# Ma, a. AtrMrcAanti Lalitb:mar v. Sltrte Adica Jule Miii• U4

- **Citation:** [1963] 2 S.C.R. 953
- **Court:** Supreme Court of India
- **Decided:** 1963
- **Bench:** S. K. Das, M. HmA.YA.TULLA.B a.nd J. c. SRA.H
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ma-a-atrmrcaanti-lalitb-mar-v-sltrte-adica-jule-miii-u4-2558
- **Pages:** 24

## Headnote

..4.rbitration-Reoooation-Pt1Wtr
of
Ouurt-Periotlic
fluctWJtion of price, if an emergency~:A.rbitralion Act, 1940 (10
of 1940), 88. 6,34-Worlcing Manval ofllie lilaetlndia Jute and
Heenan lil:rcliange, Oh. IX. paMB. 7(c), 11.
The appellants as sellers of raw jute entered into
forward contracts with the respondent jute mills to sell such
jute to thCDI. The contracts.being transferable specific delivery
contracts, were entered into . in the standard printed forms
of'the ~t India Jute & Hessian Exchange Ltd., which was
an association rCcognised under the Forward Contracts
(Regulation) Act, 1912, and thus were subject to the rules
and bye-Jaws made by the &change which provided for
arbitration of .dispu!CI by the tribllll&I of· Arbitration of the
198B
Slate of My•or1
v
8, S. Matap.,
1981
Ma, a.
AtrMrcAanti
Lalitb:mar
v.
Sltrte Adica Jule
Miii• U4.
954
SUPREME COURT REPORTS [1963]
Bengal Chamber of Commerce and Industry or the Indian
Chamber of Commerce in Calcutta.
The appellants failed
to supply the stipulated jute within the time mentioned in
the
guarantee clauses.
The respondents exercised their
option under the rules aforesaid, canceJlcd the contracts and
charged the appellants for the difference in price between
the contract rate and the market rate prevailing on the date!
of cancellation and on the appellants denying their liability
applied for arbitration. The appellants thereupon applied
to the High Court under s. 5 of the Arbitration Act, 1940, for
Tevoking the authority of the arbitrator.
There case in
contemplated in Para 11, in Ch. IX of the Working Manual
of the Exchange sub•tance was that there was an emergency
as due to scarcity of raw jute and speculation at the relevant
time and the price of raw jute shot up abnormally, tbiJ
placed the buyers and sellers of r"w jute in two conflicting
camp, and the majority of lhe arbitrators in the r,anel of
arbitration of the Bengal Chamber of Commerce and
ndustry
being connected with the buyers of raw jute, the jute mills,
wtre disqualified from acting as impartial arbitrators.
The
High Court held that no such emergent condition had been
proved as would justify revocation of the authority of an
appointed arbitrator.
Held, that the normal periodical ftuctuation in the price
of raw jute could not constitllte an emergency within the
meaning of para. 11 in Ch. IX of the Manual since such
fluctuations have been taken into consideration by those who
entered Into forward contracts. Such an emergency must
be one which is abnormal and which none could foresee. It
could not, therefore, be said that in the present case there
was such a conflict of interest between sellers and buyers as
would render the panel of arbitrators having a practical
experience of the normal fluctuations of the market disqualified
to act as impartial arbitrators.
Th• object of ss. 5 and 34 of the Arbitration Act was
the same, namely, to prevent arbitration, with this difference
tbat an application under s.5 would lie if proceedings had not
yet .been
commenced in Court
whereas under s. 34 an
application lay when they had commenced,
But a Court would not lightly exercise its discretion to
grant leave to revoke an arbitrator's authority.
Before it
would do so it must be satiafied that" a substantial miJcarriage
of justice would otherwise take place.
Parties would not
be relieved from a tribunal of their own choice simply becaUIC they feared that its decision might go agalnat them,
•
'·
.
•
'
(
~--
2 S.C.R.
SUPREME COURT REPORTS
955
and the court had to base its decision on. one 01 other of five
·• grounds, namely, execs• or refosal of jurisdiction by arbitrator,
misconduct of arbitrator, disqualification .of arbitrator,
charges of fraud and lastly the existence of exceptional
circumstances.
•
•
In the instant cases there
were no exceptional
circumstances to justify the conclusion that the arbitrator
was disqualified by bias due to conflicting ciaos interest.
cBalabw: Aganrola v. l,achminarain J'Ute Mfg. Go. Ltd.
(19

## Text

_Characters 0–39,958 of 45,723. This is a partial read: ask again with offset=39958 for what follows._

_,
l
,
,
. \c •
•
l
2 s.c.R.
SUPREME COURT REPORTS
953
justice. It is hardly necessary to add that cl. 8 of
s. 545 of the Bombay Police Manual ca.n not be held
to be b1.d a.s contravening the rules of natural
justice.
'fhis finding however does not dispose of the
entire matter. It is the contention of the respondent that the Deputy Inspector Genera.I of police
was not entitled in revision to enhance the punishment and this question has not been decided by the
learned Judges. It is therefore necessary to remand
this case for hearing on this a.nd a.11 other issues
whioh might a.rise for decision. We accordingly
set a.side the order in appeal and remand the oa.se
for hearing on the other points in· this oase. Coats
of this appeal will a.bide the result of the hearing
in the Court below.
Gase remanded •
M/S. AMARCHAND LALITKUMAR
.v.
SHREE AMBICA JUTE MILLS LTD.
(S. K. DAS, M. HmA.YA.TULLA.B a.nd J. c. SRA.H, JJ.)
