9911796707
TMI Blog1980 (10) TMI 198X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 4,25,343.00 from a giant foreign engineering and construction company which had undertaken to erect a thermal power station at Barauni in Bihar State under a contract dated February 27, 1960, with Bihar State Electricity Board, filed a suit in the year 1963 which stands stayed without the slightest progress for the last 17 years and with end nowhere in sight. Plaintiff (appellant herein), a private limited company, a labour contractor, entered into a sub-contract for erecting two complete radiation type steam boilers as part of Thermal power station at Barauni, with the defendant Invest-Import, a Yugoslavia based company which in turn had entered into a contract with the Bihar State Electricity Board for setting up the power station. Plaintiff sub-contractor, pursuant to the sub-contract dated July 10, 1961, had to supply skilled labour, unskilled labour and apprentice labour, to carry out the erection work and incidentally to do other things provided in the sub-contract. The contract also provided for employing extra labour force as well as carrying out extra stipulated job for installation, substantial alteration of design etc. as and when desired and directed by the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbitration, the suit filed by the appellant should be stayed. It was also averred that if the provisions of Arbitration Act did not apply the Court should in exercise of its inherent jurisdiction injunct the plaintiff appellant from proceeding with the suit instituted by it. There were further averments praying for vacating ad interim injunction granted by the High Court which are no more relevant. The respondent annexed to the petition for stay the sub-contract between the parties dated July 10, 1961, as also some correspondence that had ensued between the parties. Appellant filed a counter affidavit sworn by one Bhikhubhai Gourishankar Joshi who described himself as principal officer and constituted attorney of the appellant company controverting the averments made by the respondent in the petition seeking stay of the suit. The principal contention taken in the counter affidavit was that there was no concluded agreement between the parties to refer all the disputes arising out of the sub-contract to arbitration as contended for and on behalf of the respondent. To substantiate this contention letter dated July 10, 1961, the very date on which the sub-contract was entered into bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on both the parties. It was also held that the claims made by the appellant in the suit arose out of the sub-contract which included arbitration agreement and, therefore, the plaintiff must be bound by the bargain undertaken by him. The contention of the appellant that even if there was a subsisting arbitration agreement, in the facts and circumstances of the case discretionary relief of granting stay of suit would cause irreparable hardship and deny justice to the appellant was negatived. Appellant then moved an application for a certificate under 7 Article 133(1)(c) of the Constitution. The High Court was of the opinion that the appeals did involve substantial questions of law and the case was a fit one for appeal to the Supreme Court and accordingly granted a certificate under Art. 133(1)(c). Appellant accordingly preferred these two appeals by certificate. At the commencement of hearing of the appeals Mr. P. K. Chatterjee, learned counsel who appeared for the appellant stated that by passage of time the prayer for injunction restraining the respondent from recovering its claim from Bihar State Electricity Board had become infructuous and accordingly Civil Appeal No. 2408/68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntends that admittedly the Managing Director of the appellant company has signed sub-contract Ext. A which incorporates arbitration agreement and the appellant accepted the same and entered upon the work entrusted to it under Ext. A and, therefore, it is not now open to it to repudiate a part of the contract which provides for reference of disputes arising out of the subcontract to arbitration of a foreign arbitral tribunal. Appellant countered by saying that the appellant accepted the principal contract but not the agreement to refer the dispute to foreign arbitral tribunal and that there are tell-tale circumstances on record which would convincingly establish that the parties were not ad idem with regard to arbitration clause in Ext. A. To recall, sub-contract Ext. A was signed by the parties in Belgrade on July 10, 1961. Managing Director of the appellant was in Belgrade on that day. On that very day Managing Director sent a letter from Belgrade itself addressed to the respondent at Belgrade, relevant portion of which may be extracted: "10th July 1961 "I have signed the contract of Barauni Thermal Power Station work with you. I have objected to the clause of Arbitration put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are spelt out in paragraphs 5 and 6 of the affidavit which are extracted hereinabove. In para 6 it is in terms admitted that the appellant purported to send a letter to the respondent seeking to modify and/or delete the arbitration clause contained in the contract dated July 10, 1961. and also purported to send a telegram to the respondent. He further proceeded to state that the respondent never agreed to the modification and/or deletion of the arbitration clause. This unambiguous admission unmistakably shows that the letter and the cable