Ramji Dayawahla and Sons Private Ltd. vs Messrs. Invest Import

Bijayesh Mukherji, J.—This judgment governs two appeals numbered 110 and 111 of 1964. Each is by the plaintiff, Ramji Dayawahla & Sons Private Ltd., a company incorporated under the Indian Companies Act, hereinafter referred mostly as "the appellant". Appeal No. 110 is from an order dated January 10, 1964, of A.N. Ray, J., staying the appellant''s suit, being suit No. 1359 of 1963, and all proceedings thereunder. Appeal No. 111 is from an order dated February 6, 1964, of the same learned judge dismissing the appellant''s application in that suit for injunction and vacating too the interim one granted on August 2, 1963--the very day the said application was filed and moved.

Suit No. 1359 of 1963 is a suit raised by the appellant on August 1, 1963, seeking to recover Rs. 4,25,343.00 from the sole defendant, (now the respondent before us and hereinafter referred to as "the respondent"), Invest Import, a company incorporated in Yugoslavia, with its registered office at Belgrade and a local office at 36 Ganesh Chandra Avenue within the jurisdiction of this Court. The origin of this suit lies in an agreement dated July 10, 1961, (hereinafter referred to as "the contract"), by which the respondent had appointed the appellant as the subcontractor for the erection of two (2) complete radiation type steam-boilers for a thermal power station at Barauni in the State of Bihar, for the erection of which, again, the respondent was under a contract dated February 27, 1960, or thereabouts, with the Bihar State Electricity Board. Apparently, the parties fell out at and during the time the work was on in terms of the contract. And the result has been this suit--No. 1359 of 1963--the plaint of which can broadly be divided into the following parts, whereover possible in chronological order, (which the drafter of the plaint does not heed to), and also according as the averments purport themselves to be in terms of the contract or not, in order to see how the claim laid comes to Rs. 4,25,343.00.

I. In terms of the contract.

A. Construction of 3,500 tons of iron and steel structures--400 tons thereof having been in excess of the quantity stipulated upon. Price thereof at the contract rate of Rs. 155 a ton comes to Rs. 62,000.00 (Rs. 155 multiplied by 400) which the respondent had agreed to pay, but which remains unpaid, in spite of a bill dated February 8, 1963, having been lodged to that end. [Paragraph 5 of the plaint.] Rs. 62,000.00.

B. The respondent failed to supply tools, equipments, machinery and cranes in time, in spite of having agreed to do so. Cranes were supplied, but only in February, 1962. In terms of the contract, however, the appellant was asked to start work in September 1961. Rseult: the appellant had to keep its labour idle from September 1961 to February, 1962, sustaining thereby a loss of Rs. 30,000 for which a bill was submitted on February 8, 1963, but in vain. [Paragraph 7 ibid.] Rs. 30,000.00

Total Rs. 92,000.00.

C. Damages again for the respondent''s failure to supply gas and electrodes, in terms of the contract, resulting in the appellant''s labour having remained idle for a number of days, and thus causing loss which is assessed at Rs. 23,500. A bill dated April 4, 1963, to that end submitted for payment evoked no response. [Paragraph 8 ibid.] Rs. 23,500.00.

Total Rs. 1,15,500.00.

It appears to be worthy of note that of the plaint''s three paragraphs just analysed, the first one (paragraph 5) begins: "Pursuant to the aforesaid contract......", and the last two (paragraphs 7 and 8) begin each: "According to the aforesaid agreement......"

II. Purporting to be independent agreements, not in terms of the contract.

A. In or about September 1961.

Paragraph 13 of the plaint where no firm date is mentioned

For periodic damage of the materials, which were insured with the Oriental Insurance Co., in or about September 1961 the respondent directed the appellant to do the repair and agreed to pay the appellant the amount realized from the said insurance company minus the respondent''s supervision charge at 20 per cent. The respondent did realize from the insurance company Rs. 1,00,000.00, but failed to pay the appellant 75 per cent, thereof: Rs. 75,000, agreed upon though, and demand notwithstanding. [Quaere: why 75 per cent. ? 20 per cent, taken away, what remains is 80 per cent., which would lift the claim to Rs. 80,000.] Rs. 75,000.00.

Total Rs. 1,90,500.00.

B. January 6, 1962 [3 new agreements as set out in paragraphs 10, 11 and 14 of the plaint], (i) Paragraph 10. The contract provides for transport of materials within a radius of 100 metres. But the appellant did carry materials for more than 5 times the distance. It was therefore agreed on January 6, 1962, that the respondent would pay the appellant Rs. 42,595.00. For non-payment thereof. Rs. 42,595.00.

(ii) Paragraph 11. For erection of the unit concerning "the refractory job", under the contract the respondent was to supply the appellant suitable firebricks of proper size. This the respondent did not do. The appellant had therefore to cut the firebricks supplied, in order to conform them to proper size and specification. It was accordingly agreed between the parties on or about January 6, 1962, that would be "treated as extra" for which the respondent would pay the appellant Rs. 3,625. For failure to pay so, Rs. 3,625.00.

Total Rs. 2,36,720.00.

(iii) Paragraph 14. The contract provides for supply by the respondent of materials from Yugoslavia "duly fabricated and ready for erection on unit basis". During the continuance of the work, however, "materials came in divided portion", and from "several other countries" too. That led to extra drilling, welding, cutting etc. with a view to making the materials suitable for erection of the unit. It was therefore agreed between the parties on January 6, 1962, that that "would be treated as extra" for which Rs. 40,000 has become due to the appellant and payable by the respondent. Rs. 40,000.00.

C. October 4, 1962. [2 New agreements as set out in paragraphs 6 and 9 of the plaint.] (i) Paragraph 6. In view of the urgency of the work and with a view to ensuring a speedy construction, it was agreed between the parties on or about October 4, 1962, that the respondent would pay the appellant Rs. 20 a ton more than what Was stipulated in the contract for construction of iron and steel structures. Therefore, for 3,500 tons of such structures at Rs. 20 a ton. Rs. 70,000.00.

Total Rs. 3,46.720.00.

(ii) Paragraph 9. For a special type of insulation work, not provided for in the contract, it was agreed between the parties on or about October 4, 1962, that that would "be treated as extra" for which the respondent would pay the appellant Rs. 40,000. For failure and neglect to pay so. Rs. 40,000.00. Total Rs. 3,85,720.00.

D. A certain day earlier than February 12, 1963. [Paragraph 15 of the plaint: Twice has it been averred here-- "It was agreed between the plaintiff (appellant) and the defendant (respondent)"--but without any date. The bill for the amount as the result of the agreements as pleaded is however dated February 12, 1963. So the date of the agreements is placed as a certain day earlier than February 12, 1963.]

For the materials mentioned in paragraph 14 of the plaint the respondent directed the appellant to do the requisite sheeting work, having at the same time agreed to pay the appellant "for the said work as extra @ 50/- per 100 sq. feet". Rs. 7,000 became thereby due to the appellant and payable by the respondent. More, for the painting of the boiler drums, steel structure sheets and other work, the appellant had to employ labour 100 strong. It was therefore agreed between the parties that the respondent would pay the appellant an additional cost of Rs. 37,000 (probably inclusive of the preceding sum of Rs. 7,000, because no separate claim has been laid for that). For nonpayment thereof: the agreed amount of Rs. 37,000. Rs. 37,000.00.

Total Rs. 4,23,720.00.

E. A certain day earlier than February 16, 1963. [Paragraph 12 of the plaint where no date of any agreement is pleaded; what is more, no agreement even with the respondent is pleaded. Be that as it may, going by the date of the bill: February 16, 1963, submitted by the appellant, the date is placed as that: certain day earlier than February 16, 1963.]

For a strike staged by the appellant''s labour on or about May 8, 1962, Government had agreed to reimburse the appellant of the loss suffered, but only through the respondent, who realized Rs. 1,623 on that account from the authorities and yet made no payment to the appellant. Rs. 1,623.00.

Grand Total Rs. 4,25,343.00.

This, then is the conspectus of the plaint the appellant came to Court with on August 1, 1963. The very next day, to wit, on August 2, 1963, the appellant took out a notice of motion for an "injunction restraining" the respondent, "its servants and agents, from in anyway withdrawing from the Bihar State Electricity Board any money without keeping a sum of Rs. 4,40,000"--a sum presumably considered as a sufficient cover for the decretal dues plus costs, should the litigation culminate in the appellant''s favour--"until the disposal of the suit." In the application for injunction, affirmed on August 1, 1963, and filed in Court on the day following, the facts set out in the plaint are reiterated. And presumably in order to make the application viable, a little more is stated too, such as the respondent being a foreign company with no assets in this country other than the "contract with the Bihar State Electricity Board", and worse still, having commenced winding up its affairs in India etc. etc. On the foot of such averments, the appellant did get an ex parte, interim injunction, as prayed for, on August 2, 1963.

Now, it was for the respondent to make a move. On August 9, 1963, it took out a notice of motion for stay of the appellant''s suit (no. 1359 of 1963) and all proceedings thereunder. The application for stay, affirmed on August 8, 1963, and filed in Court on the day following, is captioned, inter alia, as one u/s 34 of the Arbitration Act 10 of 1940 and section 151 of the Procedure Code 5 of 1908. By this application, the respondent.

(i) admits the contract (paragraph 3),

(ii) reproduces the contract''s arbitration clause, upon which hang the fortunes of this litigation, and which bears: "Any mutual dispute should be settled in mutual agreement, however, should they fail to reach an agreement in the way, both the contracting parties accept the jurisdiction of the Arbitration by the International Chamber of Commerce in Paris with application of Yugoslav materials and economical law,--(paragraph 4),

(iii) traces the origin of the disputes and differences between the parties to the demand by the appellant on May 28 and 29, 1963, of certain extra claims which the respondent "denied and disputed" by its letter of June 20, 1963, (paragraph 6),

(iv) refers to the appellant''s solicitor''s letter of June 10, 1963, laying a claim of Rs. 2,73,342 for the work done (till then) under the contract and certain extra work as well--a letter which was replied to with the intimation that the claim so lodged was "under dispute" and that, should the solicitor''s client desire to pursue the matter the claim was to be submitted to the principal (the respondent Invest Import) at Belgrade where the contract was signed (paragraph 7),

(v) makes a grievance of the fact that, "various false and incorrect allegations" apart, its letter dated June 20, 1963 (just referred to) and the arbitration clause (just reproduced) were "wrongfully suppressed"--and with an "ulterior motive" too, so far as the arbitration clause is concerned--by the appellant in its application for injunction with a view to obtaining an order ex parte, and rounds off its submission with the prayer that these disputes and differences, "out of, in respect of and/or relating to" the contract, may be referred to arbitration in accordance with the arbitration clause which is attracted here very much indeed (paragraphs 11, 9, 10, 8, 13, 14 and 18).

The remaining material averments in the respondent''s application of August 9, 1963, for stay of the appellant''s suit (no. 1359 of 1963) are:

(i) The respondent is a company incorporated in Yugoslavia with its registered office at Belgrade and a local office at 36 Ganesh Chandra Avenue within the jurisdiction of this Court (paragraph 1): just what the cause title of the plaint is.

(ii) "By letter of Indent" dated February 27, 1960, the Bihar State Electricity Board had engaged the respondent as a contractor for, among other things, erection of a thermal power station at Barauni (paragraph 2): just what the appellant pleads in paragraph 1 of its plaint.

(iii) For the work done and to be done, periodic payments made by the respondent to the appellant come to a total of Rs. 5,02,700.00, which is in excess of the appellant''s "legitimate dues" by Rs. 16,000 or thereabouts. But true it is that final accounting has yet to be gone into (paragraph 5).