..4.rbitration-Reoooation-Pt1Wtr
of
Ouurt-Periotlic
fluctWJtion of price, if an emergency~:A.rbitralion Act, 1940 (10
of 1940), 88. 6,34-Worlcing Manval ofllie lilaetlndia Jute and
Heenan lil:rcliange, Oh. IX. paMB. 7(c), 11.
The appellants as sellers of raw jute entered into
forward contracts with the respondent jute mills to sell such
jute to thCDI. The contracts.being transferable specific delivery
contracts, were entered into . in the standard printed forms
of'the ~t India Jute & Hessian Exchange Ltd., which was
an association rCcognised under the Forward Contracts
(Regulation) Act, 1912, and thus were subject to the rules
and bye-Jaws made by the &change which provided for
arbitration of .dispu!CI by the tribllll&I of· Arbitration of the
198B
Slate of My•or1
v
8, S. Matap.,
1981
Ma, a.
AtrMrcAanti
Lalitb:mar
v.
Sltrte Adica Jule
Miii• U4.
954
SUPREME COURT REPORTS [1963]
Bengal Chamber of Commerce and Industry or the Indian
Chamber of Commerce in Calcutta.
The appellants failed
to supply the stipulated jute within the time mentioned in
the
guarantee clauses.
The respondents exercised their
option under the rules aforesaid, canceJlcd the contracts and
charged the appellants for the difference in price between
the contract rate and the market rate prevailing on the date!
of cancellation and on the appellants denying their liability
applied for arbitration. The appellants thereupon applied
to the High Court under s. 5 of the Arbitration Act, 1940, for
Tevoking the authority of the arbitrator.
There case in
contemplated in Para 11, in Ch. IX of the Working Manual
of the Exchange sub•tance was that there was an emergency
as due to scarcity of raw jute and speculation at the relevant
time and the price of raw jute shot up abnormally, tbiJ
placed the buyers and sellers of r"w jute in two conflicting
camp, and the majority of lhe arbitrators in the r,anel of
arbitration of the Bengal Chamber of Commerce and
ndustry
being connected with the buyers of raw jute, the jute mills,
wtre disqualified from acting as impartial arbitrators.
The
High Court held that no such emergent condition had been
proved as would justify revocation of the authority of an
appointed arbitrator.
Held, that the normal periodical ftuctuation in the price
of raw jute could not constitllte an emergency within the
meaning of para. 11 in Ch. IX of the Manual since such
fluctuations have been taken into consideration by those who
entered Into forward contracts. Such an emergency must
be one which is abnormal and which none could foresee. It
could not, therefore, be said that in the present case there
was such a conflict of interest between sellers and buyers as
would render the panel of arbitrators having a practical
experience of the normal fluctuations of the market disqualified
to act as impartial arbitrators.
Th• object of ss. 5 and 34 of the Arbitration Act was
the same, namely, to prevent arbitration, with this difference
tbat an application under s.5 would lie if proceedings had not
yet .been
commenced in Court
whereas under s. 34 an
application lay when they had commenced,
But a Court would not lightly exercise its discretion to
grant leave to revoke an arbitrator's authority.
Before it
would do so it must be satiafied that" a substantial miJcarriage
of justice would otherwise take place.
Parties would not
be relieved from a tribunal of their own choice simply becaUIC they feared that its decision might go agalnat them,
•
'·
.
•
'
(
~--
2 S.C.R.
SUPREME COURT REPORTS
955
and the court had to base its decision on. one 01 other of five
·• grounds, namely, execs• or refosal of jurisdiction by arbitrator,
misconduct of arbitrator, disqualification .of arbitrator,
charges of fraud and lastly the existence of exceptional
circumstances.
•
•
In the instant cases there
were no exceptional
circumstances to justify the conclusion that the arbitrator
was disqualified by bias due to conflicting ciaos interest.
cBalabw: Aganrola v. l,achminarain J'Ute Mfg. Go. Ltd.
(194. 7) 51 C.W.N. 863, Tolaram Nat/Jmull v. Birla J'Ute Manu.
facturing Go. Ltd. (1948) 2 Cal. 171, Dwarkallas Go. v. Keshar.
aeoB'Ulma, (1948) I Cal. 190.and Bhuwalka lJros. Ltd. v •
FeteclianaMurlidhar,. (1951) 2 Cal. 115; distinguished .
. The extension of time given to the buyers by the
contracts beyond a month specified by para. 7(c) in Ch. IX
of the Working . Manual for delivering letter of authority
did not bring the contracts materially into conflict with that
provision ·nor could the absence of the expression "without
any difference on both sides", which occurred in the sold
notes, from the bought notes make any difference to the
rights of the parties.
CIVIL Al'l'ELLATE JuruSDIOTION : Civil Appeal
No. 640 of 1961;
Appeal by speoia.l leave from the judgment
and order dated September 14', 1961, of the Calcutta.
High Court in Matter No. 44 of 1961.
WITH
Civil Appeals Nos. 173 to 175 of 1962.
Appeal by special leave from the judgments
and order dated September 14 and 21,. 1961, of
the .Calcutta. High Court in Matters Nos. 149, 258
and 162 of f961.
A(. 0. Betdl'IJOil,, Attornev General of India, B.
Ben and P. K. Bose, for the appellants in C.A. No.
640 of 61.
·
llaehine Ohaud'/w,ri, Ellis Meyer, B'lllrr.ota K.
Ohawlhuri and I. N. Shroff, for the respondent in
C.A~ No. 640/61.
·-
Amarcluajd
Lofill:wr.ar
Y.
