# RAMJI DAYAWALA & SONS (P) LTD v. INVEST IMPORT October 9, 1980 ·

- **Citation:** [1981] 1 S.C.R. 899
- **Court:** Supreme Court of India
- **Decided:** 1980-10-09
- **Case number:** Civil Appeal Nos. 2407-2408 of 1968
- **Bench:** P. N. Shinghal, D. A. Desai
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ramji-dayawala-sons-p-ltd-v-invest-import-october-9-1980-8185
- **Pages:** 30

## Headnote

Arbitration Act 1940, S. 34; Code of Civil Procedure 1908, S. 15; Arbitration (Protocol and Convention) A ct 1937, S. 3 ; & Foreign Awards (Recognition & Enforcement) Act, S. 3-Sub-contract between Indian .firm and foreign
firm-Sub-contnact incorporating .an agreement to re.fer disputes to a foreign
arbitral tribunal-After execution
o~ agreement Indian firm repudiating the
arbitration agreement-Suit for re'C:overy in High Court by Indian firm-Foreign
firm contesting that suit to be stayed on account of arbitration clause in the
agreement-Single Judge and Division Bench deciding stay of suit necessary-:
Decision-Whether valid-power of court to stay suit-Exercise of discretion
by trial court-Interference by appellate court.
The appellant (plaintiff), a private limited company, a labour contractor,
entered into a sub-contract with the respondent (defendant), a Yugoslavia based
company which in turn had entered into a contract with the State Electricicy
Board for setting up a power station.
The sub-contract dated July 10, 1961
between the appellant and the respondent incorporated a·n agreement to refer
~ll the disputes arising out of the sub-contract to arbitration by the International Chamber of Commerce in Paris
with the
application of Yugoslav
materials and economical law.
In carrying out the work undertaken under
the sub-contract, the appellant claimed that it carried out some extra work
for which it was entitled to recover extra amounts from the respondent, and
as the claims were not satisfied or met with by the respo~dent, the appellant
filed a civi\ suit on the original side of the High Court for recovery of the
amount.
On .a notice of motion taken out by the appellant, the High Court
granted an ad interim exparte injunction restraining the respondent from withdrawing the money due to it from the State Electricity Board.
Pursuant to service of the aforesaid notice of motion' the respondent moved
an application under sec. 151 of the Code of Civil Procedure, alleging in the
petition for stay that the disputes and differences that arose were in respect
of and/or relating to the sub-contract dat,ed July 10, 1961 and in view of the
subsisting agreement to refer disputes or differences arising under or out of
the sub-contract to arbitration, the suit filed by the appellant should be stayed.
The appellant filed a counter-affidavit contending that there was no concluded
agreement" between the parties to refer all the disputes arising out of the subcontract to arbitration and alleged that by letter dated July 10, 1961, the very
date on which the sub-contract was entered into at Belgrade, the Managing
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SUPREME COURT REPORTS
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Director of the appellant company informed the respondent that he had objected to the arbitration clause in the agreement. It was also averred that a
cable was also sent by the Managing Director on reaching Bombay on July 13,
1961 requiring that the clause regarding arbitration be deleted. Second contention was that even if it is held that there is a subsisting arbitration agreement, having regard to all the circum&tances of the case, the discretion should ·
not be exercised in favour of· the defendant-respondent.
The Single Judge granted !he P<ctition of the respondent and stayed further proceedings in the suit filed by the appellant, and vacated the ad interim
injunction granted in favour of the appellant.
The appellant preferred two appeals.
One against the order of the single
Judge granting stay of the suit of th'e appellant and the other against the order
vacating the ad in•terim injunction. A Division Bench of the High Court dismissed both the appeals by a common judgment holding that there was a
valid subsisting arbitration
agreement between the parties and that it was
binding on both. It also held that the claims made· by the appellant in the
suit arose• out of the sub-contract which included the arbifration agreement
and, therefore, the appellant mus

## Text

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,,,
RAMJI DAYAWALA & SONS (P) LTD.
v.
