbitrator on behalf of the defaulting party as well and the two surveyors or arbitrators so nominated shall proceed to act. The decision of the Surveyors or Arbitrators or the Umpire shall be final and binding on both parties.

It is hereby agreed that a Surveyor or an Arbitrator or an Umpire under this clause shall be a merchant resident of Calcutta who is either himself personally a member of the Bharat Chamber of Commerce or is a Partner Director or a Manager or Assistant Manager or a responsible officer of a firm or a Company, which firm or company is a member of the Bharat Chamber of Commerce.

It is further expressly agreed that any Survey or Arbitration under this clause shall take place at Calcutta and any Arbitration shall except as modified by this clause be under the provisions of the Indian Arbitration Act that may be in force at the time. All disputes under the contract are subject to jurisdiction of Calcutta High Court alone.'

17. The main point for consideration is whether there was any agreement for arbitration in the contract for supply of the 400 K.W. generating set. As we have seen, the contract was by correspondence and the revised offer by the respondent for the generating set was by its letter of April 16, 1964. The endorsement at the bottom of the first page of the letter was that contract was subject to the standard terms, an extract whereof was 're-produced on the back'. On the reverse was 'the extract from general sale conditions applying against orders and quotations'. Clause one provided that the purchaser's offer was accepted strictly on the understanding that he accepted the respondent's general sale condition. There can be little dispute that if the extract contained a provision for arbitration the disputes arising from the contract entered into would be subject to arbitration. The extract did not contain any such provision, but at the end of the extract there was a further endorsement providing that complete sale condition could be supplied on request. The general sale conditions applying to quotations, a copy whereof had been annexed to the application of the respondent under Section 20, contained in its last clause being Clause No. 29 the provision for arbitration, which has been quoted above. The parties are at variance on the question of incorporation of the said provision in the contract for the supply of the generating set, in respect whereof, as we have seen, the appellant had raised various claims in the suit instituted at Sirohi.

18. In Halsbury's Laws of England Fourth Edition, Vol. 2, Article 522 it is laid down:

'It is inherent in cases of incorporation by reference that the parties are concerned not with one document alone but with at least two, one of which contains an arbitration clause and the other of which does not. In some cases the one document may constitute a contract between other parties. A common case is where the two documents concerned are a charter party and a bill of lading. If the relevant contract between relevant parties is contained in the document which does contain the arbitration clause, no question of incorporation arises, Where this is not the case, the question whether the document containing the arbitration clause is incorporated in the relevant contract between the relevant parties is, as always, a question of construction.'

19. We shall now refer to the decisions cited at the bar. In T.W. Thomas & Co, Ltd. v Portsea Steamship Co. Ltd., 1912 AC 1 a bill of lading provided that goods shipped thereunder should be delivered to the shipper, '..... with other conditions as per charter party', with further endorsement therein in the margin as 'Dock load at shipper's risk, and all other terms and conditions and exceptions of charter to be as per charter party, Including negligence clause'. The charter party provided that 'Any dispute or claim arising out of any of the conditions of this charter shall be adjusted at port where it occurs, and the same will be settled by arbitration'. It was held that the arbitration clause was not incorporated in the bill of lading.

20. Lord Loreburn L. C, observed that under the, words 'with other conditions as per charter party', it was well settled that it could not be said that the arbitration clause in the charter party was incorporated or made applicable. It was further observed:

'The arbitration clause is not one that governs shipment, carriage or delivery or the terms upon which delivery is to be made or taken; it only governs the way of settling disputes between the parties to the charter party and disputes arising out of the conditions of the charter party and not disputes out of the bill of lading,'

21. It was also observed by Lord Atkinson in his concurring judgment as follows:--

'...... It would be a sound rule of construction to adopt that when it is sought to introduce into a document like a bill of lading-- a negotiable instrument -- a clause such as this arbitration clause, not germane to the receipt, carriage, or delivery of the cargo or the payment of freight, the proper subject-matters with which the bill of lading is conversant --this should be done by distinct and specific words, and not by such general words as those written in the margin of the bill of lading in this case.'

22. In Dwarkadas & Co. v. Dalurarn Gojanmull, : AIR1951Cal10 (FB) it was observed by Harris, C. J. referring to earlier decisions as follows (at p 16, Para 45):--

'It is clear that in this case (Thomas & Co.'s case (1912 AC 1)) the House of Lords did not hold that the terms of an earlier contract could not be imported into a subsequent contract by appropriate language or that an arbitration clause found in an earlier contract could not be imported into a subsequent contract if the language was both appropriate and clear. Further they admit that if an arbitration clause found in an earlier contract can be written in bodily into the later without any inconsistency or without causing any vagueness or uncertainty then such an arbitration clause could be imported. What their Lordships held however was that on the facts of the case, the nature of the arbitration clause in the charter party was such that it could not be imported into a contract relating to different subject-matter. If the arbitration clause was imported bodily into the bill of lading, it would on its face deal with no disputes, arising under the bill of lading and at best it would be vague and uncertain and quite insufficient to oust the jurisdiction of the courts.'