were received by the respondent. Of course, again at a later stage when Panich Stojan, Project Manager of the respondent entered the witness box to give evidence in support of the application for stay he was asked at Question No. 13 whether he had any knowledge about the letter sent by the appellant on July 10, 1961, relating to the arbitration clause contained in the agreement. The answer was that the deponent had not received any letter in his department. To question No. 16 about the cable, the answer was that the respondent had not received any cable also. In cross-examination when he was confronted with the averments in paragraph 6 of the affi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to have been deleted from the subcontract Ext. A. Add to this the circumstance that a petty labour contractor could not have been expected to or was not likely to agree to arbitration by a foreign arbitral tribunal stationed in Paris because it would be beyond its reach to seek relief by arbitration in a foreign country. Incidentally it was urged by Mr. Majumdar that even if the court proceeds on the assumption that the letter and the cable were received, it is not open to this Court to look into the contents of the letter and the cable because the contents are not proved as the Managing Director of the appellant company who is supposed to have signed the letter and the cable has neither entered the witness box nor filed his affidavit proving the contents thereof. Reliance was placed on Judah v. Isolyne Bose. In that case a letter and two telegrams were tendered in evidence and it was observed that the contents of the letter and the telegram were not the evidence of the facts stated therein. The question in that case was whether the testatrix was so seriously ill as would result in impairment of her testamentary capacity. To substantiate the degree of illness, a letter and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a given case acceptance of a suggestion may be silentio reinforced by the subsequent conduct. True it is that the general rule is that an offer is not accepted by mere silence on the part of the offeree. There may, however, be further facts which taken together with the offeree's silence constitute an acceptance. One such case is where a part of the offer was disputed at the negotiation stage and the original offeree communicated that fact to the offerer showing that he understood the offer in a particular sense. This communication will probably amount to a counter offer in which case it may be that mere silence of the original offerer will constitute his acceptance (see Halsbury's Laws of England, 4th Edn.,Vol. 9, para 251). Where there is a mistake as to terms of a document as in this case, amendment to the draft was suggested and a counter offer was made, the signatory to the original contract is not estopped by his signature from denying that he intended to make an offer in the terms set out in the document; to wit, the letter and the cable (Ibid. para 295). It can, therefore, be stated that where the contract is in a number of parts it is essential to the validity of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etween the parties, this could only be got rid of by either (a) a mutual agreement to call off the sale, or (b) an agreement for a variation of the terms of the original contract. The mere fact that there have been negotiations which prove to be abortive and do not result in an enforceable agreement does not destroy the original contract: see Perry v. Suffields Ltd. (1916) 2 Ch. 187. C.A." If on the evidence in this case it can be held that the subcontract Ext. A was concluded contract in respect of all clauses of it including the arbitration agreement, a subsequent repudiation of a part of it by a party to the contract cannot affect the concluded agreement. But as clearly pointed out hereinbefore an amendment was suggested to the draft of the intended contract and immediately after the signing ceremony a letter pointing out that part in respect of which amendment was sought and not carried out was not acceptable and it was followed by a cable it would indicate that the parties were not consensus ad idem with regard to a severable portion of contract and there was thus lack of mutuality on the question of arbitration agreement. Therefore, the conclusion is inescapable that there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubtedly the Court will still have a discretion in exercise of its inherent jurisdiction to grant stay of the suit or refuse the same but the approach of the Court would be different. If s. 34 of the Arbitration Act, 1940, is attracted, ordinarily the approach of the Court would be to see that people are held to their bargain. Therefore, the party who in breach of arbitration agreement institutes an action before the Court, the burden would be on such party to prove why the stay should be refused. On the other hand, if the application is under s. 151, C.P.C., invoking inherent jurisdiction of the Court to grant stay, the burden will be on the party seeking stay to establish facts for exercise of discretion in favour of such party. In the present case respondent who moved an application for stay of suit instituted by the appellant founded its request for stay on shifting sands in that at one stage it was stated that the application was under s. 34 of the Arbitration Act, at other stage it was stated that it was under s. 151, C.P.C., and before us it was stated that it is under s. 3 of the Arbitration (Protocol and Convention) Act, 1937, or under the Foreign