INVEST IMPORT
October 9, 1980 ·
[P. N. SHINGHAL AND D. A. DESAI, JJ.]
Arbitration Act 1940, S. 34; Code of Civil Procedure 1908, S. 15; Arbitration (Protocol and Convention) A ct 1937, S. 3 ; & Foreign Awards (Recognition & Enforcement) Act, S. 3-Sub-contract between Indian .firm and foreign
firm-Sub-contnact incorporating .an agreement to re.fer disputes to a foreign
arbitral tribunal-After execution
o~ agreement Indian firm repudiating the
arbitration agreement-Suit for re'C:overy in High Court by Indian firm-Foreign
firm contesting that suit to be stayed on account of arbitration clause in the
agreement-Single Judge and Division Bench deciding stay of suit necessary-:
Decision-Whether valid-power of court to stay suit-Exercise of discretion
by trial court-Interference by appellate court.
The appellant (plaintiff), a private limited company, a labour contractor,
entered into a sub-contract with the respondent (defendant), a Yugoslavia based
company which in turn had entered into a contract with the State Electricicy
Board for setting up a power station.
The sub-contract dated July 10, 1961
between the appellant and the respondent incorporated a·n agreement to refer
~ll the disputes arising out of the sub-contract to arbitration by the International Chamber of Commerce in Paris
with the
application of Yugoslav
materials and economical law.
In carrying out the work undertaken under
the sub-contract, the appellant claimed that it carried out some extra work
for which it was entitled to recover extra amounts from the respondent, and
as the claims were not satisfied or met with by the respo~dent, the appellant
filed a civi\ suit on the original side of the High Court for recovery of the
amount.
On .a notice of motion taken out by the appellant, the High Court
granted an ad interim exparte injunction restraining the respondent from withdrawing the money due to it from the State Electricity Board.
Pursuant to service of the aforesaid notice of motion' the respondent moved
an application under sec. 151 of the Code of Civil Procedure, alleging in the
petition for stay that the disputes and differences that arose were in respect
of and/or relating to the sub-contract dat,ed July 10, 1961 and in view of the
subsisting agreement to refer disputes or differences arising under or out of
the sub-contract to arbitration, the suit filed by the appellant should be stayed.
The appellant filed a counter-affidavit contending that there was no concluded
agreement" between the parties to refer all the disputes arising out of the subcontract to arbitration and alleged that by letter dated July 10, 1961, the very
date on which the sub-contract was entered into at Belgrade, the Managing
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SUPREME COURT REPORTS
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Director of the appellant company informed the respondent that he had objected to the arbitration clause in the agreement. It was also averred that a
cable was also sent by the Managing Director on reaching Bombay on July 13,
1961 requiring that the clause regarding arbitration be deleted. Second contention was that even if it is held that there is a subsisting arbitration agreement, having regard to all the circum&tances of the case, the discretion should ·
not be exercised in favour of· the defendant-respondent.
The Single Judge granted !he P<ctition of the respondent and stayed further proceedings in the suit filed by the appellant, and vacated the ad interim
injunction granted in favour of the appellant.
The appellant preferred two appeals.
One against the order of the single
Judge granting stay of the suit of th'e appellant and the other against the order
vacating the ad in•terim injunction. A Division Bench of the High Court dismissed both the appeals by a common judgment holding that there was a
valid subsisting arbitration
agreement between the parties and that it was
binding on both. It also held that the claims made· by the appellant in the
suit arose• out of the sub-contract which included the arbifration agreement
and, therefore, the appellant must be bound by the bargain undertaken by
him. · It negatived the appellant's contention that on the facts and circumstances of the case discretionary relief of grant of stay of suit would cause
irrepairable hardship and deny justice.
