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Citation Codes
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Case Number
Advocates
  • C. Mallick and Tibrewal
  • Roy Chowdhury
Judges
  • Ramendra Mohan Datta, J.
Acts
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Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • C. Mallick and Tibrewal
  • Roy Chowdhury
Judges
  • Ramendra Mohan Datta, J.
Acts
See more information ...
Smart Summary

Structured Summary of the Court's Opinion

Factual and Procedural Background

The respondent, Bangur Brothers Limited, purchased 40,000 bags of "Heavy cees" from the petitioner, Shree Luchminarain Jute Manufacturing Co. Ltd., by a contract dated 2 February 1967 concluded through broker notes. The contract contained an arbitration clause providing that disputes arising out of or in connection with transferable specific delivery contracts should be referred to arbitration under the relevant Chamber of Commerce bye-laws.

On about 3 February 1967 the respondent required the petitioner to mark the goods with specified markings; the goods were so marked. The petitioner issued Lorry Delivery Order No. 67/95 dated 15 February 1967 for a lot of 100 bales. The respondent paid Rs. 76,355.40 (a bill was issued and the cheque encashed), the goods were appropriated to the contract and the respondent sold them on to the Director of Supply and Transport, NEFA (for defence purposes). The goods were inspected at the petitioner's mill by an officer on behalf of NEFA.

The petitioner repeatedly failed to deliver the goods; on 4 March 1967 delivery was refused at the mill and the petitioner endorsed the delivery order indicating their crane was out of order. Letters from the respondent's solicitors to the petitioner went unanswered. On or about 21 March 1967 the respondent filed suit and obtained an ad interim order appointing a receiver (Nageswar Prasad Pandey) over the 100 bales. The receiver demanded possession but the petitioner refused or failed to deliver the goods.

On 3 April 1967 the petitioner applied under Section 34 of the Arbitration Act, 1940 for a stay of the suit on the ground of the arbitration clause. The court initially granted an ad-interim stay in the arbitration proceedings and recorded an assurance from the petitioner's solicitor that the petitioner would not obstruct the receiver's taking possession; nevertheless, possession was still not delivered and the receiver could not obtain the goods. The court was thus required to determine whether to grant a stay under Section 34 in light of these facts and the respondent's objections.

Legal Issues Presented

  1. Whether the petitioner is entitled to an order for stay of the suit under the exercise of the court's discretion under Section 34 of the Arbitration Act, 1940.
  2. Whether there exists any dispute between the parties that is referable to arbitration under the arbitration clause in the contract.
  3. Whether the conduct of the petitioner (including alleged obstruction of the receiver and failure to comply with court-ordered delivery) should lead the court to refuse a stay in the exercise of its discretion under Section 34.

Arguments of the Parties

Respondent's Arguments (as presented by Mr. Roy Chowdhury)

  • There is no existing dispute referable to arbitration: the goods bore special markings indicating ownership by the respondent; the lorry delivery order was issued on behalf of the respondent and showed those markings.
  • The respondent had paid the price in full (bill for Rs. 76,355.40; cheque encashed); the goods were inspected on behalf of NEFA and were appropriated to the contract; therefore there was no contractual dispute as to entitlement to delivery.
  • The petitioner's endorsement on the delivery order that their crane was out of order does not constitute a dispute that should be sent to arbitration.
  • The petitioner's asserted defence that the goods were pledged with Punjab National Bank Ltd. (if true) is not a proper defence to withhold delivery in these proceedings, and the bank had not applied in the matter.
  • The petitioner acted in a highhanded manner, resisted delivery to the receiver despite the solicitor's recorded assurance, and thus should not be permitted a stay.

Petitioner's Arguments (as presented by Mr. Tibrewal)

  • The petitioner had complied with the formal requirements of Section 34 of the Arbitration Act and was ready and willing to refer the dispute to arbitration; therefore the court should exercise its discretion to stay the suit and allow arbitration to proceed.
  • Implicitly, the petitioner advanced conduct-based assurances (recorded by its solicitor) that it would not obstruct the receiver; nevertheless, on the merits the petitioner sought stay because of the arbitration clause.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Uttam Chand Saligram v. Jewa Mamooji, ILR 46 Cal 534 : AIR 1920 Cal 143 The opinion does not specify the exact rule or principle from this case in the provided text. The court held this case to be distinguishable and stated it had no application to the facts of the present matter.
Chandanmull Jahaleria v. Clive Mills Co. Ltd., ILR (1948) 2 Cal 297 : AIR 1948 Cal 257 The opinion does not specify the exact rule or principle from this case in the provided text. The court held this case to be distinguishable and stated it had no application to the facts of the present matter.
Heyman v. Darwins Ltd., (1942) AC 356 The opinion does not specify the exact rule or principle from this case in the provided text. The court held this case to be distinguishable and stated it had no application to the facts of the present matter.
Union of India v. Birla Cotton Spinning & Weaving Mills Ltd., (1964) 2 SCR 599 : AIR 1967 SC 688 As summarized in the opinion: the Supreme Court considered a case where the Union made part payment but disputed the balance because it sought to appropriate the amount against claims under another contract; the Supreme Court held that under those circumstances there was no dispute arising "under" or "in connection with" the contract and therefore refused to stay the suit. The court relied on this authority by analogy: it treated the Union of India decision as supporting the proposition that, if no dispute arises under or in connection with the particular contract, there is nothing to refer to arbitration, and so a stay may properly be refused.

