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1952 DIGILAW 45 (MAD)

The Firm of Tatavarti Nagapotha Rao (died) v. Balabhadra Ramakrishnayya

1952-02-19

P.V.RAJAMANNAR, VENKATARAMA AYYAR

body1952
Order.- Basheer Ahmed Sayeed, J.- The point that arises for consideration in this revision petition is whether by reason of a certain clause in the contract, by which the parties agreed that the terms and conditions of the Nellimarla or Chittavalasa Jute Mill Company’s contract should be binding between the parties, certain clauses contained in the Nellimarla contract that any disputes should be referred to arbitration, should get incorporated in the contract between the parties or not. In a decision given by me, reported in Ramdayal Rameswarilal v. Chandra Narasimham1, after considering the decisions cited before me, I came to the conclusion that the terms of the contract of Nellimarla or Chittavalasa Jute Mill Company did get incorporated into the terms of that suit contract by reason of the fact that there was an agreement between the parties that those terms should be observed between them in case of a dispute and consequently I held that the matter was one that should be referred to arbitrations and that until such arbitration was complete, the parties were not entitled to go before a Court. Subsequent to my decision referred to above, a decision of the Calcutta High Court has been reported in Dwarkadas &38; Co. v. Daluram2. The Full Bench of the High Court at Calcutta appears to have agreed with the view I have taken in Ramdayal Rameswarilal v. Chandra Narasimham1. Further, it is brought to my notice that, subsequent to my decision, my learned brother, Raghava Rao, J., had occasion to consider a similar point raised in a civil revision petition and agreed with my view on the matter. That decision is still unreported and seems to have been given in a civil revision petition. The learned counsel for the respondent now brings to my notice that, subsequent to my decision as well as that of Rahgava Rao, J., my learned brother Panchapakesa Ayyar, J., has taken the opposite view; and his decision which is also unreported is said to have been made in C.R.P. Nos. 941, and 942 of 1949. The judgment is dated 20th February, 1951. 941, and 942 of 1949. The judgment is dated 20th February, 1951. In this judgment my learned brother seems to think that in order to make the parties become bound by the terms of the contract of Nellimarla or Chittavalasa Jute Mill Company, the said terms should be specifically brought home to the parties, otherwise, a party cannot be bound by the terms of which he has no knowledge. This appears to be the view taken by my learned brother on the facts of that case. He has further held that the mere clause in the contract under N.B. that the terms and conditions of the Nellimarla or Chittavalasa Jute Mill Company’s contract should be binding against the parties, could not be sufficient and there should be evidence to the effect that the party had specific knowledge of the terms of the contract which were sought to be brought into operation by virtue of the N.B. clause in the suit contract. But my learned brother has not discussed the various authorities which have been referred to in my decision or in the decision reported in Dwarkadas &38; Co. v. Daluram1. It also transpires that neither my decision nor that of Raghava Rao, J., has been brought to the notice of my learned brother Panchapakesa Ayyar, J. In this state of things, the learned counsel for the respondent would urge that since there is a conflict of views in regard to the real import and binding nature of a clause of the kind now in controversy, between the Judges of this High Court, it would be desirable that the conflict is set at rest by referring the matter to a Bench of this Court. Though the learned counsel for the petitioner would say that there is no need for such a reference to a Bench, still I think that once there has been a conflict in this Court between single Judges on the same point, it would be in the interests of all parties concerned that the matter should be argued before a Bench and a final decision arrived at as to what exactly should be the law applicable to such cases. In this view, I refer this matter to a Bench. The orders of the Hon’ble the Chief Justice will be obtained for posting the case before a Bench. K.B. Krishnamurthy for Petitioner. T. Ramamurthi for first Respondent. In this view, I refer this matter to a Bench. The orders of the Hon’ble the Chief Justice will be obtained for posting the case before a Bench. K.B. Krishnamurthy for Petitioner. T. Ramamurthi for first Respondent. The Judgment of the Court was delivered by Venkatarama Ayyar, J.- This revision petition has been referred by Basheer Ahmed Sayeed, J., to a Bench in view of the conflict between his judgment reported as Ramdayal Rameswarilal v. Chandra Narasimham2 and the judgment of Panchapakesa Ayyar, J. in C.R.P. Nos. 941 and 942 of 1949. The facts relevant for the purpose of this revision are these:- The plaintiff is a merchant carrying on business at Ellore. The first defendant is a firm carrying on business at Masulipatam and defendants 2 and 3 are its partners. On 1st January, 1944, the defendants entered into a contract with the plaintiff at Vijayawada, Ex. P-1. Under that contract the defendants agreed to supply the plaintiff 30,000 gunnies, or 75 bales at Rs. 56-12-6 per 100 gunnies. There is a note in the contract in these words: "Terms and conditions as per Chittavalasa or Nellimarla Jute Mill Company’s contract." The plaintiff filed the suit to recover Rs. 998-8-0, as damages for breach of contract. The suit was filed on the Small" Cause side of the Sub-Court, Vijayawada. The defendants filed an application under section 34 of the Arbitration Act for staying the suit. They alleged that the Chittavalasa or Nellimarla Jute Mill Company contract contained clauses for arbitration and that accordingly the plaintiff was a party to an agreement in writing for arbitration and therefore the suit ought to be stayed under section 34 of the Arbitration Act. The plaintiff denied knowledge of the terms of this contract and stated that he was not furnished with a copy of this contract. The Subordinate Judge held that the plaintiff had no clear knowledge of the existence of the arbitration clause and following the decision in Ramlal Murlidhar v. Haribux Puranmull1 , he dismissed the application. Against that order the defendants have preferred this civil revision