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Mury Exportation Vs. D. Khaitan and Sons Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberSpecial Suit No. 6 of 1955
Judge
Reported inAIR1956Cal644
ActsArbitration (Protocol and Convention) Act, 1937 - Sections 5, 7 and 8; ;Arbitration Act, 1940 - Schedule - Articles 5 and 12 - Sections 34, 35 and 37; ;Limitation Act, 1908 - Section 3
AppellantMury Exportation
RespondentD. Khaitan and Sons Ltd.
DispositionApplication allowed
Cases ReferredHouse of Lords In N. V. Kwik Hoo Tong Handel Mastschappiji v. James Finlay
Excerpt:
- .....the plaintiff wrote to the chamber renouncing its attempt at conciliation end submitting its claim for arbitration. the chamber replied on 2-2-1950 acknowledging that the plaintiff's claim had been submitted to arbitration. the international chamber duly wrote to the defendant on 2-3-1950 that a claim had been made by the plaintiff. on 30-3-1950 the defendant's solicitors replied to the chamber stating that the defendant had filed a suit in this high court at calcutta for a declaration that the agreement was void as the defendant was persuaded to enter into the contract on fraudulent representation and stating that in view of the suit in this court the arbitration could not be proceeded with and the defendant would not be liable under any award made by the chamber. this suit was.....
Judgment:
ORDER

P.B. Mukherji, J.

1. This is a matter under the Arbitration (Protocol & Convention) Act, 1937. The petitioner is Mury Exportation, S. A. R. L. a French company incorporated and registered under the Laws of France having its principal office at 15, Rue dela Paix, Paris. The matter although initiated by a petition is treated as a suit under Section 5, Arbitration (Protocol & Convention) Act, 1937.

2. The application or the suit is for filing the award made is Paris dated 18-2-1954 by the Court of Arbitration of the International Chamber of Commerce, Paris under Section 4, Arbitration (Protocol & Convention) Act which provides that any person interested in a foreign award may apply to any Court having jurisdiction over the subject-matter of the award that the award be filed in Court.

3. The respondents are D. Khaitan & sons Limited, an Indian Company carrying on business at 14, Netaji Subhas Road, Calcutta, within the jurisdiction of this Court. The award directed Khaiten & Sons Ltd., to pay to Mury Exportation the sum of Rs. 9,076-2-5 and 33595 French Francs with interest at 5 per cent. till the date of payment and the costs of arbitration amounting to 150,000 French Francs. The award was signed by Thomas R. Webb and duly authenticated. In Indian currency the award amounts altogether to Rs. 1,23,651-12-10 and the Indian equivalent is not disputed.

4. The facts of the case may be very briefly stated: On 27-12-1946 the plaintiff and the defendant executed in Paris an agreement by which the defendant was appointed agent for the sale of the plaintiff's perfumery products in India. The agreement provided for arbitration according to the rules of the International Chamber of Commerce at Paris. The actual arbitration clause in that agreement is in the following terms:

'Every litigation as to the validity or construction or execution of the present agreement, shall be finally decided in Paris, according to the 'Reglement de conciliation et d'arbitrage' of the International Chamber of Commerce 38 Quai Albert Ier, Paris, by one or several arbitrators appointed according to this 'Reglement' '.

A copy of the Rules of Conciliation and Arbitration of the International Chamber of Commerce is annexed to the petition.

5. The defendant had accepted three bills of exchange on account of the price of the goods delivered by the plaintiff. The first bill of exchange was dishonoured by the defendant in August 1947, the second one was dishonoured by the defendant in November 1947 and the third one was dishonoured in February 1948. Thereupon the plaintiff wrote to the Administrative Commission of the International Chamber of Commerce invoking the procedure of conciliation provided by the Rules of the Chamber. On 27-1-1950 the plaintiff wrote to the Chamber renouncing its attempt at conciliation end submitting its claim for arbitration. The Chamber replied on 2-2-1950 acknowledging that the plaintiff's claim had been submitted to arbitration. The International Chamber duly wrote to the defendant on 2-3-1950 that a claim had been made by the plaintiff. On 30-3-1950 the defendant's solicitors replied to the Chamber stating that the defendant had filed a suit in this High Court at Calcutta for a declaration that the agreement was void as the defendant was persuaded to enter into the contract on fraudulent representation and stating that in view of the suit in this Court the arbitration could not be proceeded with and the defendant would not be liable under any award made by the Chamber. This suit was instituted by the defendant D. Khaitan & Sons. Ltd. on or about 30-3-1950 and the prayer made by the defendant was for a declaration that the agreement dated 27-12-1946 was illegal and void and for an injunction restraining the present plaintiff from acting upon that agreement. It is noticeable that no application for injunction, however, was made by D. Khaitan & Sons, Ltd. restraining Mury Exportation from proceeding with the arbitration before the International Chamber of Commerce.