(iv) The respondent has not been winding up its business, as falsely alleged. Nor is it true, as falsely alleged again, that the respondent has no assets in this country save "the contract with the Bihar State Electricity Board." "In spite of full knowledge" the appellant "has wrongfully suppressed" that the respondent is engaged in (a) the laying of gas grid pipe from Durgapore to Calcutta, (b) the Salt Lake reclamation project, (c) the "Basin Bridge" thermal power plant, Madras, and also other works at various places in India. For carrying out the said projects, the respondent "owns and possesses very valuable machinery, tools, plants and implements" which, together with other assets, be valued at Rs. 2,45,80,000 or thereabouts--a fact "falsely suppressed" by the appellant (paragraph 12).

(v) Assuming, but not admitting that the Arbitration Act 10 of 1940 does not apply, a stay (of the appellant''s suit) is yet called for. To allow the appellant to proceed with its suit will be to allow it to take advantage of its own wrong and of the breach committed by it of its own contract which still subsists and binds it too. Carriage of the suit, in the circumstances--and a Vexatious and mala -fide suit'' at that--will degenerate into a "wrongful abuse of the process" of the Court (pa 16).

On the foot of such averments the respondent got an interim stay on August 9, 1963, just as the appellant had got an interim injunction a week earlier, namely, on August 2, 1963.

The appellant answered this application for stay, on August 20, 1963, with an affidavit-in-opposition, affirmed on August 17 previous, by one Bhikubhai Gouri Shankar Joshi (shortened hereafter into Joshi), its principal officer and constituted attorney. One of the points taken by such affidavit is that there is no arbitration agreement in the contract in the sense that the parties thereto, namely, the appellant and the respondent, had mutually agreed in Belgrade on July 10, 1961--the very day the contract was signed--and thereafter, not to give effect to the said arbitration agreement. So, though the arbitration agreement physically exists in the body of the contract, it is to be deemed to have been deleted. "In view of the disputed question of fact" about the legal existence or non-existence of the arbitration agreement in the contract, A.N. Ray, J. set down for trial on evidence the respondent''s application for stay. Evidence was gone into on January 9, 1964. But the only evidence that was called and recorded was the evidence of Panich Stojan, aged 37, working in July 1961 as the chief engineer of the project department of the respondent. The appellant qua respondent in the Court of first instance did not call its managing director, Lalbhai R. Contractor (shortened hereafter into Lalbhai), who had signed the contract on July 10, 1961, in Belgrade, as will resently be seen.

By his judgment delivered on January 10, 1964, the learned trial judge allowed the respondent''s application of August 9, 1963, and stayed the appellant''s suit (no. 1359 of 1963) inclusive of all proceedings thereunder, holding inter alia:

A. There is an arbitration agreement between the parties.

B. All agreements subsequent to the contract flow out of it and are therefore covered by the the contract''s clause containing the arbitration agreement which is of the widest amplitude, providing as it does: "Any mutual dispute should be settled in mutual agreement", without any word of limitation like ''arising out of the contract'' or ''having reference to the contract''.

C. No vagueness defeats ''Yugoslav materials and economical law''--the very law which has been made applicable by the contract and therefore governs the contract.

D. The parties entered into the contract containing an agreement for arbitration to be held abroad. Well aware of the consequences of such an agreement as they are, the appellant, one of the parties to such contract, is disentitled to the exercise of discretion in its favour, because of the difficulty to have evidence abroad.

E. The Arbitration Act 10 of 1940 applies, even though the arbitration is to be held outside India.

Hence this appeal by the plaintiff: appeal No. 110 of 1964.

Turning now to the injunction, the learned judge by his order dated February 6, 1964, dismissed (as noticed) the plaintiff''s application of August 2, 1963, seeking just that: injunction, and necessarily dissolved the interim one he had granted the same day, namely, on August 2, 1963. Hence the other appeal--appeal No. 111 of 1964--by the plaintiff too.

First to appeal No. 110 in support of which Mr. Sabyasachi Mukherji, the learned counsel for the appellant, has addressed us on the following points--

One, the claim in suit is not covered by the arbitration agreement.

Two, the Yugoslav materials and economical law, which will govern the contract and arbitration both, by virtue of the arbitration agreement itself, is so vague and uncertain. Necessarily therefore the arbitration agreement is rendered incapable of being enforced.

Three, the difficulty of going all the way to Paris and establishing the claim there is to be taken into reckoning. Once that is done, no casts has been made out for the grant of a discretionary relief in the form of staying the suit, no matter whether u/s 34 of the Arbitration Act 10 of 1940 or u/s 151 of the Procedure Code 5 of 1908. Four, it is a foreign arbitration which bulks so large here. Hence, the Arbitration Act, having no extraterritorial operation, cannot be called in aid; nor, a fortiori, a particular section of the Act, namely, section 34. Again, section 34 failing--and fail it must--it is not for the Court to invoke its inherent jurisdiction which does not exist in the facts here: existence of a specific provision (section 34) and non-availability thereof on legal grounds. Five, the trial judge has fallen into an error in holding that there is an arbitration agreement.

If, in reality, there is no arbitration agreement, no other point will fall to be considered. No arbitration agreement being there, no stay can be there too. Indeed, the arbitration agreement is the very foundation of the stay prayed for, granted and now appealed against. So, of the five points listed above, the fifth one is taken up first.

The contract is annexure A to the respondent''s application for stay and also to the appellant''s application for injunction. As an annexure to either of the two applications--the two applicants being adversaries to one another--the contract consists of 10 articles--1, 2, 3, 4, 6, 7, 9, 10, 12 and 13. On that both parties are agreed. It will therefore be hardly a profitable task to enquire: where are the remaining 3 articles--5, 8 and 11 ? It will be an idle inquiry at that, save what is stated in paragraph 16 infra. Because there is not even a soupcon of evidence to that end in either party''s affidavits. So, let a cursory glance be taken over the 10 articles which constitute the contract. Each of these 10 articles has a theme all its own. Article 1 captioned ''Subject of contract'' records what the contract is for, or, to quote the words of the article, what "the employer orders with the contractor". And what will the employer order with the contractor but "erection of 2 complete radiation type steam-boilers" which, as noticed already, do form the subject of the contract, with the very various detail (including "the trial run and run for take over purposes") set out here (article 1). The employer, it need hardly be said, is the respondent; and the contractor is the appellant. Article 2 captioned ''Contract (Contractor''s ?) assignment and liabilities'' and article 4 captioned ''Employer assignment and liabilities'' may be considered together. If article 2 lays down what the appellant qua contractor "is bound to render available to the Employer", such as (i) securing labour (specified) at all stages: (a) ahead of the commencement of the erection of the steam-boilers, (b) during the progress of the work, (c) when the trial run is on and (d) the point of time when the plant is taken over, (ii) preparing the "field of erection", (iii) transporting equipment and materials which are to be stored at a distance of 100 metres "from the inbuilding place" etc. etc., article 4 prescribes what the respondent qua employer is bound to do, such as (i) furnishing the contractor "the drawings and technical documentation for erections", (ii) delivering special erection tools, cranes, electric winches (hoists), electric welding apparatus, (iii) maintaining cranes and "consumable materials" etc. etc. Article 4, in addition, fixes the time-limits too for the completion of the job. "The agreed upon erection shall be completed" within 8 months for Boiler I and 13 months for Boiler II. The method of computation of time is also laid down. Article 3 captioned ''Organising of Site'' caters for just what the caption bears. To secure cohesion, this article requires the contractor''s delegate by whom "the site shall be superintended" "to keep an erection logbook which shall be treated to have a character of public substantial evidence" and which the Employer delegate shall regularly sign". For "extra stipulated jobs as for instance, substantial alterations in design", it provides, by paragraph (8), that "the Employer shall not recognise to the Contractor the respective claims unless the jobs concerned were approved by Employer''s Personnel after a written job order for these jobs were (was ?) issued". Article 6 captioned ''Price'' makes it obligatory amongst other things, for the employer to pay the contractor at Rs. 155 a ton for "the total inbuilt weights of equipment", other things being there. The only point worth noticing in article 7 captioned ''Terms and conditions and mode of payment'' appears to be that--

For additionally executed works and additionally engaged men which are not included in the price per ton, the Contractor shall submit separate monthly reports (or statements) also on each 1st of a month.

The heading of article 9 is ''Penalties''. It provides that the employer shall take all steps to get the work going on September 15, 1961, and, what is more, to keep everything spick and span for the trial run of "X Boiler" on May 15, 1962, the contractor strictly adhering to the erection plan or the time schedule furnished by the employer. True to its heading, the article further provides that should the erection be delayed, "it will be lawful with the Employer to deduct from the total erection valuation 1.5 per cent, but no more than 15 per cent. of the value of work contracted for each delayed week." Article 10 is the article on ''Premiums and Indemnification'', as its heading goes. What it says to the contractor comes to this:

Fulfil all your liabilities "prior to the period stipulated," and earn a weekly premium of Rs. 2,000, subject to a maximum of Rs. 16,000.

For indemnity to the employer, what this article--article 10--records may be quoted in full:

Should the Contractor fail to execute the work, or such however executed, are not adequate to duties they are intended for, resulting either in non-performance of the plant or in its incapability to normally perform its duty then Contractor is bound to effect all repairs on his expense.

Article 10 concludes with a clause for force majeure: irresistible coercion or compulsion. Article 12 captioned ''Special rights'' consists of three paragraphs, the first two providing for the right of the employer to terminate the contract with due notice on certain things happening, and the third and last one containing the arbitration agreement (already reproduced) on which this litigation depending before us depends. Article 13 with the heading: ''Other provisions'' is a 3-paragraph article. The first paragraph concedes the right of the contractor "to use the erection works in advertising purposes" on one condition: "he explicitly puts that the whole of the erection was carried out under superintendence of the Employer enterprise experts". The second paragraph of this article deserves to be quoted in extenso:

The above contract has been drawn 6 copies in English language, 4 copies of which being for Employers and 2 for Contractor records.

The third paragraph provides when the contract receives effect:

The effective date of this contract is the date of signing it by both contracting parties.

Immediately below it is--

VII. 1961,

and then follow the signatures.

Such then is the contract providing for the detail and even the nuances for this work and that. On July 10, 1961, it was signed at Belgrade by Petrovich for the respondent and by Lalbhai for the appellant. Petrovich is the respondent''s technical manager. Lalbhai is the appellant''s managing director. So says on oath the respondent''s chief engineer, Panich Stojan, in whose presence the contract was signed at Belgrade on July 10, 1961. In the course of his cross-examination before A.N. Ray, J., some sort of a doubt is sought to be raised on his having witnessed the signing of the contract at Belgrade:

Q. Does anything appear from the document that you were present in the room when the contract was signed ?

A. No, that is not necessary, because only two gentlemen signed the contract and they can be present during the signing; I know Mr. Lalabhai (Lalbhai) very well because I was with Lalabhai (Lalbhai) on that day.

A convincing answer, rendered all the more convincing by a letter dated July 10, 1961, from Beograd (Belgrade) to the respondent over the signature of none else than Lalbhai. Marked exhibit "A" to the affidavit in opposition filed by the appellant on August 20, 1963, and affirmed by Joshi on August 17 previous, it bears, in so far as it is material here:

Beograd 10th July, 1961.

Messrs. Invest Import Beograd, Yugoslavia.

Dear Sirs,

I have signed the Contract of Barauni Thermal Power Station Work with you.

I have objected to the clause of Arbitration put in there is (sic) agreement which was deleted from our revised draft of agreement sent to you in advance.

