Ghewarchand Danchand vs Banwarilal Garodia

S.R. Das Gupta, J.—This is an application on behalf of Ghewarchand Danchand for a declaration that there is no arbitration agreement between the parties under which the claim of the Respondents for refund of the sum of Rs. 4,125 can be referred to the arbitration of the Bengal Chamber of (sic) an order that the arbitration agreement contained in (sic) No. 2599, dated August 8, 1949, has ceased to exist and (sic) determination of the effect of the arbitration agreement (sic) in the said contract and for other incidental reliefs.

The Petitioner''s case before me is as follows:

On August 8, 1949, the Petitioner entered into a contract with (sic) Respondent, whereby the Respondent sold and/or agreed to (sic) 300,000 yards of hessian cloth on terms and conditions (sic) in contract No. 2599, dated August 8, 1949. The (sic) contract contained an arbitration clause. Under the said (sic) delivery was to be given at the rate of 100,000 yards (sic) month from October to December, 1949. The Respondent (sic) and neglected to deliver any quantity in respect of the (sic) portion of the said contract. On October 26, 1949, the (sic) Trades Association issued a circular to its members for (sic) guidance, saying that the sellers, who had failed to fulfil (sic) contractual obligations in delivering goods to the buyers, (sic) pay differences to the buyers measured by the difference (sic) the contract price and the maximum mill price obtained the time plus a penalty of (sic) per cent, which was the rough (sic) of the profits which the buyers could have made, had (sic) received the goods. The maximum ex-mill price of the (sic) hessian at the end of October was Rs. 55 per 100 bags, fie Petitioner, thereafter, sent a bill of difference to the (sic) for Rs. 11,000 for the October portion of the said (sic) which was the difference between the contract price and (sic) maximum ex-mill price of the said goods at the end of (sic) 1949, together with (sic) per cent, penalty. The Petitioner at the bill at the request of the Respondent, who represented to (sic) Petitioner that it could not deliver the October portion of the (sic) goods and would pay the aforesaid difference. It is the (sic) of the Petitioner before me that, on November 1, 1949, it (sic) agreed by and between the Petitioner and the Respondent (sic) the Petitioner would give up its claim for the (sic) goods (sic) would accept the said sum of Rs. 11,000 in full settlement (sic) its claim for the October portion of the goods under the said (sic). Pursuant to the said agreement, the Petitioner sent (sic) said bill which the Respondent accepted and paid for. In (sic) circumstances the Petitioner contends that there is no dispute (sic) difference between the parties in respect of or arising out of (sic) said contract No. 2599 as the Petitioner and the Respondent (sic) mutually agreed amongst themselves as to the quantum of (sic) payable by the Respondent to the Petitioner, i.e. the (sic) sum of Rs. 11,000 which the Respondent paid and the (sic) accepted. In other words, the contract No. 2599 was (sic) discharged. Notwithstanding the said settlement (sic) the payment as aforesaid, the Respondent has purported to submit a claim before the Bengal Chamber of Commerce (sic) refund of the sum of Us. 4,125 which was paid as penalty (sic) non-delivery of the October portion of the said goods. (sic) Petitioner contends that the said submission to the arbitration the Bengal Chamber of Commerce is wrong and that the (sic) which the Respondent is now making for refund of the said (sic) of Its. 4,125, is not a claim or dispute arising out of the (sic) contract and the arbitration agreement contained in the (sic) contract. In the circumstances the Petitioner has made (sic) present application for the reliefs claimed therein.

The case of the Respondents, as appearing from the (sic) of claim filed before the Bengal Chamber of Commerce, is (sic) follows:

