Kanpur Agra Transport Corporation v. United India Insurance Co. Ltd. & Another

Majumdar, J.

1. The plaintiff-respondents in or about June 1982 instituted a suit against the defendant-appellant for a decree for Rs. 87, 266.84 in favour of the plaintiff 1 or the plaintiff 2 (i.e., the respondents before us); in the alternative, enquiry into the compensation payable by the defendant (i.e., the appellant before us) to the plaintiffs for the loss and damages suffered and decree for the sum so found due on such Enquiry, Receiver, Costs etc. The fact of the case is that on or about Sept. 8, 1980 the plaintiff No. 2, Kesoram Industries and Cotton Mills Ltd., delivered to the defendant at Tribeni 72 cases, stated to have contained Viscose Rayon Yarn, for carriage and delivery to the plaintiff to Kesoram Industries and Cotton Mills Ltd. at Amritsar. The defendant accepted the said goods for carriage. On Sept. I3, 1980 the truck carrying the said goods met with an accident, as a result of which some of the goods were damaged. On Jan. 12, 1981 the plaintiff No. 2 lodged a claim for Rs. 79, 578.13 with the defendant. The defendant, however, by a letter dt. Jan. 17, 1981 repudiated the claim of the plaintiff No. 2 and requested the said plaintiff to realise their claim, if any, from the under writers. The defendant also repudiated the claim in the suit and denied their liability to compensate for loss or damages said to have been suffered by the plaintiff No. 2.

2. The writ of summons in this suit was served on the defendant on June 28, 1982 and the appellant (i.e., the defendant) took out an application under S.34 of the Arbitration Act on July 27, 1982 for staying the suit instituted by the plaintiffs by contending that the transaction between the parties were governed by the Consignment Note No. GR No. CAL 29373 dt. Sept. 8. 1982 which, inter alia, contained an arbitration clause to the effect that : "All disputes with respect to the subject matter of this GR shall be got decided by reference to arbitration. The Manager of the Company shall be the Arbitrator whose decision shall be binding on both parties".

3. The respondent before the trial Court (i.e.. the respondent No. 1 before us) opposed the said application made under S.34 of the Arbitration Act on the grounds, inter alia, that there was no arbitration agreement between the parties and that even if there was such agreement that was vague and uncertain. The respondent also contended before the trial Court that in any event the petitioner (i.e., the appellant before us) at the time of commencement of the proceedings and still thereafter was not ready and willing to proceed with the arbitration. The respondent also had taken another point before the trial Court that since the Arbitrator, according to the arbitration clause if there was a definite and certain arbitration agreement, was an Officer of the appellant petitioner and as such the said Arbitrator was likely to be biased and he might not act in a fair manner while determining the claim of the respondent.

4. The plaintiff 2 in the suit subrogated and or assigned all its rights, title, interest and benefit to the plaintiff 1 in the suit (i.e., the respondent 1 before us) in respect of the damaged goods and proceeds thereof and all rights, reliefs, actions, claims and remedies in respect thereof which the plaintiff 2 would have against the defendant in the suit (i.e., the appellant before us) for the said loss and damages.

5. The learned Judge held that the arbitration agreement sought to be relied on by the appellant was not clear as to which particular Manager the parties had in mind as arbitrator and as such the said arbitration agreement was vague and uncertain. The learned Judge also held that the appellant petitioner was not ready and willing to refer tile dispute to arbitration as and when the claim was preferred. Accordingly, the learned Judge dismissed the application taken out by the appellant holding that the appellant petitioner was not entitled to an order on that application. Hence this appeal.

6. The appellant before us has now challenged the said Judgment and Order under appeal on the ground that the learned Judge did not appreciate the terms of the arbitration agreement relied on by the appellant and according to the appellant, there is no ambiguity in the arbitration agreement as it would appear from the arbitration agreement that "the Manager of the Company shall be the Arbitrator". It was also contended on behalf of the appellant that the appellant was also ready and willing to proceed with the arbitration and that would be evident from the conduct of the appellant that the appellant took out an application under S.34 of the Arbitration Act for staying the suit instituted by the plaintiffs as there was an arbitration agreement between the parties as contained in the said Consignment Note and the subject matter of the suit was also covered by the said arbitration agreement.