Arbitration clause will be acceptable to us if only arbitration to be done in India, according to the rules and regulation and procedure of our Country.

** ** **

Yours faithfully for Ramji Dayawahla & Sons P. Limited, Sd. Lalbhai R. Contractor (Managing Director)

The solecisms, the letter just reproduced is full of, be left alone. Indeed, a feature of this litigation is that the Indian and the Yugoslav, whatever their differences, are united in defiling the purity of the English language, the arbitration clause itself and other provisions of the contract I have copiously quoted in paragraph 14 ante, as also other matters quoted from a certain letter of the respondent in paragraph 19 infra., furnishing so many paradigms thereof. Still what the letter over the signature of Lalbhai seeks to convey is so clear. And it is plain to be seen that Lalbhai, the managing director of the appellant had signed the contract on July 10, 1961, right in Belgrade.

Furthermore, when he had signed it so, the arbitration clause embodied in the third and last paragraph of article 12 was very much in it. Article 12 inclusive of this arbitration clause is not like one of the three articles--5, 8 and 11--seen no more in the contract as part thereof. Thus, even before the ink Lalbhai had pressed into service for his signature on the contract became dry, he is supposed to have inflicted this letter on the respondent--the other party to the contract. By any standard, this appears to have an unsavoury look about it. That being so, a prudent man is apt to be full of comments. In the first place, if the "revised draft of agreement", as Lalbhai puts it in his letter, had the arbitration clause deleted from it--by the way, were articles 5, 8 and 11 then deleted from the revised draft ?--why did you lend your signature to the contract with the arbitration clause so much in it ? You are not a moron. You are the managing director of a big enough company to whom the respondent has paid so far, as alleged and admitted, Rs. 5,02,700. More, there is the evidence on oath of the respondent''s chief engineer Panich Stojan:

....but arbitration clause was not discussed with Mr. Lala Bhai (Lalbhai); he agreed with the arbitration clause:

with no denial from Lalbhai, the only person who could give a denial. No explanation is forthcoming even why he does not examine himself on a crucial matter as this. Non-examination of such a one, depriving his adversary, the respondent, of the crucible of cross-examination, must necessarily be the strongest possible circumstance going to discredit the truth of the appellant''s case on this point. See Gurbaksh Sigh v. Gurdial Singh and another, 32 C.W.N. 119 (P.C.). In the second place further and better evidence is needed to enable the Court to hold that a letter as this was in fact sent to the respondent in Belgrade. The statement in paragraph 4 of the affidavit in opposition, where despatch of this letter is averred, is said to be true to the knowledge of Joshi (who had affirmed the affidavit), as if he were in Belgrade too, along with Lalbhai. Joshi does not say he was. Lalbhai was there, as is apparent. But he does not pledge his oath either in any affidavit or in the witness-box, though the matter is set down for trial on evidence. Panich Stojan, the chief engineer of the respondent, does. He denies on oath the respondent having received any such letter, though he was in Belgrade for "something less than one year" from July 10, 1961, or thereabouts. There is a denial in the respondent''s affidavit in reply too. It cannot therefore be found as a fact that the letter was in fact sent to the respondent at Belgrade. Non-production of the register of letters received at the Belgrade end--a register Panich Stojan speaks of in the course of his cross-examination--cannot give rise to a presumption adverse to the respondent. It cannot, because a letter which is not proved to have reached the addressee, as is found upon evidence, cannot find its way to the addressee''s register. In the third place Lalbhai''s telegram from Bombay on July 13, 1961, to the respondent at Beograd (Belgrade), referring to the letter of July 10 previous and harping on the same theme: deletion of the arbitration clause from the contract, signed already, merits like treatment mutatis mutandis, the worst which tells against the appellant being absence of oath from one of Lalbhai''s stature and knowledge. Much too much cannot be made of Panich Stojan''s statement in answer to question No. 48 :

Mr. Constantunovich must have replied to it.

It is plain from the manner of his answer, using the words "must have", that it is not what he knows of, but guessess to be, and thereby takes for granted. Hence it is not evidence even. It is a conjecture. In the fourth place, let it be assumed that Lalbhai had written so and cabled so. So what ? By such unilateral act, the bilateral contract containing the arbitration clause will not be changed and bereft of the arbitration clause. The fourth proviso to section 92 of the Evidence Act 1 of 1872 has not been overlooked. Has not been overlooked either a Bench decision of this Court presided over by Das Gupta, C.J. and Bachawat, J. (as their Lordships then were) in Rungta Sons Private Ltd. Vs. Jugometal Trg. Republike and Another, , where it has been held that an arbitration agreement is not by law to be required in writing within the meaning of the proviso (4) to section 92, even though the Arbitration Act, only for the purposes of the Act, does not recognize an arbitration agreement unless it is in writing: section 2(a). Whether or no this view by which we are bound needs reconsideration be left alone. Denuded of matters not relevant here, the mandate of the fourth proviso to section 92 of the Evidence Act is that the existence of any distinct subsequent oral agreement to modify a contract may be proved. The appellant is just after that. By a distinct subsequent oral agreement the arbitration clause has become dead and may therefore be deemed as deleted. But, unfortunately for the appellant, that has not been proved even prima facie. Put at its highest, the appellant''s managing director, Lalbhai, had sent a letter and a telegram to the respondent for having the arbitration clause deleted. That is all that can be held in favour of the appellant, though that will mean conversion of bad evidence or no evidence into good evidence. But this sort of stretching goes to waste. Because no agreement is ''born'' yet. It requires two to make an agreement. Despatch of a letter and a telegram without any response from one to whom they are despatched means one and only one; not two. And in spite of no response, you did your part of the contract from September 1961 to 1963 before you instituted your suit. In the fifth place, the whole thing shows Lalbhai in an odious light. Two-faced, he carries his signatures lightly, putting one on the contract with the arbitration clause in it, putting another on a letter on the same day to get the arbiration clause out of it, and repeating the performance three days later on a telegram. Right from the day he lent his signature on the contract, it very much looks he was trying to keep in reserve an escape-valve. But law bars the way to escape. Law holds him to the sanctity of his first signature, the one on the contract inclusive of the arbitration agreement, and says: ''Your subsequent two signatures, if any, and the letter and the telegram, if that, over such two subsequent signatures, are idle ones to get you freedom from the arbitration agreement''.

In the circumstances the finding must be what the learned judge of first instance has come to: that there is an arbitration agreement in the parent contract. The fifth point on which this appeal has been opened is found so.

Let it now be considered whether or no the claim in suit is covered by the arbitration agreement--the first point Mr. Mukherji addresses us on, in support of appeal No. 110. While developing this contention, Mr. Mukherji prefaces his submission with the concession that the matters listed in paragraph 5, 7 and 8 of the plaint fall within the arbitration agreement. What these matters are like has been noticed. To read them, whether in the summary that has been made or in the original averments in the plaint, is to find that they are covered by the arbitration agreement. At the same time, Mr. Mukherji contends that the matters paragraphs 6 and 9-15 of the plaint deal with are outside of the arbitration agreement. Let this contention be examined. Earlier in this judgment, these matters Mr. Mukherji refers to have been arranged in chronological sequence.

"In or about September 1961" is timed in paragraph 13 of the plaint as the formation of the first ever distinct oral agreement subsequent to the contract. The gist of such subsequent agreement, no firm date even of which the appellant can mention, and the effect thereof come to this: ''I repaired the insured matrials, since damaged, on your having agreed to pay me the money realized from the insurance company minus your supervision charges at 20. You realised Rs. 100,000. So, 75 per cent, thereof amounting to Rs. 75,000 is mine. [Really on the term as alleged, it should have been 80 per cent, amounting to Rs. 80,000]. I, therefore, claim what is my due''. The respondent denied a claim as this by its letter No. Ing. MJ/ZP-1 of June 20, 1963--some one month and eleven days ahead of the filing of the suit by the appellant on August 1, 1963, and a day more ahead of the filing on August 2, 1963, of the application for injunction by the appellant, who however did all that could be done to see that this important letter was not looked into, by suppressing it, though out to secure the discretionary relief of an injunction,--a matter the respondent rightly makes a grievance of. The denial was in the following terms:

Your request for payment of the repairing works for damage equipment (You said so), we cannot accept. According to the Contract, Art. 3, Para 8, all out-contracted works that your firm carries out for our firm will be paid on the base of wages. From 9th February, 1962 till 2nd April, 1963 it was paid to your firm the sum of Rs. 47,384 for out-contracted works. This amount includes also the works of equipment repairment. Besides this, the works for equipment repairment were performed by our labour and our machines and the repairment itself was carried out by our material. In any case, we cannot accept your request to agree to the amount of Oriental Insurance Company.

Article 3, paragraph (8), which the respondent''s letter of June 20, 1963, quoted from quotes so aptly, calls attention a little more, though noticed already. Its burden is ''extra stipulated jobs''--an expression which can only mean jobs (other than those specified in the contract) stipulated upon. To clarify the meaning of this expression, an illustration is given: "as for instance, substantial alterations in design." It is illustrative, certainly not exhaustive. So, even if the appellant''s version that it did the repair of the Insured materials which got damaged, and that too at the desire of the respondent, is taken as true prima facie (though the respondent denies it throughout) it is an "extra stipulated job" within the meaning of article 3, paragraph (8), of the contract. The rest of paragraph (8) will then receive effect. And what does the rest of paragraph (8) provide ? It provides for two things. One, the employer, that is to say, the respondent shall not recognize the claim for such extra work unless the job concerned is approved by the respondent''s personnel after a written order for such job is issued. Two, even then payment for this sort of extra work shall be "on a daily wage rate basis" the scale of which for different classes of labour is enumerated.

So, an extra sitpulated job of the type said to have been done by the appellant does come very much within the ambit of the contract and necessarily of the arbitration agreement in it. The appellant was aware of this paragraph in article 3 of the contract and therefore trimmed its sails accordingly. The avernment in paragraph 13 of the plaint by-passes this paragraph in article 3 and sets up a distinct subsequent oral agreement "in or about September 1961" (hardly 2 months after the contract) by which, it is said, the appellant had agreed to pay the whole of the insurance money realized minus supervision charges at 20 per cent. Seized as we are of an interlocutory matter, concerning the stay of a suit and not of the suit itself, let such averment be taken at its face value, though the respondent had denied it on June 20, 1963, faced with such a demand for the first time, by the appellant''s letters dated May 28 and 29, 1963, a little less than two years after September 1961; had pleaded this very letter in its application for stay on August 9, 1963, to which it (the letter) was annexed; and had reiterated its denial in paragraph 16 of its affidavit-in-opposition filed on January 21, 1964, in answer to the appellant''s application for injunction on August 2, 1963. Even on such generous assumption, this distinct subsequent oral agreement is covered by the arbitration clause of the contract. How large the language of the arbitration clause is be recalled. "Any mutual dispute" comes under it. A dispute means a dispute. It needs no annotation. Mutual means shared by two or more. In the context of the contract, it means shared by two--the appellant and the respondent. Any means no matter which. Thus, without more, any mutual dispute here means a dispute, no matter which, between the appellant and the respondent. Say, while at Barauni, Lalbhai takes from Panich Stojan lessons in the Slovanic language which he picks up. After that, a dispute arises between the two, Panich Stojan contending that he is entitled to Rs. 25 a lesson as his remuneration, and Lalbhai contending that it was merely a labour of love. Will such a dispute come under the arbitration agreement ? Obviously not. Because it has little to do with the contract of which the arbitration agreement forms part. Piercy v. Young, [1879] 14 Ch. D. 200, Mr. Mukherji cites in another context, appears to be a case in point. An arbitration clause providing that any differences or disputes between the partners shall be decided by arbitration, Jessel, M.R. observed:

......It cannot be read literally as meaning all differences or disputes which might arise between the partners. If there was a quarrel about a horse-race which had no connection with the partnership business, of course it could not mean that......

