M.A.A. Kashani vs K. Satyanarain and Co.

Chakravartti, C.J.—The Appellants against whom the Arbitration Tribunal of the Bengal Chamber of Commerce and Industry made an award for Rs. 5,423 together with interest at the instance of the Respondents applied before Bachawat, J., for an order setting aside the award and having failed to obtain the order they have preferred the present appeal.

The facts are as follows: The Appellants were the buyers under a contract, dated September 29, 1952, of 150 bales of B. Twills from the Respondents, the transaction having been negotiated by a broker, named B.B. Agarwalla. Delivery of the goods was to be given in three months'' instalments of equal quantities in the months of October, November and December 1952. The instalments for October and November were duly delivered and accepted and no question arises in this appeal regarding those instalments. As regards the December instalment, the due date was December 31, 1952, but it is the common case of the parties that the date was extended up to January 4, 1953. The dispute is as to whether the goods were delivered or offered for delivery on that date. The contract said in the usual language that the delivery was to be alongside an Export Vessel in the Port of Calcutta, but subsequently the vessel was specified and the Appellants issued shipping instructions to the Respondents to take the goods alongside a vessel called the "Gambhira". The Appellants'' case is that an employee of theirs went to the Port on January 5, 1953, at about 3 p.m. and ascertained from a clerk of Messrs. Mackinnon Mackenzie and Co., Ltd., the Managing Agents of the Shipping Company, that up to that time there was no entry for the cargo on the register. Not unnaturally, the Appellants presumed that the Respondents had failed to carry out the terms of the contract and to deliver the goods in due time and acting on that presumption, they cancelled the contract. The Respondents'' case is that the goods were in fact taken and placed alongside the "Gambhira" on January 4, 1953, as stipulated, and that if any failure had occurred on the part of any of the contracting parties, it was not a failure on the Respondents'' part to deliver the goods, but a failure on the part of the Appellants to take and accept delivery. In accordance with their own case the Respondents submitted bills to the Appellants which the latter declined to pay. The dispute was thereupon referred to the arbitration of the Bengal Chamber of Commerce and Industry and ended in an award in favour of the Respondents as I have already stated.

The Appellants'' application for an order setting aside the award was based on the general ground that there had been no proper hearing of the case by the arbitrators. Mr. Sen, who appeared on behalf of the Appellants, conveniently subdivided the general ground into four specific ones. I shall follow his subdivision and deal with the contentions advanced in respect of each.

It was contended, in the first place, that there had been no proper hearing of the case, inasmuch as the arbitrators had failed to examine a material witness. The material witness, it was explained, was some representative of the Shipping Company, who would possess the necessary knowledge and would be able to answer all questions as to whether the goods had in fact been placed alongside the "Gamhira" on January 4, 1953, and as to the circumstances in which no entry in regard to the cargo had been made on the register. It was contended, in the second place that the hearing before the arbitrators was not a proper hearing because it was vitiated by the reception of and reliance on a piece of inadmissible evidence. The inpugned evidence was a letter, dated January 10, 1953, addressed by Messrs. Mackinnon Mackenzie and Co., Ltd., to the Respondents about which I shall have to say a great many things later. The contention was that since that letter was the only evidence outside the statements of the Respondents as to the goods having been placed alongside the vessel on January 4, 1953, since its contents were hearsay of the worst type and since the arbitrators had obviously based their decision on that letter, the award was liable to be set aside. The third ground of attack was that a proper opportunity to cross-examine one Nathuram, a witness examined on behalf of the Respondents, had been denied to the Appellants, although leave to cross-examine the witness had been asked for. It was said that if the Appellants had been permitted to cross-examine that witness, they would be able to demonstrate to the arbitrators that the case set up by the Respondents could not possibly be true. It was lastly contended that the hearing before the arbitrators was also vitiated by reason of their refusal to examine a witness whom the Appellants had tendered. The witness concerned was the broker through whom the transaction had been negotiated, but the actual person whom the Appellants had in mind seems to be of doubtful identity for reasons which I shall explain later. It was contended that the broker who had negotiated the transaction knew everything about the resources of the Respondents and the Appellants would be able to prove through him that the reason why an extension of the due date had been asked for and obtained, was that the Respondents had no stock of B. Twills at all at the relevant date which they could deliver against their December obligations under the contract.