In appeal to this Court against the order of stay of the suit granted by
the High Court, it was contended on behalf of the appellant: (I) there was no
concluded arbitration agreement between the parties to refer the disputes arising out of the sub-contract dated July 10, 1961 to arbitration and, therefore,
the suit cannot be stayed ; (2) even if the. Court came to the conclusion that
there was such a subsisting arbitration agreement between the parties, prayer·
for stay having been made under sec6on 51 c.f the Code of Civil Procedure
and/or under section 34 of the Arbitration Act, 1940, read with Section 151
CPC, the Court should not enfon:e it in its discretionary jurisdiction as it
would result in miscarriage of justice ; (3) in view of the provisions contained
in the Arbitration (Protocol and Convention) Act, 1937 the Court could not
invoke its inherent jurisdiction under section 151 CPC and the Speciar" Act
would not assist the respondent as the case. was not covered by its provisions.
It was also contended that the undermentioned circumstances when properly
evaluated would unmistakably indicat<' that the instant case is not a .fit case
in which the Court should decline to adjudicate• upon the dispute brought to it
by granting stay in favour of the respondent.
(I) The work under the special
contract Ext. A dated July 10, 1961 was executed and carried out in India
and the whole of the evidence both for and against the appellant in India, (2)
the amount claimed in the suit is so disproportionately small in relation 10
the huge cost of arbitration to be held at Paris :in France, that forcing the appellant to incur the cost to realise such a small 8Um would be denial of justice,
(3) restrictions on availability of foreign exchange is a relevant consideration,
a fact of whic~ the Court can take :iudicial notic:, '.4) the Co~rt ~hould not
render its assistance by granting stay to one who ms1st_s _on arb1trat10n. not as
a matter of principle but with a view to thwarting, stifhn~ or e~haust1~g the
th
·d
d (5) in all cases of arbitration by a foreign arb1tral tnbunal
oh er ~
1
e,I ans
ri"der that in case. of hard,;hip or injustice, Courts of the
t ere 1s a way a
.
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country of the party being forc.ed to go to foreign arb1tral tnbunal will protect him.
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901
On behalf of the respondent it was contended that (I) even if the conrt
proceeds on the assumption that the letter and the cable were received, it is
not open to the Court to look into the contents of the letter and the cable
because the contents were not proved, as the Managing Director ef the appellant
company who was supposed to have signed the letter and the cable had neither
entered the witness box nor filed his affidavit proving the contents thereof, (2)
that once the sub-contract was admittedly signed and executed by the. Managing
Director of the appellant company, subsequent attempt on behalf of the appellant to repudiate a part of the contract would be of no avail and the court
cannot give effect to it except if the· 1.10vatio suggested by the appellant was
unreservedly accepted and agreed to by the respondent, and (3) when the motion
is addressed to the discretion of the court and the couPt has exercised its discretion, 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.
Allowing the appeal,
HELD: 1.
Both the learned Single Judge and the Division Bench of
the High Court were in error in granting stay of the suit.
The stay of the
suit granted by the learned Single Judge and affirmed by the Division Bench
is vacated.
The suit should proceed further from the stage where it was
stayed.
The trial court would give priority to it and dispose it' of as expeditiously as possible. [928G-H]
2. The sub-contract marked Ext. A had been signed both by the Managing Director of the appellant company as well as on behalf of the respondent
company.
The third paragraph of Article 12 of sub-contract Ext. A recites
an arbitration agreement. The provision is for a reference of disputes arising
out of the sub-contract to foreign arbitral tribunal, namely, the International
Chamber of Commerce in Paris.
Such a
clause
spells
out an arbitration
agreement. [908E-F]
3. (i) The Appellate Bench of the High Court held that the letter and the·
cable were not received by the respondent.
This conclusion is not only contrary to evidence on record but reached in utter disregard of the admission of
the Manager of the respondent.
[9 IOA-B]
(ii) The letter and the cable would show that the arbitration agreement
to refer disputes to a foreign arbitral tribunal in. the draft was not acceptable
to the appellant though the other terms were acceptable. The appellant repudiated the arbitration !lgreement soon after the agreement was signed when
the Managing Director of the appellant was in Belgrade and took the follow
up action by sending a cable reiterating and repeating the objection immediately
after his return to India. After this specific objection with regard to a·rbitra-.
tion agreement in the sub-contract, the respondent allowed the appellant to
proceed further with the implementation and execution of the sub-contract,
without controverting what the appellant had stated in the letter arid the cable.
