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Case Number

C.R.P No. 582 of 1950.

Attorney(S)

Mr. N. Rammohan Rao for Petr.
Mr. V. Parthasarathi for Respt.

Judges

Basheer Ahmed Sayeed, J.

Acts

S. 34 of the Arbitration Act

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Smart Summary

Structured Summary of the Legal Opinion

Factual and Procedural Background

The petitioner in this revision petition is the defendant in O.S. No. 702 of 1948 pending before the District Munsif's Court at Vijayawada. The plaintiff in that suit sought damages for alleged non-performance of contracts between the parties. The defendant applied under S. 34 of the Arbitration Act for a stay of the suit, contending that the contract terms provided for settlement of disputes by arbitration. The learned District Munsif refused to grant the stay, and the learned Subordinate Judge upheld that decision. The present petition challenges the Subordinate Judge's order.

The suit contracts (Exhibits A-1 and A-2) identify seller, buyer, quality, quantity, rate, place and time of delivery and terms of payment, and contain a clause (marked "N.B.") stipulating that "the terms and conditions should be as per Nellimarla or Chittavalsah Jute Mill company's contract." The contracts specifically describe the goods as empty gunny bags manufactured by H.D. Nellimarla or Chittavalsah Jute Mills and refer to a particular settlement/contract number and rate.

Legal Issues Presented

Whether the terms and conditions of the Nellimarla or Chittavalsah Jute Mill company's contract were incorporated into the parties' suit contracts such that the dispute must be referred to arbitration.
Whether the learned District Munsif and the learned Subordinate Judge correctly exercised their discretion under S. 34 of the Arbitration Act in refusing to stay the suit.
Whether any alleged ambiguity in the contract terms prevents ousting the jurisdiction of the courts and thus bars reference to arbitration.

Arguments of the Parties

Petitioner's (Defendant's) Arguments

The suit contracts contain a specific stipulation that further terms and conditions should be "as per Nellimarla or Chittavalsah Jute Mill company's contract," which incorporates arbitration terms by reference and therefore requires a stay under S. 34 of the Arbitration Act.
The plaintiff was aware of the mills' terms (having dealt in such goods, even through brokers), so the incorporation by reference is effective.
Authoritative decisions (including Temperley Steam Shipping Co. v. Smyth & Co., Vali Mahomed Ayoob v. Shamdeo, and Mohanlal v. Bisserlal) support the construction that such external standard terms are incorporated; these precedents were relied upon before the Court.
The courts below did not properly exercise their discretion under S. 34 and their orders should therefore be revised.

Respondent's (Plaintiff's) Arguments

The plaintiff contended he was not aware of the exact terms and conditions of the mills' contracts and therefore the arbitration terms were not effectively incorporated.
The District Munsif relied on two factual points in refusing the stay: (a) the plaintiff's asserted ignorance of the mills' terms and (b) that the plaintiff had given notice before filing suit and the defendant did not respond to that notice.
The respondent relied on authorities such as Ramlal Murlidhar v. Haribux Puranmull (which follows Chatturbhuj Chandunmull v. Basdeodas Daga) and Kedarnath Babulal v. Sumpatram Doogur to support the position taken by the courts below.
Respondent's counsel also referred to observations in Sircar's commentary on the Arbitration Act to the effect that, where there is ambiguity as to contract terms, the courts' jurisdiction should not be ousted.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Ramlal Murlidhar v. Haribux Puranmull	Authority relied on by the Subordinate Judge (and which follows Chatturbhuj Chandunmull v. Basdeodas Daga).	The Court read the decision and concluded the facts in those cases differ from the present contracts; therefore that authority does not apply to this case.
Chatturbhuj Chandunmull v. Basdeodas Daga	Earlier decision followed in Ramlal Murlidhar; relied upon by the respondent side below.	The Court considered it in the line of authorities relied on by the Subordinate Judge but found the facts distinguishable and the line of decisions inapplicable here.
Kedarnath Babulal v. Sumpatram Doogur	Relied upon by the respondent; invoked for propositions concerning ambiguity and ousting of court jurisdiction.	The Court noted the citation and the respondent's reliance on observations in that case, but found no ambiguity in the present contracts and therefore did not adopt the rule urged from this authority.
Temperley Steam Shipping Co. v. Smyth & Co.	Principle of construction for incorporation of terms by reference; relied upon by petitioner's counsel.	The Court accepted the principle as furnishing the proper rule of construction for the present facts and was inclined to follow it to hold that the mills' terms were incorporated into the suit contracts.
Vali Mahomed Ayoob v. Shamdeo	Authority relied on by the petitioner as supporting incorporation by reference where facts are similar.	The Court found the facts in that case to be "on all fours" with the present case and to support the petitioner's construction; the ruling was treated as persuasive.
Mohanlal v. Bisserlal	Authority relied on by the petitioner for the applicable rule of construction.	The Court found this authority to be aligned with the petitioner's position and treated it as supporting the conclusion that the mills' terms were incorporated.
G. Freeman & Sons v. Chester Rural Council	Authority referred to by respondent and cited in other decisions the respondent relied upon.	The Court described this decision as clearly distinguishable from the facts of the present case and therefore not applicable.
T.W. Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd.	Authority relied on by respondent's line of cases; contrasted with Temperley.	The Court observed it is distinguishable from the present facts and noted that it does not refer to the earlier Temperley decision; the Court did not follow it for the present issues.
A.A.O. No. 146 of 1948 (Judgment of Raghava Rao J., unreported)	Recent, not-yet-reported decision called to the Court's attention.	The Court read that judgment and found it turned on different points that are not relevant to the facts of the present case, so it was not treated as decisive here.