So even the largeness of the language as is evidenced by the expression ''any mutual dispute'' has to be cut down to mean only those disputes which have connexion with the contract: disputes which are related to the contract. Without more, that is to say, without the contract, it may very well mean all sorts of conceivable disputes under the sun. But, with more, that is to say, with the contract of which the arbitration clause employing the expression--any mutual dispute--forms part, it can only mean disputes having connexion with the contract: disputes related to the contract.

Now, what is the test of finding out whether or no a particular dispute has connexion with, or is related to, the contract ? Take the case of (4) Re: An Arbitration between Hohenzollern Action Gesselschaft Fur Locomotive and the City of London Contract Corporation, (1886) 54 Law Times 596, Mr. Mukherji relies upon in support of his contention that this post-contract stipulation of September, 1961 by which the respondent had agreed to give the appellant the major portion of the insurance money is not covered by the arbitration agreement. Mr. Somnath Chatterjee, the learned counsel for the respondent, relies on this very case and contends for just the opposite: the post-contract stipulation of September, 1961 does fall within the arbitration agreement. So let the case be looked into a little closely. The arbitration clause there was one of the widest amplitude:

All disputes are to be settled by the engineer to the purchasers and the engineer to be appointed by the vendors, or their umpire in case of difference.....

Substitute: "Any mutual dispute" for "All disputes" with the necessary grammatic change. Any you get the arbitration clause of the contract in hand, leaving aside the forum of arbitration. To run on with Hohenzollern''s case, the contract, there was a contract for the sale of locomotives. And it provides: the price would be paid by the purchasers upon the certificate of their engineer that the locomotives were in perfect working order at Croydon. The purchasers'' engineer refused to give his certificate. Nor did he give any reason of such refusal. Ultimately, the matter came before the two arbitrators in terms of the arbitration clause. The two arbitrators, one engineer from each side, were unable to agree and appointed an umpire who made an award in favour of the vendors. The attempt to set aside that award failed in the divisional court and also in appeal from the judgment of the said court. Lord Esher, M.R., read the words of the arbitration clause, though "in the widest possible terms", as if they were: "all disputes that may arise between the parties in consequence of this contract having been entered into". Having read the clause so, his Lordship observed:

The question, therefore, comes to be, was this a dispute in consequence of the contract having been made ? All the engines were sent to Croydon, but the engineer refused to give his certificate, or to give any reason for withholding it. The manufacturers said that they were entitled to the price of the engines. How could that question have arisen except for this contract having been made ?

That was how the dispute there was found to be connected with, or related to, the contract. In the case in hand too, the appellant says: In or about September, 1961 you asked me to repair your materials I had to work with. More, you said too, these materials are insured against damage, and you will pay me the money you recover from the insurance company minus your supervision charges at 20 per cent.; whereas the respondent says: No; never had I agreed to pay you so. Indeed, I could not. For one thing, I had done the repair with my labour; not you. For another, for other ''out-contracted'' work (which does not include this repair business) you had done, I paid you Rs. 47,384 in terms of article 3, paragraph 8, of the contract. Thus, the same approach here too: How could such question have arisen except for the contract having been made ? So it is a consequence of the contract and thereby has connexion with, or relation to, the contract. Hence the contention of Mr. Chatterjee, that a matter as this is the consequence of the contract, prevails over that of Mr. Mukherji just the other way about.

Or read the arbitration clause here as Lopes, L.J. read the arbitration clause in Hohenzollern''s case: "all disputes in respect of the contract or its construction". Even so, the conclusion cannot but be the same. The post-contract stipulation said to have been agreed to by both parties is that the appellant shall get Rs. 75,000 (as the appellant claims) out of the insurance money got by the respondent. What is it but an alteration or modification of the term embodied in article 3, paragraph 8, of the contract ? It is a modification not going to the very root of the contract which, subject to this modification, remains as it was. Nor does it change the contract''s essential character: erection of two complete radiation type steam-boilers for the thermal power station at Barauni. A modification as this is read into and becomes part and parcel of the contract. (5) Juggilal Kamalapat''s case, [1952] 58 C.W.N. 730, appears to be so apt on a point as this. There the original contract was modified in certain material particulars, such as extension of the shipping time, relaxation of the clause that each monthly shipment would be deemed to be a separate contract, a new matter (not in the original contract) in the shape of an undertaking to ship by a named steamer, original time for the opening of a letter of credit not adhered to etc. Yet it was held:

The original terms continue to exist except in so far as they are inconsistent with the modifications. The arbitration clause contained in the original contract is in no way inconsistent with the modifications and continue to subsist.--

just as it does here, including within its ambit the modification "in or about September 1961", according to the appellant''s allegation.

Thus, the test to determine whether or no a particular dispute is covered by the arbitration clause inside of a parent contract is that: Is it or is it not the consequence of the parent contract having been made ? If it is, it falls within the arbitration clause. Or to put it in another way: "Is it in respect of the contract, by contract, being meant not only the contract as originally made, but also such subsequent modifications or alterations, which do not go to the root of the contract, nor change the contract''s essential character, and which are therefore read into the original contract, becoming part and parcel thereof ? If it is, it cannot flee the arbitrtaion clause. In fine, the test may well be whether or no a party to the contract, not prone to a conduct which is simulate, if challenged, can reasonably claim that what he does, he does because of the contract, but for which he could not have done what he is doing. Apply this test to the new agreement of September, 1961 as the appellant pleads in paragraph 13 of the plaint. Certainly it is in consequence of the contract (of July 10, 1961) having been made. Certainly too it is in respect of the contract (of July 10, 1961) in which it merges itself. But for the parent contract, the appellant could not have done what it says it did.

In Government of Gibraltar v. Kenney and another, [1956] 2 Q.B. 410, Mr. Mukherji cites, Sellers, J. upholds, in the circumstances obtaining there, the right of the arbitrator to adjudicate upon a quantum meruit, in view of the arbitration clause covering "any dispute or difference" which arises or occurs between the parties "in relation to any thing or matter arising out of or under this agreement". Following most of the speeches in Keyman v. Darwins Ltd. in the House of Lords, [1942] A.C. 356: [1942] 1 All E.R. 337, the distinction between matters "arising out of" and "under" the agreement is reiterated:

...it is quite clear that arising out of is very much wider than ''under'' the agreement.

In the arbitration clause in hand, any mutual dispute necessarily means a dispute arising out of the contract, in addition to a dispute under the contract. Omission of the words--arising out of or having reference to--does make the large language of the arbitration agreement larger still, as the learned trial judge points out in one part of his judgment. Rightly does he consider them as words of limitation. But whether such words are there or not, any mutual dispute in the context here cannot but mean a dispute arising out of the contract or having reference to the contract. To return to Sellers, J.''s judgment, the claim for quantum meruit is regarded as an incident, which does arise as a consequence of the contract and which does, therefore, arise out of the contract itself. In other words, in the facts of that case, no contract, no quantum meruit. Surely the defendant, Cyril Ernest Kenney, a quantity surveyor, would not have done all he did for years on end from 1946, outside the provisions of the agreement, and at the request, express or implied, of the plaintiff, but for the original contract in writing dated April 25, 1046. By parity of reasoning, for the extra work of repairing the materials, outside the provision of the contract, the appellant before us could have also invoked quantum meruit, as Mr. Chatterjee rightly submits. The appellant invokes instead an oral agreement, distinct and subsequent to the contract, come to "in or about September, 1961." Be it one or the other, it does arise out of the contract but for which this incident, this consequence, of September 1961, would not have taken place.

Another case Mr. Mukherji cites on this point remains to be noticed, though it has been noticed in another context. It is Piercy v. Young, (Supra), where the arbitrationtion clause, "one of the shortest", "if not the shortest" Jessel, M.R. had ever seen, bears:

Any differences or disputes which may arise between the partners shall be settled by an arbitrator to be agreed upon between the partners.

There, however, "the chief issue" between the plaintiff Piercy and the defendant Young was "whether the partnership has been put an end to by the Plaintiff having sold his share for �5000". A partner being no more a partner, how can there be a difference between a partner and a partner ? That being so, it was held that the matter in dispute was not within the agreement for arbitration. Surely nothing like it can be said of the facts this litigation reveals, or of the agreement of September 1961, set up by the appellant.

What holds good about the post-contract agreement of September, 1961, equally holds good of the following post-contract agreements pleaded by the appellant in the plaint:

A. Three agreements of January 6, 1962.

I. That the respondent would pay the appellant Rs. 42,595.00 for carrying materails for more than 5 times the distance of 100 metres within a radius of which the contract provides, so it is said, that the materials were to be transported (paragraph 10 of the plaint).

II. That the work of cutting the firebricks supplied, in order to conform them to proper size and specification, would be treated as extra for which the respondent would pay the appellant Rs. 3,625 (paragraph 11 ibid).

III. That the work of extra drilling, welding, cutting etc. of materials supplied, (not being materials which were to be supplied in terms of the contract), would be treated as extra for which the respondent would pay the appellant Rs. 40,000 (paragraph 14 ibid.).

B. Two agreements of October 4, 1962.

I. That, in view of the urgency of the work and with a view to encouraging speedy construction, the respondent had agred to pay the appellant Rs. 20 a ton more than what was specified (Rs. 155 a ton) in the contract, that is to say, Rs. 175 a ton, for construction of iron and steel structures (paragraph 6 ibid).

II. That, a special type of insulation work, not provided for in the contract, would be treated as extra for which the respondent would pay the appellant Rs. 40,000 (paragraph 9 ibid).

C. One agreement on a certain day earlier than February 12, 1963.

I. That, for the painting of the boiler drums, steel structure sheets, etc. the respondent had agreed to pay the appellant an extra cost of Rs. 37,000, to meet the expenses the appellant had incurred for employing labour 100 strong (paragraph 15 ibid.)

Apply the test which has been applied to the agreement "in or about September 1961". And each one of these six post-contract agreements (very much disputed by the respondent) is the consequence of the parent contract having been made--a contract but for which no such question could have arisen; each one of these six post-contract agreements is in respect of the parent contract, the root and essential character of which remains as it was, these six agreements being only read into the parent contract of which they become part and parcel. Thus, these six agreements, modifying the parent contract and merging themselves in it, do come within the ambit of the parent contract and necessarily of its arbitration clause.

Still another matter the plaint deals with remains: the avernment in the twelfth paragraph. The appellant''s labour went on strike on or about May 8, 1962. The State Government of Bihar said to the appellant: ''We shall reimburse you of the loss. But you will have to apply through the respondent". The appellant did just that on February 16, 1923. The respondent, it is said, realized, Rs. 1.623 from the authorities on that account, but has been withholding payment of this sum to the appellant. True, nothing like an agreement is seen here. Far less is seen anything falling within the parent contract. What is seen instead is tort, if not a crime: criminal misappropriation, the requisite mens rea being there, on the foot of the truth of this allegation and of the falsity of the assertion of the respondent that it had not received any money so far from the authorities. Yet this also arises very much out of the parent contract. This sort of a mutual dispute, one side maintaining, ''You are misappropriating the amount'', and the other side saying, ''No; far from misappropriating it, I have not even received the amount yet'' is undoubtedly a dispute arising out of the contract itself, though not under the contract. To quote, with a little adaptation, from the judgment of Cohen and Asquith, L. JJ. in Woolf v. Collis Removal Service, [1948] I K.B. 11, where a claim sounding in negligence, a claim "made either in pure tort or quasi-contract", is unsuccessfully sought to be put outside the contract:

"......Yet there is a sufficiently close connexion between this claim (of Rs. 1,623) and the transaction (of employing labour under the contract) to bring the claim within the arbitration clause." : page 18 of the report.