6. Then what happened was that the present plaintiff made an application for stay of the suit on the ground that the arbitration was proceeding before the International Chamber of Commerce. The stay was refused by Sinha, J. The result was that both the arbitration and suit proceeded. The arbitration resulted in the award and the suit is a long way yet from its end and it has not even been heard.

7. Curiously enough that application for stay was made by the present plaintiff under the local Arbitration Act, 1940, although the present application is under the Arbitration (Protocol and Convention) Act, because the award is a foreign award. The question, however, whether the matter is governed by the local Arbitration Act or the Arbitration (Protocol and Convention) Act is a question of law and the fact that the applicant plaintiff wrongly instituted the previous application under the local Arbitration Act would not alter the legal effect, if in law it is the Protocol Act which governs the rights of the parties.

8. To proceed with the merits or facts it is necessary to state that on 27-7-1953 the plaintiff wrote to the Chamber requesting it to proceed with the arbitration. On 29-9-1953 the Chamber wrote to the defendant in respect of the claim of the plaintiff. The defendant replied on 9-10-1953 stating that in view of the pendency of the suit the arbitration proceedings should not be continued and the defendant would not be liable under any award. Even at that stage the defendant did not apply in its own suit which was not stayed for an injunction restraining the present plaintiff from proceeding with the arbitration. Thomas R. Webb was appointed Arbitrator by the International Chamber of Commerce on 18-11-1953 and he wrote on the same day to the defendant about the claim of the plaintiff and fixing 18-1-1954 for the hearing of the arbitration. To that notice the defendant's solicitors replied on 5-1-1954 repeating what they had stated before that the suit was pending and that the defendant could and would not participate in the arbitration proceedings. The Arbitrator, therefore, had no other option but to proceed on such statement and evidence as he had before him and whatever was placed by the plaintiff. The award followed in February, 1954. The present application now is to file that award.

9. A number of points were urged by Mr. Meyer appearing for the defendant. The first point is that the award is not duly authenticated according to the law of Prance. I reject that objection because it is distinctly pleaded in para. 17 of the petition that the award is duly authenticated according to the law of Prance. It is exhibited with the petition. The copy shows authentication by the First Secretary of the Indian Embassy in Paris. Not only that there is also an affidavit of Victor Bataille of Paris. He is a lawyer practising in Paris for the last 44 years. He swears on his oath in his affidavit of 15-7-1955 saying that the statement in para. 17 of the petition is correct and that the proceedings before the Arbitrator in Paris were according to the law and procedure of France. As against this evidence of foreign law and procedure there is no evidence which the defendant has produced. I am bound to hold, therefore, that the due authentication of the award according to the law of France has been proved before me and the applicant has satisfied the Statutory requirement of Section 8(1)(a) of the Protocol Act.

10. The second objection taken by Mr. Meyer is that the French award is not final. Here again I reject his argument on the very same ground. It is pleaded in para. 18 of the petition that the award has become final according to the law of' France. The affidavit of Victor Bataille also swears such statement to be true. As against that the defendant has not produced any evidence to show that the award is not final according to the law of France. I am, therefore, bound to hold that the award has been final according to the law of France and the statutory requirement under Section 3(1)(b) of the Protocol Act is satisfied. Rule 5 of Appendix 6 of the Original Side Rules requires the petitioner to file affidavits in proof of such facts and the applicant in this case has done so.

11. The third objection taken by Mr. Meyer is that the award is bad on the ground that notice of the filing of the suit was given to the Arbitrator and the plaintiff and therefore further proceedings of the arbitration including the award are invalid under Section 35, Arbitration Act, 1940. I am of the opinion that Section 35, Arbitration Act, 1940, does not apply to arbitrations of the International Chamber of Commerce where the Arbitration (Protocol and Convention) Act of 1937 applies. In Shiva Jute v. Hindley & Co., Ltd., reported in 57 Cal WN 573 at p. 577 (A) the learned Chief Justice delivering judgment of the Court of Appeal observed:

'I have grave doubts as to whether Section 35 of the Indian Act can have that result on an English award.'