Bachawat, J., overruled all the contentions of the Appellants. He was not prepared to hold that the Appellants had in fact asked for an opportunity to cross-examine Nathuram, nor that the broker had been present as the hearing and tendered as a witness. As regards the reception of and reliance on inadmissible evidence, the learned Judge pointed out that both sides had referred to the correspondence without any objection or protest and since the Evidence Act did not apply to arbitration proceedings, he did not find it possible to hold that any of the letters and in particular the letter of January 10, 1953, was inadmissible in evidence so as to have vitiated arbitration proceedings. The learned Judge held further that he could not find the arbitrators guilty of having misconducted the proceedings by omitting or refusing to examine a material witness, because they were the best judges of the quantum and safficiency of evidence. The learned Judge also pointed out that both parties appeared to him to have left it to the arbitrators to decide all the points in dispute on the materials placed before them and that it was not correct to suggest that either of the parties wanted to call any further evidence.

Before us, Mr. Sen has repeated the same four points and advanced an elaborate argument. Since the most important of the contentions is that relating to the letter of January 10, 1953, I would deal with that contention first.

Before I deal with the contention, it is necessary to state a few more facts. It appears that, after the Appellants had cancelled the contract on the ground that the Respondents had failed to bring the goods alongside the "Gambhira" on January 4, 1953, they were informed by the Respondents that the goods had in fact been taken alongside the vessel on the due date. On receipt of that information, the Appellants inspected the register kept by the Shipping Company and found that certain entries had been subsequently made, under a back date at the bottom of two of the pages of the register, from which it would appear that the goods had in fact been placed alongside the vessel on January 4, 1953, as alleged by the Respondents. As the relevant entries appeared to the Appellants to be obvious interpolations, they addressed a letter to the Shipping Company on January 6, 1953, in which they alleged that "some irregular practice has been "exercised on the shipping clerk concerned" and asked the Shipping Company to look into the matter immediately and also to let the Appellants have their "certificate of the correct alongside "date" of the goods. That letter of the Appellants was replied to by Messrs. Mackinnon Mackenzie and Co. on January 8, 1953. By the reply, the Appellants were informed that the matter was being investigated but at the same time the following statement was included in the letter: "We would, however, confirm that when "our shipping clerk on S.S. ''Gambhira'' was requested by your "representative at 3 p.m. on the 5th January to ascertain whether "the above goods were alongside the ''Gambhira'' the entry for the "cargo was not on the register." This letter was followed up by a second letter from the Shipping Company, dated January 10, 1953, by which the results of the investigation were communicated to the Appellants. It was stated that Boat No. 158, which was the boat by which the Standard Jute Company had sent the goods, had been "registered as alongside No. 3, Garden Reach Jetty on "the 31st December, 1952". The letter went on to say as follows:

In view of the vessel not ariving until the 3rd January, it was taken to a Howrah Mill to lift more bales and reported back on the 4th January, 1953, when it was to wed alongside S.S. "Gambhira" on the 4th January evening.

These facts are established from the port Register Office in King George Dock which covers the Garden Reach Jetty area.

Proceeding to explain why the relevant entries had not been made contemporaneously put on the subsequent date, the letter stated that the Exports Clerk had received the boat note on the 4th evening but due to pressure of work he had put the boat notes in the pocket of his coat and did not register the boat in his book on January 4, "He did not find the boat notes until he "searched the pockets of his coat on the morning of the 6th, when "in view of the fact that the boat had been alongside the 4th he "entered the registrations at the bottom of the page for the 4th." The letter stated further that when the Appellants'' representative saw the Exports Clerk in the afternoon of the 5th, he was preoccupied with organising the work for the night and being unable to remember off hand whether the particular boat had been alongside on January 4, he suggested to the representative that he should examine the register for himself.