The ''consequence'' test again. This claim is the consequence of the parent contract in absence of which it could never have been made. The claim is there, because the contract is there. Conversely, if the contract were not there, the claim could not have been there too. It does therefore arise out of the contract. It has therefore reference to the contract.

Having regard to the foregoing considerations, it must be held that the whole of the claim in suit is covered by the contract''s arbitration clause. And the first point on which Mr. Mukherji opens the appeal is found so.

The burden of Mr. Mukherji''s second point (which is now taken up) is: The Yugoslav materials and economical law which, by virtue of the arbitration clause, governs the contract and arbitration both, is so vague and uncertain. Ergo, the arbitration clause itself is incapable of being enforced.

Asked what this law is, Panich Stojan says:

I do not know so good English to explain what it means here--

which indeed (lack of knowledge of good English) is plain upon the whole of the evidence, oral and documentary. That does not however mean that there is no such law or that it is vague, uncertain and unascertainable, just as the affirmation of Joshi is in the affidavit-in-opposition of August 20, 1963. Incidentally, how the non-existence of such law, or such law being vague, uncertain and unascertainable, if it exists can be true to the knowledge of Joshi, as he solemnly affirms it is, is apt to beat one. He did not go to Yugoslavia. Lalbhai did. But he does not take the trouble of making any affirmation by an affidavit. To return to Stojan''s evidence, he is definite--and says so on oath--that the Yugoslav materials and economical law exists. More, the supporting law in Paris, the venue of arbitration chosen by the parties, must be this Yugoslav law, as the parties had solemnly agreed. Asked by the cross-examining counsel, Mr. Mukherji, what the provisions of such law are, he ripostes:

You know better than me.

Material law is, according to him, Yugoslav law. By economical law must be meant, he says, some economical law. And then he confesses:

I cannot explain to you what means by economical and material law.

Even after this confession, he is asked:

Q. 68. What is that according to you ? Presumably exasperated, under an erroneous impression that he is being badgered, though in Mr. Mukherji''s questions you find nothing like badgering misnamed cross-examination, he answers:

According to me the signature of Lalbhai appears only a centimeter away from the arbitration clause, and this arbitration clause is signed by Lalbhai.--

a pithy answer in a lively form remarkable alike for its raciness and truth If it lightens a discussion on one aspect of the law of arbitration it brings out too in bold relief the hollowness of the appellant''s case that the arbitration clause was agreed to be treated as dead.

Thus, this is all his evidence about that law: Yugoslav materials and economical law, apparently an uncouth English rendering of, and adaptation too from, a West German draft, the rendering and adaptation having been made by certain Yugoslavs, one of whose strong points is certainly not the English language. Worse, here is an engineer speaking on this particular Yugoslav law. What better can one expect of such a one-a layman in the realm of law ? Ask one of our engineers in the witness-box what the provisions of the Sale of Goods Act are. And he is sure to cut the sorry figure Panich Stojan does. From that certainly you will not infer that the Sale of Goods Act does not exist, or that, if it exists, it is a law--vague, uncertain and unascertamable. If the matter be examined in this perspective--a very proper perspective in the circumstances--no inference favouring the appellant can be drawn from such evidence of Panich Stojan. What counts therefore is not what Stojan, an engineer ignorant of law, says, but what Lalbhai, a hard-headed businessman, one of the eminence of the managing director, and right at Belgrade signing the contract in all solemnity on July 10, 1961, does not choose to say either from the witness-box or in any affidavit. Did he or did he not know on July 10, 1961, what this law was? Panich Stojan says, Lalbhai did not even discuss the arbitration clause; he agreed with what it contained. That is elicited in cross-examination. Would a hard-boiled one as Lalbhai agree to have the arbitration clause in the contract without knowing what this law was--the very law incorporated here as the law by which both the arbitration and the contract would be governed ? It looks so improbable. And it is rendered a greater improbability by the very letter he had addressed from Belgrade to the respondent on the very day he had signed the contract: July 10, 1961, if he had addressed it at all. Not a word is there to the effect: ''Your Yugoslav materials and economical law does not exist; if it does it is vague, uncertain, and, worse still, unascertainable; so much so that I have not been able to lay my hands on it and I do not know what it is''. All that is said instead is: ''let there be arbitration in India according to our rules, regulations and procedure''. That is understandable. One has always a leaning in favour of the law of his own country. To say so is not to say that the other fellow''s law is vague, uncertain and unascertamable. What appears to be deserving of notice is that Paris, the venue of arbitration agreed upon, happens to be the country of neither party. Even if it be assumed that Lalbhai knew not what he was signing, though there is no basis whatever for such an assumption, he has only to step into the witness-box and say so, or, far less, to a wear an affidavit affirming so. He does nothing of the kind. Nor does he offer any explanation for this sort of an extravagant conduct. The conclusion cannot therefore be resisted that he was fully cognizant of the Yugoslav materials and economical law when he had lent his signature on the contract, acknowledging thereby that the Yugoslav materials and economical law would rule both the contract and the arbitration.

In vain have we been addressed on the aspect of private international law impinging on this subject. No doubt, "what is the foreign law" (here the Yugoslav materials and economical law)--a matter "of which no knowledge is imputed" to us or to any one of our brethren in this Court--"must be proved, as facts are proved, by appropriate evidence, i.e., by properly qualified witness". [See Chesire: Private International Law, 4th edition, page 127, as also Dicey''s Conflict of Laws, 7th edition, page 1107, Mr. Mukherji refers us to]. Panich Stojan is no doubt a singularly unqualified witness to prove this foreign law. But A.N. Ray, J. was not called upon to try the action in accordance with the Yugoslav materials and economical law. Were that so, this aspect would have had an importance all its own. Since that is not so--indeed, the decision will be a matter for the International Chamber of Commerce in Paris, a body which can fend for themselves--even its relevance does not appear to be obvious.

Therefore, the second point, on which Mr. Mukherji opens the appeal, also fails. And it is held that the Yugoslav materials and economical law cannot go down as vague, uncertain, and unascertainable; nor the arbitration clause making that law applicable to the contract and the arbitration as well.

The third and the fourth points Mr. Mukherji raises in support of appeal No. 110 are now taken up for consideration. We shall assume for the purpose of the appeal what Mr. Mukherji contends for: that the Arbitration Act 10 of of 1940 cannot rule the litigation in hand, an agreement as there is to submit "any mutual dispute" to foreign arbitration--just as the Supreme Court assumed the other way round in Michael Golodetz and Others Vs. Serajuddin and Company, . On this assumption, section 34 ibid., conferring on the judicial authority the "power to stay legal proceedings where there is an arbitration agreement", cannot avail the respondent. This does not however baulk the judicial authority, namely, the Court, in the exercise of its inherent jurisdiction for doing justice between the parties. But that is what Mr. Mukherji''s further contention is: section 34, a statutory provision for stay, failing, the Court''s inherent jurisdiction for just that (stay) falis too. A contention as this, however, is opposed to the law the Supreme Court lays down in Golodetz''s case (supra) :

"The power enunciated by section 34 of the Arbitration Act is inherent in the Court"-- (per Shah, J. speaking for the Court: at page 1046 of the report).

And the Supreme Court rendered this judgment in an appeal carried by Golodetz from the decision of the Court of Appeal here, presided over by P.N. Mookerjee and U.C. Law, JJ. [ Serajuddin and Co. Vs. Michael Golodetz and Others, ], reversing an order, made by A.N. Ray, J. u/s 34 of the Arbitration Act, staying the suit [ Michel Golodetz and Others Vs. Serajuddin and Co., ]. The judgment is of P. N. Mookerjee J, with whom Law, J. agreed. In the course of this judgment, his Lordship also expressed himself in favour of the inherent jurisdiction of the Court when bereft of its power u/s 34:

......even if section 34 does not apply to arbitrations like the present, the Court has ample power, in a proper case, to grant a stay of the suit in the exercise of its inherent powers". Page 51 of the report in AIR Again further down :

"Section 34 provides for stay of a suit before an Indian Court and if the [Arbitration] Act,--and therefore, section 34 also,--does not apply to the case of a foreign arbitration, the Court can, in a proper case, exercise the cognate or similar power possessed by it u/s 151 of the Code of Civil Procedure".--Page 55 ibid.

Manohar Lal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal, , Mr. Mukherji refers us to, does not shake this position a whit. Indeed, this decision turns on its own facts which have little in common with the case before us. Haghubar Dayal, J., speaking for the majority of the Court, holds that, there being no express prohibition in section 94 of the Procedure Code, section 151 thereof can be called in aid to issue temporary injunctions in circumstances not covered by Order 39 ibid., the interests of justice requiring so. On merits, however, the injunction issued by the Indore Court restraining the defendant before it from proceeding with his suit in the Asansole Court is not sustained, as it "cannot be said to be an order necessary in the interests of justice or to prevent the abuse of the process of the Court". Thus, what is wrong in Manohar Lal''s case (supra) is misuse of the Indore Court''s power u/s 151. Not that the said Court had no power thereunder. If anything, the principle of the decision lends support to the view that in a proper case the Court can draw upon the cognate power it possesses u/s 151 of the Procedure Code, there being no express prohibition in section 34 of the Arbitration Act. Indeed, an express prohibition completely changes the outlook, making it impossible for the Court to rise above it, even in the name of its inherent power. Otherwise it will be within the power of the Court to enforce as valid that which competent enactments have declared as invalid--a clear reductio ad absurdum, sure to secure the ends of injustice instead of justice, and also to perpetrate abuse of prcoess of the Court instead of preventing it: just the opposite of what section 151 is after. But you search in vain for such prohibition or declaration in section 34 which nowhere says: ''the Court may make an order staying the proceedings only in this manner and in no other; or no stay of the proceedings shall be valid unless the same is granted hereunder''. The position is therefore this: the Court looks to section 34 of the Arbitration Act and section 151 of the Procedure Code for its requisite power to grant a stay, just as it looks to Order 39 and section 151 again for its necessary power to issue an injunction. Section 34 eludes the Court which is nonetheless convinced upon all it sees that not to grant a stay in the circumstances is to negate justice. Then and then only section 151 enables the Court to do what it feels should be done for the ends of justice for which alone it exists. So also about injunction. The matter is such that Order 39 does not reach it. Yet an injunction there must be to prevent miscarriage of justice. Section 151 again comes to the Court''s aid and says: ''your powers are already there inherent in you. I have simply saved them for you. Do justice by invoking such powers''. Thus, it is not possible to accept Mr. Mukherji''s contention: section 34 failing, the inherent jurisdiction of the Court fails too. The law the Supreme Court lays down in Golodetz''s case (supra) stands. The law is that the power section 34 of the Arbitration Act confers on the judicial authority is inherent in that authority, namely, the Court. Nothing in the earlier Supreme Court decision: Manohar Lal''s case (supra), affects this law, as has just been noticed:

