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Showing contexts for: void contract arbitration in The State Of Bombay vs Adamjee Hajee Dawood And Co. on 1 March, 1951Matching Fragments
7. The plff. on these facts filed the suit, claiming the reliefs I have mentioned above.
8. Sarkar J. construed the plaint as one for a declaration that the arbitration agreement contained in the contract is invalid & on that view he held in view of Sections 32 & 33, Arbitration Act, that the suit was not maintainable. With great respect to the learned Judge, we are unable to construe the plaint in that way. In the plaint, the plff. states the circumstances under which, according to it, the alleged contract was entered into & claims a declaration that the contract is not binding on the plff. This is not a suit merely for a declaration that the arbitration agreement is invalid. It is a suit claiming something more, namely, claiming that the contract containing the arbitration clause is void.
10. Mr. Bijan Mitter appearing on behalf of the respondent urges that Sections 32 & 33, Arbitration Act, in effect bar all suits in which a declaration is claimed that a contract, which contains an arbitration clause, is void. That argument overlooks the nature of an arbitration clause which is contained in a contract. In 'Heyman v. Darwins, Ltd.,' (1942) 1 All. E. R. 337 at p. 347, Lord Macmillan observes as follows:
"I venture to think that not enough attention has been directed to the true nature & function of an arbitration clause in a contract. It is quite distinct from the other clauses. The other clauses set out the obligations which the parties undertake towards each other 'hinc inde;' but the arbitration clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both parties that, if any dispute arises with regard to the obligations which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution. Moreover, there is this very material difference that, whereas in any ordinary contract the obligations of the parties to each other cannot in general be specifically enforced and breach of them results only in damages, the arbitration clause can be specifically enforced by the machinery of the Arbitration Acts. The appropriate remedy for breach of the agreement to arbitrate is not damages but its enforcement. Moreover, there is the further significant difference that the courts in England have a discretionary power of dispensation as regards arbitration clauses which they do not possess as regards the other clauses of contracts."
11. To the same effect are the observations in the speeches of Viscount Simon, Lord Wright & Lord Porter. It is clear from the observations in this case that a contract may come to an end, e.g., by frustration; but the 'arbitration agreement' may yet remain operative. The arbitration agreement may be declared void without the contract being declared invalid. They are two separate things.
12. Whether the arbitration agreement falls with the contract depends upon a particular test & that test is laid down in 'De La Garde v. Worshop & Co., (1928) Ch. 17 "The test is said to be whether the contract is determined by something outside itself, in which case the arbitration clause is determined with it, or by something arising out of the contract, in which case the arbitration clause remains effective & can be enforced." (Russel on Arbitration Edn. 14 p. 75)
14. It does not follow, therefore, that a suit asking for a declaration that the 'arbitration' agreement is void is necessarily tantamount to a suit that the contract (containing the arbitration clause) is void.
15. The word used in the sections is 'agreement' in the expression 'arbitration agreement', & not 'contract'. Yet where necessary the Act uses the word contract', e. g., in Section 7(1) of the Act, "where it is provided by a term in a contract ...." In Section 7(2) the Act uses the words 'arbitration agreement'. The legislature, though it uses the word 'contract' in Section 7 has purposely refrained from using the word 'contract', in Section 32 & Section 33. Therefore, we have no doubt that the legislature has advisedly used the words 'arbitration agreement' in these sections. I cannot take the view that Section 32 contemplates the case of suits challenging the validity of a contract because it contains an arbitration clause. If the intention of the legislature were that all contracts containing an arbitration clause should come within the purview of Sections 32 & 33, the legislature would have said so in appropriate words. In my view, Sections 32 & 33 have a very limited application, namely, where the existence or validity of an 'arbitration agreement' (& not the contract containing the 'arbitration agreement'), is challenged. Assume for a moment that Sections 32 & 33, Arbitration Act, have repealed Section 39, Specific Relief Act. Which section of the Specific Relief Act will apply in such cases to contracts which do not contain an arbitration clause? We cannot take the view either that Section 39, Specific Relief Act, has been partially repealed, that is to say, repealed so far as it relates to contracts containing an arbitration clause. To hold that Section 39, Specific Relief Act has been wholly or partially repealed will lead to absurd result.