Mr. Sen''s contention was that the crucial question in the case was whether or not the goods had been placed alongside the "Gambhira" on January 4, 1953. The letter of January 10, addressed by the Shipping Company to the Appellants, was the only piece of independent evidence in the case and it went, if 1 may use the expression of Mr. Sen himself, "to the root of the "matter", but the contents of the letter were hearsay of the worst type. According to Mr. Sen, if a body of arbitrators having to decide an issue of fact relied upon a piece of wholly or obviously inadmissible evidence relating to a point which went to the root of the dispute between the parties, they misconducted the proceedings and any award made by them was liable to be set aside. In aid of that contention, Mr. Sen referred to the case of Walford Baker and Co. v. Macfie and Sons (1915) 84 L.J. (K.B.) 2221, or rather the observation on that case appearing in Russell on Arbitration, 15th Ed., p. 154. Reference was also made to the observations on the same case in Halsbury''s Laws of England, 3rd Ed., Vol. 2, p. 35.

Since the sheet-anchor of Mr. Sen''s argument on this part of the case was the decision in Walford, Baker and Co. v. Macfie and Sons (1915) 84 L.J. (K.B.) 2221, it will be convenient if I set out the whole observation that that case contained in Russell on Arbitration. It reads thus:

A contract for the sale of sugar contained no provision for the suspension of deliveries "if the production by the sellers was prevented or lessened by causes "beyond their control", nor any similar clause. Owing to a cause beyond their control, the production by the sellers was lessened. Disputes having arisen, recourse was had to arbitration. A former contract between the parties containing such a suspension clause as the above was produced to the arbitrator by the sellers. The arbitrator awarded simply that "the sellers are entitled to suspend delivery "under this contract". The court were satisfied that, in making this award, the arbitrator was influenced by the terms of the earlier contract. Held that the award must be set aside on the ground that the arbitrator had been guilty of legal misconduct, inasmuch as he had in making his award looked to a document other than the contract, which was the only matter before him, or, in otherwords, had allowed to be given, and had acted upon evidence which was wholly inadmissible and which went to the root of the question submitted to him for decision.

The learned author after giving the above summary of the case proceeds to quote an observation of Lush, J., where the evidence was described as "absolutely inadmissible". The proposition for which the decision is an authority has been stated in Halsbury with greater bravety and in the following words:

He (that is to say the arbitrator) must not admit and act upon evidence which is obviously inadmissible and which goes to the root of the question which he has to decide.

Mr. Sen modelled his argument on the above observations on Walword, Baker and Co. v. Macfie and Sons (Supra), and contended that the letter of January 10, 1953, was "absolutely" or "obviously" inadmissible and since it also went to the root of the question which the arbitrators had to decide, the award based upon it was a bad award and accordingly liable to be set aside. The argument was reinforced by saying that the case was not one of mere reception of a piece of inadmissible evidence but it was case of reliance, wholly and solely upon a piece of inadmissible evidence for the pruposes of the relevant finding.

In my view, the letter of January 10, 1953, cannot possibly be said to be absolutely or obviously inadmissible in the sense in which those expressions were used in the case cited. What was held in substance in the case cited was that since the arbitrator, having to decide the rights and liabilities of the parties before him under contract A, put that contract on one side and purported to pronounce on those rights and liabilities by reference to another contract altogether, say contract B, he relied on evidence which was absolutely or obviously inadmissible and the award made by him by reliance on such evidence could not be sustained. The evidence which was condemned as absolutely or obviously inadmissible in that case was evidence which had no relationship whatsoever with the issue that was before the arbitrator for decision. It was inadmissible not by reason of any technical rule of evidence, but for the reason that its subject-matter was wholly foreign to the issue of fact which the arbitrator had to decide. The letter of January 10, 1953, is evidence of quite a different character. No one can say that its contents are not relevant to the issue which the arbitrators had to judge. The only ground on which Mr. Sen would exclude it from evidence was not that its contents were not relevant to the issue of fact before the arbitrators but that they constituted mere hearsay and, therefore, could not be received or used as legal evidence. In my view, the contention of Mr. Sen can be shortly answered by the consideration pointed out by the learned trial Judge that the rules of the Evidence Act do not apply to arbitration proceedings. The letter of January 10, being pertinent in everyone of its lines to the subject-matter of dispute and not being foreign to the subject-matter in the sence in which the second contract was regarded as foreign in the casea cited and the technical rules of the Evidence Act not being applicable, it is impossible to say that, by receiving or relying upon the letters, the arbitrators misconducted the proceedings.