The matter may now be examined from another point of view. An application u/s 34 simpliciter is not an application in arbitration proceedings. It is a proceeding in the suit. See Basanti Cotton Mills Ltd. v. Dhigra Bros, ILR [1950] I Cal 546, and Badri Narayan, Lall v. Union of India & others, 67 C.W.N. 627, cases Mr. Chatterjee cites in support of his contention to that end. So, a proper case being there, a proceeding in suit can attract the inherent jurisdiction of the Court, section 34 notwithstanding. Incidentally, if section 34 fosters no more than that: a proceeding in the suit, and not a proceeding in arbitration, why can it not be called in aid for staying a suit ? With great respect, and greater humility, this aspect calls for a reconsideration of the view that section 34 does not apply to the problem under discussion. Still, let section 34 be left out of account completely, on the assumption made: that the Arbitration Act 10 of 1940 is not applicable here. How the respondent''s application for stay is captioned has been noticed: u/s 34 of the Arbitration Act and section 151 of the Procedure Code too. In view of the assumption just set out, the caption and the contents of the application be deemed to have been excised of any reference to section 34 and the Arbitration Act. Section 151 then remains. And remain it must. Because, the respondent faced with a suit as this, a suit which is the upshot of a contract with an arbitration clause, can petition the Court for a stay under the only section available to it: section 151; and because the Court, if it is minded to grant a stay in the exercise of its sound discretion, can do so, also under the only section available to it: section 151. Section 28 of the Contract Act 10 of 1872 does not void the contract which is the basis of the suit in hand. It does not, because Exception 1 thereto saves it, providing that this section shall not render illegal a contract by which the contracting parties have agreed to refer their dispute to arbitration. The legality of the contract is emphasised, as the Court is powerless to invoke its inherent jurisdiction to give effect to part of a contract the whole of which is illegal. The same test again: no Court can treat as valid that which a competent enactment (here the Contract Act) has declared as invalid. Again, assurance is lent to such a view about the Court''s power to stay by the principle Mackinnon, L.J., reiterated in Racecourse Betting Control Board v. Secretary for Air, [1944] I Ch. 115 at page 126, that the power and duty to stay in cases of this type arose not so much u/s 4 of the Arbitration Act, 1889 (cf. our section 34), but "under a wider general principle, namely, that the Court makes people abide by their contracts". His Lordship continued: "Section 4 of Arbitration Act, 1889, (now S. 4 of the Arbitration Act, 1950), only applies this principle to one type of such an agreement". So, whichever way the matter may be considered, the respondent cannot be denied the benefit of section 151, sufficient grounds being there to avail it.

It is therefore for decision now if sufficient grounds exist for a stay, as ordered by the learned trial judge. The averment in paragraph 14(f) of the appellant''s affidavit-in-opposition filed on August 20, 1963, and affirmed by Joshi on August 17, previous, calls attention:

14 *** *** ***

(f) In view of the fact that the subject-matter and the evidence and the materials in respect of the claim arisen in this suit are all situated in India it would be a denial of justice to have the Arbitration by International Chamber of Commerce in Paris. In the facts and circumstances of this case it would be difficult for both the plaintiff or the defendant to substantiate their assertion before the International Chamber of Commerce at Paris. In the premises to refer to the International Chamber of Commerce in Paris would be a denial of Justice.

What appears to be interesting is that even an averment as this is true to the deponent Joshi''s knowledge, as he swears in the twenty-third paragraph of the affidavit-in-opposition. It then comes to Joshi affirming from his own knowledge that it will be difficult even for the respondent to substantiate its "assertion" before the International Chamber of Commerce at Paris. However knowledgable Joshi may be, his knowledge cannot surely go as far as that: what is difficult or not difficult for his adversary with its registered office at Belgrade much nearer to Paris than Barauni or Calcutta. No wonder, Iliza Kostantinovic, the manager of the respondent, denies any difficulty of the sort in the respondent''s affidavit-in-reply dated August 20, 1963. This is, however, a small matter which need not be made much of. What in reality the appellant seeks to impress by this averment in paragraph 14(f) of its affidavit-in-opposition (just reproduced) is that it will be so difficult to carry the evidence to Paris. Mr. Mukherji too places it in the forefront of his submissions on this point and contends: the suit should not have been stayed by the lower Court in the exercise of its discretion because of the difficulty of going all the way to Paris and establishing the claim there. So, ultimately it boils down to evidence. Because, by evidence only can a claim be established unless, of course, the adversary admits the claim. No question of an admission arises here. Hence evidence there must be. But what evidence--oral or documentary ? If oral, the evidence of how many witnesses--one or one hundred ? If documentary, to send the whole of it to Paris by sea-mail or even by air can present nothing like a job. Again, is oral evidence essential to establish the claim ? Or will affidavit evidence suffice ? We do not simply know, though we know well enough by now the theme and thread of the appellant''s plaint. The appellant''s affidavit-in-opposition--and that is the only evidence on its behalf--does not enable us to know either. On such a meagre affidavit, so vague too, without any particulars, as the respondent rightly pleads in its affidavit-in-reply, and as Mr. Chatterjee submits before us, the appellant cannot be allowed to continue its action which it has brought in breach of the contract with the respondent that any mutual dispute between them shall be determined, not in this Court, but in Paris by arbitration of the International Chamber of Commerce there. On the other hand, it becomes the duty of the Court to make the appellant abide by the contract solemnly entered into and now so lightly sought to be got rid of.

It is then said, though not on affidavit, but as a submission through counsel: no matter how few the witnesses, the restrictions on foreign exchange are there only to be seen; and how will they be taken to Paris and presented before the International Chamber of Commerce there ? In this background, it is emphasized: not to allow the appellant the freedom of the carriage of its suit here by staying it is to deny it justice. Nice though such a contention looks at first glance in the context of today, a little probe below the surface is apt to show how untenable it is now. Let judicial notice be taken u/s 57 of the Evidence Act 1 of 1872 of the notorious fact that foreign exchange to enable one to go abroad cannot be had for the mere asking. More, the authorities concerned scrutinize such applications with the utmost strictness resulting in refusal in very many cases. Grant all this. Still what is there to convince the Court that the appellant shall share the same fate as so many others do ? The fate of Lalbhai, the managing director of the appellant, was otherwise only some two years before the institution of the suit when he had the requisite foreign exchange all right so that he could be in Belgrade on July 10, 1961, to sign the contract. So, why should it be assumed that he would not get foreign exchange this time too to plead his cause--a cause which owes its existence to the grant of foreign exchange in 1961 ? That he will be denied the necessary foreign exchange has to be, but has not been, proved. It can by no means be assumed. Howsoever much we may take judicial notice of the notorious fact: dearth of foreign exchange, we cannot blink people getting that and going abroad too on numerous occasions. If the other one is notorious, this one is no less notorious either. Furthermore, the appellant applying for foreign exchange to plead its cause before the International Chamber of Commerce in Paris is not the appellant applying so for sending its officers and men on a pleasure trip. It is for the thermal power station at Barauni--one of the so many national assets which we are building, and have built, with foreign collaboration, which our Welfare State prizes most, and so rightly too. It is all the more a reason why it is impossible to assume that the appellant, once favoured with the requisite foreign exchange in 1961, when also the position was so tight, would be denied foreign exchange in 1965 or thereabouts when the position might be tighter still. At all events, we have had no materials put before us on which we can arrive at a firm finding of fact that the appellant will not get the requisite foreign exchange to plead its cause before the International Chamber of Commerce in Paris. Therefore, to put it at its lowest, the appellant''s verbal plea through its counsel to that effect before us appears to be premature.

To this be added non-acceptance on behalf of the appellant of a very reasonable suggestion made by us during the hearing of the appeal that the stay of its suit will continue, only to be lifted when the appellant''s attempt to get the requisite foreign exchange at the appropriate time fails. Is the appellant then out to exploit the restrictions now placed upon the grant of foreign exchange by the powers that be for national welfare ?

We are thus unable to say that the order of the learned trial judge staying the appellant''s suit in the exercise of his discretion is incapable of being sustained. On things as they stand now, it becomes a case of exercise of discretion u/s 151 of the Procedure Code, though the learned judge exercised his u/s 34 of the Arbitration Act 10 of 1940. It does not matter which, because, again going by the law the Supreme Court lays down in Golodetz''s case (supra), the discretion u/s 34 is inherent in the Court. In other words, the discretion which is the Court''s u/s 34 is the discretion which is the Court''s u/s 151 as well. And so soon as it is said that the matter is one for the Court''s discretion u/s 151, it is as well to remember that in exercising discretion as this, a Court is not bound in the same manner "to stand by things decided" (stare decisis), "to abide by former precedents", as it is bound where "the same points come again in litigation"--points the law on which has been "solemnly declared and determined". In other words, the discretion conferred by a statute cannot be circumscribed by judicial decisions in the same way, say, an interpretation of a point on law can be. In (23) re: An Attorney, (1913) ILR 41 Cal 446: 19 C.W.N. 593, Jenkins, C.J., observed--

Not one jot or one tittle can be taken away from or added to the plain and express provisions of the Legislature by any decision of the Court; nor can this discretion vested by the section in the Court be crystalised or restricted by any series of cases: it remains free and untramelled to be fairly exercised according to the exigencies of each case.

Such then is the freedom of the Court in the exercise of discretion vested in it by law. But it is freedom, not licence. So, where the appellate court "sees that the decision" of the primary court "will result in injustice being done it has both the power and duty to remedy it", as observed Lord Atkin in Evans v. Bartlam, [1937] A.C. 473: [1937] 2 All. E.R. 646. The principle that the order of the primary court will stand unless it acted on some wrong principle of law did not find favour with his Lordship:

Appellate jurisdiction is always statutory; there is in the statute no restriction upon the jurisdiction of the Court of Appeal.

Still normally a court of appeal does not interfere with the exercise of the primary court''s discretion except on grounds of law. But normalcy is not there when such exercise walks so awry as to work out injustice. A court of appeal then does no more than its duty by exercising its obvious power qua court of appeal and setting things right. Not that it merely substitutes its discretion for the discretion already exercised. It is hardly necessary to deal at length with this branch of the law on the strength of which a court of appeal interferes with the exercise of discretion by the primary court. Because we are at one with the learned trial judge in the conclusion he has come to by granting, in exercise of his discretion, a stay of the appellant''s suit. Mention must, however, be made of Ward v. James, [1965] 1 All. E.R. 563. It is a decision of the Full Court of Appeal on "an undertaking from learned counsel on behalf of the defendant that he would be satisfied with any decision to which the full court comes on the hearing of this appeal and would not proceed further to the House of Lords". The point at issue was if an order of Roskill, J., affirming in the exercise of his discretion an order of Master Lawrence for trial by jury of the plaintiff''s action for damages for personal injuries in a motor accident, should be interfered with by the Court of Appeal. Lord Denning, M.R., read the judgment of the court. On this branch of law, his Lordship started "with the celebrated case in 1770 of R. v. Wilks", (1770) 4 Burr. 2527. It was a case where "Wilkes was in custody as an outlaw" and where "Lord Mansfield, C.J., then made this well-known pronouncement:

It is indeed in the discretion of the court to bail a person so circumstanced. But discretion, when applied to a court of justice, means sound discretion guided by law. It must be governed by rule, not by humour; it must not be arbitrary, vague and fanciful, but legal and regular.

Coming "to the question: in what circumstances will the Court of Appeal interfere with the discretion of the judge ?", his Lordship observed:

At one time it was said that it would interfere only if he had gone wrong in principle; but since Evans v. Bartram, that idea has been exploded.

Then, after a review of cases, his Lordship enunciated two broad propositions:

A. When a statute gives a discre-the courts must not fetter it by rigid rules from which a judge is never at liberty to depart.

B. Nevertheless the courts can lay down the considerations which should be borne in mind in exercising the discretion and point out those considerations which should be ignored. This will normally determine the way in which the discretion is exercised and thus ensure some measure of uniformity of decision.

