Chandra Singh vs Executive Engineer, Assam Railway and others

G. Mehrotra, J.—This is an appeal against an order of the Additional District Judge, Upper Assam Districts, Silchar, who refused to make an award the rule of the Court end pass a decree on the said award.

The material facts are that during the continuance of the last world war the Railway Administration, then known as Bengal and Assam Railway invited tenders for the construction of additional staff quarters for the Traffic and Electric Departments of the said Railway at Akhaura, a place which is now in East Pakistan. Sardar Chanda Singh, who is the appellant before us, submitted a tender. His tender was accepted and an agreement was entered into on the 26th of July 1945 between the contractor on one side and the Governor-General of India, represented by the Executive Engineer, B. and A. Railway, Haflong on the other for the construction of the said houses.

The value of the work undertaken was Rs. 1,53,600/-. It was further agreed under the said agreement that all disputes relating to or arising out of that contract were to be decided by arbitration. Various materials for the construction of the staff quarters were stored at Akhaura by the contractor. He started the work, and, in fact, made two houses. Further progress of the .work was hampered because the Railway could not acquire the site. Thereafter the work had to be suspended on account of the flood. In the meantime, on the 15th of September, 1945 the work was finally stopped by the Railway as the hostilities ceased; but, according to the appellant, the Railway undertook to take over and pay for the materials collected at the site.

It is not necessary to give further details of the facts. The appellant made various attempts to give his bill for the price of the materials for payment soon by the Railway both to the Pakistan and Union Governments but there was no response. Thereafter a Press Note was issued by the Union of India on the 23rd of May 1948 under which it was stated that the Union of India undertook the liability to pay the amounts which were due to the various contractors under contracts entered into between the Government of India and the contractors prior to the partition of India, but a certain procedure for submission of bills was prescribed therein.

In pursuance of the above Press Note the appellant submitted his bill to the Government or India. Nothing, however, happened. Thereafter the appellant took recourse to the provisions of the arbitration clause under the agreement and appointed Shri Sudhir Chandra Dutta Roy, Pleader, Silchar, as the sole arbitrator. The arbitrator sent notice to the Govt. of India indicating that he was appointed the sole arbitrator in pursuance of the arbitration clause in the agreement and that 29th June, 1949 was fixed for hearing the cases of the parties.

The Union of India, however, did not participate in the proceedings before the arbitrator on the ground that the arbitrator had no jurisdiction. The arbitrator gave his award on the 29th June, 1949 for Rs. 49,352/- in favour of the appellant. This award was once filed in the court of the Sub-divisional Officer at Haflong who set aside the award on the 11th of March, 1950. On appeal, the District Judge affirmed the order, but on 23rd of August, 1951 this Court in revision set aside the order of the courts below on the finding that the Arbitration Act did not apply to Haflong area.

It further directed that the court below, however, should not have set aside the award but should have only returned the award to the arbitrator for presentation before the proper court. Thereafter the present application was made under S. 14 of the Indian Arbitration Act before the District Judge, Silchar, for making the award a rule of the Court and pass a decree on the basis of the award. This application was contested by the Union of India on various grounds. The main ground taken by the Union of India was that the Court at Silchar had no jurisdiction to entertain the suit for filing of the award. The trial court accepted the contention of the Union of India and held that the court had no jurisdiction to entertain the petition.

But deciding the other issues raised between the parties held that the award should be set aside. After having held that the court had no jurisdiction to entertain the application for filing the award, it was not necessary for the court below to give decision on other issues. Any decision by the court on the other issues cannot be binding on any proper court which may be entitled to entertain the application.

Under S. 31 (1) of the Indian Arbitration Act, an award is to be filed in any Court having jurisdiction in the matter to which the reference relates. The main question, therefore, is whether the Court at Silchar had jurisdiction to entertain the suit in relation to the matter which is the subject of reference. The contention raised by the Union of India is that at the time when the contract was entered into to put up certain constructions no doubt the Railway was owned by the then Government of India but after the partition on the appointed day, that is 15th of August, 1947, the liabilities of respective Dominions, which came into existence on that date, were distributed with regard to the properties, under the Indian Independence (Rights Property and Liabilities) Order, 1947.

The main argument raised by the learned counsel for the appellant is that the way in which the court below had proceeded to deal with the matter was erroneous. The court below has held that so far as the earlier agreement between the parties was concerned, it came to an end and the rights, and liabilities of the parties were to be regulated by the subsequent agreement between the parties under which the Railway undertook to take over the materials stored by the appellant on payment of the price. If that is so, then the cause of action accrued in Silchar where the appellant resided on the principle that the debtor must seek his creditor.

As the liability was of the Government of India to pay up the price of the goods stored, to the appellant, the appellant had a right to bring a suit for recovery of the price of the goods in the court within the jurisdiction of which he resided. The court below, according to the contention of the appellant, was not right in holding that no part of the cause of action arose in Silchar. The court below has said that as the goods which, were removed by the Government were stored at a place which was within the jurisdiction of East Pakistan and the price had to be paid there, no part of the cause of action arose in the district of Silchar and thus the suit could not be filed at Silchar.

It is not necessary to examine in detail the correctness of the proposition enunciated by the court below because in our opinion there is another ground on which the appeal must be dismissed. If there was a fresh contract, under which the Government undertook to pay the price of the goods which were given to it, there was no arbitration clause in respect of the said agreement. Realising this mistake, Mr. Ghose for the appellant has candidly argued, that it was a consequence which arose out of the first contract. Under the first contract the Government had asked the appellant to make certain constructions.