Indeed, if the letter of January 10, 1953, is to be excluded on the ground that it is absolutely or obviously inadmissible, the Appellants are bound to find themeslves in a position in no way favourable to them. If the Respondents relied upon the letter of January 10, 1953, the Appellants relied upon the letter of January 8, preceding. Apart from the letter of January 8, there was no independent evidence led before the arbitrators to show that the goods had not in fact been placed alongside the "Gambhira" on January 4, 1953. The Appellants did not examine their clerk who had gone to the dock and consulted the Exports Clerk of the Shipping Company or inspected the register. The Shipping Company sent some information to the Appellant collected by them. The information contained in the letter of January 8, is thus no less hearsay than the information contained in the letter of January 10, and if the latter letter is to be excluded on the ground that it is inadmissible being hearsay, the former letter must equally be excluded and the result would be that the Appellants would have no independent evidence to rely on to show that the Respondents had failed to place the goods alongside the vessel on January 4, 1953, according to the terms of the contract as modified. The arbitrators do not seem to have ignored the fact that the relevant entries in the register of the Shipping Company are subsequent additions and indeed that they are so, was not disputed. They appear to have taken into consideration both the letters and taken the view of the facts which those letters suggested to them. I am entirely unable to see how it can be said that by relying on the letter of January 10, 1953, they misconducted the proceedings.

Turning now to the point of non-examination of a material witness, I have already stated that the material witness according to the Appellants would be some representative of the Shipping Company who would be competent to answer all relevant questions regarding the goods having been placed alongside the vessel on January 4, 1953, and the reasons for no contemporaneous entries having been made. Mr. Sen argued that, at one stage of the proceedings, the arbitrators themselves considered the evidence of such a representative essential and in a notice issued by them to the Appellants they asked them to call such a representative. I have looked into the notice and I do not read it in the sense in which Mr. Sen would read it. The notice is one of the ordinary type issued when the production of certain documents is required. It is customary to say in such a case that the party addressed or some representatives of his should attend with the documents concerned. The notice in the present case was of the same type, merely calling for the production of the register of the Shipping Company and there is nothing in it to suggest that the arbitrators desired some representative of the Shipping Company to be produced for the purpose of an independent oral examination. Mr. Sen next contended that, in the absence of some competent representative of the Shipping Company, his clients had been unable to test the truth of the statements contained in the letter of January 10, 1953. Assuming that the position was as stated by Mr. Sen, I find it still impossible to hold that the arbitrators misconducted themselves in not requiring the production of some representative of the Shipping Company in the absence of any prayer made to them on behalf of the Appellants. The learned trial Judge has read the minutes as indicating that neither party wanted any further evidence to be called. Leaving the minutes aside for the time being, I would point out that arbitrators cannot possibly be held to have been guilty of misconduct, because they did not take any steps for the production of certain witnesses, if the party complaining of the omission never asked for those witnesses to be called and did not insist on appropriate steps being taken. Mr. Sen conceded that he was unable to say that his client had made any prayer on their own account for calling some representative of the Shipping Company. According to him, they had relied, as they were intended to rely, on the presumption that the onus lay upon the Respondents to prove that they had in fact placed the goods alongside the vessel and that they would call a representative of the Shipping Company in due course. As I have pointed out before, it was not the Respondents alone who required some representative of the Shipping Company to prove the truth of the statements contained in the Company''s letters, the Appellants required him equally to prove the truth of the contents of the letter of January 8, 1953. I find myself entirely unable to hold that a certain body of arbitrators may be held guilty of having misconducted the proceedings on the ground that they themselves did not play the part of Plaintiffs and Defendants and did not call witnesses on their own account, although neither party before them asked any witnesses to be called.