Proposition A is virtually the proposition Jenkins, C.J., pronounced more than half a century ago, as just noticed. And the necessity of proposition B lies in the necessity of the Judges "acting alike in all cases of like nature", to quote with a little adaptation from what Lord Mansfield, C.J. observed in R. v. Wilkes (supra). Else, in a given case, Judge A would exercise his discretion, Judge B would refuse to do so, and law pronounced by judges would be in a state of perpetual flux. But "it is an essential attribute of justice in a community that similar decisions should be given in similar cases."

The correct place of former precedents in matters governed by statutory discretion thus ascertained, the decisions cited at the bar may now be reviewed. Golodetz''s case (supra) must be noticed first. What weighed with their Lordships of the Supreme Court in upholding the decision of the Court of Appeal here, by which Golodetz''s prayer for stay of Serajuddin & Co.''s suit was refused, was (i) availability of all the evidence on the disputes in India and (ii) severe restrictions on the grant of foreign exchange to individual citizens which would make it impossible for the respondents (Serajuddin & Co.) to take their witnesses to New York, with the result that the proceeding before the American arbitrators would be ex parte, thereby causing injustice to them (the respondents). What do their Lordships of the Supreme Court lay down in having said so ? Certainly no rigid rules from which a judge is never at liberty to depart, to quote Lord Denning again. Indeed, this must have been farthest from their Lordships'' mind. On the other hand, these are the two considerations which their Lordships desired to be borne in mind when dealing with the exigencies the type of which Golodetz''s case brought to light. It does not therefore appear to be right to cite this as a precedent of universal application in all cases where discretion is to be exercised to stay or not to stay a suit concerning a foreign arbitration.

This is one consideration. There is still another. All the evidence in the case in hand is not in India. The contract was signed at Belgrade; whereas the contract in Golodetz''s case appears to have been signed at Calcutta. Contract apart, on the very day it was signed, namely, on July 10, 1961, the appellant''s managing director Lalbhai claims to have addressed a letter to the respondent right from Belgrade : a claim which the respondent denies. These are the features which are conspicuous by their absence in Golodetz''s case. True it is that the rest of the evidence is to be collated mostly from Barauni. But the Court has not been taken into confidence and told what this evidence will be like. Unless that is known, the difficulty in substantiating the appellant''s "assertion" in Paris remains unknown too. What goes before in paragraph 37 ante is reiterated; and it is emphasized that the averment in paragraph 14(f) of the appellant''s affidavit-in-opposition appears to be so ''liquid'' as to make it impossible for a court of law to act upon it.

There is another consideration yet. It is about restrictions on the issue of foreign exchange. In Golodetz''s case it was a commercial deal between two private firms, "Michael Golodetz & Co. (a firm registered in New York under the appropriate law)" and "Serajuddin & Co. (a firm registered under the Indian Partnership Act)". (Pages 720 and 721 of 63 C.W.N. : P.N. Mookerjee, J.''s judgment). The State was nowhere near it. But the deal the contract in hand embodies has as its hub the thermal power station at Barauni--an undertaking sponsored by the State of Bihar and carried through its Electricity Board. For a national undertaking as this, augmenting the nation''s wealth, the outlook attending the issue of foreign exchange can never be the outlook granting foreign exchange for an ordinary business deal between two private firms--one Indian and another American. Lalbhai had, and Serajuddin & Co. had not, foreign exchange in the recent past for the deals concerned. Therefore, this is one more ground which distinguishes the case before us from Golodetz''s.

It appears to be worthy of note as well that in Golodtez''s case one of the matters by which the Court of Appeal here felt overborne was the learned Advocate General''s concession before it "that the entire matter would be governed by the Indian law, the matter of arbitration by the Indian Arbitration Act and the other matters under the aforesaid contract by the Indian Contract Act" (63 C.W.N. 726). Furthermore, what required "some serious considerations" in Golodetz''s case was "that difficult question of the Indian Law of frustration of contract", "in some respects, at least, materially different from the English law on the point", and retaining "its complexities from various points of view, particularly, in the matter of its application" in spite of the pronouncement of the Supreme Court in Satyabrata Ghose v. Messrs. Mugneeram Bangur & Co., 1954 S.C.A. 187. And here ? Nothing of the kind; the Yugoslav materials and economical law instead, in which the arbitrators in Paris cannot be inconvenienced as the American arbitrators would have been in wrestling with the complex Indian law of frustration of contract in Golodetz''s case. No doubt, before the Supreme Court the concession attributed to the learned Advocate General was denied "upon an affidavit sworn by one Surhid Mohan Sanyal". But their Lordships did not think much of this affidavit, because of "a somewhat singular circumstance" of Sanyal having made no such assertion in his affidavit before this Court concerning the prayer for a certificate under article 133 of the Constitution, though ultimately the issue of "the law applicable to the contract" was kept open for the trial judge. So, here is still another feature for which the case before us stands on its own and distinguishes itself from Golodetz''s.

Mr. Mukherji submits that the appellant''s case resisting the stay of its suit is stronger, because no reference has yet been made to arbitration; whereas in Golodetz''s case the American arbitrators, by virtue of the reference made to them, were seized of the disputes already. What Mr.; Mukherji seeks to convey, as I understand him, is plainly this: ''In spite of an arbitration reference already made, Serajuddin & Co.''s suit was not stayed in Golodetz''s case. Will you grant a stay here with no arbitration reference yet ?'' Mr. Mukherji is right about the American arbitrators having had the disputes before them prior to the institution of the suit in this Court by Serajuddin & Co. What happened was that, disputes and differences having arisen between the parties, on or about January 15, 1958, Golodetz and others referred them "in terms of the contract to the arbitration of the American Arbitration Association in accordance with the rules thereof." (See the judgment of the trial judge, A.N. Ray, J., in Michel Golodetz and Others Vs. Serajuddin and Co., at page 130). Serajuddin & Co. instituted its suit on February 6, 1958. [See the judgment of the Court of Appeal (P.N. Mookerjee, J.''s) in Serajuddin and Co. Vs. Michael Golodetz and Others, ]. On February 13, 1958, summonses of the suit were duly served. On February 14, 1958, the tribunal clerk of the American Arbitration Association informed the parties that the arbitrators had "entered on the reference" which was set down on March 13, 1958, for hearing. No more need be stated in justification of Mr. Mukherji''s submission that the arbitration reference was already there when Serajuddin & Co. had instituted its suit in this Court. But what happened here ? On June 10, 1963, the appellant''s solicitors, Messrs. T. Banerji & Co., wrote to the respondent claiming on behalf of the appellant Rs. 2,73,343 "in respect of claim in which account had been made". 17 days later, to be exact, on June 27, 1963, a telegram from the respondent answered the solicitor''s letter. Its burden is: ''Your client''s claim is under dispute. Want to pursue it ? Then, submit your claim to our principal (Invest Import) at Beograd (Belgrade) where the contract was signed''. The same day, a letter was sent in confirmation of the telegram which was incorporated therein. 7 days earlier than that, namely, on June 20, 1963, the respondent had sent a detailed reply to the claim by the appellant of Rs. 2,73,343--a letter which the appellant took good care to suppress in its application for injunction. From June 27 onwards the appellant was biding its time, not submitting the dispute to arbitration in terms of the arbitration clause, no informing the respondent what it thought of the letter of June 20 or the telegram of June 27, till it presented its plaint on August 1, 1963. And once the suit was filed and proceeded with, an interim injunction having been obtained on the day following, naturally the respondent was ''up and about'' resisting it, an interim stay having been obtained on August 9, 1963, and having been made absolute on January 10, 1964. An appeal followed soon enough on May 5, 1964, preceded by the usual stay. So, where was the opportunity to refer the matter to arbitration ? And what is its relevancy either ? Golodetz was swift in having referred the disputes to arbitration on January 15, 1958--some 22 days ahead of the filing of the suit by Serajuddin & Co. on February 6 following. The respondent was not. It could not be either. It was awaiting the appellant''s reply to its letter of June 20 and its telegram of June 27. For having expected a little normal courtesy of the appellant and its solicitors in the shape of a reply, whatever it be, surely the respondent does not forfeit its right under the arbitration clause of the contract which binds both--the respondent as much as the appellant. The appropriate reference will be made hereafter. Not making a reference in the circumstances can hardly be a ground for refusing to stay the suit. Then, in a litigation, the case is not to the swift, but to the just. Golodetz was swift, but his cause was found not just, without any fault of his own. He therefore lost. The appellant has not been swift in making a bee-line for the Paris arbitrators, and for good reasons too. But his cause is just. He therefore wins.

The next decision cited is (18) The Fehmarn, [1957] 2 All E.R. 707, "not at all an easy matter to determine", as the trial judge, Willmer, J., observed more than once. There a cargo of about 500 tons of turpentine in bulk in apparent good order and condition was loaded in the Russian port of Ventspils by a Russian shipper on board the Fehmarn, a ship owned by the defendants, a German company, for being delivered at the port of London "in the like good order and condition". "The plaintiffs, an English company, purchased the cargo and became the holders of the bill of lading, thereby agreeing to be bound by" "a very large assortment of terms, conditions and exceptions" on the back thereof. One such term (No. 26) bore:

All claims and disputes arising under and in connexion with this bill of lading shall be judged in the U.S.S.R.

At the port of London the cargo was discovered to be contaminated. And as usual the damage was surveyed. On allegations as these the plaintiffs had issued a writ claiming damages against the German owners of the Fehmarn, the defendants, who in turn moved to set aside the writ and to stay all subsequent proceedings in the plaintiff''s action. Upon these facts, the considerations which were to be borne in mind in exercising the discretion of staying or not staying the suit concerning a bargain "treated as equivalent to an arbitration clause" were so even. On the plaintiffs'' side were to be reckoned--

They were persons domiciled in England.

The claim arose in England.

The damage sued for was discovered just there.

In England too the cargo was surveyed and the damage ascertained.

Vertually all the evidence the plaintiffs would call was to be found just there.

The evidence about the condition of the cargo on shipment at the Russian port would of course be not found in England. But the representation in the bill of lading that the cargo was shipped in apparent good order and condition was there to be relied on by the plaintiffs in the first instance.

No hardship to the defendants who as Germans were equally foreigners in Russia and England. Therefore it was no worse for the defendants to try the case in Russia than it was to try the case in England; the more so, as the ship was neutral, neither Russian nor British, but German.

On the defendant''s side were to be stressed--

The parties had by agreement selected a foreign tribunal: the Russian Court.

The defendants would call evidence to show that the railway wagons in which the cargo was delivered to the ship were themselves contaminated, so that the Fehmarn was not answerable for the contamination found and alleged.

The defendants were entitled to fight their case with all the weapons at their disposal. And the weapon they chose for the motion was perfectly a legitimate weapon to use. Not that their principal object was not to achieve a trial in Russia, but merely to make it more difficult for the plaintiffs to assert their claim.

They acted bona fide.

What, amongst others, tilted the balance, in favour of the plaintiff''s action continuing, was the find through the solicitors'' correspondence that even the defendants, presumably Germans as they were, did not really want the case to be tried in Russia. In the end, that made not "an easy matter" perhaps easy of solution. Nothing like that can be attributed to the defendant here: the respondent before us. Nor can it be said that to stay the suit in hand would be depriving the plaintiff (the appellant) "of any remedy at all", as it was said of the plaintiffs in The Fehmarn. We see nothing on which we can apprehend that the appellant will not get a fair and undiluted justice in Paris or that the appellant will not be able to present its case there.

