1. The only question for consideration in this application is what is the scope of arbitration agreement dt. 28th Jan. 1981 between R.S Kedia and Sunil Kumar Dey and Srinivas Pandit. The relevant portion of the said arbitration agreement is set out hereinbelow:—

“Whereas the parties above mentioned have executed a Hire Purchase Agreement today with regard to the Motor Vehicle TDV of 315 H.P having 6 cylinders and painted bearing No. 692011000606 on the Engine No. 3440-73094472 on the chasis registered under Police registration No. WGT 1674 complete with accessories. Year of Manufacture 1981. This agreement witnesseth that we hereby agree that notwithstanding condition No. 15 of the said Agreement of Hire Purchase executed by us today all disputes differences claims arising out of the terms of the said Agreement of Hire Purchase with exception of the rights of the owners to seize the Article under all circumstances in terms of the Hire Purchase Agreement and all the disputes with regard to the claims under, on Demand Pronote executed by the hirer alone or both hirer and guarantor in favour of the owners in connection with the said Hire Purchase Agreement and all claims with regard to the compensation due to the instalments unpaid interest thereon, seizing expenses and charges, postage and telegrams, other incidental expenses and damages done to the vehicle in machinery, tyres and tubes etc. to the vehicle regarding which the said Hire Purchase Agreement is executed today shall be referred to the Sole Arbitration of Mr. G.P Lath of 6 Old Post Office Street, Calcutta-1 under the provisions of Indian Arbitration Act 1940 or any statutory modifications thereof. The award of the said arbitration shall be final and shall be binding on the parties to this agreement and the said Hire Purchase Agreement executed today provided that regarding the right of the owner to seize and take possession of their vehicle at any time under the provisions of the said Hire Purchase agreement, the decision of the owners shall be final and irrevocable and not subject to this reference to the Arbitrator. The fee of the Arbitrator in case of any such reference shall be 2½% of the value of the claim of the claimant with a minimum of Rs. 25/-. The Arbitrator shall be competent to decide the liability of the parties for the cost of the Arbitration.”

2-3. For the purpose of proper determination of the said question it is necessary to consider the facts culminating in this application. The material facts inter alia are that on or about 28th Jan. 1982 the petitioner and respondent No. 2 entered into a hire purchase agreement in writing with the respondent No. 1. In the said agreement the respondent No. 1 was termed as owner and the respondent No. 2 was termed as hirer and the petitioner was termed as guarantor. The respondent No. 1 agreed to let on hire to the respondent No. 2 and agreed to take on hire from the respondent No. 1 one TDV motor vehicle bearing No. 692001000606 on the engine and No. 344073094472 on the chassis on inter alia the following terms and conditions:—

a) the hirer would pay to the owner on the execution of the aforesaid agreement the sum of Rs. 34541.88 p. as an initial payment by way of hire which shall become the absolute property of the owner and shall punctually pay to the owner at its address for the time being at Calcutta without previous demand 18 consecutive monthly rents or hires consisting of Rs. 9250/- each except as to the first of such payment would be made on 15th Mar. 1981 and each subsequent payment on or before 15th of every succeeding calendar month;

b) the hirer would be at liberty at any time during the continuance of the said agreement to terminate the hiring by returning the said vehicle to the owner in Calcutta in the same order and condition in which it was delivered to the hirer (fair wear and tear excepted);

c) the hirer would pay to the owner interest at the rate of 2% per mensem on the amount of any sum overdue including any sum for taxes, fees, repairs and supplies which might be due from the hirer to the owner in respect of the said vehicle;

d) the hirer would hold the said vehicle as a Bailee of the owner and shall not have any proprietary right or interest as purchaser therein until they shall have exercised their option of purchase as provided in the said agreement and shall have the whole amount due under the said agreement or under any terms thereof. By and under the said agreement of Hire Purchase and for the consideration mentioned therein the petitioner guaranteed due performance and observance by the hirer of terms and conditions of the said agreement and agreed to pay to the owner at its his address for the time being at Calcutta within the said jurisdiction on demand any money or which might become payable under the said agreement and not paid by the hirer either by way of debt or damages, costs or expenses. Another agreement in writing dt. 28th Jan., 1981 was made between the parties whereby the parties agreed to refer the disputes to arbitration. The said arbitration agreement has already been set out earlier.

