# THE CALCUTTA TRAMWAYS CO. LTD v. THE CORPORATION OF CALCUTTA

- **Citation:** [1965] 3 S.C.R. 354
- **Court:** Supreme Court of India
- **Decided:** 1965-03-12
- **Case number:** Civil Appeal No. 245 of 1964
- **Bench:** K. Subba Rao, J.C. Shah, R. S. Bachawat
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-calcutta-tramways-co-ltd-v-the-corporation-of-calcutta-3494
- **Pages:** 4

## Headnote

B
Cakutta Tnnrvways Act (W.B. Act 25 of 1951), s. 5-·.4.greements
with .4.rbitration clause-Whether saved.
By the enactment of Calcutta Tramways Act, 1951, the Government of west Bengal was substituted tor the Corporation of Calcutta
(HesponJent) ln ;·arious agreements entered into between· the predeccssors-m-interest of the appellant and the predecessors-in-interest
of the rtopondcnt, subject to a reservation that any sum payable under
the agreements shall be payable by the appellant to the respondent.
All the agreements contamed an arb.traLon ckuse which provided
for refcr.1:1ng aHy u1sputes arising under the agreements to arbitration
a1 the prescribed .manner. Disputes arose as regard the track rent.
payable by the appeUant· to the responuent and the dispute was
referr.;d to arb.trat1on in accordance with the terms of the arbitration
clause. 'lhe appellant nominated its arbitrator without pcejuciice to
its right;, and tiled an application in the High Court, for the determinat.on oi lne que.stion whether there was a valid
agreement netween the appellant and respondent. The High Court held
that there was an agreement. In appeal by special leave:
HELD: Both the r'ght to the sums payable to· the respondent and
the proced'1re of arbitration were saved under the Act.
The proviso to s. · 5 of the Act, in terms as well as hy necessary
implication brings the subject-matter of the sums payable under the
agreements both under the substantive and procedural aspects within
the scope of the exception. The substantive right to the payment of
rent and the procedural one to have any dispute arising in respect of
that rigllt relerred to arb'tration embodied in the agreements are
interconnected and are not severable. To preserve the substantive
right and to withhold the procedural right to enforce it is to save the
right and deny the remedy, (357. C-D, F-G]
C1viL APPELLATE JurusmcnoN: Civil Appeal No. 245 of
1964.
.
Appeal by special leave from the judgment and order dated
February 13, 1963, of the Calcutta High Court in Award Case No.
8 of 1963.
A. V. Viswanatha Sastri and D. N. Gupta, for the appellant.
S. T. Desai and P. K. Mukherjee, for the respondent.
The· Judgment of the Court was de!ivered by
Sobba Rao, J. On or about October 2, 1879, the Corporation of
the town of Calcutta incorporated under Bengal Act IV of 1876
into an ag!eement in writing with Dillwyn Parrish, A!freoh
Parrish and Robmson Souttar, hereinafter called the grantees.
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CAL. TRAMWAYS v. CORPORATION OF CALCUTTA (8ubba Rao, J.)
355
whereunder the Corporation granted to the said grantees the right
to construct, maintain and use certain tramways in Calcutta on
payment of certain rents as provided in the said agreement. The
aoreement contained an arbitration clause which provided for
r;ferring any disputes arising under the said agreeme_nt to arbitration in the manner prescribed thereunder. The said agreement
further provided in cl. 28 that the words "the said Corporation"
would include the Corporation and its successors. Different agreements were entered into between the successors of the Corporation
of Calcutta and the grantees from time to time, namely, on November 22, 1879, September 2, 1893 and December 9, 1899, and were
confirmed by appropriate Acts. In all these agreements the appellant's predecessor-in-interest agreed to pay the rents to the respondent's predecessors-in-interest in respect of the tramways constructed, maintained and used by them. All the said agreements contained an arbitration clause similar to that contained in the first agreement. The Corporation. of Calcutta is now the successor of the
properties of the Corporation of the town of Calcutta constituted
under the Bengal Act IV of 1876. It was constituted by Bengal Act
II of 1888. The appellant, i.e., the Calcutta Tramways Co. Ltd., is
the successor or the assignee of the said grantees. On August 30,
1951, the State of West Bengal entered into an agreement with the
appellan