The third ground urged by Mr. Sen was that his clients should have been given an opportunity to cross-examine the witness Nathuram who had deposed on behalf of the Respondents. The learned trial Judge has not believed that any such opportunity had been asked for and he referred to the omission of any statement in the minutes regarding any such request. Mr. Sen complained that the learned Judge should have relied solely on the minutes in the face of the conflicting affidavits and should not have directed the matter to be set down for trial on evidence as he was asked to do by the Appellants. Asked what his clients expected to elicit by the cross-examination of Nathuram, Mr. Sen referred us to the statements contained in para. 16(b) of the petition to this Court and submitted that his clients would elicit the relevant facts relative to the points mentioned in that paragraph. One of the points mentioned in the paragraph is the reason for the Respondents asking for and obtaining an extension of time till January 4, 1953, if they were in a position to give delivery on December 31, 1952, as alleged by them. It appears to me that this point is answered by the contemporaneous correspondence which has been exhibited in extenso by both parties. It is clear from that correspondence that when the due date under the original contract was approaching, an exchange of letters took place between the parties, the Appellants insisting that the goods must be placed alongside the vessel "Gambhira" and the Respondents pointing out the impossibility of doing so, inasmuch as the vessel was not expected to be berthed till January 4, 1953. It was to make it possible for the Respondents to place the goods alongside the "Gambhira". as insisted on by the Appellants, that the due date was extended to January 4, 1953, and it was for that reason that the extension was asked for. That appears clearly from the correspondence and in particular from the letter addressed by the Respondents to the Appellants on December 30, 1952, whereby they conveyed their thanks to the Appellants for granting an extension of time. They thanked the Appellants "for kindly "extending the due date of the above contract to the 4th January, "1953, and your kindly, not insisting on goods being alongside by ''December 31, 1952, as the stamer is not in the port". As has so often been said, witnesses may lie but documents do not. 1 am unable to see how it could be said that if. in the face of the correspondence to which I have just referred, the arbitrators considered it unnecessary to allow cross-examination on the first of the points mentioned in para. 16(b) of the petition, they can be said to have misconducted the proceedings.

The second point mentioned in the same paragraph is the time when and the agency by which the goods had been brought alongside the vessel on January 4, 1953. It will be recalled that there is documentary evidence referred to in the Shipping Company''s letter of January 10, 1953, that the goods were in fact placed alongside the "Gambhira" on January 4, 1953, but that evidence is not the only evidence. Any evidence coming from the Ship ping Company might be regarded as suspect but there is a piece of what I may call independent evidence, which seems to place the matter beyond doubt or dispute. It is a letter, dated January 13, 1953, addressed by Messrs. Mackinnon Mackenzie to the Standard Jute Company, Limited, who had sent the goods on behalf of the Respondents. I am free to confess that while the letter is to a certain extent in favour of the Respondents, it is also in favour of the Appellants, because the Shipping Company are making a statement in it which is not easily intelligible and which is plainly inconsistent with what they stated in their letter of January 10, 1953. But the fact remains that the Standard Jute Company had asked the Shipping Company whether the boat sent by them and carrying the goods had been placed alongside the "Gambhira" and the reply is that it had been placed alongside the vessel on December 31, 1952. It is quite true that, if the statements contained in the letter of January 10, 1953, be correct, the "Gambhira" was not in the port at all till January 4, 1953, and accordingly the goods could not have been placed alongside the vessel on December 31, 1952, as stated in the Shipping Company''s letter of January 13, 1953. As I have stated already, the fact, in any event, remains that an independent third party, a Jute Company against which nothing has been said in these proceedings had sent the goods and made an enquiry of the Shipping Company as to whether the goods had been placed alongside the vessel on tie due date. As regards where the goods had been placed on December 31, 1952, more light is thrown by the second paragraph in the letter of January 10, 1953. I have already quoted the relevant terms of that letter. It would be recalled that the Boat No. 158 was, according to that letter, registered as alongside No. 3, Garden Reach Jetty on December 31, 1952, and that it was stored alongside the "Gambhira" on January 4, 1953, after that vessel had entered the port. The statement in the letter of January 13, 1953, that the goods had been placed alongside the "Gambhira" on December 31, 1952, appears to have been an incorrect and a confused statement and the real position is probably indicated in the second paragraph of the letter of January 10. Why I say that the statement in the letter of January 10, 1953, is reliable is that the facts are stated to have been established from the Port Register Office in King George''s Dock. There appears to be a distinction between placing the goods alongside a vessel and placing them alongside the jetty and the position disclosed by the letters of the Shipping Company appears to be that the goods, in the present case, were first placed alongside the jetty, because the vessel had not yet arrived and then placed alongside the vessel. If so there would be an entry in the relevant books of the dock when the goods were placed alongside the jetty and that possible was the reason why the arbitrators had asked the Appellants if they wanted to examine the Dock Clerk as it appears from the minutes of the hearing. The Appellants are recorded as having said that they were not particular about the Dock Clerk''s evidence. It appears to me that the entries in the Port Office Register in King George''s Dock must have been independent entries and if in view of the existence of those entries which the Appellants apparently did not want to test by cross-examining the Dock Clerk and the documentary evidence contained in the Shipping Company''s letter of January 10, 1953, the arbitrators thought that no cross-examination of Nathuram was necessary, I am unable to hold that they can be said to have misconducted the proceedings.