Court's Reasoning and Analysis

The Court examined the express wording of the suit contracts (Exs. A-1 and A-2). Each contract, after setting out routine particulars (seller, buyer, quality, quantity, rate, delivery, payment etc.), contained a clause marked "N.B." stipulating that "the terms and conditions should be as per Nellimarla or Chittavalsah Jute Mill company's contract." The contracts also specifically identified the goods as empty gunny bags manufactured by the named mills and made reference to a particular settlement/contract number.

From these facts the Court drew the following analytical steps:

Because the contracts explicitly refer to and incorporate the mills' contract terms by reference, and because the goods and source (the particular mills) are expressly stated in the contracts, the mills' terms are apt to be incorporated into the suit contracts.
The plaintiff's claimed ignorance of the mills' terms was rejected on the evidence: the plaintiff had prior dealings in such goods (even if through brokers) and could not be treated as a stranger to the trade practices and the mills' terms. On this basis, the Court found the District Munsif's reliance on plaintiff's ignorance a weak ground to deny a stay.
The District Munsif's alternative reason — that the plaintiff had given notice and the defendant did not reply — was also held to be insufficient, standing alone, to justify refusal to stay under S. 34.
The Court considered the authorities relied upon by both sides. It concluded that the line of authorities relied upon by the respondent (including Ramlal Murlidhar and related cases) were factually distinguishable and did not control the present case. Conversely, authorities relied upon by the petitioner (notably Temperley and certain other cases) presented principles of construction that fit the facts and supported incorporation by reference.
The Court addressed the contention that ambiguity in contract terms would preclude ousting court jurisdiction. It found no ambiguity in the present contracts so as to trigger that principle; accordingly, the rule invoked from Kedarnath and Sircar's commentary did not apply.
On the whole circumstances, and applying the accepted rule of construction (as in Temperley and the petitioner's supporting authorities), the Court concluded the mills' terms were incorporated and that the defendant was entitled to invoke arbitration; a stay under S. 34 was therefore appropriate.

Holding and Implications

The revision petition is allowed; the suit is stayed under S. 34 of the Arbitration Act and the matter is to be referred to arbitration in accordance with the agreement between the parties. Costs were awarded to the petitioner.

Implications:

Direct effect on the parties: the District Munsif's and Subordinate Judge's refusals to stay the suit were set aside; the defendant's application under S. 34 succeeds and the dispute will proceed to arbitration as per the incorporated terms. The petitioner is granted costs.
Broader implications: the Court did not purport to lay down a new binding precedent of this Court on the point; it applied existing authorities and principles of contractual construction (notably the principle accepted in Temperley) to hold that incorporation by reference was effective in the circumstances of these contracts. The opinion emphasizes factual distinctiveness in comparing precedents rather than announcing a novel rule.

V.C.S

This summary is confined to and derived solely from the contents of the provided opinion. No additional facts or legal propositions have been added beyond what the opinion itself states.