## Text

354
THE CALCUTTA TRAMWAYS CO. LTD.
v.
THE CORPORATION OF CALCUTTA
March 12, 1965
A
[K. SUBBA RAO, J.C. SHAH AND R. S. BACHAWAT, JJ.J
B
Cakutta Tnnrvways Act (W.B. Act 25 of 1951), s. 5-·.4.greements
with .4.rbitration clause-Whether saved.
By the enactment of Calcutta Tramways Act, 1951, the Government of west Bengal was substituted tor the Corporation of Calcutta
(HesponJent) ln ;·arious agreements entered into between· the predeccssors-m-interest of the appellant and the predecessors-in-interest
of the rtopondcnt, subject to a reservation that any sum payable under
the agreements shall be payable by the appellant to the respondent.
All the agreements contamed an arb.traLon ckuse which provided
for refcr.1:1ng aHy u1sputes arising under the agreements to arbitration
a1 the prescribed .manner. Disputes arose as regard the track rent.
payable by the appeUant· to the responuent and the dispute was
referr.;d to arb.trat1on in accordance with the terms of the arbitration
clause. 'lhe appellant nominated its arbitrator without pcejuciice to
its right;, and tiled an application in the High Court, for the determinat.on oi lne que.stion whether there was a valid
agreement netween the appellant and respondent. The High Court held
that there was an agreement. In appeal by special leave:
HELD: Both the r'ght to the sums payable to· the respondent and
the proced'1re of arbitration were saved under the Act.
The proviso to s. · 5 of the Act, in terms as well as hy necessary
implication brings the subject-matter of the sums payable under the
agreements both under the substantive and procedural aspects within
the scope of the exception. The substantive right to the payment of
rent and the procedural one to have any dispute arising in respect of
that rigllt relerred to arb'tration embodied in the agreements are
interconnected and are not severable. To preserve the substantive
right and to withhold the procedural right to enforce it is to save the
right and deny the remedy, (357. C-D, F-G]
C1viL APPELLATE JurusmcnoN: Civil Appeal No. 245 of
1964.
.
Appeal by special leave from the judgment and order dated
February 13, 1963, of the Calcutta High Court in Award Case No.
8 of 1963.
A. V. Viswanatha Sastri and D. N. Gupta, for the appellant.
S. T. Desai and P. K. Mukherjee, for the respondent.
The· Judgment of the Court was de!ivered by
Sobba Rao, J. On or about October 2, 1879, the Corporation of
the town of Calcutta incorporated under Bengal Act IV of 1876
into an ag!eement in writing with Dillwyn Parrish, A!freoh
Parrish and Robmson Souttar, hereinafter called the grantees.
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CAL. TRAMWAYS v. CORPORATION OF CALCUTTA (8ubba Rao, J.)
355
whereunder the Corporation granted to the said grantees the right
to construct, maintain and use certain tramways in Calcutta on
payment of certain rents as provided in the said agreement. The
aoreement contained an arbitration clause which provided for
r;ferring any disputes arising under the said agreeme_nt to arbitration in the manner prescribed thereunder. The said agreement
further provided in cl. 28 that the words "the said Corporation"
would include the Corporation and its successors. Different agreements were entered into between the successors of the Corporation
of Calcutta and the grantees from time to time, namely, on November 22, 1879, September 2, 1893 and December 9, 1899, and were
confirmed by appropriate Acts. In all these agreements the appellant's predecessor-in-interest agreed to pay the rents to the respondent's predecessors-in-interest in respect of the tramways constructed, maintained and used by them. All the said agreements contained an arbitration clause similar to that contained in the first agreement. The Corporation. of Calcutta is now the successor of the
properties of the Corporation of the town of Calcutta constituted
under the Bengal Act IV of 1876. It was constituted by Bengal Act
II of 1888. The appellant, i.e., the Calcutta Tramways Co. Ltd., is
the successor or the assignee of the said grantees. On August 30,
1951, the State of West Bengal entered into an agreement with the
appellant whereby the Government agreed to purchase the undertaking of the appellant as provided in the said agreement. The said
agreement was subject to an Act being passed by the appropriate
Legislature ratifying the agreement and giving effect to it. The Calcutta Tramways Act, 1951 (W.B. Act XXV of 1951) was passed
and it came into effect on October 18, 1951. Under that Act the
Government of ·,vest Bengal was practically substituted for the
Corporation of Calcutta under the various agreements subject to a
reservation that any sums payable under the said agreements shall
be payable by the appellant to the Corporation. Disputes arose as
regards the track rent payabie by the appellant to the Corporation
and the dispute was referred to arbitration in accordance with the
terms of the" arbitration clause. Though the parties appointed arbitrators in terms of the arbitration clause of the agreements, the
appellant nominated its arbitrator without prejudice to its rights
and filed-oo
7, 196_3, an
in the Original Side of
the Calcutta High Court, mter a/ia, for the determination of the
question whether there was a valid arbitration agreement between
the appellant and the respondent and for other incidental reliefs
The application was heared by AN. Ray, J. who held that there
an agreement between the appellant and the respondent and that
the appellant was a party to the arbitration clauses contained in the
relevant agreements, that the respondent could make a reference to
arbitration in terms of the said agreements and that the reference
to
arbitrators was valid, legal and effective. The appellant, by