The shipment of the goods ordered for the October portion (sic) the contract could not be arranged for because the (sic) Controller had requisitioned the whole supply in Calcutta (sic) therefore, there were no sellers in the market. On November (sic) the Respondents received a letter from Ghewarchand Danchai informing them that since they failed to deliver the goods (sic) October due date they would be submitting their difference (sic) in terms of the Grunny Trades Association circular No. G-5 Without challenging at that time the right to claim 7� per cent penalty the Respondents paid the full amount of the bill because the Grunny Trades Association was backed by the Indian (sic) Mills Association and under no circumstances the Respondent could disobey the directions of that body. The extra (sic) of 7� per cent, over the maximum price for non-delivery of (sic) goods for October December, 1940, were both illegal (sic) excessive and were decided by the Committee of the (sic) associations in a hurry on October 26, 1949 and without (sic) legal opinion prior to their decision in the matter. Later (sic) when legal opinion was taken, it was found that the said 7� per cent, penalty was unwarranted and the arbitrators were entitle to assess damages only on the basis of difference between (sic) contract price and the rate fixed by the Jute Controller. (sic) Respondents claim refund of the sum paid by way of penalty (sic) being an amount paid in excess by them to the Petitioner. The Respondents further contend that all payments were (sic) on the express condition of errors and omissions excepted (sic) if at any time after payment it is found out that a payment (sic) made by mistake a refund is always applied for and as it hi been established that the penalty of (sic) per cent, over (sic) maximum price was unwarranted it became clear that (sic) Respondents were entitled to a refund. In their affidavit (sic) opposition before me, the Respondents further allege that the were compelled to pay the penalty on account of the (sic) able pressure brought upon the buyers including the Respondent (sic) the said Gunny Trades Association and the circular issued (sic) the said association. They deny that there was any (sic) between the parties as alleged in the petition or (sic) the bill was sent in pursuance of such alleged agreement, (sic) further contend that their firm was forced to pay the (sic) of the bill because of the said circular and pressure (sic) and threat held out by the said Association that anyone (sic) settling on the said basis would be black listed. The (sic) pressed for payment and threatened to report the Respondent firm to the Association and the payment was made in (sic) circumstances. The Respondents further contend that the payment of 7� per cent, penalty was illegal and they are entitled (sic) refer the dispute between the parties to the arbitration of the (sic) Chamber of Commerce under the said arbitration agreement incorporated in the said contract. These are the respective (sic) of the parties before me.

In order to decide whether the present dispute between the (sic) comes within the arbitration clause, I shall have to (sic) the scope of the arbitration clause itself. In the case of (sic) Trading Company, Ld. v. Jute and Gunny Brokers, Ld. Unreported, is Lordship Chatterjee J. observed as follows:

It is really a question of the scope of the submission. Parties can submit arbitration any question and it is a question of the construction of the arbitration clause or a determination of the scope or ambit of the authority of the arbitration and it depends on the terms of the submission whether the particular dispute (sic) the parties falls within the arbitrator''s jurisdiction.

The arbitration clause in the contract in question reads as follows:

All matters, questions, disputes, differences and/or claims arising out of and/or (sic) and/or in connection with and/or in consequence of or relating to this (sic) whether or not the obligation of either or both parties under this contract (sic) subsisting at the time of such dispute and whether or not this contract has (sic) terminated or purported to be terminated or completed shall be referred to (sic) arbitration of the Bengal Chamber of Commerce under the rules of its Tribunal (sic) Arbitration for the time being in force and according to such rules the arbitration shall be conducted.

It is difficult, if not impossible, to find a wider arbitration (sic) than the one which is now before me. It embraces "All (sic) questions, disputes, differences and/or claims" whether (sic) arise "out of and/or concerning and/or in connection with and/or in consequence of or relating to this contract" and (sic) at the time of such dispute "the obligation under the (sic) is subsisting" and "whether or not the contract has been terminated or purported to be terminated or completed". (sic) being the nature of the arbitration clause in question, the (sic) is whether the present dispute comes within the ambit of (sic) said clause. In my opinion it does. This dispute really (sic) to the amount of damages paid under the contract. It is a dispute relating to the payment of damages under the (sic) Can it then be said that it is not a dispute either relating to (sic) concerning or in connection with or in consequence of (sic) contract? The contract itself may have been terminated (sic) the obligations under the contract may not be subsisting but (sic) arbitration clause would still be operative and any (sic) relating to the said contract would come within the ambit of (sic) said clause.

In the case of Bala Bux Agarwala v. Lachminarain (sic) Manufacturing Company, Ltd. (1947) 51 C.W.N. 863, 868 S.R. Das J. had to consider (sic) effect of an arbitration clause which was in the same terms as (sic) one now before me and his Lordship observed as follows:

It embraces disputes that may arise before or after the termination of (sic) contracts and whether or not the obligations of the parties are subsisting (sic) disputes arise.

His Lordship held that the said arbitration clause was (sic) in scope and in effect than an ordinary arbitration clause (sic) is usually attached to commercial contracts and which was (sic) in the contract which was the subject-matter of Hirji (sic) case (1926) A.C. 497. His Lordship then proceeded to observe as follows:

They are so expressed that they, in my opinion, constitute an (sic) agreement which is collateral to or even independent of the substantive (sic) of the contracts themselves. The substantive contracts and the (sic) agreements are, as it were, separate contracts rolled into one and set for in one document for the sake of convenience.