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Ramdayal Rameswarilal v. Vissamsetti Chandra Narasimham

The petitioner in this petition is the defendant in O.S No. 702 of 1948 on the file of the District Munsif's Court at Vijayawada. The plaintiff in that suit claimed damages against the defendant for non-performance of the contracts entered into between the parties. The defendant took out an application under S. 34 of the Arbitration Act to have the suit stayed on the ground that the terms of the contract contemplated a settlement of disputes between the parties by reference to arbitration. The learned District Munsif did not agree with the contention of the defendant, and even so, the learned Subordinate Judge upheld the decision of the learned District Munsif. This petition is therefore preferred against the order of the learned Subordinate Judge.

It is useful in this connection to refer to the actual terms of the contracts entered into between the parties (Exs. A-1 and A-2). After setting out the name of the seller, the name of the buyer, the quality, quantity, rate, place of delivery, time of delivery, terms of payment etc., the written contract which is signed by both the parties sets out in the clause marked N.B that the terms and conditions should be as per Nellimarla or Chittavalsah Jute Mill company's contract. Below this, further particulars are set out which are to this effect viz., “Settlement against Contract No. 72 dated 21st March, 1947 at the rate of Rs. 90-0-6 per hundred bags only.” These contracts are for the supply and purchase of empty gunny bags manufactured by H.D Nellimarla or Chittavalsah Jute Mills. This is specifically mentioned in the contracts against column 3. In view of the contents of these contracts wherein specific reference is made to the supply of goods manufactured by a particular mill and wherein there is a stipulation that the terms and conditions should be as per the contract of the said Nellimarla or Chittavalsah Jute Mill company, it cannot be contended for a moment that the plaintiff was not aware of the terms and conditions under which the goods were supplied by the Nellimarla or Chittavalsah Jute Mills. Besides, it is in evidence that the plaintiff has been dealing with such goods manufactured by the said mills, though he has been purchasing the same, as per his own evidence, through brokers. It cannot be said that he was a stranger to transactions of the type in question. Both the parties must be stated to be in the full know of the terms and conditions under which supplies and purchases of the products manufactured by either Nellimarla or Chittavalsah Jute company are made by those who have dealings in gunny bags manufactured by the said mills. When such is the background, and when there is a specific stipulation, which invites the particular attention of the signatories to the contract to the fact that the terms and conditions should be as per Nellimarla or Chittavalsah Jute Mill company's contract, surely there can be no substance in the contention of the plaintiff that he was not aware of what exactly were the terms and conditions under which the products manufactured by the said two Mills were being supplied or sold in the market. Ignorance on the part of the plaintiff, of the terms and conditions under which such sales are made by the said manufacturing companies appears to be one of the reasons why the learned District Munsif refused to exercise his discretion in staying the suit as required by the defendant. The other reason which has been relied upon by the learned District Munsif in refusing to stay the suit as prayed for by the defendant appears to be that the plaintiff gave notice before filing the suit, and that the defendant did not choose to send any reply to the threat of the plaintiff held against the defendant that he would file a suit if damages were not paid. These two reasons referred to above can hardly be said to be sufficient for the District Munsif to refuse to exercise the jurisdiction which is vested in him under S. 34 of the Arbitration Act. In my opinion, the learned District Munsif was not correct in having taken the attitude which he did on these two very flimsy grounds.

Even so, the learned Subordinate Judge while upholding the decision of the learned District Munsif has not approached the question from the background that was available to him and as evidenced by the terms of the contract. As the contract after setting out the relevant particulars that have usually to be incorporated in any contracts between the parties who deal in the purchase of goods manufactured by the Mills referred to above, has definitely stipulated that the further terms and conditions of the contract should be those that have been laid down in the contract of the Nellimarla or Chittavalsah Jute Mill company, there is no sufficient ground for the learned Subordinate Judge to come to the conclusion that the terms of the contract of the Nellimarla or Chittavalsah Jute Mill company did not get incorporated in the terms of the suit contracts. If it was not the intention of the parties that the terms of the Nellimarla or Chittavalsah Jute Mill company's contract were to be incorporated, there was absolutely no reason why such a stipulation should have been entered into in the suit contracts, especially, after all the relevant particulars which would ordinarily be sufficient for a contract, had been entered up. As already observed, the ground that the plaintiff was not aware of what exactly were the terms and of the contracts of the said mills is not tenable. On the other hand, it was incumbent upon the plaintiff who was entering into a contract with the defendant to have acquainted himself with the exact terms and conditions under which the goods were being sold or supplied by the said two companies, when there was a stipulation as to the terms and conditions of the contract.

