P.P. Commercial Company vs Cancom Grain Company Inc.

Kalyan Jyoti Sengupta, J.—This Motion has been taken out by the defendant/Respondent above-named for the following relief�s:

(a) Leave granted Clause 12 of the Letters Patent to institute C.S. No. 351 of 2000 be revoked and/or set aside ;

(b) The plaint of C.S. No. 351 of 2000 be rejected and taken off the file ;

(c) The said C.S. No. 351 of 2000 be dismissed ;

(d) Stay of all further proceedings in C.S. No. 351 of 2000,

(e) Interim order dated 31 August 2000 passed in the aforesaid suit being annexure ''A'' hereto be forthwith vacated ;

(f) The parties to the aforesaid suit be referred to arbitration clause contained in the Contract by and between the parties being Annexure ''A'' hereto;

(g) Ad-interim order in terms of prayers (a) to (f) above;

(f) Costs of and incidental to this application be paid by the Plaintiff;

(i) Such further or other order or orders be passed and/or direction and/or directions be given as to which this Hon''ble Court may seem fit and proper.

The suit was filed by the Plaintiffs above-named for the following relief�s:

(a) Declaration that all the notices dated 3rd March 2000, 18th April 2000, 23rd May 2000 and a purported application before GAFTA dated 16th May 2000 being part of annexure ''D'' are illegal, null and void ;

(b) A decree adjoin the notices mentioned in Prayer (a) above to be void and for delivery up and cancellation of the same ;

(c) Declaration that the arbitration proceedings commenced by way of notices dated 3rd March 2000, April 18, 2000 and 23rd May 2000 and pending before GAFTA between the parties are illegal, null and void ;

(d) A decree for declaration that there is/was. no arbitration agreement or .any subsisting arbitration agreement between the parties to refer to, arbitration (e) A decree for perpetual injunction restraining the Defendant and their servants and agents from proceeding with arbitration proceeding before GAFTA commenced by way of Notice dated March 3. 2000 and/or any proceeding relating thereto in any manner whatsoever;

(f) Receiver;

(g) Injunction ;

(h) Costs ;

(i) Further, or other relief�s.

The case made out in the- petition being the grounds of Notice of Motion is that the Plaintiffs above-named suppressing material relevant fact has obtained an interim order dated August 31,.2000 whereby the Defendant and/or its servants and, agents have, been restrained by an order of injunction from proceeding with the. arbitration between GAFTA commenced by notices dated March 3, 2000, April 18, 2000 and May 16, 2000 or any proceeding relating thereto.

It is the. case of the Defendant that, the Plaintiffs. suppressed .the fact that there was concluded two ''contracts, one bearing No. 99171 for sale of quantity of 537,5 Metric Ton Canadian Large Whole Yellow Peas and another being No. 99168 for sale of 1070.5 Metric Ton Canadian Large Whole Yellow Peas at an agreed rate.

In terms of these contracts the Plaintiff No. 1 was obliged to-open Letter of Credit for purchase and the Defendant- herein was obliged to sell and supply the same. The said contracts were entered into and concluded in writing and reduced in a document. There were exchange of several correspondences whereby period of furnishing of Letter of Credit for purchase of the aforesaid Peas and corresponding period of delivery of the goods were extended. However, the Plaintiff in breach of the said concluded contract did not furnish Letter of Credit nor took delivery of the aforesaid goods though the same were stored and made ready for delivery by the Defendant. As such the Defendant has substantial claim in view of breach of the aforesaid contracts. The said written contracts embody arbitration agreements whereby and where under the disputes in relation to the said contracts were referred to arbitration in London as per GAFTA Arbitration Rules. The dispute has already been referred to arbitration under GAFTA Rules since the Plaintiff in spite of request failed to nominate its own arbitrator under the GAFTA Rules an arbitrator was appointed on behalf of the Plaintiff. So the reference was pending before the joint arbitrator and this fact of reference was and is within the knowledge of the Plaintiff and in fact the Plaintiff''s Advocate-6n-Record had replied to the letter of GAFTA questioning the authority of clubbing two sets of disputes in one arbitration in relation to two contracts.

Mr. Prabir Kumar Sen, learned Senior Advocate appearing with Mr. Prabuddha Laha, learned Advocate contends that the Plaintiff is guilty of suppression of material relevant fact and in this process Plaintiff has been able to obtain interim order of injunction whereby arbitration proceedings has been stayed. He has drawn my attention to various correspondences exchanged between the parties and particularly letter of Mr. R.L. Gaggar Advocate-on-Record for the Plaintiff. Had those documents been disclosed or drawn attention to the Court the Court certainly would not have passed interim order of injunction. So the interim order of injunction which was passed by suppression of material fact is liable to be vacated. In support of his contention he has relied on decisions reported in Ratan Chandra Nayak Vs. Adhar Biswas, ; Mishri Debi Agarwal Vs. Asstt. Collector of Central Excise and Others, and Prof. A.K. Sanyal Vs. Dr. Chitta Ranjan Basistha and Others,

