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Banwarilal Garodia Vs. Joylal Hargulal - Court Judgment

LegalCrystal Citation
CourtKolkata High Court
Decided On
Case NumberAward No. 48 of 1955
Reported inAIR1956Cal467
ActsArbitration Act, 1940 - Sections 30 and 35
AppellantBanwarilal Garodia
RespondentJoylal Hargulal
Appellant AdvocateA.C. Bhabra, Adv.
Respondent AdvocateE.R. Meyer, Adv.
DispositionApplication dismissed
Cases ReferredMessrs. Saha and Co. v. Messrs. Ishar Singh Kripal Singh and Co.
- .....of a notice to the arbitrators that a legal proceeding had been commenced upon 'whole' of the subject-matter of the reference. indeed it preserves and protects those parts of ths arbitration proceedings which had taken place before the notice of the legal proceeding is given to the arbitrators. in order to render arbitration proceedings invalid within the meaning of section 35 of the act, it is necessary therefore, that three very important and distinct conditions must be satisfied namely (1) first that a 'legal proceeding' must be commenced, (2) secondly such legal proceeding must be upon the 'whole' and not merely part of the subject-matter of the reference and (3) thirdly that a notice of such legal proceeding must be giv-en to the arbitrators. in that event what happens is that.....

P.B. Mukharji, J.

1. This is an application by the petitioner Banwarilal Garodia, a registered firm under the Indian Partnership Act to declare Award No. 484 of 1954 dated 31-3-1954 of the Bengal Chamber of Commerce illegal and invalid and to set aside such award. There is an alternative prayer to modify the award by deleting 'payme:it of interest' mentioned in para 20(u) of the petition. The Notice of Motion was taken out as early as 3-5-1955, but has managed to remain undisposed so long.

2. Mr. Bhabra appearing for the applicant did not urge all the grounds mentioned in para 20 of the petition. He selected the grounds stated in sub-paras (a), (c), (f), (g), (h), (q), (r), (s), (u) and (v) of para 20 of the petition and abandoned all others. In fact, he urged before me five points to set aside the award and to declare it in-valid.

3. His first point of objection was that the contract itself was illegal under the West Bengal tration Goods Act 5 of 1950, and, therefore, the arbitration clause was illegal and the arbitrators had no jurisdiction. He did not press this point. The ground on which that point is based is the disputed fact, whether the respondent was or was not in fact a habitual dealer in the sale or purchase of jute goods. As I am of the view that this is a question of fact which in the present arbitration clause is within the competence of the Arbitrators to decide, I do not think that the contract by itself and on the face of it can be said to be illegal. The Arbitrators are competent, in my opinion, to decide whether a person is in fact a habitualdealer or not. A contract is not hit by this Statute unless this particular fact is proved to come within the mischief of the Act. I, therefore, overrule the first objection.

4. The second objection of the applicant is that there is error in the award so far as its date is concerned. The award is dated 31-3-1954. It is shown from the stamp paper on which the award is written that it could not have been given on. 31-3-1954 but on 1-4-1954. The stamp vendor's endorsement on the back: of the stamp paper on which the award is written shows that the stamp paper was sold on 1-4-1954. The body of the award begins with the date 31-3-1954. I do not consider this objection to have any merit at all. There are many reasons for saying so. The first is that the award may have in fact been made by the Arbitrators on 31-3-1954 in the sense that the Arbitrators had on that date decided what they would award. The fact that the Award was subsequently typed on the stamped paper on the next day 1-4-1954 does not discredit the date 31-3-1954. Secondly, the stamp vendor's endorsement is not necessarily unimpeachable or infallible and it might very well be that his date was wrong and the Arbitrators' date was right. The stamp vendor himself might have made an error in giving the date. It is also quite possible that the Arbitrators may have dictated the award on the 31st March to a Stenographer, and the Stenographer finally transcribed it on the stamp paper on the following day, 1-4-1954. The Arbitration Act does not insist that a date. should be given on every award or that an award must always bear a date. Nor do I think that it is such an error as can at all make the award bad and illegal. Mr. Bhabra wanted to argue that the Arbitrators awarded interest up to the date of the award and, therefore, it was essential that the date should be correct. Indeed so. But the interest of 4 1/2 per cent on the amount of the award which was Rs. 18,381-8-0 for one day would be a trifle. According to the well-known maxim of law, a Court or the law does not concern itself about trifles. De Minimis Non Curat lex. I, therefore, overrule the second point of objection.

