: R. Sim & Co. vs. Respondent: Pak. Industries (Jute Mills) Ltd.

HIGH COURT OF EAST PAKISTAN

Appeal from Original Order No. 6 of 1953

Decided On: 17.02.1956

Appellants: R. Sim & Co.
Vs.
Respondent: Pak. Industries (Jute Mills) Ltd.

**Hon’ble Judges:**Amin Ahmed, C.J. and Murshed, J.

Counsels:
For Appellant/Petitioner/Plaintiff: Suresh Chandra Bose

For Respondents/Defendant: Sisir Kumar Sen

JUDGMENT

Murshed, J.

1. This appeal is directed against the judgment and order passed by Mr. F.A. Ahmed, Subordinate Judge, 4th Court, Dacca, in Title Suit No. 99 of 1952, on 1.7.52. The material facts, in so far as they are relevant for the purpose are that the plaintiff appellant Messrs. R. Sim & Co., Narayanganj entered into a contract with the defendant Messers Pak Industries (Jute Mills) Ltd. Narayanganj on the 5th March, 1951. This contract, which is marked Ext. 3 in this case, sets out the terms and conditions which are to bind the parties. According to this contract the defendant agreed to deliver 250 bales of jute of a quality described as ‘white bot’ to the plaintiff at a price of Rs. 40/- per maund.

2. Clause 12 of the said contract provides as follows:–

“All matters, questions, disputes, differences and/ or claims arising out of and/ or concerning and/ or in connection with and/ or in consequence of or relating to this Contract whether or not the obligations of either or both parties under this contract be subsisting at the time of such dispute and whether or not this Contract has been terminated or purported to be terminated or completed shall be referred to the arbitration of the Dacca-Narayanganj Chamber of Commerce under the rules of its Tribunal of arbitration for the time being in force and according to such rules the arbitration shall be conducted.”

3. Inasmuch as the aforesaid contract provides for a reference of disputes arising out of the contract to the arbitration of the Dacca Narayanganj Chamber of Commerce under the rules of its Tribunal of arbitration for the time be in force, it is necessary to notice the rules of the said Tribunal of arbitration.

4. The rules of the Tribunal of arbitration adopted by a resolution passed at a Special General Meeting held on the 17th day of January, 1950, as amended at a Special General Meeting held on the 8th day of December, 1951, are marked Ext. 4 in this case. The terms of the contract (Ext. 3) and the rules of the Tribunal (Ext 4) are admitted by both parties.

5. The rules (Ext. 4), inter alia, provide as follows:–

“…

V (4) The names or name of the persons constituting a Court shall not ordinarily be disclosed to the parties nor shall the parties he entitled to such information as of right. In the event of any of the parties applying on special grounds (to be specified in writing to the Registered) for the disclosure of the said names or name the decision as to whether such disclosure shall be made or not shall rest in the absolute discretion of the Registrar. The non-disclosure of the said names or name shall not in any case affect the validity of the arbitration proceedings, or any award therein to afford ground of objection to the filing of the award.

XV. The dispute will normally be decided by the Court on the written statements of the parties and oral evidence will not be taken nor will be parties be entitled to appear, or any formal hearing be held. The Court shall have power if it thinks fit to appoint a time and place for the hearing of the reference and to hear oral evidence.

…

XXVIII. The parties shall in all things abide by and obey the award, which shall be binding on the parties and their respective representatives notwithstanding the death of any party before or after the making of the award, and such death shall not operate as a revocation of the submission.

XXIX. Whenever an award directs that a certain act or thing shall be done by one party to the reference, e.g., delivering or taking (with or without allowance) delivery of goods and such party fails, to comply with the award, the party in whose favour the award, is made may make a fresh application for a further award determining the amount of damages or compensation payable by reason of such failure and the Registrar, on respect of such application shall proceed to constitute a new Court which may not consist of the same or of one or more of the members constituting the Court who made the first award, and the new Court shall proceed under these rules to arbitrate on the said application and the award thereon may be filed separately or together with the original award.

6. As differences arose between the parties in respect of the said contract as to the quality and condition of the jute which was being delivered to the plaintiff, a reference was made to the Tribunal of arbitration of the Dacca Naragonj Chamber of Commerce by the plaintiff to decide the dispute placed before it.

7. Accordingly, the Tribunal of arbitration of the Dacca-Naragonj Chamber of Commerce made an award dated 11.4.51. This award is marked Ext. 5 in this case. The terms and provisions of this award are not disputed by the parties. The aforesaid award (Ext. 5) provides, inter alia, as follows:–

“2. That the buyers shall have the following options to be declared within seven working days from the date of this award:

(a) That the buyers may accept the aforesaid 250 Kucha bales at the contract rate subject to the following allowances:–

An allowance of Rs. 1/8/- per maund for low quality and, in addition thereto, another allowance of Rs. 3/13/6/- per maund for excessive moisture.