This unmistakably shows that the respondent accepted the alteration as suggested by the appellant in that the arbitration agreement was deemed to have
been deleted from the sub-contract Ext. A.
[910H; 911A-D]
4. If the truth of the facts stated· in a document is in issue, mere proof
of the handwriting and execution of the document would not furnish evidence
of the truth of the facts or contents of the document. The truth or otherwise
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of the facts or contents so stated would havti to be proved by admissible evid·
ence i.e. by the evidence of those persons who can vouchsafe for the truth of
the facts in issue. [912B-C]
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In the instant case the utter failure of the respondent to reply to. the
letter and the cable controverting the averments made
therein unmistalyibly
establish the truth of the averments made in the letter. [912E]
5. Iii the facts of a· given case acceptance of a suggestion may be sub
silentio reinforced by the subsequent conduct.
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 con- J
stitute 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 1the offer in a particular sense. This communication will probably amount to a count•er offer in which case it may be
that mere silence of the original offerer will constitute his acceptance. [9120-H]
In the instant case, the conclusion is inescapable that there was no concluded arbitration agreement between 1he parties. [914E]
1t
Halsburys Laws of England 4th Edn. vol. 9 para 251, R. v. Fulhan, Haml!Wrsmith and Kensington Rent Tribunal, ex pa1·te Zerek, [1951] I All E. R.
482, Davies v. Sweet (1962) 2 W.L.R. 525, refem!d to.
6. (i) The High Court totallir overlooked and ignored the admission of
· rece.ipt of letter and cable in paragraph 6 of the affidavit. The High Court
attached importan.ce to the denial of the rec:eipt of the letter and the cable
by the employee of the respondent company in the oral evidence and did not
attach importance to the subsequent <idmission that the manager of respondent
company must have replied to the letter and the cable. Admission, unless explained, furnishes the best evidence. The High Court overlooked the mate.rial
evidence, drew impermissible inference and came to the conclusion which on
evidence is found utterly unsustainable.
[914G-HJ
(ii) A finding of fact recqrded by the High Court overlooking the incon·
trovertible evidence which points to the contrary and, therefore, utterly unsustainable cannot come in the way of this Court reaching a correct conclusion
on facts and the examination of the t'vidence by this Court cannot be impeded
by a mere submis·sion that this Court does not interfere with finding of fact.
[915A]
7. (i) Both the Courts practic:ally overlooked the basic difference in the
approach whi.ch the Court will have to adopt if the application is to be !rented
under section 34 of the Arbitration Act, 1940, or one under section 151 C.P.C.
In any event, as the motion is at the discretion of the Court and as both the
parties have led evidence, the
burden of proof
would
assume secondary
importance. · [9 l 6F]
Michael Golodetz & Ors. v. Sev·ajuddin and Co. [1964]
S.C.R. 19, referred
to.
(ii) It is well settled that when' 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. It is equally well settled
that where the t~ial court ignoring the relevant evidnce, side
tracking
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R. D. & SONS v. INVEST IMPORT
903
approach to be adopted in the matter and overlooking various relevant con·
siderations, 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 court it is to be exercised
according to well established judicial principles, accor~ing to reason and fair
play, and not according to whim and caprice. [917B-C]
Craies Statute Law 6th Edn. p. 273 R. v. Wilkes (770) 4 Barr 2527, referred
to.
8. The Single Judge and the Division Bench completely overlooked the
well established pcinciples in granting stay of suit in a case, where reliance is
placed upon a subsisting arbitration agreement. [9170]
·
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9. When parties by contract agree to arrange for settlement of their disputes by a Judge of the:ir 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 Coutt
would not Jend 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.
However, it 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. [9180-F]
Bristol Corporation v. John Aird & Co. [1913] A.C. 241 at 257 and Owners
of Cargo Ex "Athenee" v. Athenee Llyods' Ost Law Reports, Easter Sittings
1922, Vol. XI, page 6, referred to.
