Patna High Court
Union Of India (Uoi) vs Shri Nath Bihari Sharma And Anr. on 10 January, 1957
Equivalent citations: AIR1957PAT697, 1957(5)BLJR234, AIR 1957 PATNA 697
JUDGMENT Sinha, J.
1. This appeal is by the defendant to an action for recovery of certain amount of money by way of out of pocket expenses in connection with a certain contract entered into between the plaintiffs and the defendant and which contract was abruptly rescinded by the defendant. This appeal arises out of an order passed under Section 34 of the Arbitration Act refusing to stay further proceedings in the suit. The facts, in brief, for the purpose of understanding the case need be stated.
On the 5th of November, 1948, a contract was entered into between the plaintiffs and the defendant, namely, the Union of India, for construction of several temporary huts at Ba'rauni junction under Mansi subdivision of the Engineering Department of the North Eastern Railway. The contract was entered into on behalf of the Union of India by the Chief Engineer of the said railway, and the work was to be completed by the 31st of January, 1949.
When materials and men were gathered by the plaintiffs and some work had been started, the plaintiffs received a letter dated the 29th of December, 1948 on behalf of the defendant asking to stop the work altogether and also asking the plaintiffs to submit account of the loss of out of pocket expenses due to sudden stoppage of the work. On the 20th of January, 1949, the plaintiffs submitted their bill for Rs. 22,867 1/12/- as submitted by the learned Counsel for the appellant. On the 26th of November, 1943, the plaintiffs had requested the Resident Engineer, Mansi, for supply of bolts and nuts for completion of the work.
On the 27th of January, 1949, the Resident Engineer informed the plaintiffs that the Chief Engineer had extended the period for completion of the work to the 28th of February, 1949. On the 1st of February, 1949, the Resident Engineer informed the plaintiffs that the bolts and nuts required by them were not at all necessary inasmuch as wooden pegs would be enough for the work in question. On the 7th of February. 1949, the plaintiffs did not accept the extension of time as given by the Chief Engineer.
By a letter dated the 27th or 28th of February, 1949, the Chief Engineer rejected the plaintiffs' claim on the ground that the plaintiffs had made no arrangement for the work. On the 3rd of May, 1949, the plaintiffs requested the Assistant Engineer to take measurements of the work so far done so that their bill might be prepared accordingly, and measurements were, in fact, taken in plaintiffs' presence between the 4th and 6th of October, 1949 and bills were prepared. According to the defendant, all the bills were paid and the plaintiffs accepted the same, and the plaintiffs' security which had been given at the time of the contract, namely, Rs. 3,000/- was refunded to the plaintiffs with a token cut of Rs. 50/-.
On the 29th of December, 1951, the plaintiffs served a notice under Section 80 of the Code of Civil Procedure on the General Manager of the defendant railway. On the 17th of April, 1952, the General Manager replied that the claim of the plaintiffs was barred, and it was not barred, the dispute should have been referred to arbitration, as provided for in the agreement. On the 3rd of May, 1952, the plaintiffs instituted the present suit for compensation for breach of the contract, and the suit was valued at Rs. 8,681/12/9, although, according to the plaintiffs, they were entitled to Rs. 22,000/- and odd.
On the 19th of August, 1952, the defendant appeared in the suit, and filed a petition stating that the suit was not maintainable, and that the dispute should have been referred to arbitration of the Deputy Chief Engineer of the North Eastern Railway. It appears that upon that petition the Court passed orders to the effect that the matter would be heard as a preliminary point after the written statement had been filed. On the 8th of September, 1952, the written statement was filed.
2. The matter as to whether the suit should have been stayed under Section 34 of the Arbitration Act was heard, and the Court held (1) that the matter in controversy in the suit was outside the scope of the agreement, and (2) that the defendant had not shown his willingness for referring the matter to arbitration. Therefore, according to the Court below, the civil suit could not be stayed.