The Protocol Act and the Arbitration Act are two Statutes governing different kinds of arbitration, and to introduce sections of one Act to regulate the arbitration under the other Act will be to create confusion and contradiction which I do not think was intended by the Legislature, I shall attempt to give my reason briefly. To my mind it is clear that the basic object of Section 35, Arbitration Act, 1940 is that within the same system of law in the same country two Tribunals, one a Court of law and the other a Court of arbitration should not be allowed to compete in deciding the same dispute, and therefore provision is made to avoid such conflict either by staying the suit under Section 34, Arbitration Act, 1940 and allowing the arbitration to proceed or by nullifying the arbitration under Section 35, Arbitration Act, 1940 by giving notice of the suit. That consideration or conflict between courts and arbitrators under the same sovereign working under the same system of law is absent where parties under different systems of law and different sovereigns are concerned and in the case of arbitration governed by the Protocol Act which involves the questions of both public and private International law in regulating commercial disputes of parties who are subjects of different States and carry on international trade.

12. It was then tried to be put the other way about by Mr. Meyer. The argument was that although Section 35, Arbitration Act, 1940, did not apply, even then as the foreign arbitration had proceeded in spite of the notice of suit, it will be against both the law and the public policy in India under Section 7, Arbitration (Protocol and Convention) Act, 1937 to allow the award to be filed and thereby to be enforced. Either Section 35, Arbitration Act, 1940, applies or it does not. If it does not, as I hold it does not, then to refuse subsequently, although notice under Section 35 did not render the arbitration invalid, to allow the award to be filed because the award is made against Section 35, Arbitration Act, 1940, would be to indulge in a kind of contradiction and would obviously defeat the very express provisions of international recognition of foreign law in arbitration under the Protocol Act where by Sections 7 and 8 thereof the conditions relate to arbitration agreement being valid under the law by which it was governed and the award being final in the country in which it was made. As the arbitration and the award in this case could not be bad or invalid under the law of France because Section 35 of the Local Arbitration Act, 1940 does not apply there, the result cannot be altered by invoking the law of India or the public policy in India. For these reasons I reject the objection of Mr. Meyer also on this point.

13. The next objection of Mr. Meyer was in connection with the rules of conciliation and arbitration of the International Chamber of Commerce. One of the conditions on which this Court has to be satisfied before a foreign award: is made enforceable is that under Section 7(1)(c) of the Protocol Act, the foreign award has been made in conformity with the law governing the arbitration procedure. The substance of that objection is that the Arbitrator was not appointed properly or duly under those rules and that there was a breach of Articles 5, 7 and 12. On facts I am satisfied that there was no breach of any of the articles. Article 5 provides for the Court of Arbitration. It says;

'The International Chamber of Commerce has a Court of Arbitration, the members of which are appointed by the Council of the International Chamber. The function of the Court is to provide means for settlement by arbitration of business disputes of an international character.'

14. Mr. Meyer first tried to urge that a dispute has to be an international dispute and as this dispute is not an international dispute but a dispute between citizens of two different countries it did not come under this kind of arbitration. I am entirely unable to accept that argument, the fallacy of that argument is that the article provides for arbitration of 'business disputes' and not of 'international disputes.' What it does say is this that the business dispute must be of an international character. But that is very different from an international dispute. I am of the opinion that Article 5 on a proper construction means arbitration of business disputes and does include the dispute between two traders who are citizens of two different sovereign States. Because the difference is between the citizens of two different States such business dispute assumes international character. The words 'international character' in Article 5 qualify the words 'business dispute' and do not mean any dispute simpliciter between a nation and a nation.

15. The next objection of Mr. Meyer in this respect was that under Article 7 the Court of Arbitration must notify the main facts of the claim and ask the opposite party to furnish within the stipulated time a statement of the case in answer as companied by all documents and information in support. Mr. Meyer's contention was that the defendant never got this notice from the Court of Arbitration and therefore he contended that it was in breach of Article 7. Now here again Mr. Meyer is wrong on facts. The letter of 18-12-1953 which is annexed to the affidavit of Gajanan Khaitan himself affirmed on behalf of the defendant on 12-4-1956 states:

'The Court of Arbitration of the International Chamber of Commerce decided, in a session held on 18-11-1953, to proceed to arbitration in the above entitled matter and named the undersigned sole arbitrator. A copy of the submission to arbitration was sent to you by the Secretary-General of the Court of Arbitration with his registered letter of 14-12-1953.