The learned Subordinate Judge however has relied on the decision reported in Ramlal Murlidhar v. Haribux Puranmull(1) which follows Chatturbhuj Chandunmull v. Basdeodas Daga(2) and Kedarnath Babulal v. Sumpatram Doogur* (3). I have read through these decisions, and I do not think the facts as disclosed by the present suit contracts are the same as those that are considered in these decisions. In my view, they do not apply to the present case. On the other hand, the learned Counsel for the petitioner has relied upon Temperley Steam Shipping Co. v. Smyth and Co., (4), Vali Mahomed Ayoob v. Shamdeo(5) and Mohanlal v. Bisserlal (6). On a perusal of these authorities relied upon by the learned Counsel for the petitioner I am inclined to agree with the rulings laid down in these decisions, as the facts in those cases are on all fours with the facts in the present case. They furnish the proper rule of construction to be followed in such circumstances as those that obtain in the present case. There is of course no direct authority of this Court on the point at issue. My attention has however been drawn to a recent decision of my learned brother, Raghava Rao J. which has not yet been reported. That decision is in A.A.O No. 146 of 1948. I have read through that judgment, which has turned upon different points which are not relevant to and have no bearing on the facts of the present case. I must however mention in this connection, that two of the important decisions cited by the learned Counsel for the respondent, namely, G. Freeman & Sons v. Chester Rural Council(7) and T.W Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd.(8) and which are referred to in Ramlal Murlidhar v. Haribux Puranmul Chaturbhuj Chandunmul v. Basdeodas Daga and Kedarnath Babulal v. Sumpatram Doogur* are clearly distinguishable form the facts that obtain in the present case. It may also be stated that T.W Thomas & Co. Ltd. v. Portsea Steamship Co. Ltd. does not refer to an earlier decision in Temperley Steam Shipping Co. v. Smyth and Co. the principle of which decision is acceptable to me as doing justice to the circumstances of the present case, and I hold that the terms of the contract of the Nellimarla or Chittavalsah Jute Mill company got incorporated into the terms of the suit contracts.

Mr. Parthasarathi, learned Counsel for the respondent invited my attention to the observations in Kedarnath Babulal v. Sumpatram Doogur* and also to the observations made by the learned author Sircar in his commentaries on the Arbitration Act at pages 292, 293 and 301, wherein it has been stated whenever there is an ambiguity with regard to the actual terms of the contract the jurisdiction of the Courts ought not to be ousted. On the facts of the present case, I do not think that there is any ambiguity at all with regard to the terms of the contract, so as to justify my adopting the ruling in the authorities cited by the learned Counsel for the respondent. The circumstances of the present case as set forth above justify the construction that the terms and conditions of the Nellimarla or Chittavalsah Jute Mill company did become incorporated into the terms of the suit contracts.

The next point urged by learned Counsel for the respondent is that in so far as the judicial discretion has been rightly exercised by the Courts below, there is no scope for this Court to interfere in revision with the orders passed by the two Courts below. I am afraid I cannot agree with this contention of the learned Counsel for the respondent. I do not think, as already observed, that the Courts below have exercised the jurisdiction vested in them in a proper manner, on the facts of the case. I do not think there is any substance in the contention of the respondent that there is no proper agreement for submission to arbitration. The terms and conditions in question do constitute a sufficient agreement to refer to arbitration Taking the entire circumstances of the case, I am inclined to hold that the defendant is entitled to the benefit of the terms of the contract which have been stipulated between him and the plaintiff, and it is a fit case wherein the matter should be referred to arbitration as per the agreement between the parties, and there will therefore be a stay of the suit under S. 34 of the Arbitration Act.

In the result the revision petition is allowed with costs.

V.C.S

Ramdayal Rameswarilal v. Vissamsetti Chandra Narasimham

Structured Summary of the Legal Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's (Defendant's) Arguments

Respondent's (Plaintiff's) Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Ramdayal Rameswarilal v. Vissamsetti Chandra Narasimham

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