5. The third point of objection urged on behalf of the applicant is that the Arbitrators should not have held the meeting on 30-3-1954 and in any event should not have proceeded ex parte on that date. It is essential to state the relevant facts to show that this point also has no substance. On 26-2-1954 the Bengal Chamber of Commerce notified the applicant that the Arbitration would be held on 10-3-1954. Only two days before the date, namely, on 8-3-1954, the applicant wrote to the Chamber for postponement of the meeting of 10-3-1954 for three weeks on the ground that their Mr. Burman was lying ill. There is no complaint in respect of this alleged meeting of 10-3-3954. In fact, on 11-3-1954, the Bengal Chamber of Commerce wrote to the applicants informing them that the arbitration had been 'finally' postponed till 30-3-1954 and requesting them to be present in accordance with the directions given in their letter dated 26-2-1954. Now one of the directions contained in the letter of the 26th February was 'Please further note that should you fail to appear before them at the time and date mentioned above (the adjourned date being 30-3-1954) the Court will hear and take into consideration whatever evidence is adduced by the opposite party'. The applicant kept quiet until the very eve of the meeting. Then on 29-3-1954, the applicant's Solicitor wrote to the Bengal Chamber of Commerce asking for an adjournment of the meeting fixed to be held next day on 30-3-1954 on the ground that the applicant's Manager was not in town. Nothing wassaid in this letter that he had gone out of town to recuperate his health, which is an improvement introduced in the petition. The Arbitrators received that letter on the day of the meeting,30-3-1954. The meeting took place as they refused to adjourn their meeting any further. In fact, in the notice of 11-3-1954, the Chamber had distinctly stated and informed the applicant that the Arbitration had been 'finally' postponed till 30-3-1954. From the word 'finally' it was quite clear that no further adjournment was to be granted. If, in fact, this particular gentleman was out of town, then surely the applicant could have informed long before the day previous to the meeting that it would not be possible to attend that meeting. By the use of the word 'finally' and also the special express direction in the letter of 26-2-1954 it is clear that the applicant knew that if he failed to attend, then the Arbitrators would proceed ex parte. Mr. Bhabra attempted to say that on31-3-1954 one Sankerlal Sureka a clerk of the applicant firm went and saw one Mr. Phillips an Assistant of the Bengal Chamber of Commerce and asked him to arrange to extend the time but Mr. Phillips told him that the Award had already been made on the 30th March. This argument does not carry the applicant any further. First, this whole story of visit to Mr. Phillips is disputed and there is nothing in trie minutes of the arbitrators to support this story. Secondly, I have already found that the Award was correctly dated. Thirdly, I am of the opinion that when the arbitrators give clear notice that they would not grant any further adjournment and if a party does not choose to appear on the 'final' date they would proceed ex parte. then the party who does not attend in spite of such notice absents himself at his risk. I therefore find no misconduct of the arbitrators on this point. It is more than curious that although the applicants wrote on 29-3-1954 which gave no opportunity to the Arbitrators to reply in time conveying their decisions, the applicants without any intimation from the Arbitrators whether their prayer for adjournment had been granted or not, chose to take the risk of not attending the meeting of 30-3-1954. The applicants could easily have sent somebody else on their behalf to make any representations that they wished. I am, therefore, satisfied that this whole story of one Mr. Burman not being available or out of town just on the day of meeting is not a true case at all. For these reasons, I overrule this objection also.

6. The fourth objection urged by the applicants against the award is that the Arbitrators had awarded interest on damages. This objection also has no substance. The word 'damages' is not mentioned by the Arbitrators at all in any part of their award. I am, therefore, not prepared to construe the sum awarded as the damage and then to hold that interest on such damage is illegal. Besides in this case the respondents had given written notice both in their statement before the arbitrators as well as otherwise that they would charge and claim interest and such notice was in writing. I, therefore, overrule this objection also.