The purpose of this letter is to notify you that the arbitration hearing will be held at the Court of Arbitration of the International Chamber of Commerce, 38 Cours Albert lee, Paris 8, France, on Monday, January 18, 1954 at 11 a.m. You have the right to be present at the hearing, in person or by a representative, and to produce such evidence bearing on the issues of the arbitration as you may wish to be considered by the arbitrator.'

Now that was the letter written by the Arbitrator himself and copy of it was sent to the General Secretary of the Indian Committee and the Secretary-General of the Court of Arbitration and a similar letter was sent to the plaintiff. Now this letter clearly shows that Article 7 was fully complied with. Notice was given and the case of the plaintiff was sent to them and a time was given for the defendant to answer such claim with all documents and informations in support thereof. I, therefore, find that there was no breach of Article 7 and reject Mr. Meyer's objection on that ground.

16. The next objection which Mr. Meyer took was under Article 12. The objection is that when the parties do not agree to the appointment of a sole Arbitrator, the International Chamber could not appoint a single Arbitrator, I do not think that follows at all from Article 12. Article 12 only relates to choice of arbitrators by parties. If the parties want, they can agree to have either a sole arbitrator or three. In other words, parties cannot agree to appoint two arbitrators only. In a case where the parties want three arbitrators, the third one is appointed by the Court of Arbitration, and in the case where one of the parties failed to nominate his arbitrator within the time set by the Court of Arbitration, the Court could itself appoint that Arbitrator. But it also provides expressly that if the parties fail to agree on the number of Arbitrators, the Court of Arbitration shall, as a general rule, appoint a sole Arbitrator. It is, therefore, clear that this Article 12 is mainly a choice of Arbitrators by the parties. On the express provision of Article 12 I am satisfied that the Court of Arbitration appointed by the International Chamber of Commerce has full and unequivocal power to appoint a sole Arbitrator in case of a dispute between two parties. Here the parties obviously failed to agree upon the number of arbitrators because the respondent refused to go to arbitration far less appoint an arbitrator. Besides, I am satisfied from the facts of this case that this objection cannot be sustained because it was never made by the defendant at any stage. It was never the point of the defendant that the International Court of Arbitration could not appoint a sole Arbitrator. The defendants never made any claim that they should be allowed to nominate any arbitrator on their side. I, therefore, reject Mr. Meyer's argument both on the law and on the facts on this point. This disposes of Mr. Meyer's objection on the alleged breach of Articles and Rules of Conciliation and Arbitration of the International Chamber of Commerce.

17. Lastly, one more objection was urged by Mr. Meyer, and that was that some of the correspondence that the plaintiff had between the plaintiff and the Court of Arbitration was not forwarded to the defendant. Here again the facts are not established by the defendant. I find that the defendant has concealed many of the letters which it is obvious that he had received. For instance, the letter of 30-3-1950 written by the defendant's solicitor to the Court of Arbitration of the International Chamber of Commerce refers to the letter of 3-3-1950 which was addressed by the Court of Arbitration; but that letter has not been produced by the defendant. Similarly, the letter of 9-10-1953 from the defendant shows that the defendant received the letter of 29-9-1953 where the Chamber wrote to the defendant in respect of the plaintiff's claim. But that letter of 29-9-1953 has not been disclosed by the defendant. Then again the 'defendant's solicitor's letter of 5-1-1954 shows that the defendant received another letter of 14-12-1953 from the Chamber but which the defendant has not disclosed. I am satisfied that the defendant's affidavit cannot be believed on the facts, and I have no doubt in my mind that the defendant received all the material correspondence and was not in the least prejudiced. In fact, the defendant's sole attitude from the beginning was not to take any interest in the arbitration by the International Chamber of Commerce and they openly took the attitude that they would not be liable under the award on the ground that they filed a suit in this High Court & had sent a notice of such suit under Section 35, Arbitration Act, 1940. IE the defendant has taken the risks, the defendant has to take the legal consequences. Besides, I do not think that where an arbitration clause provides for an arbitration to be conducted according to particular Rules and Regulations, the system of exchange of letters provided by the Bengal Chamber of Commerce can be imported into such kind of arbitration. Examining the correspondence the Chamber had with the defendant, it seems to me that the International Chamber had been unexceptionably fair and there is nothing on record to show that there has been any misconduct on their part in any manner,