Sliru drnbidd Juli
MitlJ Lid.
t/1111
A~
r...tiflt·•·
••
s~_...J.,,.
tltllt LU.
Da1J.
9116
SUPREME OOURT REl'ORTS [1963]
N. 0. Ohatterjee, B. L. Kanodia and B. P.
JJlaheawari, for the appellants in C.A. No. 173 of
1962.
B. Sen, B. L. Kanodia and B. P. Mahuhwari,
for the appellants in C.Aa. No. 174 and 175 of
1962.
G. 8. Pathak, M. G. Poddar and D. N. Mt.l/dierjee
for the respondents in C.A. No. 173/62.
·
P. L. Kliaitan, 8. N. Andley and Ramuhwar
Nalh, for the respondents in CA. No. 174/62.
A. 0. Bhabra, M. G. Poddar, P. L. Khaitan and
D.N. Mukherjee for the reapondents in C. A. No.
175/62.
1962. May 3. The Judgment of the Court wae
delivered by
S. K. DAS, J.-These four appeals, all with
speoial leave of this Court, have been heard together
because they raise common questions of law and
fact.
This judgment will govern them all.
In the High Court of Calcutta, in or about
February-July, 1961,
a series of applications
numbering about 170 were filed by sellers of raw
jnt.e. The main relief askt1d for by those applioationa
was the revocation of the authority of an arbitrator
appoint.ed under certain
contracts which the
applicants had entered into with the respondents
iD circumatanoee whioh we aha.II presently state;
Bxoept iD two or three oaeo& the respondent.I were .
all jute mill companies which pnrchase raw jute
and manufacture finished goods therefrom. The
main oontroveray which theee applioa.tiona gave rise
to was deAlt with by the High oourt in its judgment
dat:ed September 14, 1961, in the application entitled
Ram Kumar OMotaria v, TUaghur Juk Faclofoy Go.
LU. (Matter No. 20 of 1961 before the Hip Court).
•
...
:!f
' \
,
1
i
;
I
1
.. .
.\
' i
...
2 S.C.R.
SUPRl!:ME COURT REPORTS
957
•
Certain special points arising in some of the other
applications were dealt with in separa.te judgments.
•
•
) The· High Court stated in its judgment in Ram·
Kumar Ohhotaria v. Titaghur Jute Factory Oo. Lt<l.
that the only relief, among the many included in
the petition, preSBed at the hearing WaB leave to
revoke the authority of the appointed arbitrator
under the provisions of s. 5 of the Arbitration Act,
1940 (Act 10 of 1940) which provides 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."
·
'
We shall now state t.he circumstances in which
the applications were made for leave to revoke the
authority of the appointed arbitrator and in doing
so we shall state somewhat fully the facts alleged
in the application of M/s. Amarohand Lalitkumar
a firm registered under the Indian Partnership Act,
and carrying on business in Calcutta, which, firm
is the appeJlant before us in Civil Appeal No. 640
of196L The facta being similar we shall not repeat
them with regard to the other three appeals, but
refer to such 11pecial facts or points in those '.appeals
as have been pressed before us .
-t
On. April 22, 1960, M/s. Amarchand Lalitkumar, whom we shall refer to as the appellant,
entered into a contract being contract No. 1786
with Shree Ambica Jute Mills Ltd., respondent
0in
Civil Appeal No. 640 of 1961, whereby the appellant
agreed to sell and the respondent agreed to buy
some 10,000 mannds of Middle and Bottom Jute
at a particular price. The contract was negotiated
by a firm of brokers M/s. A. M. Mair & Co. (Private)
Ltd., and was entered into in the standard printed
form prescribed by the East India Jute & Hessian
Exchange Ltd. (hereinafter referred to as the
1
•
1961.
Amar Mand
Loli·kumdr
••
Shrte ,Jmbica Jule
.lfil/1 Ltd.
DasJ.
f
1HI
A•..M.nd
Lalfl•llllfOr
v.
,\Ar.1 Ambit11 Jrtle
Muu LU.
Dcu J,
958
SUPREME OOURT REPOR'l'B [1963]
'Exchange) and was suhject to the rules and bye·
. aws made by it.
The oonti:act was a forward
contract being a transferable specific delivery
contract in raw jute, the contract providing by a
guarantee clause for "shipment or despatch during
August/September, 1960'. By the operation of the
provisions of the Forward Contracts (Regulation)
Act 1952 (Aot 74 of 1952), and the notifications
made by the Central Government thereunder,
forward contracts for tho sale or purchaee of raw
jute in the city of Calcutta ,,.hicb included the area
within the municipal limits of Calcutta, the Port.
of Calcutta and the districts of 24 Parganas, Nadia,
Howrah and Hooghly, could only be entered into
between members of a recognised asaociation or
•hrough or with any such member. The exchange was
such a recognised as11oeiation. The Aot empowered
recognised &88ociations to make bye-laws for the
regulation and control of forward contracts subject
to the previous approval of the Central Government.
The Exchange made such bye-laws relating to the
transferable specific <lelivery contracts in raw jute
which bye-laws will be found in Chapter IX of the
Working Manual issued by the Exchange. Terms
and conditions of transferable specific delivery
contracts in raw jute as pr6tioribed by the said byelaws provided for arbitration of all claims and
disputes arising out of or in relation to such
contracts by the Tribunal of Arbitration of the
Bengal Chamber of Commeree and Industry or the
Indian Chamber of Commerce in Calcutta in
accordance with the rules framed by the said
Chambers. In some appeals before us the oontraots
provided for arbitration by the Bengal Chamber
of Oommeroe and Industry and some by the Indian
Chamber of Commerce in Calcutta. The rules of
the two Chambers for constituting Tribunals of
Arbitration are similar and such difference as is
material for j/Ur purpose will be advertecl to later
in this judgment. Paragraph 11 in Ch. IX of the
•
•
..