23. In this case the relevant agreement provided as follows:--

'Subject to all terms and conditions of the contract...... issued to us by M/s. Bubna More & Co......'. The contract with M/s. Bubna More & Co. provided an arbitration clause and it was held that the arbitration clause in the first contract between Bubna More & Co. and the respondent was in the widest terms and was thereby imported into the subsequent contracts between the appellant and the respondent, if the arbitration clause in the original contract was written in subsequent contracts, it would be wholly intelligible and not inconsistent with any of the terms of the subsequent contract and would on its face apply to all disputes arising under the subsequent contracts.

24. In T. B. & S. Batchelor & Co. Ltd. v. Owners of S. S. Merak, (1965) 1 All ER 230 it was observed by Russel L. J.:--

'......a true view pf that case (Thomas & Co. Ltd.) is that it shows that clauses which are directly germane to shipment, carriage and delivery may be incorporated by general words though the fact that they are found in the charter party may involve a degree of verbal manipulation to fit exactly a bill of lading but that where there is a clause whose subject-matter is not thus directly germane, such as an arbitration clause, it is not permissible to construe general words of incorporation as extending to a clause which does not in terms relate to a bill of lading.'

25. In Owners of the Ship Annefield v. Owners of the Cargo, (1971) 1 All ER 394 (known as Annefield case) it was held that there was no scope for arbitration as the arbitration clause in charter party was not germane to the subject-matter of the bill of lading nor the expression was explicit enough to incorporate the arbitration clause of the charter party in the bill of lading. It was observed by Lord Denning M. R. as follows:--

'I would follow the test laid down by Russel L. J. in the Merak, but I would adapt it slightly. I would say that a clause which is directly germane to the subject-matter of the bill of lading (that is to the shipment, carriage and delivery of goods) can and should be incorporated into the bill of lading contract, even though it may involve a degree of manipulation of the words in order to fit exactly the bill of lading. But, if the clause is one which is not thus directly germane, it should not be incorporated into the bill of lading unless it is done explicitly in clear words either in the bill of lading or in the charter party.'

26. Following the above proposition it was held by Denning, M. R. in Thai-Europe Tapioca Service Ltd. v. Government of Pakistan, 1976 (1) Lloyds LR 1 that the clause 'all terms, conditions, liberties and exceptions of the charter are herewith incorporated' did not incorporate the arbitration clause into the bill of lading.

27. On a review of the above cases the following principles regarding the incorporation of the provisions of one agreement into another agreement appear to have been laid down.

(a) a clause in an earlier contract can be imported into a subsequent contract if the language is appropriate, unambiguous and clear.

(b) such clause in the earlier contract an be written in bodily into the later contract if there is no inconsistency or vagueness or uncertainty,

(c) A clause in the earlier contract which is germane to the subject-matter of the later contract may be incorporated therein by general words though some degree of manipulation may be involved.

(d) In respect of a clause in the earlier agreement which is not directly germane to the subject-matter of the later agreement, it is not permissible to construe general words as incorporating such clause therein when, the clause in terms does not relate to transactions of such later contract. Such clause can only be incorporated in the later contract by clear words either in the earlier or subsequent contract.

28. Applying these tests, assuming the question is one of incorporation of the provision of arbitration into the contract for supply of 400 K.W. generating set, there can be little dispute that the arbitration clause in such transaction is not necessarily or directly germane. Apart from the question of uncertainty or vagueness or inconsistency, there is however no bar to incorporation by express and clear language the provisions of an arbitration clause in an earlier contract into the subsequent contract. In the case before us we have referred to the relevant clauses which are clear enough to show that the instant contract was entered into with the express understanding that the general sale condition of the respondent would apply, the extract whereof was given overleaf in the written, revised offer made toy the respondent and accepted by the appellant. There was a further endorsement to the effect that complete sale conditions would be available on request. In view of this, on the face of this written provision, Et is not possible for the appellant to contend on the above authorities that there was no provision for arbitration in respect of the said contract in express language even if such arbitration was not germane to the transaction between the parties,