The petitioner duly paid the said sum of Rs. 34,541.88 p. at the time of execution of the aforesaid hire-purchase agreement whereby possession of the said vehicle was duly made over to the petitioner by the respondent 1. According to the petitioner he also paid a sum of Rs. 1,04,000/- by way of instalments from time to time. The respondent 1 duly determined the said hire-purchase agreement on ground of defaults in payment and lodged his claim for a sum of Rs. 1,80,647.50 p. as per particulars set out hereinbelow:

The petitioner and the respondent No. 2 filed their counter-statement of facts and contested the claim of the respondent No. 1. The learned Arbitrator passed an award and subsequently a judgment and decree was passed in terms of the said award. Thereafter an application was made for setting aside the said decree on the ground that no notice was served under S. 14(2) of the Arbitration Act. The said application was allowed and the decree was set aside. The petitioner in the instant application has prayed for setting aside of the said award on the ground that there is no scope for passing an award under the Arbitration Agreement dt. 28th Jan., 1981. According to the petitioner there is no scope for any reference of dispute which can be decided by the arbitrator as all the disputes have been excepted under the said arbitration clause. It may be noted, however, that the petitioner appeared before the arbitrator and contested the claim of the respondent No. 1 and never raised any question as to jurisdiction of the arbitrator.”

Particulars

Balance of the 7th monthly or hire .. Rs. 250.00 Arrears of the 8th to 18th monthly hires of rents which fell due during the period from 15-10-81 to 15-8-82 @ Rs. 9,250/- per month .. Rs. 101750.00 Proportionate rent of hire payable in respect of the said vehicle from 16-8-82 to 31-8-82 .. Rs. 4625.00 Interest under the aforesaid agreement for late payment of hires or rents .. Rs. 23032.50 Expenses incurred in or about collecting the hires or for attempting to take possession of the said vehicle .. Rs. 3000.00 Mesne profit for the wrongful use and detention of the said vehicle for the period 1-9-82 to 30-4-83 @ Rs. 9250/- per month .. Rs. 74000.00 Insurance premium paid in respect of the said vehicle .. Rs. 990.00 Rs. 207647.00 Less paid by the respondents .. Rs. 27000.00 Rs. 180647.50

4-5. In support of his contention the learned Advocate for the petitioner relied upon an unreported judgment and decision of a single Judge of this Court in Matter No. 2230 of 1987 between Bijoy Kumar Pande and Auto Trade Finance Corporation. In that case it was held by the learned Judge in respect of disputes under a similar arbitration clause and agreement that not a single dispute referred to arbitration is arbitrable under the arbitration agreement. Accordingly Mr. Shibdas Banerjee learned Advocate for the petitioner, submitted following the said unreported judgment and decision that there is no scope for arbitration on the basis of the said agreement and award passed on the basis of the said arbitration agreement cannot have any effect and ought to be set aside. He further submitted that the Court should interpret the agreement as contra proferentum and against the financier. In support of his contention he relied upon the judgment and decision in the case of State of Maharashtra v. Dr. M.N Kaul (dead) by his legal representative, reported in AIR 1967 SC 1634. In that case stay was obtained on condition of furnishing bank guarantee. The time during which the bank guarantee was to remain in force expired and the original petitioner also died. The authorities concerned wanted to recover the amount of bank guarantee from the bank to which the bank objected. While holding that a document of bank guarantee is to be strictly construed according to its words the Supreme Court observed that there are exceptions to the same when there is ambiguity in the words itself. When the ordinary rules of construction fall the Courts interpret the guarantee contra proferentum that is against the guarantor or use the recitals to control the meaning of the operative part where that is possible. But it was clearly held in that case that the cardinal rule is that the guarantor must not be made liable beyond the terms of his engagement and contention of the bank that the guarantee which was no longer enforceable was accepted by the Supreme Court in that case.

6. The learned Advocate for the respondent 1 Radheshyam Kedia on the other hand submitted that the parties have submitted to the jurisdiction of the arbitrator by filing statement of claim and counter-statement of claim. The learned Advocate further submitted that the petitioner filed counter-statement of claim and appeared before the learned Arbitrator but did not raise this question as to jurisdiction of the learned Arbitrator. Under such circumstances the petitioner is estopped from raising this contention at the moment. The learned Advocate further submitted that this is not such a case where the contract itself is illegal. The parties can always proceed under such circumstances and the scope of the arbitration agreement may be enlarged by the parties themselves as has been done in this case. The learned Advocate for the respondent further submitted that the said document dt. 28-1-81 being a commercial document Court should lean in favour of giving effect to the document and not construe it in a manner so as to invalidate the document.