2 S.O.R.
SUPREME OOuRT REPORTS
959
4
Workin~ Manual of the Exchange made certain
provisions for unavoidable delay in the supply of
'
goods by the sellers of jute. · In order to appreciate
the main controversy between ·the parties it is
n1ecessary to quote the relevant .portion of that
,
paragraph.
·
"11. (a) In the case of jute and in the
E1venl! of seller being prevented or delayed in
carrying out their obligations under the contract by the occurrence of fire, strikes, riots,
polil!ical or communal disturbances, hartals
and or civil commotions, breakdown of public
transport services, suspension of bookings,
they . shall give immediate intimation thMeof
to buy,,rs. · The sellers' an<'.l buyers' rights
shall thereupon be a.s follows : -
(i) On the sellers producing satisfactory evidence of the prevention or delay,
they shaH be granted an extensfon of
time for delivering not exceeding thirty
days from due date of all penalties.
.
(ii) If the cont,ract be not implemented within the extended period referred to
in clause (i) above bu;yers shall thereupon
be entitled to exercise any one of the
following option : -
(I) Of cancelling the contract,·
(2) Of buying against sellers in the
open market on the day on which the
option is declared and cha.rging them
any difference,
·
'
.
.
(3) Of cancelling the · contract and
charging sellers the difference between
contract and the market ,price on the. day
~ 1'hich the option is ch!eland,
Ama1chatul
LaliUumar
Yo
Shrta A1t1bicaJuk
Mi/11 Ltd.
va. .T.
191~
.fJWJJeAolld
LalN.bma•
Y.
S~rt1 A.mbita Jur1
Mills Lid.
Dcu '.
960
SUPREME OOUBT REPORTS (1963]
Sellere shall notify buyere that the goods will
or will not be shipped within such extended
period referrf'd to in clause (i) and in the case
<
of sellers intimating that they will be unable
to ship within the extended time buyer shall
exercise their option under clause (ii) on the
fifth working day of receiving such notice and
notify sellere. Iu the absence of any such
notice from sellel'll it shall be deemed ·that the
goods have not been shipped and buyers shall
exercise thejr aforesaid option on the fifth
working day after expiration of the extended
,
date and notify sellers.
"
........................
The a&Be of the appellant was that at the relevant
time certain emergent conditions a.rose in the raw
jute tra. -le and induatry. which prevented the appellant from au pplying the raw jute stipulated for in
the contract within the time mentioned in the guar-
• ,
ntee cla.us11.
By I\ Jetter dated October I 0, 1960,
the respondent exerciaed ita option under para. l l
q11oted
earlier,
canoolled
the contra.ct
and
charged the
appellant for
the
difference
in
price between the contract rate and the market
rate prevailing on the date of Cl\ncella.tion.
The
a.ppelJant denied that it bad any liability to pay
the difference. Thereupon th.e reapondent applied ..
for arbitration by the Tribunal of Arbitration
conatituted
in
accordance
with
the
rules •
of the Bengal Chamber of Commerce end Industry. The Registrar of the Chamber wrote to
tho appellant that the arbitration case (No. 10 of
19 61) would be heard by the Tribunal on a certain
date. The date was then extended and before the
Arbitration Tribunal could decide the matter the ,_
applications in the High Court were made for rovo
~
king the authority of the appointed arbitrator.
The facts 111d d1t11m•h11fu 11'hith arcl>rding
\o \be
&}'ftlla11l
~ih1attd the t11lt1g01cJ 11e1e
•
)
_j
' ' •
2 S.C.R.
SUPREME COURT REPORTS
961
state.d in para 11 of the petition and the substance
of the allegations was that owing to the two causes
of scarcity of raw jute and speculation, the prices of
raw jute· shot up abnormally giving rise to an emergent condition in the jute trade and industry and
especially in respect of trading in future contracts
in raw jute. The appellant's oase was that by
reason of that emergency the buyers and sellers of
raw jute were placed in two conflicting camps and
the vast majority of the arbitrators in the panel of
arbitration comprising the Tribnnal of Arbitration
of the Bengr.1 Chamber of Commerce and Industry
were either directly or indirectly connected with
one or other of the jute mills which were all buyers
of raw jute. ·In I araR. 21; 22 and 23 of its petition
the appellant stated -that when the parties entered
into the contract they never contemplated that
there would happen such an exceptional situation
as arose in the jute trade during .the relevant
period of Septem her-October, 1960 ; that the· arbi·
trators of the Tribunal of
Arbitration of: the
Bengal Chamber of Commerce and Industry' were
disqualified from.actin&: as arbitrators inaBinuch · as
they were all connected with the buyers and there
was every probability that they would .be biased in
favour of the buyers; therefore,· the appellant reaso- ·
nably apprehended that. it would not be possible
"
for the arbitrators to act as iw partial or disinterest-
~ ed judges. In para 33 the .appellant stated :
"The interest of the . sellers of raw jute
are in conflict with the interest of the buyers
of raw jute. In the events that have happened
th~ sellers of raw jute have formed them·
selves into a group and the buyers of raw jute
have formed another group. The Indian Jute
Mills Association is dominated by the buyers.
The Indii.n Jute Mills Association dominates
the 11eid Chamber and its Arbitrator. ·The ·
Jndian ;Jgt.e lljlls Al!lleeiatio!l is 00mrnitte4
162
Amarchand
Lalitkumar
-
v.