3. Mr. Ghosh, on behalf of the defendant appellant, has submitted that on both these points the Court below is wrong. It is said that the subject-matter of the suit is well within the terms of the contract for reference to arbitration, and that the defendant was throughout willing and anxious to have the matter referred to arbitration
4. The first question, therefore, is whether the reliefs asked for in the plaint were matters covered by the agreement to refer the dispute to arbitration. It would be useful to quote the relevant portion of the agreement in this regard : -
"I agree that my work may be stopped at any time by the Divisional Engineer on his giving me or by Agent on works, seven days' notice in writing, or by myself on my giving similar notice to the Divisional Engineer, as I agree that the measurement of my works shall be made by the Engineer at any time appointed by him in writing subsequent to the expiry of the said notice, and that the measurement shall be made by him at the said time whether I am present or not and that on payment for work done and approved, and for approved materials delivered at site of works as ascertained by the said measurement I shall have no further claims against the railway and I agree that should any dispute arise matters connected with this agreement, the same shall be referred to a person to be nominated in this behalf by the General Manager for the time being of the north Eastern Railway, whose decision in writing shall be final and binding on both parties."
The important words have been underlined (here marked in inverted commas) by me. This agreement to refer the matter to arbitration, in my opinion, is couched in very wide terms. Any dispute arising on matters connected with the agreement had to be referred, under the agreement, to arbitration of a person to be appointed by the General Manager. Now, to find out whether the present dispute is covered by this General agreement, we have to look to the first relief in the plaint which is the only relevant relief and which reads as follows : -
''That the Court be pleased to pass a decree against the defendant for Rs; 8681/12/9 being the amount out of pocket expenses as per account given below by way of compensation which the plaintiffs suffered on account of breach of contract on the part of the Rly. administration".
The plaint proceeds on the footing that, because the plaintiffs had gathered materials and men and had started with the construction of the huts in question, and as the work of construction was stopped abruptly by the order on behalf of the defendant, the plaintiffs are entitled to compensation for breach of the contract.
Under the contract, the plaintiffs were entitled to execute the work by a certain date, and that work was stopped suddenly after it had commenced and continued for some time. The plaintiff's, therefore, feel aggrieved by the sudden stoppage of the work which resulted in loss to the plaintiffs. Whether the reliefs asked for in the plaint are covered by the agreement must naturally depend upon the facts of each particular case, and the authority of one case, which may have been decided on its own facts, may not afford guidance to decide the another case. In the present case, Mr. Ghosh has referred to the case of Governor-General in Council v. Associated Live-stock Farm (India) Ltd., AIR 1948 Cal 230 (A) decided by S. R. Das, J. (as he then was).
In that case also, it had been argued that the dispute then before the Court was outside the ambit of the agreement to refer the dispute to arbitration. In that particular case, the arbitration clause was to the following effect: "any dispute or difference arising out of the contract .....". In dealing with this matter, his Lordship observed as follows: -
"It should be noted that what is agreed to be referred is 'any dispute or difference arising out of the contract' and not 'any claim arising out of the contract'. Further, the words 'arising out of the contract' appear to me to be of wider import than the words 'under the contract' or 'in respect of contract' ''.
In the present case, the language used appears to me to be of still wider import; it says. "I agree that should any dispute arise on matters connected with this agreement, the same shall be referred .. ... ..'' In my judgment, the relief asked for in the plaint is fully covered by the arbitration clause of the agreement. The stoppage of the work abruptly and without notice and the consequent loss to the plaintiffs cannot but be said to be connected with the agreement. I would, therefore, hold that the Court below is wrong in thinking that the reliefs sought for in the suit are beyond the scope and ambit of the arbitration agreement.
5. Section 34 of the Arbitration Act refers to (1) party to the agreement or persons claiming under the party to the agreement, (2) matter agreed to be referred to arbitration, (3) application to the judicial authority before which the proceedings are pending to stay the proceeding at any time before filing the written statement or taking any other steps in the proceedings and (4) the discretion of that judicial authority to stay the proceedings. In the present case, the disputants were parties to the agreement and, on my finding, the dispute is with reference to the matter agreed between the parties to be referred to arbitration, and the matter of stay was before the Court below. The only question remains whether the third requisite has been complied with. The Court below on this aspect of the matter has recorded the following findings :
(1) "In this case there is nothing on record before me to show that the defendant at any stage expressed his willingness or intention to get the matter decided by arbitration".