The last point urged by Mr. Sen was that, in any event, the award was bad, inasmuch as the arbitrators had refused to examine the broker who had been tendered as a witness. The arbitrators have recorded that when asked what the Appellants intended to prove through the broker, one of their representatives said that they wanted to prove the extension of the due date, whereupon the arbitrators pointed out that the extension was admitted by both the parties. Mr. Sen contended that the minutes should not be taken as containing a full and accurate account of all that happened before the arbitrators and his clients should have been given an opportunity of adducing evidence on the point before the learned Judge. The position with regard to the broker is a most curious one. According to the minutes, "the broker in "the transaction" present at the hearing was one Mr. N.L. Gupta. According to para. 16(c) of the petition to this Court, the Appellants'' agents "pointed out to the broker in the transaction "the said B.B. Agarwalla who was all along sitting by the side" of the agents, "stating that B.B. Agarwalla was the broker who "had acted in the transaction between the parties throughout and "at all material times and requested the arbitrators to hear them "and to take their evidence". It would, therefore, seem that, although the person present at the hearing was one N.L. Gupta, the Appellants claimed that they had tendered as witness person named B.B. Agarwalla, who was the broker in the transaction. Asked how he could reconcile the two statements, Mr. Sen stated that B.B. Agarwalla was the firm name and the individual broker who had acted in the transaction was N.L. Gupta. That statement would not bear examination, because the statement contained in para. 16(c) is as clear as any statement can be that particular person bearing the name of B.B. Agarwalla and being the person who had acted as the broker in the transaction was tendered as a witness. How the broker could be B.B. Agarwalla and at the same time N.L. Gupta must pass anybody''s comprehension. As regards the contention that B.B. Agarwalla was merely a firm name and that the real individual broker acting in the matter was N.L. Gupta, I have already pointed out that it is belied by the statement contained in para. 16(c) of the petition. In my judgment, it is also belied by the statements made in the contract where the brokers signed the bought note as follows:

Tours faithfully,

B.B. Agarwalla,

Bindaban Agarwalla,

Brokers.

Even assuming against the clear words of para. 16(c) of the petition that B.B. Agarwalla was only a firm name, the individual broker was, according to the contract, not any N.L. Gupta at all, but a certain Bindaban Agarwalla. If in those circumstances the learned trial Judge did not attach any importance to the Appellant''s contention that the broker had been tendered as a witness and the refusal of the arbitrators to examine him had vitiated the proceedings, I cannot hold that he took an unreasonable view. Mr. Sen contended that if the broker had been examined, his client would be able to extract from him that the real reason why the extension of the due date had been asked for and obtained by the Respondent was that they had no goods to deliver and not that there would be no "Gambhira" on December 31, 1952, to receive the goods. As I have already pointed out that contention stands completely refuted by the contemporary correspondence and even assuming that the representatives of the Appellants did not state to the arbitrators that they wanted to prove only the extension of date through the broker, I am unable to hold that in refusing to allow the broker to be examined and extraneous matters to be brought in which would be in conflict with the contemporary correspondence, the arbitrators misconducted themselves.

In my view none of the four points urged by Mr. Sen has any substance. The appeal is accordingly dismissed with costs.

Lahiri, J.

I agree.