7. The last and the most substantial objection that was raised against the award was that this award was made after notice under Section 35, Arbitration Act had been given to the Arbitrators. What happened in this case is that the applicant instituted a suit in this Court on 18-6-1953 and kept quiet without giving any notice of the suit to the arbitrators for about six months for the notice of the suit was given to the arbitrators only on 21-12-1953. The Arbitrators at first kept the, arbitration in abeyance till about 16/19th January 1954 when the Court of tlie Arbitrators was reconstitu-ted under. Rule 7 of the Bengal Chamber of Commerce who gave notice that they would proceed with the arbitration. Even before such reconstituted Court the applicants asked for adjournment on 8-3-1954 and 29-3-1954. The award in fact was made on the 31st March or at best on 1-4-1954. It is, now said that the award is invalid under Section 36, Arbitration Act. It is necessary here only to state-one further fact before discussing the merits of this argument that the applicants allowed their own suit to be dismissed for default on 3-5-1954.

8. The suit was for a declaration that the bought and sold notes containing the arbitration clause were void on the ground that the contracts thereunder were hit by the West Bengal Jute Goods Act. The suit, therefore, claimed that the arbitration clause was illegal and null and void. In fact one of the main prayers, if not the only main prayer in the suit, was for a permanent injunction restraining the respondents from proceeding with the arbitration. My own view is that such a suit is prima facie barred by the Arbitration Act be-cause the applicants should have proceeded by way of an application under Section 32, Arbitration Act challenging the validity of the arbitration agreement. Section 32, Arbitration Act says in unmistakable terms that no suit shall lie on any ground whatsoever ior a decision upon the existence, enect or validity of an arbitration agreement. The suit therefore was not really a competent legal proceeding at all. Its ultimate fate proved it. The applicants did not proceed with their own suit and allowed it to be dismissed for non-prosecution. No reason was then given nor is given now why they did not proceed with the suit which they had filed.

9. A proper construction of Section 35, Arbitration Act demands careful analysis. It is clear from the plain reading of that section that the mere com-mencement of a legal proceeding does not 'ipso facto' render invalid the arbitration proceedings, This is a clear departure from the law as it existed before the Act and as laid down in the well-known case of 'Doleman and Sons v. Ossett Corporation' (1912) 3 KB 257 (A) followed in India in such cases as 'Jokhiram Kaya v. Ganshyamdas Kedarnath reported in 1921 Cal 244 (AIR V8) (B). The present statutory effect is that it only renders invalid only such part of the arbitration proceedings which follows the giving of a notice to the Arbitrators that a legal proceeding had been commenced upon 'whole' of the subject-matter of the reference. Indeed it preserves and protects those parts of ths arbitration proceedings which had taken place before the notice of the legal proceeding is given to the Arbitrators. In order to render arbitration proceedings invalid within the meaning of Section 35 of the Act, it is necessary therefore, that three very important and distinct conditions must be satisfied namely (1) first that a 'legal proceeding' must be commenced, (2) secondly such legal proceeding must be upon the 'whole' and not merely part of the subject-matter of the reference and (3) thirdly that a notice of such legal proceeding must be giv-en to the Arbitrators. In that event what happens is that further arbitration proceedings after the receipt of the notice become invalid unless it is said 'a stay of proceedings is granted under Section 34' although it is by no means clear how the words 'should not be referred to arbitration' in Section 34 can at all apply to a case where reference to arbitration has not only been made but the arbitration itself is actually continuing and therefore reference to arbitration is no longer a future possibility but a past event. Analysing further the language of Section 35, Arbitration Act it must be emphasised that the legal proceeding must be 'upon the whole of thesubject matter of the reference'. In my opinionhe applicants who themselves filed the suit on the ground that the Arbitrators had no jurisdiction cannot be heard to say that their suit related to the 'whole subject-matter of the reference' before the arbitrators within the meaning of Section 35, of the Act. In one breath the plaintiff says that the subject-matter of his suit was not the subject-matter of the reference and therefore he was competent to file the suit. In the next breath the plaintiff contends, the suit was a legal proceeding on the whole of subject-matter of reference. I do not think the plaintiff can be allowed to blow hot and cold. It is not more inconsistency but is gravely prejudicial to the rights of the respondent for by saying the first thing he avoids his suit being stayed under Section 34 of the Act and by saying the second thing he tries to avail of Section 35 of the Act and nulli-fy the arbitration proceedings. The applicants cannot have it both ways. In the plaint the applicant as the plaintiff openly asks for a permanent injunction to restrain the arbitration procedings but never applied in such suit for any interlocutory injunction to restrain the arbitration proceedings. They allowed the arbitration proceedings to go on and result in the award. Now that the award has gone against them they want to have it declared invalid. It is argued that no interlocutory injunction was necessary because if Section 35 itself rendered further proceedings in arbitration invalid then the Arbitrators took their risk in going on with the arbibration and making the award. True, that is so.' But then the whole question again is whether it is open to the applicants to invoke Section 35 of the Act that the legal proceedings covered 'the whole subject-matter of the reference' within the meaning of that section after having by their suit con-tended the contrary that the Arbitrators had no jurisdiction and therefore the legal proceedings had different subject-matter than the reference before the arbitrators far less the 'whole subject-matter of the Reference'.