special leave, has filed the present appeal against the said order of
the High Court.
L/Il(N)3SCI-IO
356
•
SUPREME COURT REPORTS
[1965] 3 s.c.R,
Mr. A V. Viswanatha Shastri, learned counsel for the appellant, contended that all the rights of the Corporation of Calcutta
under the various agreements stood transferred under the Tramways Act, 1951, and vested in the Government of West Bengal
except only in regard to the sums payable to the Corporation and
that, therefore, the Corporation could not rely on the arbitration
clauses of the agreements and refer the disputes arising in respect
of the sums payable in terms of the said agreements to. arbitration.
The point raised is in a small compass and turns upon the
relevant provisions of the West Bengal Act XXV of 1951, hereinafter called the Act. Under the Act the agreement entered into on
August 30, 1951, between the Governor of West Bengal on the one
part and the Calcutta Tn,mways Co. Ltd. on the other part was
confirmed. Section 3 of the Act says, "The transfer agreement is
hereby confirmed and made binding on the p1rties thereto and the
several provisicns thereof shall have effect as if the same had been
enacted in this Act." "Section 4 enacts that notwithstanding anything to the contrary in any other law, all the powers and.duties of
the Corporation of Calcutta, the Commissioners of the Howrah
Municipality, the Commissioners of the South Suburban Municipality and the Commissioners for the New Howrah Bridge with
respect to the construction, maintenance, use:, leasing of or otherwise dealing with tramways are transferred to and vested in the
Government". Section 5, which is the crucial section, reads:
(!) The several agreements particulars whereof are set out
· in the Second Schedule to this Act shall have effect as if
the Government were parties thereto in lieu of the respective bodies and persons set out in column 2 of the said
Schedule and any reference in any such agreement to any
of such bodies or persons shall unless the subject-matter or
the context otherwise requires be deemed to be a reference to the Government:
Provided that any sums payable under any such agreement
to any of such bodies or persons shall ccntinue to. be payable as if this Act had not been passed.
The Second Schedule contains a list of the titles of the various
agreements mentioned by us earlier. Under s. 5 of the Act the
Government is statutorily substituted for the respondent or its predecessors-in-interest in the various agreements stated supra. The fiction is a well defined one. The Government replaces the Corporation and its predecessors-in-interest as a party to the agreements
unless the subject-matter or the-context otherwise requires. The
natural presumption is that but for the proviso the enacting part of
the section wonld have inducted the subject-matter of the proviso
also. The proviso tc s. 5 saves from the operation of the substantive section the sums payable under any such agreements to any
such bodies mentioned therein: it excludes the operation of the
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CAL. TRAMWAYS v. CORPORATION OF CALCUTTA (SubbaRao, J.)
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fiction in respect of such sums payable. In respect of the said sums
payable the agreements entered into with the said bodies will remain
intact as if the Act had not been passed; that is to say, the respondent would still continue to be a party to the said agreements for
the said purpose. The relevant agreements provided for the recovery of the rents and also for the procedure for the recovery of
the sums so payable in accordance with the terms of the arbitration
clauses of the agreements. Had not the Act been passed and had
the Government nci been substituted in the place of the Corporation, it cannot be denied that the Corporation, if a dispute arose
in regard to the rent, could have referred the dispute to arbitration.
The substantive right to the payment of rent and the procedural one
to have any dispute arising in respect of that right referred to arbitration embodied in the agreements are interconnected and are not
severable. To preserve the substantive right and to withhold the
procedural right to enforce it is to save the right and to deny the
remedy. To accept the contention of the appellant is to make out a
new agreement between the parties in respect of the sums payable.
The acceptance of this suggestion compels the Ccrporation to give
up its agreed remedy. The alternative suggestion, namely, that in
respect of the amounts payable to the Corporation the arbitration
clauses of the agreements could be enforced by the Government
against the appellant introduces an incongruity. While the dispute
would be between the appellant and the Corporation, the arbitration would be between the appellant and a third party. The argument that the Goveroment would ]Je acting as a trustee of the
Corporation in respect of the sums payable to the Corporation is
not supported by any of the provisions of the Act. A fair construction of the proviso to s. 5 of the Act removes all the anomalies.
Further, in the substantive part of s. 5 of the Act the fiction takes
effect unless the subject-matter or the context otherwise requires.
The proviso in terms as well as by necessary implicatic-n brings the
subject-matter of the sums payable under the agreements
under. the
and .Pro:edural aspects within the scope of
the said exceptton. The fiction m s. 5 of the Act shall yield. to that
extent, to the terms of the c_ontract. On such a construction we hold
as we have indicated earlier, that both the right to the said
payable and the procedure of arbitration are saved thereunder.
In the result, we agree with the view expressed by the High
Court and dismiss the appeal with costs.
Appeal dismist1ed.