Jn the instant case the entire evidence both of the appellant and the, respondent is in this country ; the contract as a whole was executed and carried
-0ut 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 prin-
.ciple to have the decision of the foreign arbitral tribunal at Paris but the prin-
. cipal object of re.spondent is merely to make it more difficult, if not impossible, for the appellant to assert the claim.
The other vital considerations are,
that the cost of arbitration at Paris will be. so disproportionately high to the
claim involved in adjudication that one would never think of incurring such
.a huge cost to realise such a small sum claimed, and the restriction on the
availability of foreign exchange. The sum total of all these well established
.circumstances clearly indicate that the instant suit is one in which when· discretion is exercised on well settled judicial considerations no court would grant
stay and the stay has to be refused.
[925B-D]
Michael Golodetz & Ors. v. Serajuddin & Co. [19641 1 S.C.R. 19, Bristol
Corparation v. John Aird & Co. [1913] A.C. 241 at 257,
Owners of Cargo
Ex "Athenee" v. Athenee L!yods' List Law Reports, Easter Sittings 1922, Vol.
XI, page 6, V/o Tractoroexport, Moscow v. M/s. Tarapore & Company and
Anr .. [1970) 3 S.C.R. 53 and The Fehmarn [1957] 2 All E.R. 707, referred to.
10. Section 3 of the Arbitration (Protocol and Convention) Act, 1937 is
in pari materia with section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961. Section 3 of !he 1937 Act would only be attracted ifl
there is a submission pursuant to an agreement to that effect.
[928B-C]
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In the instant case while. there i> an agreement as contemplated by First
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Schedule to the 1937 Act, there is no submission made in pursuance of such
agreement and, therefore the application of the respondent could
not have
been entertained under section 3 of the, 1937 Act. [9280]
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2407-2408
of 1968.
From the Judgment and Order dated 1-12-1965 of the Calcutta: 1
High Court in Appeal Nos. 110-111/M
P. K. Chatterjee and P. K. Mukherjee for the Appellant.
S. C. Majumdar, Arvind Kumar, S. Dasgupta, Mrs. L. Arvind·
and Miss> Karabi Banerji for the Respondent.
The Judgment of the Court was delivered by
DESAI,
J.-Protracted, time
consuming,
exasperating
and·
atrociously expensive court trial:; impelled an alternative mode of
resolution of disputes between the parties : arbitrate -
don't litigate.
Arbitration being a mode of resolution of disputes by a judge of the
choice of the parties was considered preferable to adjudication of
disputes by court. If expeditious, less expensive resolution of disputes by a judge of the choice of the parties was the consumation
devoutly to be wished through arbitration, experience shows and this
case illustrates that the hope is wholly belied because in the words
of Edmond Davis, J. in Price v. Milner, (1 ) these may be disastrous
proceedings.
A petty labour contractor h'.i. search of its labour charges in a
paltry amount 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.
P1aintiff
(appellant herein), a private limi1ed 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 Yugos.lavia 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 ski1led labour,
unskilled labour and apprentice labour, to carry out the erection work
and incidentally to do other things provided in the sub-contract.
(1) [1966] 1 W.L.R. 1235.
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R. D. & SONS v. INVEST IMPORT (Desai,!.)
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· The contract also provided for employing extra labour force as well
as carrying out extra stipulated job for installation, substantial alterat_ion of dejgn etc. as and when desired and directed by the principal
'
contractor, respondent herein.
In carrying out the work undertaken
A..
under' the sub-contract, the plaintiff claims that it carried out some
extra work for which it was entitled to recover Rs. 70,000 from
the respondent. There were also other claims made by the appellant
which wire not satisfied or met with by the respondent with the
result that the appellant filed suit No. 1359/63 on the original side of
the
High Court
at
Calcutta on August 1, 1963, to recover
~
Rs. 4,25,343.00 f.rom the re~pondent. The split up of the total cl~im
·
~ has been set out m the particulars appended to para 16 of the plamt.
'
# / The appellant also annexed sub-contract between the appellant and
~. the respondent as Annexure 'A' to the plaint.