Awards (Recognition and En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this aspect, a minor contention raised by Mr. Majumdar that when the motion is addressed to the discretion of the Court and the Court has exercised its discretion one way, the appellate Court should be slow to interfere with the discretionary order and substitute its own discretion in place of the discretion of the Court before which the motion was addressed and as in this case both the learned single judge and the appellate bench have exercised the discretion in favour of the respondent, in exercise of its extra-ordinary jurisdiction this Court should not interfere with the same, may be disposed of. It is well settled that where the trial court has a discretion in the matter, the appellate court would not ordinarily substitute its discretion in place of the discretion exercised by the trial court. But it is equally well settled that where the trial court ignoring the relevant evidence, side tracking the approach to be adopted in the matter and overlooking various relevant considerations, has exercised its discretion one way, the appellate court keeping in view the fundamental principle can and ought to interfere because when it is said that a matter is within the discretion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Division Bench in granting stay of suit must receive serious consideration. When parties by contract agree to arrange for settlement of their disputes by a judge of their choice, by procedure of arbitration voluntarily agreed upon, ordinarily the Court must hold the parties to their bargain. As a corollary, if a party to a subsisting arbitration agreement in breach or violation of the agreement to refer dispute to arbitration approaches the Court, the Court would not lend its assistance to such a party and by staying the suit compel the party in breach to abide by its contract. When the parties have agreed to an arbitration by a foreign arbitral tribunal the case for stay would be stronger than if there was a domestic arbitration agreement. This proceeds on the assumption that parties not only sought and agreed upon the forum for resolution of dispute but also the law according to which the dispute would be resolved. However, this is not an absolute rule. Granting or refusing to grant stay is still a matter within the discretion of the Court. How discretion would be exercised in a given case would depend upon various circumstances. But to grant stay of the suit is still a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ims in the plaint. Broadly stated, it claims payment for extra work, difference between agreed charges and the revised charges, loss incurred on account of non-performance of a part of the contract by the respondent, etc. In respect of most of the claims the appellant will have to examine the men incharge of the work, strength of labour force supplied by it and this evidence would certainly be in India. Respondent had set up its office at Calcutta and this office was functioning even when the suit was instituted. Looking to the various heads of claim by the appellant and the correspondence between the parties prior to the suit it is safe to conclude that the evidence of the respondent would also be in India. Of course, as a remote possibility some highly placed officers may have to be examined by the respondent who may be in Yugoslavia. Mr. Majumdar learned counsel for the respondents, however, urged that the respondent has closed its office and all the books and relevant documents have been taken to Belgrade and, therefore, it is now too late in the day to say that the evidence of the respondent is also in India. The Court is required to consider the situation as on the date of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution of the dispute involved in the suit is in this country, India. In Athenee (supra) case the fact that the evidence was in U.K. was considered as very relevant consideration for refusal to stay the suit. In Michael Golodetz & Ors. (Supra) the fact that all the evidence of the parties was in India was accepted by this Court as a relevant consideration for refusing to stay the suit. The next circumstance relied upon is that the cost of arbitration to be held at Paris would be so disproportionately high to the amount claimed in the suit that forcing the appellant to go to arbitration would be denial of justice. This is self-evident. The claim in the suit is Rs. 4,25,343. Now, just contemplate taking witnesses and books of accounts to Paris for leading evidence before the International Chamber of Commerce. The cost would certainly be disproportionately high. One need not go into the mathematical calculations for this obvious and selfevident proposition. The next circumstances relied upon is restriction on availability of foreign exchange as a relevant consideration. If witnesses are required to be taken to Paris, if lawyers are to be engaged in Paris and if documents are to be se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Yugoslavia. Apart from this, the respondent has an office at Calcutta and the responsible officer like a Manager was stationed at Calcutta. The correspondence between the parties prior to the institution of the suit shows that the relevant documents were in India on the basis of which certain replies were given by the respondent to the claims advanced on behalf of the appellant. But once the suit was filed, the respondent insists that arbitration agreement should be given full effect. Having regard to all the circumstances of the case it appears