(b) That (subject to all bales opened for inspection and arbitration purposes being retained and paid for at the contract rate subject to the aforesaid allowance) the buyers may reject the said jute and treat that portion of the contract as cancelled, and charge the sellers market difference at the rate of Rs. 28/- (Rupees twenty eight) per maund; or

(c) That (subject to all bales opened for inspection and arbitration purposes being retained and paid for at the contract rate subject to the aforesaid allowances) the buyers may reject the said jute and claim a fresh tender within seven working days from the date on which the option is declared;

3. That in the event of the buyers exercising option (b) or (c) above

(i) The sellers shall:

(a) forthwith refund to the buyers such sums as may have been paid by the buyers to the sellers in respect of all the intact bales now remaining with the buyers out of the said 250 kucha bales together with interest at the rate of 6% per annum on such as aforesaid from the date of payment by the buyers until the date of this award;

(b) pay to the buyers all costs of unloading, stacking and reloading the rejected bales, together with the insurance, charge and/or freight incurred thereon;

(c) remove from the buyers' Premises/Press House within five days from receipt of the delivery order mentioned in clause 3(ii) hereof, all the intact bales remaining with the buyers out of the said 250 kutcha bales; and

(ii) The buyers shall, upon receipt of payment as aforesaid, forthwith hand over to the sellers a delivery for all the intact bales lying in the buyers' possession out of the said 250 Kutcha bales;”

After the aforesaid award was made the plaintiff, Messrs. R. Sim & Co. Ltd. Narayanganj, under the terms of clause 2(b) of the said award cancelled the contract, rejected the jute which was the subject matter of the said contract and applied to the Dacca Narayanganj Chamber of Commerce for a further award under the rules of its Tribunal of arbitration to enforce the obligations of the defendant in terms of the said award.

8. On 3.8.51 the Tribunal of arbitration of the Dacca Narayanganj Chamber of Commerce made a further award which is Ext. 5A in this case.

9. At the instance of the plaintiff the said Tribunal applied on 29.9.51 to Court under section 14(2) of the arbitration Act to file the further award dated 3.8.51, that is, Ext. 5A in this case.

10. On receipt of the application filed by the Tribunal the learned Subordinate Judge, 4th, Court, Dacca, issued notices to parties, and a notice was, in fact, served on the defendant on 20.11.51. The said application of the Tribunal was registered as Title suit No. 99 of 1952 in which Messrs. R. Sim & Co. Ltd. appeared as plaintiff and Messers Pak Industries (Jute Mills) Ltd. appeared as defendant.

11. On 3.1.52 the defendant filed an objection to the said application. The defendant did not specifically mention the provisions of the arbitration Act under which the objection was made. From the nature of the objections it seems that it was made under section 30 of the arbitration Act.

12. 17 grounds have been taken about the said objection, some of which are set out as here-under:–

“1. That the award is illegal, invalid and liable to be set aside.

2. That the suit based on the alleged award is not maintainable in its present form.

3. That the constitution of the arbitration Tribunal was illegal, the parties not knowing who the Judges were and as such the arbitration is not maintainable in law and fact.

4. That the objectors have now come to learn that the arbitrators were interested as buyers of jute and as such the arbitration is tainted with bias against the sellers and thereby the arbitrators have, misconduct themselves in arbitrating in the matter.

5. That the Judges being themselves interested in arbitration cases, the arbitration cannot be treated as fair and reliable to be set aside.

6. That the arbitrators have not heard the parties and have not taken the disposition of witnesses nor have they recorded any proceedings and consequently the award is not maintainable in law or fact. That the arbitrators have misconducted the proceedings.

7. That the present award based on Award No. 2 as referred is not legal and cannot have any binding effect.

13. The plaintiff-appellant filed a reply to the objection. The learned Subordinate Judge framed the following issues:–

“1. Is the disputed award illegal, and without jurisdiction of the Tribunal?

2. Are the objections barred by limitation?

3. Is the disputed award liable to be set aside?

4. Did the Tribunal misconduct themselves or the proceedings?

14. Issue No. 4 was decided in favour of the plaintiff and issue No. 2 was substantially in its favour. With regard to issue No. 2 the learned Subordinate Judge held that all the objections except the objection with regard to the jurisdiction of the Tribunal was covered by section 30 of the arbitration Act and were, therefore, barred by Article 158 of the Limitation Act.