On August 2, 1963,
-..,.
· on a notice of motion taken out by the appellant, a learned single
...
judge of the..fligh Court granted an ad interim ex parte injunction
restraining/ the respondent from withdrawing the money due to it
from the Bihar State Electricity Board.
Pursuant
to serviCe of
notice of motion
taken out by the
appellant, on August 8, 1963, the respondent appeared through one
Ilija Kostantinovic, Manager of the respondent company posted at
its office at 36, Ganesh Chandra Avenue, Calcutta, and moved an
application purporting to be under s. 151
of the
Code of Civil
Procedure, contending, inter alia, that the sub-co!ltract between ihe
appeHant and the respondent incorporates an agreement to refer all
the disputes arising out of the. sub-contract to arbitration and. therefore, the suit should be stayed.
The clause spelling out agreement
to refer disputes to arbitration was reproduced in the petition.
1t
reads as under :
"Any mutual disputes should be settled in mutual agreement, however, should they fail to reach an agreement in the
way, both
contracting parties accept
the
jurisdiction of the
Arbitration by the Internationa1 Chamber of Commerce in Paris
with application of Yogoslav materials and economical law".
After setting out the background of dispuks between the parties,
it was alleged in the petition for stay that in the circumstances set
out in the petition,
disputes and
differences
arose between the
appellant and the respondent out of or in respect of :md/ or relating
to the sub-contract dated July 10, 1961, and in view ofthe subsisting
agreement to refer disputes or differences arising under or out of
the sub-contract between the parties to arbitration, 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
16-645 S. C. India/80
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exercise of its inherent jurisdiction injunct the' plaintiff appellant from
proceeding with the suit instituted by rt.
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
partie!>.
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 entiered into between the appellant and the respondent, sent by the Managing Director of the appellant company as
also a telegram sent by the same person on July 13, 1961, were
annexed to the counter-affidavit.
\
Ilija Kostantinovic,
Manager of the respondent compan\r at
Calcutta filed an affidavit in rejoinder in which there are certain
ayerments which go to the root of the matter and, therefore, they
may better be extracted here. They read as under :
"5. With reference to the allegations contained in paragraph 4 of the said affidavit, I reiterate the statements contained
in paragraphs 3 and 4 of the petition and I deny all allegations,
which are contrary thereto and/ or inconsistent therewith.
6. With further reference to the allegations contained in
paragraph 4- of the said affidavit, I say that after entering into
the contract dated July 10, 1961, and after executing the same,
the respondent purported to send a letter to the petitioner seeking
to modify and/or delete the arbitration clause contained in the
contract dated July 10, 1961, and also purported to send a cable
to the petitioner. The petitioner never agreed to the modification and/or deletion of the arbitration clause as contained in the
said contract or to the alleged arbitration clause suggested by
the respondent".
The petition for stay was set down for recording evidence. · · One
H
Panich Stojan son of Nikola Panich, Project Manager, Barauni
Thermal Project, an employee of !he respondent company was
examined on behalf of the respondent. No oral evidence was offered
t
R. D. & SONS v. INVEST IMPORT (Desai,!.)
907
on behalf of the appellant.
The learned single judge by his order
A -
dated January 10, 1964, granted the petition of the respondent and
stayed further proceedings in the suit filed by the appellant.
The
learned judge also vacated the ad interim injunction granted in
favour of the appellant.
The appellant preferred ,two appeals being Civil Appeal No.
110/64 against the order of the learned single judge granting stay
of the suit of the appellant and Civil Appeal No. 111/64 against the
order dated February 6, 1964, vacating the interim injunction granted
in favour of the appellant.
A Division Bench of the High Court
disposed of both the appeals by a common judgment dated December
1, 1965, dismissing both the appeals.
While dismissing the appeals
the division bench held that there was a valid subsisting arbitration
agreement between the parties and it was binding 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
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Article 133(l)(c) .of the Constitution.
The High Court was of the
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opinion that the appeals did involve sub&tantial questions of law
and the case was a fit one for appeal to the Supreme Court and
accordingly granted a certificate under Art. 133(l)(c).