The German shipowners appealed. But that came to little. The appeal was dismissed. And leave to appeal to the House of Lords was refused. One of the reasons which weighed with the Court of Appeal was the solicitors'' correspondence leaving in the mind of their Lordships the impression, just as it did in Willmer, J.''s mind, that the German shipowners did not object to the dispute being decided in the English Courts: (19) The Fehmarn, [1958] 1 All E.R. 333 at page 336 where Lord Denning expressed himself so.

Such then is the position in facts and at law. Here is a contract sloemnly entered into between the appellant, an Indian company, and the respondent, a Yugoslav company, in aid of another contract entered into between the latter and the State of Bihar through its Electricity Board for ereetion of a thermal power station at Barauni. What a valuable possession for the nation such thermal power station means is plain to be seen. We do not, the Yugoslavs do, know the know-how of erecting a thermal power sattion. Hence they are here on the role of collaborators to help us make such an invaluable acquisition. And to get it built the authorities spare from their none too adequate resources the requisite foreign exchange for the appellant''s managing director, Lalbhai, in order to enable him to proceed to Belgrade with a view to signing the contract which he does, his signature being "only one centimetre away" from the contract''s arbitration clause. That does not daunt him. He is one whom the sanctity of his signature does not hold. The same day he writes a letter (as he says) to the respondent. By this letter he communicates: ''the arbitration clause was deleted from our revised draft''. He gets no response, but gets into the work all the same, to raise this sort of unilateral deletion a little more than two years after that, when he raises his suit. He must be, and is, held to his contract. He is held so, not only because of the contract, but also because of our consideration of "all the circumstances of the case with a strong bias in favour of maintaining the special bargain between the parties", no less because of our "vigilance to see'' that we are not driving him and his company, the appellant before us, to a tribunal (the International Chamber of Commerce in Paris) where they will not get substantial justice: just the test laid down by Lord Moulton in his speech in Bristol Corporation v. John Aird & Co., [1913] A.C. 241 at page 259. We realize, it is no good saying, as has been said, that the appellant entered into the contract with its eyes wide open. Its eyes were equally wide open to the law of the land, as Mr. Mukherji righlty rejoins. And the law of the land is: the Court will go all out to afford protection to a party by refusing to stay its suit and thus not enforcing the bargain, "if in any particular case it would be unfair to allow the arbitration", to quote from the speech of Lord Parker of Waddington in Bristol Corporation''s case ante. It is well to remember too if the contract contains visible terms, of which the arbition clause is one, it contains at least one invisible term as well. That term is: be it u/s 34 of the Arbitration Act or section 151 of the Procedure Code, or be it, "in truth, that power and duty" "under a wider general principle" as MacKinnon, L.J., put it in the Race course Betting Control Board case (supra), given proper facts, the Court releases a party from the bargain and suffers it not to be enforced. By law of the land, that is part of the bargain itself. To quote Lord Moulton again from his Lordship''s speech in Bristol Corporation''s case (supra),

Therefore to say that if we refuse to stay an action we are not carrying out the bargain between the parties does not fairly describe the position. We are carrying out the bargain between the parties, because that bargain to substitute for the courts of the land a domestic tribunal was a bargain into which was written, by reason of the existing legislation, the condition that it should only be enforced if the court thought it a proper case for its being so enforced.

The difficulty of the appellant is that in all circumstances here the Court thinks it a proper case for the contract being enforced, that in all circumstances here not to allow the arbitration will be unfair, and that, conversely, to allow the arbitration will be so fair. More, this litigation has a special feature which distinguishes it from litigations founded on ordinary commercial transactions between two private persons. With foreign collaboration we so badly need, one member State of the larger Welfare State (which is India) is adding to the national wealth by having a thermal power station. It is, therefore, not only common sense but also common honesty that no attempt should be made, or if made countenanced, to flee the terms of the contract except in exceptional circumstances which we do not see upon the whole of the materials we have had put before us. It is a relief to find that law marches with common sense and common honesty.

Appeal No. 110 will, therefore, fail.

To appeal No. 111 now: an appeal from an order too dismissing the appellant''s application for a temporary injunction.

While dealing with the other appeal, the allegations the appellant makes have been assumed to be true. Such assumption cannot avail the appellant in this appeal where interference by injunction is sought. A discretionary interlocutory relief as this is founded upon the existence of a legal right. It is therefore incumbent upon the appellant to show a prima facie case in support of the claim it makes. Not that the appellant will have to prove its case right now. But satisfy the Court it must that it has a fair question to raise as to the existence of the legal right it sets up, and that there are substantial grounds to doubt the existence of the right its adversary, the respondent, alleges.

Judged by such well-known tests, how does the appellant''s case stand prima facie for the purposes of this interlocutory matter only, and for no other ? Take the earliest distinct oral agreement of September 1961 subsequent to the contract. Repair of damaged materials, as the appellant alleges, comes very much indeed within paragraph (8), article 3, of the contract. And still the respondent would agree "in or about September 1961" to pay the appellant Rs. 75,000 out of the insurance money of Rs, 1,00,000 for which, of course, the premium was paid by the respondent, not the appellant ! It is difficult to say that the appellant has a prima facie case here. And that difficulty is enhanced by its having suppressed the respondent''s cogent letter of June 20, 1963, by which it gave a well-reasoned reply to this claim of the appellant. This manner of suppression per se disentitles the appellant to the discretionary relief it prays the Court for.

Chronologically, take then the three post-contract agreements of January 6, 1962, by the first of which a claim is laid at Rs. 42,595.00 for carrying materials for more than 5 times the distance of 100 metres. The contract, the appellant says, provides for carriage of materials within a radius of 100 metres only. Hence, it is said, the respondent had agreed to pay the appellant so. For the purposes of this interlocutary matter only, and for no other, there are reasons why it cannot be held that the appellant has a prima facie case as respects this claim. First: the relevant article of the contract--article 2 (d)--does not prescribe what the appellant says it does. It says:

Art. 2.

Contract assignment and liabilities. * * * *

(d) Transport of equipment and materials from the place of storage to place of inbuilding. The equipment shall be stored at the distance of 100 m. from the in building place.

Storage was the appellant''s assignment. Storage was the appellant''s liability too. Yet, if the appellant had stored the materials beyond 100 metres, it did so at its peril. Second: on the respondent having required the appellant to transport materials from a place five times or more the distance of 100 metres, the claim was initially laid on May 28, 1963, at Rs. 51,343.00 (not Rs. 42,595.00). By its letter of June 20, 1963, again, the respondent denied it and said:

Impropriety of this request was already explained to your representatives in Barauni, during the discussion in May, 1963.

Third: suppression of such a letter tells heavily against the appellant moving in the discretionary jurisdiction of the Court.

The second of the three ''January 6'' agreements is the cutting of firebricks by the appellant in order to conform them to proper size and specification, for which the respondent is said to have agreed to pay Rs. 3,625.00, treating the work as extra. In view of the comprehensive provision made in paragraph (8) of article 3 of the contract for "extra stipulated jobs", prima facie and prima facie only, and that too for the purposes of this interlocutory matter (and for no other), it is hard to believe the existence of a parole agreement of this nature. Again, it is not in the character of demand sent by the appellant on May 28 and 29, 1963. Did this cause of action arise then after that when the parties were at arm''s length from one another without signs of work visible anywhere ?

The third of these three ''January 6'' post-contract agreements relates to the extra welding, drilling and cutting etc. of materials other than those agreed to be supplied--for which the respondent, it is said, had agreed to pay the appellant Rs. 40,000.00 treating the work done as extra. "Extra stipulated jobs" attract as noticed, paragraph 8 of article 3 of the contract. Such extra jobs there were in fact and paid for too, the total amount coming to Rs. 17,096.00. Not in the charter of demand of May 28 and 29, just noticed. The same consideration again as in the preceding post-contract agreement of January 6. Prima facie, and only prima facie, the appellant does not seem to have a case for this oral agreement by which the respondent is said to have agreed to pay not a rupee or two, but Rs. 40,000.00, apart from Rs. 17,096.00 for extra work done in terms of the contract.

To two post-contract agreements of October 4, 1962, now. By the first, it is said that the respondent had agreed to pay the appellant Rs. 20 a ton over and above the contract rate of Rs. 155 a ton for 3,500 tons of iron and steel structures. By the letter of June 20, 1963, (which the appellant suppressed) the respondent had made it clear that such an "increase of the contracted price" was never accepted, but that a discussion why the rate-lift was demanded would be welcomed. The respondent in the 9th paragraph of its affidavit-in-opposition, affirmed by Panich (with whom we are so familiar by now), reiterates it, including an invitation for a discussion "by way of good gesture" and affirms this claim of Rs. 70,000.00 (Rs. 20 multiplied by 3,500) to be fictitious. It is not necessary to go as far as that. Suffice it to say, it looks prima facie improbable that the respondent had agreed ever to such rate-lift. And then why suppress such a letter ? Prima facie, to make the weak appear as strong. Rs. 70,000.00 in excess of the contract rate and by word of mouth only !

Another sum of Rs. 40,000 and by word of mouth too is said to be the subject-matter of the other parole agreement of October 4, 1962, for special type of insulation work. Here also suppression of the respondent''s telling letter of June 20, 1963, dwelling on Lalbhai''s presence at Belgrade, inspection by him of all the erection drawing etc., with no denial by Lalbhai, prima facie tells heavily against the appellant.

On an unspecified date, the respondent, it is said, had agreed to pay the appellant Rs. 7,000.00 for sheeting work and Rs. 37,000.00 for painting the boiler drums etc. Suppression again of the respondent''s letter of June 20, 1963 ! Asbestos sheeting for the conveyors the respondent could not agree to accept. Inclined conveyors were made of steel and "sheeted with sheet-metal". So, to the respondent, such claim for sheeting work was "quite ununderstandable." Paragraph 5 of article 2 of the contract:

The contractor is liable to perform painting of all the boiler plant parts by means of his labour, tools and paint....

which the respondent quoted and stressed in its letter of June 20 (suppressed by the appellant) falsifies a prima facie case for the appellant on this point.

On the appellant''s allegation that the respondent has been withholding Rs. 1,623.00 paid by the State Government for the appellant''s labour having struck work in May 1962, the respondent affirms that no payment has been received yet from the authorities. In absence of further and better evidence, a prima facie finding against the appellant is indicated.

Enough of detail has been entered into, though a few more are left out still. Let them remain so, taken into consideration though they have been. If it is difficult to say prima facie--as indeed it is--that the parties bound by an elaborate contract, to sign which one had to go to Yugoslavia from India, would enter into a series of parole contracts involving lakhs of rupees, it is difficult to say too that the appellant has succeeded in showing a prima facie case or the existence of a fair question to be raised. Soon soon as that is said, a temporary injunction is out of the question. Deliberate suppression of the respondent''s letter of June 20--and how important the letter is has been noticed--also disentitles the appellant to this discretionary relief. Again, it is far from true to say, as it seems prima facie, that the respondent is winding up its affairs in India or has no assets here save the contract with the Bihar State Electricity Board. On the contrary, its assets appear to be vast. So, an injunction is out of the question that way too, even if the appellant had a prima facie case, which it has not. The court below has, therefore, been plainly right, in the exercise of its discretion, in refusing an injunction.

Once more it is emphasized that the observations that go before are for the purposes of this interlocutory matter of an injunction only, and for no other.

Therefore, appeal No. 111 also fails. In the result, both these appeals (110 and 111 of 1964) are dismissed with costs.

Certified for two counsel in Appeal No. 110 of 1964.

G.K. Mitter, J.

I agree.