7. On the question of uncertainty and vagueness of the arbitration agreement, Mr. Girish Gupta, learned Counsel for the appellant has relied on a decision of this Court in the case of Shree Bhowani Cotton Mills v. Union Textile Traders, reported in AIR 1966 Cal 588 [LQ/CalHC/1965/277] . In that case, the arbitration agreement was to the effect that in case of an dispute arising out of the contract the matter in dispute would be referred to the arbitration of the Indian Chamber of Commerce whose decision should be binding on both the parties. Construing that arbitration agreement, this Court held that the parties understood where the disputes were to be referred and to whom and as such there was no vagueness or uncertainty in that agreement. The Court observed in that case that the correspondence between the parties indicated that the parties had no difficulty in identifying the Indian Chamber of Commerce at Calcutta as the agreed arbitral authority.

8. The next decision cited by the learned Counsel for the appellant is in the case of Luxmi Chand Baijnath v. Kishanlal Sohanlal, reported in AIR 1955 Cal 588 [LQ/CalHC/1954/292] . There, the arbitration clause was to the effect that reference of dispute was to "X" or "Y" and this Court held that under such arbitration agreement two arbitration tribunals could not have concurrent jurisdiction over the identical subject-matter at the same time and hence an agreement to refer dispute to "X" or "Y" was not valid. The learned Counsel for the appellant, in this connection, contended that there it was not certain as to which particular Tribunal the parties intended to have their disputes referred and as such there was some uncertainty in such arbitration agreement. But, according to the learned Counsel for the appellant, in the present case there is no such vagueness or uncertainty in the arbitration agreement as it was clearly stipulated that the Manager of the Company shall be the Arbitrator. The learned Counsel for the appellant has also referred to another decision of this Court in the case of Gokul Chand Ratan Chand v. Ram Chand Kapoor, reported in AIR 1955 NOC (Cal) 4286, which is also on the question of vagueness and uncertainty of an arbitration agreement.

9. The learned Counsel for the appellant has also referred to another decision of Allahabad High Court in the case of Radha Kishan v. Sapattar Singh, reported in AIR 1957 All 406 [LQ/AllHC/1957/89] . There, it was found by the Allahabad High Court that the parties sought to introduce some evidence to vary or alter the terms of the arbitration agreement and that was not permissible under the Evidence Act. It was also noted by the Allahabad High Court, in that case, that omission to state actual points of dispute in the arbitration agreement did not amount to uncertainty. This case has been relied on by the learned Counsel for the appellant in support of his contention that the respondent in their affidavit-in-opposition has indicated that the appellant had several branches throughout the country and it was not certain as to Manager of which branch of the petitioner would be the Arbitrator. The learned Counsel for the appellant contended that the arbitration agreement was clear which stipulated that "the Manager of the Company" would be the Arbitrator and hence no external evidence should be allowed to be forthcoming.

10. On the question of readiness and willingness it has been contended by the learned Counsel for the appellant that the appellant repudiated the claim. So the appellant was not under any obligation to ask the respondent to refer the dispute to arbitration. When there was a dispute raised by the appellant it was for the respondent to invoke the arbitration agreement when, according to the appellant, there was an arbitration agreement between the parties. Therefore, according to the learned Counsel for the appellant, as soon as the appellant came to know about the filing of the suit in disregard of the arbitration agreement between the parties the appellant took out an application under S.34 of the Arbitration Act for staying the suit and from that it can be inferred that the appellant was ready and willing to proceed with the arbitration.