15. On the question of the jurisdiction of the Tribunal the learned Subordinate Judge held as follows:–

“Now, with regard to the question whether or not the Tribunal made the disputed award without jurisdiction, it seems to me that this question must be decided in the positive, and on that basis, the award cannot be given effect to and is liable to be set aside. Admittedly two awards were made on the same dispute, one on 11.4.51 being Ext. 5 and the other on 3.8.61 being Ext. 5A. The latter award Ext. 5A is filed under Section 14(2), in which reference is also made about the earlier award Ext. 5. Earlier award Ext. 5 is not an interim award, since the Tribunal which made this award is not the same Tribunal which made the disputed award Ext. 5A, and it is not the case of any body that Ext. 5 is an interim award. In a dispute, there must be only one award, complete and certain, even though it may be conditional or in the alternative besides interim award if any. Earlier award Ext 5 being not an interim award had already completed the proceedings in the arbitration over the same dispute, and there was no further scope of the Chamber of Commerce to make the disputed award Ext. 5A. Article XXIX of Rules Ext. 4, no doubt, makes provision for a further award or second award under certain circumstances exhaustively detailed therein, but those circumstances do not exist here by reason of which, I must find that the disputed award cannot be said to be a further award within the meaning of that article in consequence whereof the disputed award Ext. 6A must be held to be without jurisdiction and a nullity. Article XXIX contemplates a further award only when the previous award directs that a certain act or thing shall be done by one party to the reference, i.e. delivering or taking (with or without allowance) delivery of goods and such party fails to comply with the award. But in the present case in the previous award Ext. 5, both parties were directed to do certain acts or things amongst which one option in the terms that plaintiff would be entitled to cancel the contract and demand market difference was given which option was in fact exercised by plaintiff, and that being so, the disputed award Ext. 5A is not within the limits of authority therefore in terms of article XXIX.”

16. On the question of limitation with regard to the objections as to jurisdiction of the Tribunal the learned Subordinate Judge found as follows:–

“But the objections about want of jurisdiction which has prevailed is not barred by limitation, since it is well settled that where an award is illegal and void for want of jurisdiction apparent on the face of it, it is not necessary that the parties should file objections to the award, within the time prescribed under Article 158 of the Limitation Act.”

17. It has been noticed that the learned Subordinate Judge ruled out all the objections of the defendant, as being hit by the provisions of Article 158 of the Limitation Act. But on the question of jurisdiction of the Tribunal the learned Subordinate Judge found that inasmuch as want of jurisdiction of the Tribunal was apparent on the face of the award, there was no question of limitation under Article 158 of the Limitation Act, The learned Subordinate Judge therefore, set aside the award and dismissed the suit.

18. The plaintiff has appealed to this Court against the judgment and order of the learned Subordinate Judge In this appeal Mr. Suresh Chandra Bose appeared for the appellant and Mr. Sudir Kumar Sen for the respondent.

19. Mr. Bose appearing on behalf of the plaintiff-appellant contended before us (1) that the award was valid and within the jurisdiction of the Tribunal of arbitration and (2) that inasmuch as the objection as to want of jurisdiction of the Tribunal of arbitration has been taken under section 30 of the arbitration Act, the defendant was barred from taking the objection, under Article 158 of the Limitation Act.

20. Mr. Sen practically adopted the reasoning’s of the learned Subordinate Judge as set out in his judgment.

21. We shall now take up the first point urged by Mr. Bose, that is, the award was a valid one and that the Tribunal had jurisdiction to make the further award which was filed in Court.

22. We have noticed above the findings of the learned Subordinate Judge on this question. It seems to us that the learned Subordinate Judge came to the conclusion that there can be only one award in respect of any dispute arising out of a contract. He proceeded to discuss the first award (Ext. 5) and came to the finding that it was not an interim award. He then came to the conclusion that the first award was final and the second award which was filed in Court (Ext. 5A) was without jurisdiction and, therefore, a nullity. The learned Subordinate Judge has not properly construed the terms of the contract (Ext. 3) and the rules of the Tribunal of arbitration (Ext. 4). It is clear from clause 12 of the contract that the parties agreed to refer the differences and disputes arising out of the contract to the Tribunal of arbitration under the rules of the Tribunal, as set out in Ext. 4, therefore, became a part of the contract.

23. It is clear from clause XXIX of the rules of the Tribunal that a ‘further award’ can be made to enforce the obligations imposed upon a party by an award, if a party in whose favour first award is made makes a fresh application for a further award.

24. From a proper construction of the terms of the contract and rule XXIX of the rules of the Tribunal it is clear that the Tribunal had jurisdiction to make the further award which was filed in Court, that is, Ext. 5A. It is open to parties to a contract to agree to refer their references arising out of the contract to an arbitration. It is also open to the parties to agree that if and when an award is made it can be enforced by a further award on a fresh reference and application. If parties chose to agree to such terms, as have been indicated above, they are binding on both parties to the contract. There is no illegality in providing for such contingencies. We, therefore, hold that it was within the jurisdiction of the Tribunal of arbitration to give the award which has been filed in this case (Ext. 5A). This jurisdiction of the Tribunal arises out of the contractual agreement between the plaintiff and the defendant by the contract, dated the 5th March, 1951. By the terms of the contract, dated the 5th March, 1951 (Ext. 3) the rules of the Tribunal of arbitration (Ext. 4) became the terms of the said contract and its provisions are binding upon both the parties to the contract.