18. Finally, Mr. Meyer suggested that the award should not be allowed to be filed on the ground that the award allowed a claim of the plaintiff which was barred by limitation under the laws in India. I am afraid I cannot entertain that point. First, on. the facts I am satisfied that the claim made by the plaintiff in this case was not barred by the laws of limitation even as they prevail in India. Mr. Meyer tried to contend that in this case the breach of contract occurred in 1947-48 by the dishonour of the bills of exchange, and the Arbitrator was not appointed until 18-11-1953 by which time the claim of the plaintiff had become barred. The starting point of limitation is to be determined not by the time when actually the particular Arbitrator Mr. Thomas Webb began to act but when the plaintiff put its claim before the Chamber. The plaintiff put its claim before the International Chamber as early. as 27-1-1950 at which date the plaintiff's claim had not become barred by the Indian laws o limitation. The fact that the International Chamber of Commerce finally constituted a Court of Arbitration in 1953 does not make the claim made in 1950 barred. The limitation for a claim is judged by the point of time when the claim is instituted and not by the day when the Court itself actually takes up the claim for disposal. Apart from the question that I am of the view that the claim of the plaintiff was not barred by the Indian laws of limitation, there is also a more cogent reason that the Indian law of limitation will not help the defendant if it was a good claim under the French law. Nothing has been shown that under the French law this claim was bad when the Arbitrator was making the award in Paris. The doctrine that no award should be enforced which is against public policy or the law of India, as laid down in Section 7 of the Protocol Act, does not in my view introduce Indian laws of limitation for claims in the present class of contract before me where the parties have chosen by their contract an arbitration in France as a method of settling their disputes. It is well established that such an agreement is effective in law. The parties may choose for arbitration any forum in the world. In fact the ratio decidendi of Lord Phillimore's speech in the House of Lords In N. V. Kwik Hoo Tong Handel Mastschappiji v. James Finlay & Co., Ltd., 1927 AC 604 (B) is that the parties in submitting their disputes to a particular forum impliedly consent that the law which is to regulate the decision is the law of that forum. This view will also be found discussed by Cheshire in his 'Private International Law' Edn. 4, p. 211. Finally the answer again is that the ambit of the arbitration clause also is wide enough to include this question of limitation. It is included in the expressions, 'validity', 'construction' or 'execution'. The word 'execution' in the arbitration clause means in this context the entire range of performance and enforcement of the agreement. Enforcement of an agreement would raise question of limitation. The word 'validity' would also include the question of limitation because a claim barred by limitation is no longer valid. I, therefore, overrule Mr. Meyer's objection on this ground.

19. As a last resort, Mr. Meyer argued that the present dispute was not covered by the arbitration clause. His argument was that the word 'litigation' in the arbitration clause meant actual proceeding in a Court of law and it was when such a proceeding in a Court of law was pending that the arbitration clause applied. The argument in my opinion is unsound. The word 'litigation' in this arbitration clause which I have quoted at the beginning of this judgment is qualified by two very clear and distinct expressions. One is 'according to the 'Reglement de conciliation et d' arbitrage' and the other is 'by one or several arbitrators appointed according to this Reglement.' Therefore the construction of the word 'litigation' in this clause clearly means 'dispute' and the contract is that such dispute has to be decided by the arbitration specified there. In fact shorn of all parenthesis the clause reads in English that 'Every litigation shall be finally decided in Paris according to the Rules of Conciliation and Arbitration of the International Chamber of Commerce, Paris by one or several arbitrators appointed according to these Rules.'

20. This disposes of all the objections taken before me by and on behalf of the defendant. As all the objections have failed, this application must succeed.

21. There will, therefore, be an order permitting the plaintiff to file the original of the said award dated 18-2-1954 or a duly authenticated copy thereof in this Court. Judgment will follow upon the award and a decree will be pronounced in terms of Indian, currency amounting to Rs. 1,23,651-12-10. The judgment will carry interest at 6 per cent, per annum. There will be interim interest also at 6 per cent, per annum. The plaintiff is entitled to the costs of this suit.


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