ShNI Ambica Jute
Mills Lid.
D.sJ.
19'1
AmGr&'·M
Lal;-
••
SJ,rt1 Adioa Jute
Mollo Lid.
DuJ.
962
SUPRDIE OOURT REPORTS [1063)
to the view that the said contracts have not
been frustrated. The said ABBociation has
also formed an opinion in respect of the
disputes between the buyers and the sellers
of raw jute."
These were the allegations on which the appellant
prayed that the authority of the appointed arbitrator should be revoked under e. 5 of the Arbitration Act, 1940.
The application was opposed by the respon·
dent which denied the allegations made by the
appellant both as to the facts and oiroamstancee
which were said t'l constitute the emergency and
&B to the alleged reasonable apprehension of bias
in the appointed Arbitration Tribunal.
'
We have stated earlier that in the High
Court to main controversy between
the parties
centred round the question, (1) if there was such
•
an emergent condition in the jute trade and industry at the relevant ti'Yle as divided the sellers and
buyers of raw jute into two opposing camps, and
(~)if the existence of such opposing oa.mpe. provided en.ch opposing camps were proved to exist, would
jnetify the revocation of the authority of tlul
appoio,ted arbitrator. 'Jh~ learned Judge who heard
the applications dealt first with the legal position
"
in England and India, in the matter of rtiv:ooation •
of the authority of an appointed arbitrator. llaving dealt with the legal po~ition, he went into the
fact. of the case and held that no such emergent
condition has been proved as would justify the
revocation of the authority of an appointed arbitrator.
He l"Xpreseed his final oonclueion in
these words:
,
"ln my opinion; the allegations about
~
I he buyers and sellers in raw jute being
~hrov.n into conflidin~ camp6 bJ the opera.
ti.on of e111e1gmt. circalllatancee or ·~•
2 S.C.R.
• SUPREME COURT REPOR'l'S
963
reasonable apprehension' of-bias in the minds
of the sellers that they ·will not get justice
from the persons· whose names appear on the
list of the panel. of arbitrators of ti..e Bengal
Chamber of Commerce
~nd Industry are
unsubstantial."
He accordingly dismissed th~ <I applications with
costs,
· l
•We consi<;ler that as a matter of logical sequence, we should deal with the que~tiqn of fact first-
• whether there was any suoh -embrgent condition·in
the jute trade a:u'd industry 'il.t the re.levant tim.e
as di vi~ed the sellera and buyera of raw jute into
two conflicting oamps so as to give 'ri~e to a
reasonable apprehension in the minds of the sellers
that they will μot get a just decision from the
appointed arbitrat:ir., .ft is only when we answer
4 the questiqn of faot. !ri favour of the appellants
-'>
that a cronsideration of'the legal position would be
necessary.
/
...
wli,at are the circmvsiances. on
which' the
appellimts rely in support of their . allegation of
an em~rgent condition in the jute trade dividing
the buyers and sellers of raw conflict.ing camps ?
It is poin,ted out that on 0.otober 18, 11160, the
~ Exchange issu~d a press note in which it was stated
. inter alia that owing to emergtint conditions prevail-·
~ ing in the jute trade, the Director ·of the Exchange
had imposed from time to time various cont:rol
measures in respect of trading in future contracts in
raw jute and had taken up a review of the trading
position in transferable specific delivery contracts.
On October 31, ·1960, a notice by the Exchange
-,. directed thatJ,rading in transferable specific· deli-
-( very contracts in raw jute shall be registered with
the Exchange.
In their petitions for leave to
revoke the authority of the arbitrator, thtr a ppellantB alao refernid to.:~ts 1JJ84e bf reporter& of
1962
A mare hand
LolUA1umar
••
Shree A.mbiaJ Juf 1
Mula .Gld.
9aa.T.
A,,..,,,_d
L111thmar
y,
S Mt' _Ambiea J rde
Mil/I Ud.
--
Da1J.
'
964
SUPREME OOURT REPORTS [1963]
certain newpapers
a.e also news items published • j
therein. We do not think
that these
news- ,
•
papt1rs report.a eshblish anything beyond what
tho
Mporters
heard
from
people
whose
identity is not disclosed, and they aro not admissible in evideDoe to establish either that an
emergency had arisen or the nature thereof. At
brat they show that there wore reports in tbe
market of a short: fall in jutE' production, a shortage
of supply of raw jute from Pakistan, sea.ling of
some of the looms in the mills, and a reduction in
working hours.
The affidavits filed on behalf of t
the appellants do Dot, however, establish that
there had been a.11.Y failure of the jute crop in
Bengal, Bihar and ABBa.m or that jute had become
unavailable at its normal sources or that such a
crisis bad a.risen as would divide the buyers and
sellers into oon(Jioting camps. It is worthy of
note that Jike any other trade in goods in . a short .
market, the jute trade, especially tho trade in future • '
contracts, is 1>.ery sensitive and rea.cl ily responds to
any stimulus, !Deluding forces which affect supply
and demand ~l>en temporarily. Such responses can
even be
sa.1d
to be the normal feature of the
jute trade like
any other trade in commodities.
As there
was no evidence of the rise and
fall in prices of raw jute during the relevant
period except from what we could gather from "
the differences in price between the contra.ct v
rate and the market rate claimed by the respondents, we allowed the parties to produce before us
the rates quoted by authorised brokers for various
kinds of jute from April 11160 to August HIBi
These figures show that the market in raw jute
almost always fluctuates; sometimes there is steady
rise; sometimes a fa.II; sometimes there is a steep "
rise (Jf a steep fall.