He further argues on merit of this application that since the arbitration agreement is valid and subsisting and such dispute has already been referred to arbitration, this Court shall not proceed with this matter rather will vacate the interim order of injunction. This arbitration agreement is embodied in the contract document itself. India and Canada are signatories to the New York Convention Awards, which has been described, in First Schedule of the Arbitration and Conciliation Act 1996. Under Article II of Clause 2 of the first Schedule which is referred to in Section 44 of the aforesaid Act recognizes that ''agreement in writing'' shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in exchange of letters or telegrams. In this case the arbitral clause is embodied in the written document. Therefore by virtue of Section 45 read with Article II, Clause 3 of the First Schedule of the aforesaid Act this Court shall refer the parties to arbitration. The language used in the aforesaid section is mandatory in nature and no discretion is left with Court once it finds that the arbitration agreement is not null and void, inoperative or incapable of being performed. In this case there is no allegation that the said contracts were null and void rather a vague attempt has been made to describe the same being inoperative. Therefore, this Court shall refer the parties to the arbitration which has already commenced.

Mr. P.K. Das, learned Senior Advocate appearing with Mr. Tilak Bose learned Advocate contends that there is no suppression of any fact or document. All documents were annexed to the plaint and petition. He has taken a preliminary objection that the person who has Verified the aforesaid petition has no authority as the Power of Attorney which was produced before this Court is not stamped properly. Therefore, the Court cannot accept a document which is improperly stamped. When an unauthorized person has verified a petition the same should not be looked into.

On merit he contends that the case of the Plaintiff is that there was no concluded or executed contract and the parties were at the negotiation stage. As such the applicability of the arbitration clause which is said to contain in the contract document is absolutely out of question. When a question has been raised before this Court by the Plaintiff as to the existence of the arbitration agreement the suit is maintainable and this can be decide only by this Court. The aforesaid New York Convention is of no application since there is no arbitration agreement. He has taken me through various documents annexed to the petition on which interim order of injunction was obtained.

Having heard the respective contentions of the learned Advocates it seems tome that there are two points involve in this matter. There are many prayers in this application. In my view, the prayers mentioned in (a), (b) and (c) cannot be entertained by this Court in'' view of the fact there is no provision under law on the ground mentioned in the petition that I should reject the point or dismiss the suit. In fact, those relief�s are contradictory and/or inconsistent with. the relief�s claimed in prayers (e) and (f). If prayer (f) is granted then suit cannot be dismissed nor the plaint can be rejected as the Court has to examine having regard to the averment and allegations made in the plaint whether the disputes involved in the plaint are required to be referred to in arbitration or not. So the aforesaid relief�s in prayers (a), (b) and (c) are refused.

Next two questions remain whether the Plaintiffs are guilty of suppression of such relevant and material fact for which the interim order granted on August 31, 2000 should be vacated or not or whether the parties to this suit should be referred to arbitration in view of the arbitration agreement.

In order to consider the relief for referring the parties to arbitration the Court is to examine whether there exists any operative arbitration agreement as Section 45 of the Arbitration and Conciliation Act provides the Court is to examine whether the agreement is null and void, inoperative or incapable of being performed or not.

In my opinion to decide any question within Section 45 of the said Act factual existence of the arbitration agreement is must. If there is dispute as to the factual existence of the arbitration agreement which is the precise question here, the Court must resolve this dispute first before decides the question of applicability of the arbitration agreement. In pursuit of this object I find there are various letters and correspondences which are produced in original before me and copies whereof also are annexed to the petition, and I have no doubt in my mind that Plaintiff entered into concluded contract with the Defendant and further this agreement contains an arbitration clause. The arbitration clause contains as follows:

When pot in conflict of above GAFTA 24/Arbitration in London as per GAFTA 125 Rules.

I am unable to accept the argument of Mr. Das that the contract was not signed and/or concluded. The original of the contract document dated April 5, 1999 being No. 99168 and of dated June 5, 1999 being No. 99171 are produced before me. I find there from that the Plaintiff''s authorized person duly signed the said document and on behalf of Defendant one M/s. A.F. International Corporation signed. The same were not only signed but, it appears, as a follow up action in taken of acceptance of the said contract Plaintiff''s as well as the defendant�s authorized agent duly exchanged correspondences. Therefore, I hold that there is factual existence of the agreement which contains arbitration agreement. The execution of the aforesaid contracts as well as the factual existence of the arbitration agreement has in fact been accepted by the Plaintiff, as Mr. R.L. Gaggar, Solicitor and Advocate acting on behalf of the Plaintiff wrote a letter to one Ms Amrapli Chowdhury, Arbitration Manager, GAFTA House in London. The said letter dated June 7, 2000 unmistakably records acceptance of existence of the arbitration agreement. The relevant text of the aforesaid letter needs to be reproduced here.

I am concerned on behalf of P.P. Commercial Company having its office at 11, Clive Row, 4th Floor, Calcutta- 700 001 and I am writing this letter to you on their behalf and under their instructions. It appears that on application from Middleton Potts on behalf of Cancom Grain Company Inc., Canada, Mr. C. Carr has been appointed Arbitrator on behalf of P.P. Commercial Company;

Presently, my clients are not going into the merits of the reference, there are two contracts, each contract being a separate and independent one. GAFTA has clubbed the two contracts and referred the disputes under one reference and appointed Mr. C. Carr as the Arbitrator on behalf of P.P. Commercial. Would you kindly let me know whether ''GAFTA'' is authorized to club two separate and independent contracts and thereafter make one reference. On hearing from you, P.P. Commercial would suitably deal with the matter.