10. This involves construction of the expression 'the whole of the subject-matter of the reference' occurring in Section 35 of the Act. Any interpretation of that expression must in my opinion be guided by the principle behind that section that on the same subject-matter the Court of law and the Court of the arbitrators must not compete for the good reason that it will lead to the possibility of conflict of decisions. Therefore the possibility of conflict of decisions must be real and not fanciful. Prom that principle follows naturally its corollary that the legal proceeding must be upon the 'whole of the subject-matter of the reference' and not merely a part. The expression 'whole of the subject-matter of the reference' to me means, without attempting to be at all exhaustive in such construction that the decision in that suit or legal proceeding one way or the other will decide the whole matter referred to the arbitrators. In other words a one-sided possibility of the suit being decided in one way is not enough to render invalid the arbitration proceedings. For instance this was a suit to declare the arbitration agreement along with the bought and sold notes to be void and illegal. Now if the plaintiff lost the suit (as indeed he did in this case) then that would not decide the subject-matter of the reference at all. In fact such a dismissal of the suit would never adjudicate fully and completely the rights of the parties. It is true that if the plaintiff won the suit and the Court had decided in his favour that the contracts were illegal, then the Arbitrators would have had no jurisdiction and consequently their award would be a nullity, and therefore there is no need to invoke Section 35 of the Act to render it invalid. Tosay therefore that because the suit challenges the very basis of the arbitration clause it covers the 'whole of the subject-matter of the reference' is to take the most superficial view because the word 'whole' cannot mean whole if the decision in the) suit is in one way and part or nothing at all if such decision is the other way. That would not be giving the plain ordinary meaning to the word 'whole' but a speculative meaning. This interpretation also will prevent speculative suits without jurisdiction being filed by recalcitrant parties wanting to subvert, arbitration agreements & thus held up any arbitration proceeding for an indefinite length of time on the specious plea that such suit is pending in respect of the 'whole of the subject-matter of the reference'. A suit assuming it lies, to decide that an arbitration clause itseli is void and illegal because of a particular statute cannot conceivably be a subject-matter of the reference to arbitiation far less the 'whole' of the subject-matter of the reference.

11. One other case was referred to me. That was the decision of Elagden J. in 'All India Groundnut Syndicate Ltd. In re 'reported in 1945 Bom 497 (AIR V32) (C). But there the learned Judge although discussing the question of 'subject-matter of the reference' was guided by the fact of the case before him that there was the special plea in para 12(a) of the plaint where the plaintiff actually asked the Court to take over jurisdiction and supersede the arbitration. No such fact is present before me. The whole of that decision rested on the special plea. The other decision that Mr. Ehabra relied on was 'The State of Bombay v. Ad-amjee Hajee Dawood and Co.' reported in : AIR1951Cal147 , where the Court of Appeal here stated that Section 32, Arbitration Act did not bar a suit challenging the validity of a contract simply because the contract contained an arbitration clause. That case, however, did not at all decide the question of interpretation of Section 35, Arbitration Act and that case and the decision of Blagden J, require to be re-read in the light of the recent Full Bench decision of this Court in 'Messrs. Saha and Co. v. Messrs. Ishar Singh Kripal Singh and Co.' : AIR1956Cal321 .

12. I, therefore, overrule this last objection of the applicant and hold that the Award in this case is not invalid under Section 35, Arbitration Act.

13. The application, therefore, fails and is dismissed with costs.

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