Take for example, the period
•
between Auj.tust 1960 to January lll61-the period
of deli'lery iD 111oa\ cf the ea1e1-in c11e of &he
"fariet.ies of jute "'8. ABottom
Ju~ Iu
•
-. --
2 S.C.R.
. SUPREME COURT REPORTS
965
August 1960 there was a steaey rise from Re.35/- to
about Rs.40/- per maund. In 8eptember 1960 the rise
continued and reached to about Rs. 43/-. It continued
also, in October and reached about Rs. 54/-. Towards
the, middle of November there was a fall. In
January 1961 there was again a rise which conti-
. nued till March .. In April there was again a fall
whfol:i continued till July 1961. We have taken
only one example, but these ups and downs in
price levels are noticable in other varieties -of jute
also, such as, Pakistan N. C. Cuttings etc. A
person trading in future contracts must take these
ups and· downs into consideration when entering
into ·contracts, and we fail to appreciate how these·
ups and downs can constitute an emergent condition
which will divide the buyers and sellers ·into two
conflicting camps. The question whether the seller
was entitled to an extension of time in the circumstances then prevailing would undoubtedly arise for
determination by the appointed arbitrator, who
having practical experience of the fluctuations
which tho trade normally undergoes would be in a
position to judge the validity of such a claim.. But
it is difficult to appreciate how this periodical rise
or fall in pi;ices can be called. an emergency which
made the contracts impossible of performance or
divided the ·buyers and sellers into two conflicting
camps at the relevant time.
·
Much was made of the fact that the Indian
Jute Mills Association was a very influential body
of· jute -mill owners, affiJiated with the Bengal
Chamber of Commerce and Industry. It was
alleged that they were sister bodies having their
offices at the ~ame place and that they carried out.
a. common policy in matters of trade.
It was
·pointed out that the majority of arbitrators in the
. pan~l of arbitration of the Behgal 'Chamber of
Commerce and Industry were either directly or in-
.·. ditec\\?' •:onned~il ll'it!i o~e or ot'!ier of \he Fe
1962
Ama1cha11d
L,,~itkumar
y.
SJ,ree Ambica Jute
Mills Lid,
•.
Doi J •
,
1"62
Amarchond
Lalitf:~mar
v.
966
SUPREME COURT REPORTS (1963]
mills. The relevant rules of B£lngal Chamber of ·
Shre• .A.mhica Jut•
Mills IJd ..
Commerce and Industry, it was pointed out, pro-
. vided that "tho Tribunal shall·· consist of such
members or assistants to members
and of
such_ . other persons who
were ·from time to
time on the panel of special Advisory Board to
·the Indian Jute Mills Association, as may from .
_ time to time be selected by the Registrar". In this
· · · respect there is a difference in tho rules made by
the Indian Chamber of Commerce, Calcutta. Thoso
rules provide for an unrestricted selection and say
that in making an appointment and nomination, the
Registrar shall select, as far as possible, persons or
a person having practical knowledge of the subject
matter of the contract_ or contracts in question and
the Registrar shall not appoint any person who for
any reason within his knowledge would not be a
proper person to act as Arbitrator etc. in the particular matter. · The appellant in Civil Appeal No. 640
brought to our notice the .. circumstance that his
solicitor wrote to the Registrar of the Bengal
Chamber of Commerce and In<iustry for the names
ofthe arbitrators and was told in reply that it was
not the practice of the Tribunal to disclose the names
· · of ·the
arbitrators; but a . classification of arbitrators of some of the cases was furnished and this
showed that one of the arbitrators would be a mill
representative and the other a jute ·broker or
~~-
.
.
We ·have taken all these circumstances into
our consideration and we are unable to agree with
the appellants that tl:rey made out a case of a
reasonable apprehension of bias on the basis
alleged, namely, that of a clash of interests between
buyers and sellers on the ground of a rise in prices.
The High· Court has rightly pointed out that it is
. not quite correct to say. that the persons who made
the applications were only sellers of raw jute .and
JlClt _bn~us _i,n tpeir t:uii-; tht_y &re peoplt who ca~
•
•
•
-.._...,
2 s.o.:R .•
SUPREME COURT REPORTS
961
on business m Oaloutta and some of them probably
"\
have buying e.ienoies in the mofussil. They must
,, be. buying jute from others and selling them to
.-..,,,
shippers, balers, and jute mills. The jute mills
"
usually buy· raw jute and turn out manufacturerl
products therefrom, which they sell: Balers and
shippers buy re.IV jute and sell the same after pressing and baling. At one end of the chain there are
jute growers who are only sellers while others are
..,
both buyers and sellers of jute or jute goods: This
latter category of persons must be taking note of
the trends in the market in en taring into their cont
tra.ots and unless there . was an emergency of the
kind which nobody could foresee, it is impossible to
say th~t there was such a olash of interests betweeL
buyers and sellers that the appointed arbitrator
havil\g practical experience of normal fluotuations
of the market would not be able to judge with fai,rneBB and impartiality the olaim of the sellers that
they were entitled to an extension of time or other
< '
relief, The High Court further. pointed that tihough
there were 170 applioations, the number of applicants was only 42 and _some only of the jute mills
in Wt>st Bengal were involved. The High Colirt
then said:
"If one takes . into consideration. the
number of jute mills situate in the distrlot of
·24 Parga.nae, Howarh,. Hooghly and .Nadia
md considers further that there are thousands
.of persons who are engaged in th!! trade of
raw jut!! it is signifioa,nt that only l!o f!lw
dozen of them heive come to this Cour~ in
.between the period Fe,bruMy, 1961, 'to the
end.of June, 1961, It appears to me .that the
difficulty, real or as1!1111¥l4, is confined .. to a
very small number of persons, · n<>t brqlight
a~ut by .r.ny !lmergent c~DQ.itwns at all >l!B
alleged. There can be no denying the fact
that the outtum of jute baa · be~n small!lr
Am!lrchrmd
Lalitlrumar
••
S/sr19AmbieaJure
Mills Ltd.
