1953 (2) TMI 48 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the arbitration clauses in the contracts.
2. Whether the settlement contracts abrogated the original contracts and arbitration clauses.
3. Jurisdiction of the arbitrator.
4. Validity of the award made by the arbitrator.

Issue-wise Detailed Analysis:

1. Validity of the Arbitration Clauses in the Contracts:
The primary issue was whether the arbitration clauses in the original contracts between the contractor firm and the Government had been abrogated by subsequent settlement contracts. The court examined the arbitration clauses within the contracts dated 2-4-1943, 15-9-1944, and 22-9-1944. The court noted that the arbitration clause is distinct from other contractual clauses and is procedural and ancillary, depending on the existence of a dispute or difference regarding substantive stipulations.

2. Whether the Settlement Contracts Abrogated the Original Contracts and Arbitration Clauses:
The court analyzed the settlement contracts dated 6-9-1948 and 22-2-1949. It was determined that the settlement contracts constituted accord and satisfaction by substituted agreement, which discharged the existing causes of action and totally extinguished the original contracts, including the arbitration clauses. Specifically, the court found that the contract dated 22-9-1944 for Kettles Camp was abrogated by the settlement contract dated 22-2-1949, rendering the arbitration clause void. However, the contract dated 2-4-1943 for Ladies Cook and its arbitration clause continued to exist as the payment terms in the settlement contract were not fulfilled.

3. Jurisdiction of the Arbitrator:
The court held that the arbitrator did not have jurisdiction to entertain claims related to the contract dated 22-9-1944 for Kettles Camp, as the arbitration clause had ceased to exist following the settlement contract dated 22-2-1949. The arbitrator's decision on the existence of the arbitration clause was not binding on the court, and it was for the court to determine the validity of the arbitration clauses.

4. Validity of the Award Made by the Arbitrator:
The arbitrator's award of Rs. 1,16,446-11-5 plus interest and costs was a lump sum award without specifying the amounts related to each contract. The court found that part of the award was void due to the invalidity of the arbitration clause for the contract dated 22-9-1944. Consequently, the entire award was deemed invalid as the court could not ascertain with certainty the amounts pertaining to the valid contract dated 2-4-1943. The court declared the award void and set it aside.

Conclusion:
The court declared that the arbitration clause in the contract dated 22-9-1944 for Kettles Camp ceased to exist since the settlement contract dated 22-2-1949. The award made by the arbitrator was adjudged void and invalid, and the court set it aside. The respondent was ordered to pay the costs of the application to the petitioner.