That contract was terminated in the year 1945 on the undertaking given by the Government that it will pay up the price of the goods which were stored by the contractors and were taken away by the Government. The dispute arose about the payment of the price of the goods. It was nonetheless a dispute under the original agreement arrived at between the parties and thus the arbitration clause was enforceable. The question, therefore, which will really arise for consideration is whether there was any liability of the Union of India under the Original contract. Clause 8 of the Indian Independency (Rights, Property and Liabilities) Order, 1947, hereinafter called the Order, reads as follows:

(1) Any contract made on behalf of the Governor-General in Council before the appointed day shall, as from that day,�

(a) if the contract is for purposes which as from that day are exclusively purposes of the Dominion of Pakistan, be deemed to have been made on behalf of the Dominion of Pakistan instead of the Governor-General in Council; and

(b) in any other case, be deemed to have been made on behalf of the Dominion of India instead of the Governor-General in Council . . .

Although the contract prior to the partition of India on the appointed day had been made between the Governor-General in Council and a third party, after the appointed day if the contract was for the exclusive purposes of the Dominion of Pakistan, it would be deemed as if the Dominion of Pakistan was a party to that contract and not the Dominion of India. By virtue of the test laid down in cl. 8 of the Order it will be the Dominion of Pakistan which will be deemed to be a party to the contract and there could be no question of any liability of the Indian Government arising out of the contract, and if there is no liability of the Government of India, this Court at any rate, has no jurisdiction to entertain an award under which the Union of India was held liable to pay a certain money.

The whole question, therefore, is whether it can be said that the contract was exclusively for the purpose of the Dominion of Pakistan. Mr. Ghose has contended that no materials have been placed by the Union of India in this case which will go to show that the contract was exclusively for the purposes of the Dominion of Pakistan. These words have been explained by their Lordships of the Supreme Court in the case of Union of India (UOI) Vs. Chaman Lal Loona, . That was a case where certain goods were supplied under a contract between the Governor-General of India and a contractor, to Military Department, at Lahore, and, there was also an arbitration clause in that contract and a question arose whether such a contract could be said to be exclusively for the purposes of the Dominion of Pakistan.

It was held that ordinarily under S. 20 of the Arbitration Act, the question of liability was one for the arbitrator and not for the Court to decide. Where, however, it appears that the Union of India as such was admittedly not a party to the arbitration agreement and could not be dragged, therefore, to an arbitration proceeding on the strength of an agreement to which it was not a party unless by operation of law it was deemed to be a party to the agreement the question of liability must be decided by the Court. Dealing with the interpretation of cl. 8 of the Ordinance, their Lordships approved of the following observations made by the Chief Justice Chagla in the case of the The Union of India Vs. Chinubhai Jeshingbhai and Others, :

It is clear from the language used in Art. 8 that the test to be applied with regard to this contract is not whether the contract was for the purposes of the Dominion of Pakistan at the date when it was made. Ex hypothesi that test is clearly inapplicable. All contracts contemplated by Art. 8 must be contracts which when made were made by undivided India by the Governor-General in Council. The test that must be applied is an artificial test and the test may be either, if the contract had been entered into on 15-8-1947, whether it would have been a contract for the purposes of the Dominion of Pakistan, or, if the Dominion of Pakistan had been in existence when the contract was entered into, whether it would have been a contract for the purposes of Pakistan.

Applying this test to the facts of the present case, if the present contract had been entered into on the appointed day, that is 15th August, 1947 or later, obviously the contract would have been for the purposes of Pakistan because the houses had to be constructed at Akhaura, which lies exclusively within the jurisdiction of East Pakistan. In this view of the matter, we must hold that the agreement in the present case was exclusively for the purposes of the Dominion of Pakistan and clause 8 of this Order is attracted. If that is so, then on the test laid down, in this case it will be the Dominion of Pakistan which will be deemed to be liable under the said contract and, by the artificial test laid, down, would be deemed to be a party to the contract. If that is so, the Government of India would not be bound by the contract and thus it will not be liable under that agreement and die Court at Silchar had no jurisdiction to entertain the application for filing of the award.

There is one more point raised by Mr. Ghose based On the Press Note issued by the government of India on the 23rd of May, 1948. That Press Note itself shows that it will not have the binding force of a contract between the parties. It was only to mitigate the hardship suffered by some of the contractors on account of the partition of India that the Government undertook on a compassionate ground the liability to pay the contractors. If that is not an admissible contract, then in that case no question arises of the Government of India''s liability on the basis of that contract.

Besides, if that is a fresh contract, it also provides the procedure for the claim to be placed before the Government and for the discharge of the liability, and, in that view of the matter, the arbitration clause in the earlier agreement of 1945 cannot be attracted to this agreement. It is contended by Mr. Ghose on the lines of the second contract, under which the Government took over the materials, that it was not a fresh contract itself but it is an acknowledgment of the liability under the earlier contract of 1945.

If that is so, the question still remains. If the liability is sought to be fastened on the Union of India under the earlier contract of 1945 and the Press Note is merely an acknowledgment of it, and, if by the artificial test laid down under clause 8 of the Order the Union of India cannot be held to be a party to the contract, then the question of liability under that contract will not arise even though this Press Note amounted to an acknowledgment of an earlier liability.

In any view of the matter, there is no force in the appeal and it must be dismissed, but in the circumstances of the case, the parties will bear their own costs.

H. Deka, C.J.

I agree.