11. Mr. Bimal Chatterjee with Mr. Jisnu Saha appearing for the respondent has contended that the arbitration agreement on the face of it is vague and uncertain as it is not clear from the arbitration agreement as to the identity of the Arbitrator. According to the learned Counsel for the respondent, it was not in dispute that the appellant had several branches throughout the country and that each Branch is managed by an individual, may be designated as Manager or Officer-in-Charge. Therefore, it is not certain from the arbitration agreement as to which particular Manager was intended to be the Arbitrator to adjudicate the disputes between the parties in terms of the said arbitration agreement. The learned Counsel for the respondent also relied on the decision of this Court in the case of Shree Bhowani Cotton Mills (AIR 1966 Cal 588 [LQ/CalHC/1965/277] ) (supra), which has been relied on by the appellant. The counsel submitted that there the Court found that parties were clear about the identity of the arbitral authority.

12. On the question of readiness and willingness the learned Counsel for the respondent has relied on a decision of the Supreme Court in the case of State of Punjab v. M/s. Geeta Iron and Brass Works Ltd., reported in AIR 1978 SC 1608 [LQ/SC/1977/297] . In that case, the Supreme Court observed that one weighty factor was to find out whether the party who invoked the arbitration clause had expressed its readiness to rely on it at the earliest stage. The Supreme Court also observed that as a matter of law mere silence on the part of the defendant when a notice under S.80 of the Code of Civil Procedure was sent to him may not, without more, disentitle him to move under S.34 and seek stay.

13. The learned Counsel for the respondent has also relied on another decision of the Bombay High Court in the case of Union of India v. M/s. Jaimspex Wires Traders, reported in AIR 1983 Bom 169 [LQ/BomHC/1982/433] . In that case, there was notice served under S.80 of the Code of Civil Procedure and no reply was given to such notice. The suit was filed against the Government and the Government came up with an application for stay on the ground that the contract contained an arbitration clause. The Bombay High Court refused the stay holding, inter alia, that Government had not merely failed to reply to the said notice under S.80 of the Civil P.C. but had also failed to indicate at any stage during the period of nearly three years from the date of the notice till the filing of the suit its willingness to go to arbitration. The Court also held that the appellate Court should not necessarily interfere with the discretion exercised by the trial Court if it is found that the discretion has been exercised by the trial Court reasonably and in a judicial manner.

14. The learned Counsel for the respondent has also argued, although such point was not taken before the trial Court, that if there is any possibility of claim being barred then the Court should not ordinarily make an order staying the suit. In this connection, the learned Counsel has, referred to a decision of this Court reported in AIR 1970 Cal 484 (sic), Steel, Plant v. Swastika Allied Steel. The learned Counsel for the respondent has also submitted that there was also an apprehension of bias against the arbitrator named in the arbitration agreement if it is found that the arbitration agreement is not uncertain and vague. In support of this the learned Counsel has referred to a Supreme Court decision reported in AIR 1967 SC 249 [LQ/SC/1966/124] (sic). The learned Judge has however discussed the pointof bias but the learned trial Judge proceeded on the basis while dismissing the appellants application for stay that the appellant was not ready and willing, and the arbitration agreement sought to be relied on by the appellant was vague and uncertain.

15. The principles for grant of stay or refusal of stay are fully indicated in the Supreme Court decision in the case of Anderson Weight Ltd. v. Moran and Co., reported in AIR 1955 SC 53 [LQ/SC/1954/157] . The Supreme Court has indicated the principles that should govern the application under S.34 of the Arbitration act. The Supreme Court observed as follows (at p.55):-

"Thus in order that a stay may be granted under this section, it is necessary that the following conditions should be fulfilled:

(1) The proceeding must have been commenced by a party to an arbitration agreement against any other party to the agreement;

(2) The legal proceeding which is sought to be stayed must be in respect of a matter agreed to be referred;

(3) The applicant for stay must be a party to the legal proceeding and he must have taken no step in the proceeding after appearance. It isalso necessary that he should satisfy the Court not only that he is but also was at the commencement of the proceedings ready and willing to do every thing necessary for the proper conduct of the arbitration; and

(4) The Court must be satisfied that there is no sufficient reason why the matter should not be referred to an arbitration in accordance with the arbitration agreement."

