1977 (7) TMI 116 - HC - Indian Laws

Summary

Issues Involved:
1. Validity and enforceability of the arbitration agreement.
2. Alleged novation of the original contract.
3. Inclusion of a third party (broker) in the suit.
4. Claim for damages for defamation.

Detailed Analysis:

1. Validity and Enforceability of the Arbitration Agreement:
The court examined the arbitration clause in the original contract, which stated that "all matters, questions, disputes, differences and/or claims arising out of and/or concerning and/or in connection with and/or in consequence of or relating to this contract" shall be referred to arbitration. The court held that the arbitration agreement was broad enough to encompass disputes regarding the original contract and any subsequent agreements related to it. The court emphasized that the arbitration clause was sufficiently wide to cover disputes arising out of the contract, including whether a subsequent agreement had been entered into.

2. Alleged Novation of the Original Contract:
The appellant argued that the original contract had been superseded by a subsequent agreement, effectively constituting a novation. The court found that there was no express pleading of novation in the plaint. The court noted that the subsequent agreement mentioned in the plaint did not expressly supersede the original contract but merely sought to discharge the appellant's liability through the broker. The court concluded that the arbitration agreement was wide enough to cover the dispute regarding the alleged novation, and thus, the issue could be referred to arbitration.

3. Inclusion of a Third Party (Broker) in the Suit:
The appellant included the broker as a third party in the suit, arguing that the broker was liable for the payment under the original contract. The court held that the inclusion of the broker could not defeat the arbitration agreement. The court observed that there was no pleading to show in what capacity the broker could represent the seller in discharging the buyer's liability. The court found that the subject matter of the suit, as confined to the buyer and the seller, was covered by the arbitration agreement in the original contract.

4. Claim for Damages for Defamation:
The appellant claimed damages for defamation based on letters written by the respondent to various parties, including the Forward Market Commission and the East India Jute & Hessian Exchange Ltd. The court held that the claim for defamation was directly and inextricably connected with the contract. The court noted that the letters were written in the course of attempting to realize the price of goods sold and delivered under the contract. The court concluded that the arbitration clause was broad enough to cover the dispute relating to the claim for damages in tort, as it arose out of and was connected with the contract.

Conclusion:
The court upheld the trial court's decision to stay the suit under Section 34 of the Arbitration Act, 1940, and referred the disputes to arbitration. The court found that the arbitration agreement was valid and enforceable, the alleged novation did not supersede the original contract, the inclusion of the broker could not defeat the arbitration agreement, and the claim for defamation was within the scope of the arbitration clause. The appeal was dismissed with costs, and the trial court's discretion was not disturbed.