Kamala Mills Ltd. v. Ganpatti Bhagawati Prasad — 1958 DIGILAW 226 (CAL)

JUDGMENT 1. THIS is an application for slay of the suit. There was a contract between the petitioners and the respondents by which the petitioners agreed to sell and the respondents agreed to purchase certain textile goods. The contract contained the arbitration clause as follows: "all disputes and questions whatsoever which shall arise between the parties hereto out of or' m connection with this agreement; or as to the construction or application thereof or the respective rights and obligations of the parties hereunder or as to any clause or thing herein contained or any account or valuation to be made hereunder or as to any other matter in any way relating to these presents shall be referred to arbitration in. accordance with the rules of the Millowners' Association, Bombay, for the time being in force regulating arbitrations with respect to piece goods." 2. THE principal objection to stay of the suit is that the arbitration clause is vague. The arbitration clause speaks of disputes to be referred to arbitration in accordance with the rules of the Millowners' Association, Bombay. It is, therefore, contended that there is no reference to anybody as the chosen arbitrator. Reliance was placed on a decision of Sinha, J. reported in 85 C. L. J 136 at page 141. In that case there was a contract containing a printed arbitration clause which was as follows: "all disputes regarding this contract to be settled by two arbitrators, one nominated by the buyers and sellers respectively in accordance with the Indian Arbitration Act." The printed portion was followed by a type-written clause which also contained an agreement for arbitration. The type-written clause was as follows: "alt disputes whatsoever arising on or out of this contract shall be referred to the arbitration under the rules of the Tribunal of Arbitration, Bengal Chamber of Commerce or the Indian Chamber of Commerce applicable for the time being for decision and such decision shall be accepted as final and binding on both the parties to the contract." 3. SINHA, J. found it difficult to make out what the parties really intended if the printed clause and the typewritten clauses were taken together to constitute one arbitration clause. If the two clauses were read together the arbitration agreement was found to be uncertain and vague and could not be given effect to. SINHA, J. found it difficult to make out what the parties really intended if the printed clause and the typewritten clauses were taken together to constitute one arbitration clause. If the two clauses were read together the arbitration agreement was found to be uncertain and vague and could not be given effect to. Assume that the type-written clause were to supersede the printed clause, Sinha J. found that there was no reference to arbitration of any particular individual or body by the type-written clause. The type written clause provided that reference is to be made under the rules of Tribunal of Arbitration of the Chamber of Commerce and there was no provision in the rules whereby there can be a reference to arbitration under the rules of the Bengal or the Indian Chamber of Commerce. The rules contemplated a prior reference by the parties to the Chamber of Commerce and in that event they provided for the appointment of arbitrators and for the conduct of arbitrators. On that basis his lordship found that the rules have no application where there is no reference to the Chamber of Commerce. Sinha, J., concluded by saying, that the arbitration agreement should be strictly construed and that clear language should be introduced into any contract which is to have the effect of ousting the jurisdiction of the courts. 4. MR. A. M. Basu, counsel for the petitioners relied on an unreported decision of S. R. Das Gupta, J. in Jhajharia and Co. v. East India Commercial Co Ltd., (1) in Award No. 146 of 1955. In that case the arbitration clause was as follows: "any dispute whatsoever arising on or out of this contract shall be referred to arbitration under the rules of the Calcutta Shellac Trade Association applicable for the time being for decision and such decision shall be accepted as final and binding on both parties to this contract." It was contended in that case that the arbitration clause was vague inasmuch as nobody had been named as an arbitrator. S. R. Das Gupta, J., relying on another previous decision of his lordship observed that such an arbitration clause was not vague, the intention of the parties being to refer their disputes to the arbitration of the Shellac: Trade Association. 5. MR. S. R. Das Gupta, J., relying on another previous decision of his lordship observed that such an arbitration clause was not vague, the intention of the parties being to refer their disputes to the arbitration of the Shellac: Trade Association. 5. MR. Basu also relied on another unreported decision of Bachawat, J., in Award Case No. 221 of 1950 (Bajranglal Shroff v. Ram Chandra Hanumanbux) (2). In that case the arbitration clause was an agreement to refer matters to arbitration under the rules of the Bengal Chamber of Commerce applicable for the time being or of the Nippon Trade Agency, Calcutta or of two Japanese merchants in Calcutta at the option of the sellers. Bachawat, J. held that the agreement provided for reference to arbitration under the rules of the Bengal Chamber of Commerce and under that agreement disputes must he referred to arbitration and the reference was to be under the rules of the Bengal Chamber of Commerce, the only person who can arbitrate under such rules being the Bengal Chamber of Commerce. Bachawat. J. referred to the case of the Ganges Manufacturing Co. v. Inderchand (3) reported in I. L. R. 33 Cal. page 1169 which is an authority for the proposition that an agreement for reference to the arbitration of the Bengal Chamber of Commerce is an agreement for reference to the arbitration of the Chamber in accordance with and under its rules of arbitration. His lordship held on a parity of reasoning where there is a reference under the rules of the Bengal Chamber of Commerce it must be taken that the parties intend that the arbitration shall be made by the only person for whom it is possible to arbitrate under such rules, namely, the Bengal Chamber of Commerce. The implication arises inevitably to effectuate the intention of the parties and to give business efficacy to the contract. Mr. Bhabra, counsel for the respondent contended that the view expressed by Bachawat. J. was slightly influenced by the fact that the later limbs of the arbitration clause in that case clearly contemplated an agreement to know persons or bodies. The other contention of the counsel was that Pachawat, J. 