crystal clear that the respondent is motivated to seek stay neither to vindicate any principle nor to hold the appellant to the bargain but to force the appellant to go to Paris incurring disproportionately heavy cost or to give up the claim. In Michael Golodetz (Supra) the fact that arbitration in New York would proceed ex parte was viewed with disfavour and stay was refused. Similarly, in The Rehman, the principal object of the defendant was not to achieve a trial in Russia but merely make it more difficult to the plaintiffs to assert their claim, was emphasized while refusing stay. In such a situation if there are other weighty cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cretion of the Court, stay was refused on the ground that the plaintiffs were persons domiciled in England, the claim arose in England, the damage sued for was discovered in England, the cargo was surveyed in England, and the damage was ascertained after the survey. The fact that the entire evidence was in England was emphasised as a relevant consideration. The Court also observed that from the correspondence one is left with the suspicion that the principal object of the defendants was not to achieve a trial in Russia, but merely to make it more difficult for the plaintiffs to assert their claim. On all these considerations stay was refused. And this decision was affirmed by the Court of Appeal in The Rehman Denning, L. J., observed that the dispute is more closely connected with England than with Russia. We cannot resist the temptation to point out that the fact situation in the case before us is almost similar, if not identical, to the one in The Rehman (Supra). The last circumstance relied upon is that in all cases of arbitration by a foreign arbitral tribunal there is always a rider that in case of hardship or injustice Courts of the country of the party being forced to go to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry either party is connected, and how closely. (d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages. (e) Whether the plaintiffs would be prejudiced by having to sue in the foreign court because they would: (i) be deprived of security for their claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time-bar not applicable in England; or (iv) for political, racial, religious or other reasons be unlikely to get a fair trial". To sum up, the entire evidence both of the appellant and the respondent is in this country; the contract as a whole was executed and carried out in this country; the claim as a whole arose in this country; the appellant is a company incorporated in this country and the respondent is having its office in this country; and that the respondent is not motivated by any principle to have the decision of the foreign arbitral tribunal at Paris but the principal object of the respondent is merely to make it more difficult, if not impossible, for the appellant to assert the claim. Add to this two other vital considerations, viz., that the cost of arbitration at Paris will be so disprop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to interfere with the discretionary relief granted in this case. The next contention is that in view of the provisions contained in Arbitration (Protocol and Convention) Act, 1937, ('1937 Act' for short), the Court could not invoke its inherent jurisdiction under s. 151, C.P.C., and the special Act would not assist the respondent because the present case is not covered by the provisions of the Act. Mr. Majumdar urged that the 1937 Act was enacted to give effect to the protocol on arbitration clause set forth in the First Schedule and to the convention on the execution of foreign arbitral awards set forth in the Second Schedule as India was a signatory to the protocol. Mr. Majumdar urged that even if the application for stay is not entertainable under s. 34 of the Arbitration Act on the ground that this is a foreign arbitration to which Arbitration Act, 1940, will not apply, nor could he invoke inherent jurisdiction of the Court under s. 151 of the Code of Civil Procedure, yet the application is maintainable under s. 3 of the 1937 Act. Section reads as under: "3. Notwithstanding anything contained in the Arbitration Act X of 1940, or in the Code of Civil Procedure, 1908, if any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edule would not attract s. 3 of the 1937 Act but it would only be attracted where there is a submission pursuant to that agreement. Section 3 of the 1961 Act prior to its amendment in 1973 read as under: "3. Stay of proceedings in respect of matter to be referred to arbitration: Notwithstanding anything contained in the Arbitration Act X of 1940 or in the Code of Civil Procedure, 1908, if any party to a submission made in pursuance of an agreement to which the Convention set forth in the Schedule applies, or any person claiming through or under him, commences any legal proceedings in any Court against any other party to the submission or any person claiming through or under him in respect of any matter agreed to be referred, any party to such legal proceedings may at any time after appearance or before filing a written statement or taking any other steps in the proceedings, apply to the Court to stay the proceedings and the Court, unless satisfied that the agreement is null and void in-operative or incapable of being performed or that there is not in fact any dispute between the parties with regards to the matter agreed to be referred, shall make an order staying the proceedings". ..... 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