Mr. Sen contended before me that there has really been (sic) agreement in law between the parties by reason of accord (sic) satisfaction of the original contract. If that is so, then (sic) to him the arbitration clause in the old contract can no long (sic) remain open and has ceased to exist. Mr. Deb, on the other (sic) contends that his client is disputing that there has been a (sic) accord and satisfaction of the old contract. The (sic) therefore, according to him, is whether there has (sic) a valid satisfaction of the old contract and it is a (sic) relating to or concerning the old contract. I agree (sic) Mr. Deb''s contention on this point. The question, (sic) there has been a valid contract in settlement or satisfaction or in fulfilment of the original contract, is question to my mind relating to the original contract and (sic) parties must be held, on the interpretation of the arbitrate clause, to have agreed to refer such dispute to the (sic) His Lordship S.R. Das J., in the case of Bala (sic) Agarwala v. Lachminarain Jute Manufacturing Company, (sic) (supra), had again to consider a similar question and his (sic) ship observed as follows (at p. 870):

The second case of the Plaintiffs in these suits is that the parties entered (sic) the agreement for extension of the settlement of contract in ignorance of (sic) respective rights arising out of the frustration of the original contracts. Here (sic) of mutual mistake of an existing fact, namely, the existing rights. The con-(sic) is that the parties entered into the agreement for extension of the (sic) contract in the belief that the original contracts were binding when (sic) truth they had, by reason of frustration, ceased to be binding and it follows (sic) the settlement contract was void ab initio and therefore, the arbitration (sic) therein never came into operation. That may be correct. But the matter (sic) not rest there. The arbitration clause in the settlement contract may be (sic). But the disputes as to whether or not there was a valid agreement (sic) extension or a valid contract in settlement of the original contracts, are disputes (sic) out of or relating to the original contracts or the fulfilment thereof and (sic) within the arbitration clauses contained in the original contracts which, I (sic) held, are subsisting.

These observations, in my opinion, apply with equal force to the (sic) case. The arbitration agreement contained in the (sic) contract is an independent agreement independent of (sic) substantive stipulations of the original contract. To use the (sic) of S.R. Das J. "the substantive contracts and the (sic) agreement are as it were separate contracts rolled (sic) one and set forth in one document for the sake of (sic)". It is the arbitration agreement which has to be (sic) into in order to decide what are the matters which are (sic) to be covered by the said agreements. It does not matter (sic) happens to the original agreement whether it subsists or (sic). The present arbitration agreement, as I have already stated, (sic) of the widest possible import. It includes any question or (sic) relating to or concerning the original contract. The (sic) whether there has been a valid contract in settlement of (sic) original contract is, in my opinion, a question relating to the (sic) contract. Mr. Sen then relied on the decision of the (sic) of Appeal in the case of Rauthmal Nahata v. Bengal Jute (sic) Company, Ld. Unreported. In that case their Lordships held that the Respondents were claiming damages not for breach of the (sic) contract but for an alleged subsequent breach and the (sic) contract having come to an end, it could not be said all (sic) once that with regard to the subsequent dealings between the (sic) there was a subsequent contract which also embodied an (sic) clause. In effect, their Lordships held that the (sic) complained of was not any breach of the original contract (sic) had come to an end but a breach in respect of the (sic) dealings between the parties and therefore, the said (sic) cannot be said to be a dispute relating to the contract. (sic) position is made more clear by Chakravartti J. while (sic) judgment in the review application. His Lordship observed as follows:

It is quite true that if the original contract carne to an end with the acceptance (sic) its breach which occurred on September 30, 1946, disputes as regards that breach (sic) be within the terms of the arbitration clause as contained in the original (sic) but not disputes as regards any subsequent dealing or subsequent breach (sic) another contract.

Thus there was in that case no such question which arises in (sic) present case, namely, whether or not there was a valid (sic) or, settlement of the original contract. Such a question, in (sic) opinion, relates to the original contract and would come with the widely worded arbitration clause. That has also been (sic) view expressed by S.R. Das J. in the Bala Bux''s case (supra) (sic) which I have referred and with which I respectfully agree. (sic) have, therefore, come to the conclusion that the present (sic) between the parties comes within the arbitration clause. (sic) result, therefore, is that there will be a declaration that there (sic) is valid arbitration agreement between the parties under (sic) the claim of the Respondents for a refund of the sum of Rs. 4,1(sic) can be referred to the arbitration of the Bengal Chamber Commerce. The Respondents costs will abide by the result the arbitration proceedings.