1959 (1) TMI 30 - HC - Indian Laws

Summary

Issues Involved:
1. Existence of an arbitration agreement.
2. Whether the arbitration agreement was rescinded by an express oral agreement.
3. Applicability of the arbitration agreement to disputes arising from a subsequent arrangement.
4. Exercise of discretion in staying the suit.

Detailed Analysis:

1. Existence of an Arbitration Agreement:
The court's power to stay a suit under Section 34 of the Indian Arbitration Act hinges on the existence of an arbitration agreement. The appellant contended that the arbitration agreement contained in the contract dated 20-11-1956 had been abrogated and superseded by an express oral agreement on 6-8-1957. The respondents argued that, under Section 2(a) of the Indian Arbitration Act, an arbitration agreement is "by law required to be in writing," thus barring proof of a subsequent oral agreement to rescind the arbitration agreement under proviso (4) to Section 92 of the Indian Evidence Act. The court held that an arbitration agreement is not by law required to be in writing and that for purposes other than the Indian Arbitration Act, an oral arbitration agreement is recognized.

2. Whether the Arbitration Agreement was Rescinded by an Express Oral Agreement:
The seller's version of the arrangement on 6-8-1957 varied over time. Initially, there was no mention of the arrangement being a substituted new agreement or that the contract dated 20-11-1956 was abrogated or superseded. Later, the seller alleged in the plaint that the contract was substituted by a new arrangement. However, this allegation was not repeated in subsequent affidavits. The court concluded that the arrangement on 6-8-1957 did not amount to an implied rescission of the arbitration agreement. The terms of the new arrangement were not inconsistent with the continuance of the arbitration agreement, and Clause 4 indicated its continuation. The court found no express oral agreement to rescind the arbitration agreement and decided this issue against the appellant.

3. Applicability of the Arbitration Agreement to Disputes Arising from a Subsequent Arrangement:
The court examined whether the disputes in respect of the balance goods and the claim for damages were covered by the arbitration agreement. The contract dated 20-11-1956 included an agreement to refer "any dispute arising out of the contract" to arbitration. The court determined that the disputes arose in the context and setting of the original contract and directly from it. The new arrangement on 6-8-1957 was made in the course of working out the rights and obligations under the original contract, and disputes about its terms directly sprang from the parent contract. The court held that the arbitration clause applied to disputes arising out of the original contract and its subsequent modifications.

4. Exercise of Discretion in Staying the Suit:
The appellant argued that the learned judge should not have stayed the suit, citing difficulties such as the unavailability of witnesses at Zurich, lack of arbitrators acquainted with Indian law, and higher costs. The court noted that it was premature to determine the arbitrators' identities and the arbitration venue. The parties had agreed that neither India nor Yugoslavia would be the arbitration venue, and no special reason was shown to deviate from this agreement. The court emphasized that the prima facie leaning is to stay the suit if the disputes are covered by the arbitration agreement. The court found no evidence that the necessary evidence could not be produced at Zurich or that the judge exercised discretion on wrong principles, and thus, it did not interfere with the judge's discretion.

Conclusion:
The appeal was dismissed with costs, affirming the decision to stay the suit under Section 34 of the Indian Arbitration Act.