25. We are fortified by the observations of Gentle, C.J. in the case of Penukonda Rathakrishnamurthy Vs. Messers Genamukala Chengalraya Chetty Chalamayya Chetty and Co. and another, reported in A.I.R. 1948 Madras, 365. In that case a seller and buyer under certain contract who were members of Yarn Merchants' Association referred five contracts to arbitration of two arbitrators. The arbitrators agreed regarding two contracts but disagreed regarding the remaining three contracts. The arbitrators made two awards, (1) with respect to the two contracts on which they agreed and (2) respecting the three contracts on which they disagreed. The matters relating to the three contracts where there had been disagreement were referred for decision to the umpire. The terms upon which the references to arbitration was made were contained in the Association’s arbitration bye laws, one of which provided that the arbitrators or umpire should have power to make an interim award or awards. The umpire made an award regarding the three contracts referred to him. An application was made under section 30 for setting aside his award on the ground that the umpire was wrong in taking up the reference with regard to the three contracts alone and should have taken cognizance of the whole of the matters of arbitration including the other two contracts.

26. It was held in that case that the award which the arbitrators made relating to the subjects upon which they disagreed was an interim award as contemplated by the bye law of the Association. That having been made, the arbitrator proceeded to make another award reflecting their differences which required consideration by the umpire. In those circumstances it was quite unnecessary for the matters upon which the arbitrators had agreed to be referred to the umpire. Hence the award could not be set aside on the ground that the umpire did not take up all matters.

27. The facts of that case are not relevant to the decision of this case; but we note the following observations of his lordship Gentle, C.J. in the case of Penukonda Rathkrishnamurthy Vs. Messrs Ganamukala Chengalraya Chetty Chalamayya Chetty and Co. and another, reported in A.I.R. 1948 Madras, 365, at page 368:–

“The next matter for consideration is whether the terms of resolution no. 159 governed or were part of the contracts for January Vaida. I have already expressed my views upon that matter. Clearly, the resolution was a bye law which came into force on the day before which it was passed, 30th, December, 1941, while the three contracts were still current. By the terms of those contracts, that bye law became a term or terms of the contracts and its provisions were binding upon both the buyer and the seller.”

28. With the above observations of his lordship we respectfully agree. It is, therefore, clear that inasmuch as the rules of the Tribunal of arbitration of the Dacca-Narayanganj Chamber of Commerce, are incorporated into the terms of the contract dated the 5th, March, 1951, the Tribunal of arbitration had the jurisdiction to make the award filed in this case.

29. Whether the first award, dated 11.4.51., was an interim award or not, the second award was a ‘further award’ within the terms of clause XXIX of the rules of the Tribunal.

30. We now take up the second contention of Mr. Bose, that is, the objection with regard to the jurisdiction of Tribunal was barred by Article 158 of the Limitation Act. The learned Subordinate Judge based his conclusion that the objection with regard to the want of jurisdiction of the Tribunal was not barred, by a totally different consideration. The learned Subordinate Judge came to a finding that the award filed in this case (Ext. 5A) was not valid award inasmuch as the award on the face of it arose out of another award (Ext. 5) which was not an interim award. The learned Subordinate Judge was of the view that there cannot be two awards in respect of differences arising out of a contract unless the first award is only an interim award. He, therefore, came to a finding that the second award (Ext. 5A) which was filed in Court was not a valid award on the face of it and that the Tribunal of arbitration had no jurisdiction to make such an award. He was also of the view that when an award was illegal and void for want of jurisdiction of the face of it, Article 158 of the Limitation Act had no application. In the face of the above finding of the learned Subordinate Judge, his conclusions on the point of limitation were right. We drew the attention of Mr. Bose to observations of the learned Subordinate Judge on the question of Limitation as quoted above. Mr. Bose was candid enough to admit that if the first assumption of the learned Subordinate Judge, namely, that the award was void on the face of it, for want of jurisdiction was correct, then his decision that such an objection was not hit by Article 158 of the Limitation Act was also correct. However, in the present case before us we have held, as has been noticed above, that the award filed in this case (Ext. 5A) was not a nullity and, therefore, we also hold that the objection of the defendant was hit by Article 158 of the Limitation Act.

31. The result, therefore, is that this appeal is allowed with costs. The judgment and or-depressed by the learned Subordinate Judge, 4th Court, Dacca in Titled Suit no. 99 of 1952 are set aside and the suit is decreed in terms of the award (Ext. 5A). The award (Ext. 5A) will form part of the decree.

Amin Ahmed, C.J.

I agree.