petition. It came up for hearing before Basheer Ahmed Sayeed, J. The petitioners contended that it was immaterial whether the plaintiff had actual knowledge of the existence of the arbitration clause or not and that having signed Ex. Against that order the defendants have preferred this civil revision petition. It came up for hearing before Basheer Ahmed Sayeed, J. The petitioners contended that it was immaterial whether the plaintiff had actual knowledge of the existence of the arbitration clause or not and that having signed Ex. P-1 the contract and there being a reference in that contract to Chittavalasa or Nellimarla Jute Mill Company’s contract all the terms of that contract must be deemed to have been incorporated in the contract between the parties and as there were also arbitration clauses in those contracts, the plaintiff must be held in law to have been a party to an arbitration agreement, irrespective of the fact whether he has read those clauses or not. It was also argued that the decision in Ramlal Murlidhar v. Haribux Puranmull1had been overruled by a Full Bench of the Calcutta High Court in the decision in Dwarkadas &38; Co. v. Daluram2. In this Court Basheer Ahmed Sayeed J. had held in the case in Ramdayal Rameshwarilal v. Chandra Narasimham3that when parties to a contract refer to another contract the terms of that contract must be deemed to have been incorporated by reference in their own contract and that in that view an arbitration clause contained in another agreement must be taken to be part of the agreement between the parties if that agreement is referred to in their contract. He also held on the facts of that case that there were sufficient materials for holding that the plaintiff had knowledge of the existence of the arbitration clause. In C.R.P. Nos. 941 and 942 of 1949 Panchapakesa Ayyar, J., held that when an arbitration clause in another contract is sought to be used as incorporated by reference there must be evidence that the party had knowledge, actual or constructive, of the existence of the arbitration clause in the other contract and in the absence of such notice, it could not be said that there was an arbitration agreement such as would attract section 34 of the Arbitration Act. It was in view of this difference of opinion that the matter has been placed before us. On the facts of this case we consider it unnecessary to express any opinion on the point on which these two judgments differ. It was in view of this difference of opinion that the matter has been placed before us. On the facts of this case we consider it unnecessary to express any opinion on the point on which these two judgments differ. 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 that document and ascertain the terms. An examination of the authorities in which this view has been adopted shows that they are either cases in which the other contract is one between the same parties and therefore the terms including the arbitration clause might be taken to have been within the knowledge of the parties; or cases in which there is reference to a specific document which was in existence and whose terms could easily be ascertained if the parties wanted to. It is reasonable to hold that when the parties had referred to a document which was in existence they had knowledge or what comes to the same thing, could have had knowledge, of all the terms contained in that document and an arbitration clause contained in that document must therefore be held to be binding on them exactly as if it had been incorporated in extenso in the signed contract. The foundation of this reasoning is the existence of another specific document containing an arbitration clause. It is essential that the terms of an agreement must be precise and definite. This applies as much to an arbitration agreement as to other agreements. Before holding that the parties have agreed in writing to refer their dispute to arbitration and in the absence of such a clause in the agreement actually signed by the parties there must at least be a specific contract or document containing such a clause in respect of which it might be said that it had been incorporated in the agreement of the parties by reference. In this case, admittedly no specific document was before the parties. No specific document is referred to in the agreement. The N.B. merely states: “Terms and conditions as per Chittivalasa or Nellimarla Jute Mill Company contract.” It is obvious that the terms and conditions of Chittivalasa contract may not be the same as the terms and conditions of the Nellimarla Jute Mills Company contract. Further it is not any particular contract of Chittivalasa or Nellimarla that is referred to. There might be contracts and contracts. Some of them might contain clauses for reference to arbitration and others might not and therefore reference to a contract of Chittivalasa or Nellimarla Jute Mills is anything but specific. One can conceive of contracts in which there are no arbitration clauses. Under the circumstances it cannot be said that there is any specific contract with reference to which the suit agreement must be deemed to have been made. In fact, what the defendants did was not to produce any contract of their own either but to produce some contract between the Mills and a stranger and it was filed as Exhibit P-2. A reference to that document shows that some of the terms were introduced in slips showing variation of the terms in the printed form. One of the terms is that the reference should be to the Bengal Chamber of Commerce. If as is suggested before us, the arbitration by the Bengal Chamber of Commerce will be open only to the members of that institution, then neither the plaintiff nor the defendants could act under this clause because they are not members of the Bengal Chamber of Commerce. Another clause is that the award should be filed in the Calcutta High Court and be made a rule of Court in that Court. A reference to these conditions shows that the parties could not have contemplated such a clause as this before they entered into this agreement. We are of opinion that unless there is another contract in existence and specifically referred to, its terms cannot be deemed to have been incorporated in the agreement between the parties by reference. As it is, the reference to a non-existing contract is too vague and uncertain to be treated as an agreement to refer to arbitration. In this view the Civil Revision Petition fails and is dismissed with costs. K.S. ----- Petition dismissed.