Da1J.
I Ht
.f.vc~
L""'-'
..
,·h It 4.ftbito Jui1
Mill, Lt,/,
Dul.
1168
SUPREME OOURT REPORTS [10031
than expected and that jute mills have had to
reduoe their working hours. Such a shortage , ' ~
in jute oannot be said to have brought about • t
an uphe11.val in the trade throwing buyers and
sellers
into
sharply
divided
conflicting
oampe."
We are in agreement with the view thus expreBBed
by the High Court.
As to the arbitrators to be appointed by the
Indian Chamber of Commerce, Calcutta, and in
some of the appeals before us the arbitrators have
to be so appointed, there -O&ll hardly be any ground •
for a rea.eonable apprehllnsion. The names of the
arbitrators are not known nor even their cla.BBiftoation.
The rules contemplate that the Registrar
shall not appoint any peraon aa arbitrator who for
any reason within his knowledge would not be a
proper person to aot aa arbitrator. What grounds
oan there be of a reaaonable appreh1msion in such •
oaeee?
We have held that there are no oonflioting
camps of buyers and eellers, and even if there are
m<lh oampe, the Registrar oan aele1:t peraons who
have practical experience of the subject matter
of the contract and not othe1 wise improper peraone
to aot as arbitrator&. The differenoe between an
application under 8. 5 of the Arbitration Act and
one under a. M is a dit'rerenoe aa to the point of ,.
time when the application i8 made. If prooeeding8
are commenced in Oourt, appliaation is made under
,..
8. 34; if prooeedinp have not oommenoed in Court
the application la made under 8. 5. The object of
both the aeotion ill the Bame, namely, to prevent
arbitration. But different oonsideratiODB would
arise on an application to 1111t aaide an award on
the ground that the arbitrator wu biased. It J8
true that on an application under 8, 5 itt is "
not
neoeeaary to tlhow that the
arbitra or
...
ii in faot blaH d aD4 it ii eDOllih to lhow tibat.
2 S.C.R.
SUPREME COUltT REPORTS
969
there is a reasonable ground for apprehension
--..;
that the arbitrator will be biased. But the
" reasonable grou)ld must be established to the satisfaction of the Court to· which an application for
leave to n;voke the authority· of ah appointed
arbitrator is made. No such reasonable ground . is
made out in the present appeals.
·•
-
We now tum to the legal position which seems
-~
to us to be quite clear. Before the Court exercises
its discretion t<i give leave to revoke an arbitrator's
authority, it should be satisfied that . a substantial
~ miscarriage of justice will take place in the event of
its refusal. In considering the exeroise by the Court
of the power of revocation it must not· be .forgotten
that arbitration is a particular method for the settlement of disputes. Parties not wishing 'the · 1aw's
delays' know,· or ought to know, that in referring a
dispute to arbitration they take arbitrator for better ·
or wrose, and that his decision is final both as to
-<: ' fact and law. In many oases the parties prefer
arbitration for these reasons. In exercising its discretion cautiously an<i sparingly, the Court has no
doubt these circumstances in view, and considers
that the parties should not be relieved from a tribunal they have chosen because they fear that the .
arbitrator's decision may go against them.-
(See
Russel on Arbitration, 16th edition, page. 54).
rhe
" grounds on which leal'e to revoke may be given .
. >1 have been put under five heads :-
·
I. Excrss or refusal of jiirisdlction by ar bitrator.
2. Misconduct of arbitrator •.
3. Disqualification of arbitrator.·
4. Charges of Fraud.
' 5. Exceptional ca.ilea.
1961
.4tn1Jrchu11d
1.tJ/ilftuma1
..
.
Slate Ambie-1 Jut,,
Mills Ltd.
Da1J.
JPfJ
AmneAo.d
Loi.-,
••
s11,,, AdUo Jut,
Mills Ud
1Ja1 J.
9'10
sUPREME OOURT REMRTs (1963]
We have held that there were no such ei:oep-
~
tional circumste.noes in these oe.ses e.s would justify
!
us to come to the conclOBion that the appointed
arbitrator would be disqualified as a result of hie.a • .
by reason of a conflicting class interest. In view of
1
this finding it is unnecessary to examine the decisions, English or Indian, e.s respects the principle
that an interest of which the parties were fully
aware at the date of the arbitrator's appointment
will not in general disqualify him, n_or will the fact
that he stands in a particular relationship to the
parties or to the mattere in dispute, if it oe.n bt1 aaid
that the parties selected him with knowledge that '
this was or muet be so.
Nor are we concerned with
the exception to which the aforesaid rule is subject
in relation to arbitrators appointed to determine
future disputes, and the statutory changes made in
English law relating thereto.
There are, however, four decisions of the
Calcuth High Court which bear an apparent reeem· •
blance to the oe.see under our oonsideration and to
'
those decisions we mUBt now turn.· In Bakrhux
Aganoola v. Lachminarain Jute Manufacturi1UJ Oo.
