1962 (5) TMI 24 - SC - Companies Law

Whether there was any such emergent condition in the jute trade aid industry at the relevant time as divided the sellers and buyers of raw jute into two conflicting camps so as to give rise to a reasonable apprehension in the minds of the sellers that they will not get a just decision from the appointed arbitrator? Held that - It is true that on an application under s. 5 it is not necessary to show that. the arbitra or is in fact biased and it is enough to show that there is a reasonable ground for apprehension that the arbitrator will be biased. But the reasonable ground must be established to the satisfaction of the Court to which an application for leave to revoke the authority of an appointed arbitrator is made. No such reasonable ground is made out in the present appeals. There were no such exceptional circumstances in these cases as would justify us to come to the conclusion that the appointed arbitrator would be disqualified as a result of bias by reason of a conflicting class interest. Clearly the parties contemplated that in case the buyer failed to furnish the license to import Pakistan Jute within the period mentioned, the contract would be deemed to be cancelled which meant that the contract was to be treated as non est for all purposes. If the contract was deemed to be cancelled, it must mean that the right and obligations of the parties came to an end simultaneously. It was not really necessary to insert the words with out any difference on both sides in the bought notes and such addition in the sold notes did not make any difference to the rights of the parties. Appeal dismissed.

Issues Involved:
1. Revocation of the authority of an appointed arbitrator under Section 5 of the Arbitration Act, 1940.
2. Alleged emergent conditions in the jute trade and industry.
3. Alleged bias and disqualification of the arbitrators.
4. Validity of the contracts under the Forward Contracts (Regulation) Act, 1952.
5. Agreement of parties regarding contract clauses.

Detailed Analysis:

1. Revocation of the Authority of an Appointed Arbitrator:
The primary relief sought by the appellants was the revocation of the authority of an appointed arbitrator under Section 5 of the Arbitration Act, 1940. This section states that "the authority of an appointed arbitrator or umpire shall not be revocable except with the leave of the Court, unless a contrary intention is expressed in the arbitration agreement." The High Court dismissed the applications for revocation, stating that the allegations of bias and emergent conditions were unsubstantial.

2. Alleged Emergent Conditions in the Jute Trade and Industry:
The appellants argued that emergent conditions in the jute trade, such as scarcity of raw jute and speculation, prevented them from fulfilling their contractual obligations. They claimed that these conditions divided the buyers and sellers into conflicting camps. However, the High Court found no evidence of such emergent conditions. The court noted that fluctuations in jute prices were a normal feature of the trade and did not constitute an emergency that would justify revocation of the arbitrator's authority.

3. Alleged Bias and Disqualification of the Arbitrators:
The appellants contended that the arbitrators were biased as they were connected with the buyers, leading to a reasonable apprehension of bias. The High Court examined the rules of the Bengal Chamber of Commerce and Industry and the Indian Chamber of Commerce, Calcutta, and found no basis for the apprehension of bias. The court emphasized that the arbitrators were selected for their practical knowledge of the trade and were not disqualified by any conflict of interest.

4. Validity of the Contracts under the Forward Contracts (Regulation) Act, 1952:
The appellants questioned the legality of the contracts, arguing that they were not in conformity with the law. The High Court referred to the relevant bye-laws and found that the contracts were valid. The court noted that the extension of time for the delivery of letters of authority did not materially conflict with the provisions of the bye-laws.

5. Agreement of Parties Regarding Contract Clauses:
The appellants argued that the parties were not ad idem (in agreement) regarding certain contract clauses, particularly the clause "without any difference on both sides." The High Court found that this clause did not make any real difference to the rights of the parties. The court held that the contract would be deemed cancelled if the buyer failed to furnish the license, meaning that the rights and obligations of the parties would end simultaneously.

Conclusion:
The Supreme Court upheld the High Court's findings, stating that no emergent conditions or reasonable apprehension of bias were established. The contracts were found to be in conformity with the law, and the parties were deemed to be in agreement regarding the contract clauses. Consequently, the appeals were dismissed with costs.

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