I do not find from the advertisement of the affidavit-in-opposition or from the submission of Mr. Das that any plea having been taken of said arbitration agreement being inoperative, null and void or incapable of being performed. The letter of Mr. R.L. Gaggar rather demonstrates otherwise. Therefore, I do not find that the said arbitration agreement is null and void, inoperative or incapable of being performed. Admittedly parties to the aforesaid arbitration agreement are of Indian and Canadian and the chosen forum of arbitration is in London. So the parties are bound by the New York Convention. As such this Court being the judicial authority within the meaning of Section 45 of Arbitration and Conciliation Act 1996 under Chapter I of Part II is to examine whether, the subject matter of this suit is covered by the arbitration agreement or not.

In the plaint it has been alleged that there was no concluded contract and the Plaintiffs have ho obligation to discharge but the Defendant has wrongfully referred this matter to arbitration. The disputes raised in the plaint are capable of being decided and/or adjudicated by and under GAFTA Rules. Under Rule 125, Clause 8 of the GAFTA Rules the Arbitrators are competent to decide their own jurisdiction. The aforesaid Rule is very comprehensive. Conveniently relevant Clause being No. 8.1 of Gafta Arbitration Rules No. 125 is quoted hereunder:

8.1 Issue of a substantive jurisdiction�

(a) The tribunal may rule on its on jurisdiction, that is, as to whether there is a valid arbitration agreement, whether the tribunal is properly constituted and what matters have been submitted to arbitration in accordance with the arbitration agreement; .

(b) In the event that the tribunal determines it has no jurisdiction, the Association will notify the parties of the tribunal''s decision. Such decision shall be final and binding upon the parties subject to any right of appeal to a board of appeal pursuant to Rule to. The Association will invoice the claimant for any costs, fees and expenses incurred. In the event that the tribunal determines that it has jurisdiction, no appeal shall lie to a board of appeal;

(c) if the board of appeal upholds the tribunal''s determination that it has. no jurisdiction, the board of appeal shall order accordingly and the Association shall notify the parties and the tribunal and will invoice the Appellants for any costs, fees and expenses incurred;

(d) if the board of appeal reserves the tribunal''s determination that it has no jurisdiction, the board of appeal shall order accordingly and shall notify the parties, the tribunal and the association, and shall order that the dispute be referred to arbitration afresh, whereupon� (i) The dispute shall be deemed to be one arising out of a contract embodying these Rules ;

(U) The tribunal formerly appointed shall thereupon case to act and shall not be reappointed when the dispute is referred as aforesaid.

... (iii) The provisions of Rule 3 shall apply, the time limits for appointment running from the date of the board of appeal''s order..

(iv) The board of appeal may in. its absolute discretion extend the time limits in these Rules, and not objection that time has expired shall, be taken if the requirements of Rules were previously complied with.

Therefore, I find that the disputes raised in the plaint as well as the disputes raised by the Defendant herein are capable of being decided by arbitration. The language of Section 45 of the aforesaid Act is very specific as I have observed that the same is mandatory and no discretion is left. Section 45 of the said Act is quoted hereunder:

Power of judicial authority to refer parties to arbitration:

Notwithstanding anything contained in Part I or in. the Code of Civil Procedure, 1908, (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement, referred to in Section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

Under such circumstances I hold that since one of the parties has already referred this matter to arbitration I therefore, refer the Plaintiff No. 1 to arbitration. I also hold that the Plaintiff is guilty of suppression of aforesaid material fact. The consistent view of the judicial pronouncement of this country as well as of this Court that a party guilty of suppression of material and relevant fact does not deserve any equitable relief. The advantage which was gained because of suppression must be diluted, therefore, on this score the interim order is also liable to be vacated. In support of this proposition the decision cited by Mr. Sen, viz., Mishri Debi Agarwal v. Asstt. Collector of Central Excise (Supra), Hindusthan Motors Ltd. v. Union of India 58 C.W.N. 209 and Sanyal (Prof.) v. Chittaranjan Baisistha (Supra) are applicable.

The other question as to the verification of the petition by incompetent person is not accepted by me as the Power of Attorney is produced before me though the same is not sufficiently stamped but for this reason I cannot dismiss this application. I direct the Defendant to produce the original Power of Attorney before the Collector for passing appropriate order and for making payment of necessary stamp duty inclusive of penalty if any. The aforesaid document shall be produced before the Collector within a period of fortnight from date. Accordingly subject to the aforesaid order this application is allowed.

There will be no order as to costs.

Stay of operation of this judgment and order is asked for, stay is granted for a period of ten days from date.

All parties are to act on a Xerox signed copy of the operative portion of the judgment and order on the usual undertaking.

Let a Xerox certified copy of the judgment and order would be made available to the parties, on urgent basis, if applied for.

Application allowed.