Appellant
accordinJ.!).y 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
which was against the order vacating ad interim injunction granted by
the High Court and the dismissal of the appeal against that order
wa&• not pressed. Therefore, Civil Appeal No. 2408/68 would stand
dismissed as having not been pressed.
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Mr. Chatterjee in support of Civil Appeal No.
2407 /68
.canvassed four contentions before us.
They are :
1. There is no. concluded arbitration agreement between the
parties to refer the disputes arising out of the sub-contract
dated July 10, 1961, to arbitration and, therefore, the suit
cannot be stayed;
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2. Alternatively, even if the Court comes to the conclusion that
there is such a subsisting arbitration agreement between
the parties, prayer for stay having been made under s. 151
of the Code of Civil Procedure and/or under s. 34 of the
Arbitration Act, 1940, read with s. 151, C.P.C., the Court
should not enforce it in its discretionary jurisdiction in the
facts and circumstances of the case as it would result in
miscarriage of justice;
3. In view of the provisions contained in Arbitration (Protocol
and Convention) Act, 1937, 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 cas1~ is not covered by the provisions of the Act;
4. This being a foreign arbitration, s. 34 of the Arbitration Act,
1940, is not attracted and the Court would have no
jurisdiction to grant stay of the suit filed by the appellant.
The first contention is that there is no· concluded arbitration
agreement betwen the parties to refer. the disputes arising out of the
sub-contract dated July 10, 1961, to arbitration and in the absence
of a mutually agreed arbitration agreement, the respondent is not
entitled to a stay of the suit filed by the appellant
either under
s. 34 of the Arbitration Act or under s. 34 read with s. 151 of the
Code of Civil Procedure. Undoubtedly, sub-contract marked Ext. A
has been signed both by the Managing Director of the appellant
company and by one Mr. Petrovije on behalf of the respondent
company. Third paragraph of Art. 12 of sub-contract Ext. A recites.
an arbitration
agreement.
The provision is for a reference of
disputes arising out of the sub-contract to foreign arbitral tribunal,
namely, the International Chamber of Commerce in Paris. Such a clause
has always been interpreted to spell out an arbitration agreement.
Respondent contends 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 sub-contract 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.
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R. D. & SONS v. INVEST. IMPORT (Desai, J.)
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, reievant portion of which may be extracted :
"10th July 1961
"I have signed the contract of Barauni Thermal Power
Btation work with you.
I have objected to the clause of Arbitration put in there in
agreement which was deleted from our revised draft of agreement sent to you in advance.
Arbitration clause will be acceptabl.e to us if only arbitration to be done in India, according to the rules and regulations
and procedure of our country".
This letter was handed in to the respondent on the same day on which
909
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Ext. A was signed and accepted by the parties and it would_ imply
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that it must be soon after the signing ceremony was over. Further,
the Managing Director of the appellant immediately on landing in
Bombay on July 13, 1961,
sent a cable to the respondent which
reads as under :
"Reached safely Bombay (stop) Reference to our letter of
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10th July 1961 regarding Arbitration clause to be deleted from
the contract document".
Three things emerge from a conjoint reading of the letter and the
cable that before sub-contract Ext. A was signed by the parties at
.Belgrade, a draft of the intended sub-contract was sent by the
respondent to the
appellant for its approval and the
Managing
Director of the appellant had raised a limited objection to the arbitration clause.
On behalf of the appellant it was suggested that there
. would be no objection to the arbitration clause if arbitration was
to be done in India. But as the original draft submitted on behalf
of the respondent suggested arbitration by a foreign arbitral tribunal
stationed in Paris, the same was objected to on behalf of the appellant
and its amendment was sought.
Undoubtedly, Managing Director
of appellant signed Ext. A which incorporated the arbitration agreement as extracted herein-before.
But the letter referred to herein
was handed in presumably soon after the signing ceremony of subG
contract Ext. A was over and was followed by the cable which not
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<>nly referred to letter dated July 10, 1961, but also reiterated and
repeated the objection to the arbitration clause.