's view should not be accepted as a. statement of law. Bachawat, J. has given cogent reasons as to why the arbitration clause is not vague and I respectfully agree with the views expressed by his lordship. The other contention of the counsel was that Pachawat, J. 's view should not be accepted as a. statement of law. Bachawat, J. has given cogent reasons as to why the arbitration clause is not vague and I respectfully agree with the views expressed by his lordship. 6. COUNSEL for the petitioner also relied on the unreported decision in Appeal from Original Order 95 of 1951 (4) (Bajranglal Shroff v. Ram Chandra Hanumanbux). This was a judgment in appeal from the afore-mentioned decision of Bachawat, J. In that case before the Appeal Court the arbitration, clause was as follows: "if in any matter or dispute doubt or question shall arise between the parties hereto regarding this contract or the goods. . . . the parties hereby agree to refer such matter to arbitration under this rules of the Bengal Chamber of Commerce applicable for the time being or of the Nippon Trade Agency Calcutta or of two Japanese merchants in Calcutta at the option of the sellers." On the construction of this agreement his lordship the Chief Justice came to the conclusion that the arbitration clause suffered from no vagueness or uncertainty. S. R. Das Gupta, J. came to the conclusion that the arbitration clause was a vague one. The appeal was decided on another point with the result that there was no definite pronouncement of the view by the Appeal Court on this question as to whether the arbitration clause is vague or not. Be that as it may, his lordship the Chief Justice scanned the arbitration clause and gave the following reasons as to why the arbitration clause was not vague and as to why the decision of Sinha, J. was liable to be misconstrued: "speaking entirely for myself I am of opinion that if the language which the parties used in the present case be closely regarded it need not cause any confusion and it is sufficient for the purpose of embodying the agreement to refer the disputes between the parties to the arbitration of the Bengal Chamber of Commerce. It will be remembered that what that clause says is that the parties agreed to refer the matters in dispute between them to arbitration, tinder the rules of the Bengal Chamber of Commerce. It will be remembered that what that clause says is that the parties agreed to refer the matters in dispute between them to arbitration, tinder the rules of the Bengal Chamber of Commerce. The confusion in my opinion, has been created because the words, 'under the rules of the Bengal Chamber of Commerce' have been read along with the word 'refer' and not, as in my opinion, they should be, along with the word 'arbitration. ' It is only if you read the words under the rules of the Bengal Chamber of Commerce with the word 'refer' that the difficulties pointed out by Mr. Justice Sinha arise but when the parties were saying that they agreed to refer matters in dispute between them to arbitration under the rules of the Bengal Chamber of Commerce, they in my opinion, clearly meant and used an apt language to convey the intention that they agreed to refer the dispute between them to an arbitration to be held under the rules of the Bengal Chamber of Commerce. No arbitration under the rules of the Bengal Chamber of Commerce can be held by any arbitrator or body of arbitrators other than the Tribunal of Arbitration of that Chamber as will appear from the rules. 'if, therefore, the parties were saying that they would refer their disputes to arbitration, which would be arbitration held under the rules of the Bengal Chamber of Commerce, they were clearly intending and saying that the disputes shall be referred to the arbitration of the Bengal Chamber of Commerce and they were not leaving anything vague." 7. I respectfully agree with the observations of his lordship the Chief Justice, namely, that the entire emphasis is on arbitration. The possibility of confusion and misconstruction has been clearly pointed out by his lordship the Chief Justice that if emphasis be shifted from the word 'arbitration' to the word 'refer' the content of the arbitration clause is missed and it loses sight of the real intention of the parties. 8. COUNSEL on behalf of the respondent took another point that there wag a possibility of bias. The point is this, in paragraph 7 of the plaint it is the plaintiff's case that the plaintiff's representative went to Bombay end saw one Motilal Tapuria representing the defendant at Bombay and the latter promised to come down to Calcutta to inspect the goods and settle matters. The point is this, in paragraph 7 of the plaint it is the plaintiff's case that the plaintiff's representative went to Bombay end saw one Motilal Tapuria representing the defendant at Bombay and the latter promised to come down to Calcutta to inspect the goods and settle matters. Motilal Tapuria's name appears in the list of panel of arbitrators. I have no doubt that Motilal Tapuria will not act as an arbitrator in this case nor is it the respondent's counsel's apprehension that Motilal Tapuria will be the arbitrator. His apprehension is this that inasmuch as Motilal Tapuria is one of the arbitrators the other persons whose names appear in the panel along with Motilal Tapuria may be biassed in his favour. Mr. Bhabra quite clearly stated that this was a mere apprehension on the part of the respondent and it could not be put at anything higher than that. In my opinion this apprehension is unfounded. It will also be extremely unsafe to act on such apprehension because in the ordinary course of affairs Millowners may know each other. If such an acquaintance is likely to influence their decision then bodies like the Millowners' Association or the Chambers of Commerce will be unable to have panel of arbitrators. For these reasons, I am of opinion that the suit should be stayed. Costs of this application in the arbitration proceedings. Certificate for counsel. Operation of this order stayed for a week.