29. But is the case before us really one of incorporation of the provisions of one contract into another contract? As we have seen in the above cases there were two distinct agreements between different parties with one party In common wherein the principle of incorporation of the arbitration clause in the later contract was sought to be invoked. This is not the position in this case before us. We are faced here with a case where the contract is one and the same between the same parties m respect of one and single transaction and the question is really as to whether the general sales conditions which are not otherwise incorporated but were only referred to by express language in the offer made by the respondent to the appellant, formed part of the contract between the parties in the circumstances. In this view it could be said that strictly the question of incorporation is not a relevant matter for consideration in respect of the controversy in issue between the parties in this proceeding,

30. The next contention raised by Mr. Mitter, learned counsel on behalf of the appellant, is that the arbitration clause in the contract, assuming it to be an enforceable one, is vague and uncertain and thus unenforceable in law. It is stated that the arbitration clause provides for appointment of two Arbitrators or Surveyors, each at the option of either party to decide the disputes arising out of the contract. It may be, it is said, that the respondent may elect to appoint an arbitrator while the appellant may elect to appoint a Surveyor. There is this inherent conflict in the provisions of the agreement in absence of clear or unambiguous language in the arbitration clause. Further the arbitration clause provides that the arbitrator or the Surveyor shall be, in the contingency referred to therein, a 'responsible officer' of a firm or company which is a member of Bharat Chamber of Commerce. These words have no meaning or the connotation attached to them which renders the clause vague, uncertain and unworkable. Reference was made to the decision in G. Scammell & Nephew Ltd. v. H. C. & J. G. Ouston, 1941 AC 251 (HL) in which Viscount Maugham observed:--

'In order to constitute a valid contract the parties must so express themselves that their meaning can be determined with reasonable degree of certainty, it is plain that unless this could be done it would be impossible to hold that the contracting parties had the same intention; in other words consensus ad idem would be the matter of mere conjecture, This general rule, however, applies somewhat differently in different cases. In commercial documents connected with dealings in a trade with which the parties are perfectly familiar the Court is very willing, if satisfied that the parties thought that they made the binding contract to Imply terms and in particular terms as to the method of the carrying out the contract which it would be impossible to supply in other kinds of contract.'

31. It appears that the contract between the parties was for supply of the generating set as also its erection by the respondent or under its supervision. According to the plaint fn the suit before the Sirohi Court the disputes raised are in respect of claims which have no connection with the process of erection or installation as according to the appellant no steps were taken by the respondent for such erection or installation. It appears that the provision for Surveyor was made in the arbitration clause in the general form of the trade (vide the arbitration clause in Dularam's case) and in the event of the dispute in connection with erection or installation, the appointment of Surveyors would be appropriate. Further under the contract it appears that either arbitrators or surveyors could be appointed and the Surveyors are squarely in the same position as Arbitrators as to the effect of an award as may be passed by them or by an umpire in event of difference between them. As to words 'responsible officers' the connotation does not appear to be vague in the commercial circle as it imports an officer who is holding a responsible position in a company or a firm carrying on business.

32. The next contention on behalf of the appellant is that the provisions of the extract given overleaf the offer vary in material aspects and/or are inconsistent with the provisions of the general sale conditions. We have carefully examined the relevant provisions and on comparison, it does not appear to be so as contended. As has been pointed out by Mr. Banerjee, learned counsel appearing for the respondent, Clauses 1 to 8 of the extract are similar to those of the general sale conditions in the following manner. Clause 1 of the extract= Clauses 1 + 21 of the general sales conditions, other Clauses 2, 3, 4, 5, 6+7 and 8 of the extract are respectively similar to Clauses 2, 12, 23, 4+5, 22 and 21 of the general sale conditions. The material difference to which our attention has been drawn relates to words 'prices ex-godown Calcutta' and 'present rate' of foreign exchange etc. in the extract while in the general sale conditions it is 'prices ex-godown factory' and 'current rate of foreign exchange etc.' These really do not make any substantial difference and at least in the present contract amounting to inconsistency.