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At one stage of the proceeding the respondent adopted a position that neither the letter nor the cable were received by it anci
they are not genuine documents.
The appellate Bench of the High
Court held that the letter and the cable were not received by the
respondent.
This conclusion is not only contrary to evidence on
record but is reached in utter disregard of the admission of the
Manager of the respondent.
Hija Kostantinovic,
Manager of the
respondent company stationed at' Calcutta filed an affidavit in rejoinder. The admissions 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 applicatimi 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 iri
paragraph 6 of the affidavit of Ilija Kostantinovic, a nebulous answer
was given that Mr. Kostantinovic must have replied to the letter
and the telegram. And he admitted that Mr. Kostantinovic was the
Manager of the branch office of the respondent company at Calcutta.
Now, one employee, viz., the Manager of the respondent company
stationed at Calcutta in terms
admitted the receipt of the letter
and the cable while the witness who claimed to be present at the
signing ceremony of the sub-contract Ext. A was emphatic that the
cable and the letter were not received and gave an explanation with
regard to the averments of the affidavit which only show that truth was
otherwise. In the face of uncontroverted and unambigiious admission
in the affidavit of the Manager of the respondent company one can
without fear of contradiction assert that the letter and the cable were
received by the respondent.
The letter and the cable would show
that the arbitration agreement to refer dispute~ to a foreign arbitral
in the draft was not acceptable to the appellant though the other
terms were acceptable. The appellant repudiated the arbitration
agreement soon after the agreement was signed when the Managing
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R. D. & SONS v. INVEST IMPORT (Desai, J.)
911
Director of the appellant was in Belgrade and took the follow up
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action by sending a cable reiterating and repeating the objection
immediately after his ,return to Ind~a.
Now once it is admitted and established that the letter and the
cable wer~ received by the respondent, ordinarily if the contents of .
the letter and cable are not acceptable to respondent, a reply to that
effect is naturally expected.
Contention i& that respondent accepted
the change in arbitration clause proposed by the appellant sub silentio
coupled with the subsequent conduct. It is a fact that the respondent
did not write back saying that if the arbitration agreement was not
· acceptable to the appellant the sub-contract would not _be acceptable
as a whole to the respondent. On the contrary, after a specific objection only with regard to arbitration agreement in the sub-contract
Ext N. by the appellant, the respondent allowed the appellant to
proceed further with the implementation and execution of the subcontract, without controverting what the appellant had stated in the
letter and the cable. This would unmistakably show that the respondent accepted the alteration as suggested by the appellant in that the
arbitration agreement was 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 stati:oned 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, i:t 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 or the appellant company who is supposed to
have signed the letter and the cable has neither entered the witnes~
box nor filed his affidavit proving the contents thereof.
Relianct>
was placed on Judah v. I solyne Bose, ( 1 ) •
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 i:n 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 two telegrams written by a nurse were tendered in evidence. The
question was whether in the absence of any independent -evi:dence
about the testamentary capacity of the testatrix the contents of the
letter could be utilised to prove want
of . testamentary capacity.
(I) AIR 1945 P.C. 174 .
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Obviously, in these circustmances the Privy Council obse!Ved that
the fact that a letter and two telegrams were sent by itself would not
prove the truth of the contents of the letter
and,
therefore,
the
contents of the lc~tter bearing on the question of lack of testamentary
capacity would not be substantive
evidence.
Undoubtedly,
mere
proof of the handwriting of a document would not tantamount to
proof of all the contents or the facts stated in the document. If the
truth of the facts stated in a document is in issue mere proof of the
handwriting and execution of the document
would
not furnish
evidence of the truth of the facts or contents of the document. The
truth or otherwise of the facts or contents so stated would have to be
proved by admissible evidence, r.e. by the evidence of those persons
who can vouch safe for the truth of the facts in issue.
But in this
case Bhikhubhai Gourishankar Joshi who filed an affidavit on behalf
of the appellant has referred to the averments in the letter and the
cable.
He is' a principal officer and constituted
attorney of the
appellant company.