Court's Reasoning and Analysis

The court proceeded in a structured manner addressing two principal strands of inquiry: (1) whether there existed any dispute between the parties referable to arbitration under the contractual arbitration clause; and (2) whether the petitioner's conduct justified refusing a stay in the exercise of the court's discretion under Section 34.

On the first strand, the court acknowledged that the contract contained a valid arbitration clause and accepted that the petitioner professed willingness to go to arbitration and had applied for a stay. However, after examining the factual matrix — the special markings on the goods, issuance of the lorry delivery order (No. 67/95) with full particulars of the markings, full payment by the respondent supported by a bill and encashed cheque, inspection of the goods on behalf of NEFA, and the respondent's appropriation of the goods to the contract — the court concluded that there was no present controversy between the parties of the kind contemplated by the arbitration clause. The court regarded the petitioner's endorsement that the crane was out of order and the petitioner's alleged claim of pledge with Punjab National Bank as insufficient to create a dispute referable to arbitration in the present context.

The court expressly considered the Union of India v. Birla Cotton Spinning & Weaving Mills Ltd. decision: in that case the Supreme Court refused a stay because the dispute in issue did not arise under or in connection with the contract. The court found the Union of India authority analogous and used it to reinforce the conclusion that "if there be no dispute then there is nothing to arbitrate upon."

On the second strand the court considered the petitioner's conduct after the grant of interim relief: despite an assurance by the petitioner's solicitor recorded in the court minutes that the petitioner would not obstruct the receiver, the petitioner resisted the receiver's efforts to take possession and advanced conduct (including alleged obstruction of the receiver and non-delivery) that the court described as highhanded. The court reasoned that even if the petitioner were allowed to refer the matter to arbitration, its demonstrated conduct created a real risk that it would obstruct or frustrate arbitration proceedings. Further contextual factors — the petitioner's corporate difficulties, a special officer appointed over the company, and an application for winding up having been presented and admitted — were relevant to the exercise of discretion.

Taking the factual assessment (no existing referable dispute) together with the petitioner's obstructive conduct and the company's precarious position, the court exercised its discretionary power under Section 34 against staying the suit. The court found "sufficient reason why the legal proceeding instituted by the respondent should be proceeded with."

Holding and Implications

Core Holding: The application for stay under Section 34 of the Arbitration Act, 1940 is refused; the ad-interim order for stay is vacated and the petition is dismissed with costs.

Direct consequences for the parties (as stated in the opinion):

  • The petitioner's application for a stay of the suit is dismissed and the ad-interim stay vacated.
  • The receiver appointed in the suit should act on a signed copy of the minutes (i.e., proceed to take possession under the court's directions consistent with the minutes).
  • Costs were awarded against the petitioner (the application was dismissed with costs).

Broader legal significance: the opinion does not purport to lay down a new general precedent beyond applying established principles (including reliance on Union of India v. Birla Cotton Spinning & Weaving Mills Ltd.). The court's ruling is founded on the specific factual conclusions (no existing dispute referable to arbitration and obstructive conduct by the petitioner) and the exercise of judicial discretion under Section 34; the judgment therefore primarily resolves the rights of the parties in this case rather than announcing a broad new rule.

NRK/GGM

Disposition: Petition dismissed.

Show full summary ...

    Lachminarain Jute Manufacturing Co. Ltd. v. Bangur Brothers Ltd. .

    1. This is an application under sec. 34 of the Arbitration Act 1940 for stay of the suit filed by the respondent Bangur Brothers Limited against the petitioner Shree Luchminarain Jute Manufacturing Co. Ltd. The facts are that by exchange of a bought and a corresponding sold note by the broker a contract was entered into being contract dated February 2, 1967 whereby Bangur Brothers Limited purchased from the petitioner 40,000 bags of Heavy cees of the size, weight and description fully mentioned in the said contract. The said contract inter alia provided the following arbitration clause:—

    “(a) 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 Transferable Specific Delivery Contracts, including the validity thereof whether or not the obligation 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 arbitration as provided for in the said bye-laws.