33. The next contention made on behalf of the appellant is that the 'extract' implies and means extract of the general sale conditions which it is purported to be and such 'extract' cannot be beyond the general sale conditions. It is stated that there are many provisions in the 'extract' which do not find place in the general sale conditions which is Annexure 'A' to the petition page 9 of the Paper Book. Clauses 9 to 13 of the 'extract' do not find place in the general sale condition. Annexure 'A'. Accordingly, it is submitted, it could not be said that the extract is an extract of the general sale conditions as contended. This argument is based on the misconception of the provisions of Annexure 'A' which applies to agreements, orders, Indents, quotation and offers for sale of Plants, Machines and Equipments. It provides further in its heading following that 'the special terms and conditions applying to Agreements, Orders, Indents, Quotations and Offers for sale of gases and to contracts for erection or for supervision of erection can be had on request.' It Js obvious therefore, that the extract which purports to be extract of the general sale conditions includes provisions regarding gases and cylinders in addition but in so far as the contract for supply of the plant is concerned the general sales conditions applying to such supply are those as set out in Annexure 'A' and naturally the provisions thereof do not extend to gas cylinders. There is, therefore, nothing basically wrong in the extract In so far as it relates to the supply of machinery is concerned.

34. The next question relates to the notice of the general sale conditions on the appellant as forming the terms of the contract. Chitty on Contract 23rd Edition in Articles 590 and 591 laid down the following propositions which have also been considered by the learned trial Judge, They are as follows:--

'590. Meaning of notice. It is not necessary that the conditions contained in the standard form document should have been read by the person receiving it, or that he should have been made subject lively aware of their Import or effect. The rules which have been laid down by the court regarding notice in such circumstances are three In number.

(1) If the person receiving the document did not know that there was writing or printing on It, he is not bound.

(2) If he knew that the writing or printing contained contractual conditions, he is bound.

(3) If the party tendering the document did what was reasonably sufficient to give the other party notice of conditions, and if the other party knew that there was writing or printing on the document, but did not know that it contained conditions then the document will be given contractual effect. Its conditions will become the terms of the contract between them.

591. Reasonable sufficiency of notice. It is the third of these rules which has most often to be considered by the courts. The question whether the party tendering the document has done all that was reasonably sufficient to give the other notice of the conditions is a question of fact in each case, in answering which the tribunal must look at all the circumstances and the situation of the parties. But it is for the court, as a matter of law, to decide whether there is evidence for holding that the notice is reasonably sufficient. Cases in which the notice has been held to be insufficient have been those where the conditions were printed on the back of the document, without any reference, or any adequate reference, on its face, such as, 'for conditions, see back', or where the conditions were obliterated by a printed stamp, in most cases however the tender of printed conditions is in itself considered sufficient.'

35. In the case of Tatavarti N.R. (Firm) v. Balabhadra, : AIR1954Mad71 it was observed as follows (at p. 72, Para 4):--

'When a contract in writing is signed by parties, they are bound by the terms contained therein whether they take the trouble of reading them or not. This principle has been extended to cases where the contract does not actually contain the terms but a reference is made to another document or contract where those terms are to be found. The reason for holding that those terms must be taken to have been incorporated by reference in their signed agreement is that it was possible for any of them to look Into the document and ascertain the terms.'

36. The appellant contended that it was never made aware of the provision for arbitration and if it was made aware about It the appellant would never have agreed to such provision as It had no office in Calcutta nor it had any connection with the Bharat Chamber of Commerce or its members to carry on the proceedings on its behalf before the Arbitrator. The respondent alleged in the affidavit-in-reply in para. 4 with reference to Nov. 20, 1960 that Mr. Bramha Bhatt who is one of the Managing Directors of the appellant had knowledge of the general sales condition and printed copies thereof were taken by him at the meeting he had on that data at Calcutta with the responsible officers of the respondent We do not think it appropriate to refer to the statements of a new fact made in the affidavit-in-reply which the appellant had no opportunity to traverse except challenging the same in course of argument. The offer for supply of 400 K.W. generating set was made by letter of April 16, 1964 as we have seen and it seems that when parties entered into the contract by further correspondence following, the offer is accepted subject to the conditions as referred to in the offer though not forwarded to or obtained by the acceptor. In such contract if the acceptance is on the face of the extract, of which the appellant admittedly had knowledge, and the extract refers to general sale conditions and the offer is made expressly subject to those conditions, the acceptor must be deemed to enter into the contract on basis not only of the conditions of extract but also of the general sale conditions. If the acceptor ignores these conditions or fails to take note of the same before entering into the contract he does so at his peril and risk.