(2) "I may also refer here to the petition filed on behalf of the defendant on 19-8-52. There also the defandant did not state either that he has been willing or that he was still willing to get the arbitration made".
(3) "I may also refer here to the written statement filed by the defendant in this suit and here also although an objection with regard to the maintainability of this suit has been taken, but no clear mention of the fact was made that the defendant was or is ready and is will ing to abide by the terms of the agreement with regard to the arbitration".
We know that the notice under Section 80 of the Code of Civil Procedure had been served on the General Manager on the 29th of December, 1951. On the 17th of April, 1952, as already indicated, the General Manager did assert that the matter in dispute should be referred to arbitration, although it was coupled with the fact that the General Manager thought in the first instance that the claim was barred. This is the attitude of the General Manager on behalf of the defendant as soon as the notice was received by him of the claim of the plaintiffs.
The suit was instituted on the 3rd of May, 1952, and, on the 19th of August, before the written statement was filed, the defendant filed an application to the effect that the plaintiffs, under the terms of the agreement, should not have filed the suit but should have referred the matter to arbitration. In the written statement also, it was re-iterated that the plaintiffs had filed the suit in spite of the provision in the agreement for arbitration. Paragraph 3 of the written statement referred to the earlier application made on the 19th of August, 1952, on which the Court had ordered that application would be disposed of after the written statement had been filed. Then again, we find that, on the 5th of November, 1952, order No. 16 stated as follows : -
"Plaintiff files hazri. Defendant files certain docts as per list. Defendant also files a petition praying to hear the question of stay of the suit for want of jurisdiction under the terms of the agreement and the matters of difference between the parties shall be referred to the arbitration. Heard lawyers of both sides. To 11-11-52 for filing a copy of the Indian Arbitration Act and orders".
In view of these facts, in my opinion, it is difficult to uphold the findings of the Court below enumerated by me. The defendant, from the time the notice under Section 80 of the Code of Civil Procedure was served and even after filing the written statement, had been willing and ready for arbitration, and it cannot be said that the defendant was not so willing. It has been submitted by Mr. M. P. Singh, on behalf of the plaintiffs, that, the Court below having exercised its discretion, this Court, in appeal, ought not to interfere unless that discretion was not judicially exercised. I entirely agree with Mr. Singh.
The difficulty, however, in my opinion, in accepting the findings of the Court below is that it has not approached the question from the correct point of view. I have endeavoured to mention the facts leading to the conclusion that the defendant was throughout willing and ready to send the matter to arbitration.
6. There was one small point raised by Mr. Singh to the effect that, under section 34 of the Arbitration Act, the defendant should have asked for stay of the proceedings and that the word "stay'' did not occur in any of his applications to the Court In my opinion, however, it is the substance that has got to be looked into, and the contents of the petition and the written statement, which I have referred to, only point to one conclusion, namely that the defendant did want stay of the proceedings pending in the Court below.
7. Under the agreement, the arbitrator has to be nominated by the General Manager for the time being of the North Eastern Railway. But, it appears, in course of the arguments before the Court below, it was suggested on behalf of the defendant that, under rule 65 of the "Instructions for the guidance of Contracts, general conditions of contract and standard specifications", the Deputy Chief Engineer was to act as one of the arbitrators In the event of a dispute between the contractors and the railway. When there was express agreement between the parties that the arbitrator should be nominated by the General Manager of the North Eastern Railway the General Manager must nominate the arbitrator, and the general rules contained in the aforesaid 'Instructions' must be subject to the specific agreement between the parties.
The appeal, in my opinion, must succeed, and it is allowed, the order of the Court below is set aside and the suit in the Court below stayed under Section 34 of the Arbitration Act; but, in the circumstances, there will be ho order for costs. It must, however, be mentioned that the General Manager of the North Eastern Railway must take immediate steps for appointment of the arbitrator and arbitration proceedings must be brought to a close without any unavoidable delay, Dayal, J.
8. I agree.