    (b) Arbitration of any claims and disputes whether admitted or not arising out of or relating to all Transferable Specific Delivery Contracts in raw jute and/or jute goods between members or between members and non-members, under the provisions of the said bye laws, shall be referred to the Tribunal of Arbitration of the Bengal Chamber of Commerce and Industry or of the Indian Chamber of Commerce, Calcutta, in accordance with the rules framed by the said Chamber, for the purpose of arbitration by its Tribunal from time to time.”

    2. On or about February 3, 1967 the respondent asked the petitioner to mark the goods as “Cal/JP-2/6516-B/BB/102 Heavy Cees Bags 40″ × 28″ hd. 2¼ lbs. Director of Supply & Transport, N.E.F.A, Jorhat Airfield Rly. Station, Howrah KGS/GRMS-39233/39332.” The goods were accordingly marked. The petitioner issued a Lorry Delivery Order being No. 67/95 dated 15th February, 1967 in respect of a lot of 100 bales of the said goods to the respondent. The said delivery order was issued on the Works Manager of the petitioner and is an admitted document. The said document contains full particulars of the markings of the goods as aforesaid. The respondent made full payment to the extent of Rs. 76,355.40 P., and a bill was issued by the petitioner showing such full payment of the price and the excise duty payable thereon. The goods were appropriated towards the contract and the property in the goods passed on to the respondent. The relative cheque was duly encashed by the petitioner.

    3. On the very same day, the said goods were inspected by the Officer-in-charge T.S.I.D Hastings, Calcutta on behalf of the Director of Supply and Transport, NEFA. Jorhat Airfield (Assam), at the mill premises of the petitioner.

    4. The respondent in their turn sold the said goods to the Director of Supply and Transport, NEFA, Jorhat Airfield (Assam). The said goods were required for defence purposes.

    5. In spite of repeated promises to deliver, the petitioner failed to deliver the said goods on some pretext or other. On March 4, 1967 on one of such occasions, the respondent went to take delivery but the petitioner's representative at the Mill failed to give delivery on the ground that their crane was out of order and a note to that effect was endorsed on the body of the said delivery order.

    6. The respondent through their solicitors Messrs Khaitan & Co. wrote several letters to the petitioner but without any success. No reply was sent at all.

    7. Thereafter the petitioner (sic respondent) filed this suit on or about March 21, 1967 and on the very same day presented an application in the said suit inter alia for an order for the appointment of a receiver over the said goods. In that application an ad interim order was made by this court appointing the respondent's constituted attorney and an officer one Nageswar Pandey as the receiver over the said goods. The said receiver immediately went to the Mill premises of the petitioner and demanded possession of the goods but the petitioner on some pretext or other failed and neglected and/or refused to effect delivery or to part with the possession of the said goods with those special markings thereon.

    8. On the 3rd April, 1967 the petitioner made this application for stay of the suit on the basis of the arbitration agreement set out hereinabove. In granting ad-interim stay this court in this arbitration proceedings also appointed the said Nageswar Prasad Pandey the receiver in respect of the said 100 bales of Heavy Cees Bags lying at the petitioner's mill at Konnagar. At the time of the said order the petitioner's solicitor Mr. C. Mallick, on behalf of the petitioner gave an assurance and represented before the court that his client would not create any obstruction in the receiver's taking over possession of the goods. The said assurance and statement was recorded in the minutes of this court.

    9. Surprisingly enough, when the receiver went to take possession of the said goods the petitioner's mill manager raised objection inter alia stating that all goods in question had never been appropriated towards the contract between the parties and that the respondents were not entitled to obtain possession of the said goods as claimed. Thereafter on April 10, 1967 Messrs Khaitan & Co. again wrote to Messrs Palit & Mallick inter alia asking them not to obstruct the receiver in taking possession of the goods and reminded the petitioner about the assurance given by and on behalf of the petitioner that no obstruction would be created in the receiver's taking over possession. The fact remains that up till today the receiver could not get delivery of possession of the said goods from the petitioner's mill.

    10. Under the aforesaid circumstances, the question for my determination is whether the petitioner is entitled to an order for stay of the suit in the exercise of my discretion under Section 34 of the Arbitration Act, 1940. It is true that there is a valid and binding arbitration agreement entered into by and between the parties herein. It is further true that the petitioner is ready and willing to go to arbitration and before taking any other step in the proceedings it has applied to this Court for stay of the suit, but the point still remains as to whether the petitioner is entitled to the order for stay on account of the following points raised on behalf of the respondent by Mr. Roy Chowdhury.