16. It appears that in order that a stay may be granted under this section, it is necessary that the proceeding must have been commenced by a party to an arbitration agreement and legal proceeding which is sought to be stayed must be in respect of a matter agreed to be referred and further the applicant had not taken any step in the proceeding after appearance and was ready and willing at the commencement of the proceeding and was still ready to do everything necessary for the proper conduct of the arbitration. Finally the Court must be satisfied that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the arbitration agreement.

17. It appears to us that from the agreement between the parties referred to above it will appear that there is no certainty about the identity of the arbitrator. The agreement sought to be relied upon by the party in the arbitration agreement stipulates that the Manager of the Company shall be the arbitrator but it is an admitted position that the appellant has several branches throughout the country and it cannot be inferred from the arbitration agreement as to who is the arbitrator in terms of the said arbitration agreement. It also appears that this arbitration agreement was contained in a Consignment Note dt. 8th Sept., 1982 where the transaction took place between the parties in or about 1980. Therefore, it is not clear whether this particular arbitration agreement governed the transaction between the parties which took place in 1980. The learned Counsel for the appellant has however, contended that the date in the consignment note which is at page 15 of the paper book is a mistake. It should be 8th Sept., 1980 and such date also appears in the middle of the consignment note. The appellant however in this petition in para 2 had mentioned the consignment note as Consignment Note No. GR No. CAL 29373 dt. 8th Sept., 1982. Therefore, it is not clear as to what was the exact date of the consignment note. In any event, it appears to us that the identity of the arbitrator is not clear from the arbitration agreement and therefore, we hold that the learned Judge was right in holding that the arbitration agreement was uncertain as the agreement was not clear as to which particular Manager the parties had in mind.

18. On the readiness and willingness we also agree with the learned Judge that the appellant was not ready and willing to proceed with the arbitration both at the time of commencement of the proceeding and also thereafter. We have looked into the correspondences exchanged between the parties and we have not seen any mention of the arbitration agreement in any of such correspondences exchanged between the parties. It will appear from the correspondence that the appellant had repudiated the claim of the respondent and asked the plaintiff 2 in the suit to approach the underwriters for the satisfaction of their alleged claim. In other letters as disclosed the appellant took the attitude that they were not liable for the plaintiffs claim and they totally repudiated the plaintiffs claim and also contended that it was for the plaintiff to look to the underwriters for satisfaction of their claim if there was any. In none of the correspondence it was mentioned by the appellant that there was an arbitration agreement between the parties and that the respondent could refer the disputes in terms of the arbitration agreement. From this conduct of the appellant we have no hesitation to hold that the appellant never intend to inform if there was any such agreement between the parties. It also appears that the appellant was never ready and willing to proceed with the arbitration at the time of commencement in this proceeding and also thereafter.

19. The power of the Court under S.34 of Arbitration Act to stay or not to stay the suit is within the absolute discretion of the Court. It is ordinarily not open to the appellate Court to substitute its own exercise of discretion for that of the trial Judge, unless it appears to the appellate Court that trial Court exercised its discretion unreasonably or capriciously, or by adopting some unjudicial approach. We, however, do not find in the present case any wrong exercise of discretion on the materials on record. Moreover, the trial Courts finding that the appellant was not ready and willing to go to the arbitration was a finding of fact, and we do not see any reason to interfere with such finding, as such finding, in our opinion, is no arbitrary nor perverse.

20. We agree with the learned trial Judge that the arbitration agreement sought to be relied on by the appellant was vague and uncertain. We also agree with the learned trial Judge that the appellant was never ready and willing to proceed with the arbitration assuming that there was an arbitration agreement between the parties.

21. We affirm the judgment and order of the learned trial Judge dt. 29th Aug., 1984. This appeal is dismissed. There will be no order as to costs. All interim orders are vacated.

22. The counsel for the appellant prays for a certificate granting leave to appeal to the Supreme Court which we refuse as, in our opinion, there is no substantial question of law of general importance which needs to be decided by the Supreme Court.

23. The operation of the order will remain stayed for three weeks from today.

24. Abani Mohan Sinha, J.

I agree.