/Ad. ( 1) the question was of a certain suits on applioatione under s. 34 of the Arbitration Aot and one
of the grounde taken was .that persons interested in
or connected with vario118 jute mill oompe.niee were
members of th~ Bengal Chamber of Commerce and ,
were on the panel Crom which arbitrators were
chosen; and a reference was made to a circular letter ~
which showed that the arbitrator~ or the firms they
repreeented were all buyers and as 1111oh interested in
seeing that the points in iellue were decided against
the eellere. After eorutinielng the allegations made
in support of ~hia ground, the Court said •
"For all I know the tremendoUB rise in •
prioea which, it is 11&id,
will prompt the · ,.,
(I) (l!lt7) 51C.W.N.863,875.
I
2 s.c.R..
SUPRl!'.ME COURT REPORTS
971
arbitrators who are. buyers to decide against the
plaintiffs who are sellers so a.a to make huge
profit for themselves, may well have induo.ed
the plaintiffs to make these allegations against
the arbitrators or their firms so as to get out
oft.heir submission and to take their cha.nee of
winning the suit in. Court and get.ting the
benefit of that rise in prioos. In my.. opinion
the allegations in the affidavits a.re not such as
I may a.ct upon them. The Bengal Chamber
of Comme~ce has gained a reputation for the
excellence of their arbitration proceedings and
I shall require much more •specific averments
offacts properly verified showing that in any
particular case justice will be denied by the
Be~gal Cha.mber of Commerce to a.ny pa.rty."
These observa.tie>ns do not help the a.pp~lla.nts of
the present oa.ses. Rather they show that the Court
must be folly satisfied before it exercises its discretion under s. 5 to revoke the a1fthority of a.n
a.ppointed arbitrator.
The same learned Judge came to a. contra.ry
conclusion in TolaramNathm'l.dl v. Birla Jute Manufacturing Co. Ltd.(1), Tha.t was also a case of stay under
s. 34, and one of the questions raised was whether
there wa.s sufficient reason why the ma.tter should not
be referred to arbitra.Uon·. One of the points to be
decided in tha.t connexion wa.s whether 'mesta' was
jute within the·meaning of the Jute. (Price Control)
OrdPr and if the Jute Mills Association had issued a
circular, while the arbitration was pending, stating
or decidin~ that 'mesta'. was not included. in that
Order. It wa.s hPld that at a . meeting of the
representatives of five associations the view was
expressed tha.t. •mesta.' did not come within the
Order. Io thos&.circumsta.oces the learned Judge
said :
(I) I 1948) 2 .Cal. 171; 1.96.
1902
Amarchancl
Lalit1<umar
v.
Shree Ambicj Jut
Mi.lta IJtd.
DaaJ,
IY61
Amtvchantl
La/iCkuma,
••
'"firt~ Antbfra Jui.
M1ll.tLtd.
D., .!.
972
SUPREME COURT REPORTS [1963]
"In the light of these principleH, the question I have to consider is whether, in the
events that have h~ppcned, it will b~ fair to
drive the plaintiff-firm to a tribunal both the
members of which are members of associations
which have exprel!Bed some clofinito views on
the question in controversy. .There is, to my
mind,
considerable
justification
for
the
appreheneion expressed by the plaintiff-firm
of probable bias of the arbitrators.
I do not
question tho honesty and integrity of the two
arbitrators, but, in the circumstances appearing in the evidence before me, it will be unfair
aliku to them ancl to plaintiff-firm to put them
in a position of conflict with their own associations. On the whole I have come to the
conclusion that this is a case where circumRtances exist which are calculated to bias the
minds of the arbitrators and where the
plaintiff-firm may legitimately ask the Court
to release it from its barge.in to go to arbitration".
The decision rested on the facts established in that
case and cannot help the appellai.te to prove their
case on the present applications.
·In fairness to learned Counse 1 for the respondents we must say that he"submitted before us that
the decision in Tolamm Nathmull v. Bir/,a J'lde
Manufacturing Co. Ltd. (1) went much beyond what
was accepted as the correct legal position in English
d'3cisionH referred to by the learned Judge; but that
is an aspect of the matters which we consider it
unncc088Rry to clecide. We hold that the facts
which must b'3 l'Stablisbed to call in aid that decision have not. been established in these cases. In
Dwarkadas Co. v. KMhardeo Bubna (') the same
learned Judge explained the poaition suooini::tly by
holding (see headnote, pa.n1, 4)-
(1) (1948) 2 Cal. 171, 196.
(2) (1948) I Cal. 190.
,
'
'
'
••
2 S.C.R.
SUPREME OOURT REPORTS
973
. . "The fa.ct that members of a committee
· of an association of commercial men dealing
in a pa.rtioular.oommodity are themselves the
arbitrators and a.re also buyers and sellers of
that . · commodity will not ordinary · diapt1te
between a particular buyer and a particular
seller. . But extraordinary circumstance may
nevertheless arise, as in the case of a commer·
cial crisis, when the members of the associa·
tion may be sharply divided into two opposing
groups as buyers in general and ·sellers in
general as
may make it improper for the
committee, which may be packed ,with an
overwhelming majority of buyers or sellers, as
the case may be, to adjudicate upon a dispute
between a buyer and a seller."
The pre-requisite condition (of the applic~ticm of
the principle which be laid down is not fulfilled ·in
th ti present. cases.
. 1'h•dast decision is Bhuwalka Brothe~1{ Lt,d. v.
Fatechand Murlidhar (1). That was a case which
proceeded on dilf~rent ~rounds, viz. ( 1) frustration
and (2) applicability of an Ordinance to the ·contract
under consideration. On those .two grounds,. the
lea.med Judge thought that he should give leave to
the petitioner to revoke ·. the authority Of the
appointed arbitrator.