37. In view of the propositions of law noted above there is no escape from, the conclusion that it was possible for the appellant to obtain the copies of the general sale conditions of which the appellant was made aware and even if he did not do so he must be deemed to have constructive and reasonable notice of the general sale conditions including the arbitration clause as forming the terms of the contract in view of the express provision made in the extract which was set out on the reverse of the offer with the endorsement at the bottom

38. Mr. Mitra has further submitted that the trial court should not have exercised its discretion in favour of arbitration when there are substantial and compelling grounds against reference to arbitration. Reference was made to the decision in Serajuddin & Co. v. Michael Golodetz, : AIR1960Cal47 in which the appeal court in an appeal from an order under Section 34 refused stay of suit in the exercise of its discretion in reversal of the order of the trial court (reported in (1956) 60 Cal WN 128 (sic)). It was observed by P. N. Mookerjee, J. speaking for the Court, following earlier English decisions as follows:--

'It is undeniable that the parties are prima facie bound by the arbitration clause and, normally, they should be asked to keep their bargain and the suit should be stayed tout that places no insurmountable bar in the way of the party, seeking to avoid arbitration and maintain the suit It only casts upon him the onus,-- undoubtedly, a heavy one-- of satisfying the court that there is sufficient reason why the matter in dispute should not be referred to arbitration, but that onus can certainly be discharged in a proper case. The agreement or contract to refer to arbitration is not necessarily decisive on the point and it creates no estoppel, so far, at least as the court is concerned; it only raises a prima facie case or presumption In favour of a decision by arbitration but that presumption is certainly rebuttable and is liable to be rebutted by appropriate grounds and circumstances in a particular case.'

39. The Supreme Court in the appeal from the said decision in Michael Golodetz v. Serajuddin & Co., : [1964]1SCR19 while dismissing the appeal observed (at p. 1046):--

'The court ordinarily requires the parties to resort for resolving disputes arising under a contract to the tribunal contemplated by them at the time of the contract. That is not because that court regards itself bound to abdicate its jurisdiction in respect of disputes within its cognizance; it merely seeks to promote the sanctity of contracts and for that purpose stays the suit. The jurisdiction of the court to try the suit remains undisputed; but the discretion of the court is on grounds of equity interposed. The court is therefore not obliged to grant stay merely because the parties even under a commercial contract agreed to submit their dispute in a matter to an arbitration tribunal in a foreign country. It is for the court having regard to all the circumstances, to arrive at a conclusion whether sufficient reasons are made out for refusing to grant stay. Whether the circumstances in a given case make out sufficient reasons for refusing to stay a suit is essentially a question of fact.'

40. The Supreme Court affirmed the High Court's finding that the facts established made out 'sufficient reason' for not granting stay of the suit.

41. Relying on these authorities Mr. Mitra submitted that the Court in the present case will not allow the arbitration agreement to be filed in the court as there are substantial grounds against such filing and serious prejudice leading almost to denial of justice will otherwise be caused to the other party. He submitted that the appellant had no business contact in Calcutta or with the Bharat Chamber of Commerce and arbitration in this city will cause irreparable prejudice and inconvenience to the appellant. Mr. Banerjee contended on the other hand that the respondent has also no business connection or office at Sirohi where the suit had already been instituted, assuming that the said court had the jurisdiction otherwise to decide the dispute, as in the offer it was expressly stipulated that the court in Calcutta will have the jurisdiction.

42. Assuming that the proposition of law laid down in Serajuddin's case is also applicable to proceeding under Section 20 of the Act, it does not appear to us that there is any insurmountable difficulty for the appellant to take necessary steps for its participation in the arbitration proceeding in Calcutta. In the context of the attending circumstances, there is no question of balance of convenience when both parties are in identical position and there is no reason to interfere in this state of affairs with the forum provided in the arbitration clause in the contract for settlement of the disputes arising therefrom.

43. Mr. Mitter has also submitted that if the appellant is relegated to arbitration, its claims may be barred by limitation in view of the provisions of Section 37 of the Arbitration Act which provides that all provisions of the Limitation Act will be applicable to arbitration as they apply to proceedings in Court. This aspect of the question should not detain us long as in the event of the claim before the Arbitration being held as barred by limitation, the suit in the court at Sirohi, which may only be stayed during the proceedings in arbitration, will proceed in accordance with law. Mr. Banerjee appearing for the respondent has also submitted to us that the respondent would concede before the arbitrators or the umpire that the time taken by the parties in the Sirohi Court should be excluded for purposes of limitation so far as the arbitration proceedings are concerned.

44. Mr. Mitter has further submitted that the court at Sirohi may proceed notwithstanding the decision of this Court on the application under Section 20 of the Arbitration Act and all proceeding before the Arbitrators will toe invalid in view of the provision under Section 35 of the Act. It appears that all further proceeding in the suit has been stayed during the pendency of the proceeding in this Court and we do not think it will be proper for us to express any opinion in the matter.

45. The appeal in the premises fails and is dismissed. The costs of the appeal will abide with the result of the arbitration, certified for two counsel.

Sankar Prasad Mitra, C.J.

46. I agree.


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