    11. In the first place, Mr. Roy Chowdhury contends that there is no existing dispute whatsoever which could be referred to the arbitration. According to him the goods had special markings of his client. The lorry delivery order was issued on behalf of the respondent and the said also contains full markings of the said goods evidencing that the same belonged to the respondent. Then again the bill for Rs. 76,355.40 with full payment has been made by his client by cheque and the same had been encashed. Thereafter the goods were inspected by the officer-in-charge, T.S.I.D Hastings, Calcutta, on behalf of the Director of Supply and Transport. NEFA Jorhat Airfield (Assam) at the mill of the petitioner. Under the circumstances the said goods were appropriated towards the said contract. Then again, when the said delivery order was presented to the mill the petitioner endorsed the same showing that the petitioners were unable to deliver the goods as their crane was out of order. Under the circumstances Mr. Roy Chowdhury submits that there could be no dispute with regard to the non-delivery of the said goods. The allegation by the petitioner that the goods were pledged with the Punjab National Bank Ltd. cannot be a correct or relevant fact and even if it is the correct position the same cannot be put up as a defence in withholding and/or obstructing delivery of possession. Punjab National Bank Ltd. has not come forward with any application before me and under the circumstances the petitioners cannot be allowed to take that defence at this stage. Under these circumstances it is quite apparent that the petitioner is acting in the most highhanded manner in refusing to give delivery of the said goods not only to the respondent but even did not hesitate to resist delivery of possession to the receiver pursuant to the order of the court. As stated above the solicitor Mr. C. Mallick assured on behalf of the petitioner that so far as his client was concerned, his client would not put up any obstruction in giving delivery of the goods to the receiver. In spite of such assurance the petitioner has resisted and/or obstructed in the receiver's obtaining possession of the said goods.

    12. Having considered all these points, I am of opinion that there are no matters or questions or disputes or differences or claims which might be said to arise out of or concerning or connecting or in consequence of or relating to the contract in suit which might be referable to the arbitration in terms of the arbitration agreement entered into by and between the parties herein. The cases of Uttam Chand Saligram v. Jewa Mamooji, ILR 46 Cal 534 : (AIR 1920 Cal 143) and the case of Chandanmull Jahaleria v. Clive Mills Co. Ltd. ILR (1948) 2 Cal 297 : (AIR 1948 Cal 257) and Heyman v. Darwins Ltd., (1942) AC 356 are distinguishable and the above cases have no application to the facts and circumstances of this case.

    13. In Union of India v. Birla Cotton Spinning & Weaving Mills Ltd. (1964) 2 SCR 599 : (AIR 1967 SC 688) the Supreme Court considered a case where the Union of India made a part payment but with regard to the balance contended that the same was not payable because they had a claim against the said party in respect of another contract and they wanted to appropriate the said balance amount against the said other contract. The Supreme Court held that under those circumstances there was no dispute between the parties which could be said to arise ‘under’ or ‘in connection with’, or even ‘with regard to’ the contract and on that basis refused to stay the suit.

    14. Under those circumstances I hold that there is no existing dispute by and between the parties and if there be no dispute then there is nothing to arbitrate upon.

    15. The next point urged on behalf of the respondent is that the conduct of the petitioner is such that I should not exercise my discretion in favour of granting stay of the suit. It is urged that the petitioner deliberately flouted the order of this court; the petitioner has obstructed the receiver in obtaining the possession of the goods pursuant to the order of this Court.

    16. Mr. Tibrewal appearing on behaif of the petitioner contends that his client has complied with all other requirements as provided by sec. 34 of the Arbitration Act and the court should exercise its discretion in favour of granting stay. In my opinion Mr. Tibrewal's contention would have been correct in the normal course of events. But there is a case where the discretion has to be exercised with reference to its particular context. In the facts and circumstances of this particular case as stated above the court has to consider whether the parties should be allowed to proceed with the trial of the case before the arbitrators or whether the parties should proceed with their disputes in courts. If the applicant for stay acts in such arbitrary manner and fails to carry out the order of the court then it can well be imagined that even if such applicant is allowed to refer his dispute to arbitration the applicant would himself create all sorts of troubles and impediments in the matter of arbitration proceedings. In the facts and circumstances of the case I cannot agree with the contention of Mr. Tibrewal and accordingly I exercise my discretion against the stay of the suit. In my opinion, there is sufficient reason why the legal proceeding instituted by the respondent should be proceeded with. Lastly, Mr. Roy Choudhury, has rightly contended before me that the fact that the petitioner company is in involved circumstance and there is already a special officer appointed over this company by the court taking company matters and an application for winding up has already been presented and admitted by the said court should be taken into consideration in the matter of exercising any discretion. Under the circumstances the application must fail and accordingly the ad interim order for stay is vacated. The application is dismissed with costs. The Receiver appointed in the suit herein should act on a signed copy of the minutes.

    NRK/GGM

    17. Petition dismissed.

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    Comments

    Lachminarain Jute Manufacturing Co. Ltd. v. Bangur Brothers Ltd. .
    (Jun 28, 1967)