7. In support of his contention the learned Advocate relied upon the following cases:—

1. Abdulla Ahmed v. Animendra Kissen Mitter, AIR 1950 SC 15;

2. The Godhra Electricity Co. Ltd. v. State of Gujarat, AIR 1975 SC 32;

3. Union of India v. D.N Revri & Co., AIR 1976 SC 2257;

4. National Fire & General Insurance Co. Ltd. v. Union of India, AIR 1956 Cal 11;

5. Waverly Jute Mills Co. Ltd. v. Raymond & Co. (I) Pvt. Ltd., AIR 1963 SC 90;

6. Prasun Ray v. Calcutta Metropolitan Development Authority, AIR 1988 SC 205.

8. In the case of Abdulla Ahmed v. Animendra Kissen Mitter (AIR 1950 SC 15) (supra) the Supreme Court held in case of ambiguity with regard to a phrase in a contract the evidence of conduct of the parties as to how they understood the words to mean can be considered in determining the true effect of the contract made between the parties. Extrinsic evidence to determine the effect of an instrument is permissible where there remains a doubt as to its true meaning. Evidence of the acts done under it is a guide to the intention of the parties in such a case and particularly when acts are done after the date of the instrument.

9. In the case of Godhra Electricity Company Ltd. v. State of Gujarat (AIR 1975 SC 32) (supra) the Supreme Court has followed its' earlier decision in the case of Abdulla Ahmed v. Animendra Kissen Mitter (AIR 1950 SC 15) (supra) and held that extrinsic evidence to determine the effect of an instrument is permissible where there remains a doubt about its meaning and that evidence of the acts done under it is guide to intention of the parties particularly when acts are done shortly after the date of instrument.

10. In the case of Union of India v. D.N Revri & Co. (AIR 1976 SC 2257) (supra) although arbitration clause provided for the appointment of an arbitrator by the Secretary to the Government of India in the Ministry of Food & Agriculture nomination of the arbitrator was made by a Secretary, Department of Food, in the Ministry of Food & Agriculture at the time when the arbitration clause was made. There was only one Secretary in the Ministry of Food and Agriculture but at the time of nomination there were two departments of the said Ministry — one of Food and other of Agriculture and it was the Secretary, Department of Food, who made the nomination. It may be noted that although notice under S. 80 of the C.P Code was served by the respondent, instead of filing a suit the respondents filed their statement of claim before the arbitrator and in the statement they claimed payment of an aggregate sum of Rs. 7,89,858/- from the appellant and also prayed for a declaration that the contract stood final and properly performed by the respondents. The appellant also filed its reply. It was stated in para 18 of the statement of claim of the appellant “that under Cl. 17 of the contract the Secretary, Food and Agriculture Ministry of the Government in its discretion has the right to nominate sole arbitrator and referred the dispute to the arbitrator and that has been duly done on 27th Feb. 1958 and the parties have been duly notified under Secretary to the Government letter No. SIMPT-3(4) dt. 27th Feb. 1962.” The respondents filed their written statement denying the claim of the appellant and in para 18 of the written statement they averred that para 18 of the statement of claim in which Government of India has not objected to the proceedings in connection with the claim of the respondents and the counter claim of the respondents were carried on before the arbitrator and the respondent participated in the arbitration proceedings without objection or protests against the jurisdiction of the arbitrator. The arbitrator ultimately made an award against the respondents. The only question before the Supreme Court was as to whether the appointment of the arbitrator by the Secretary, Department of Food in the Ministry of Food and Agriculture was a valid appointment. Obviously, if the appointment was invalid the arbitrator would have no jurisdiction to arbitrate upon the dispute between the parties and the award would be invalid. But an alternative argument was also advanced on behalf of the appellant to sustain the award and it was that the respondents not having raised any objection to the appointment of arbitrator and participate in the arbitration proceedings without any demur or protest, it was not open to them after the award was made to challenge it on the ground of invalidity of the appointment of arbitrator. The Supreme Court held that the document being a commercial document between the parties it must be interpreted in such a manner as to give efficacy to the contract rather than to invalidate it. The Supreme Court further held that it would not be right while interpreting a contract, entered into between two lay parties, to apply strict rules of construction which are ordinarily applicable to a conveyance and other formal documents. The meaning of such a contract must be gathered by adopting a common sense approach and it must not be allowed to be thwarted by a narrow pedantic and legalistic interpretation. The Supreme Court held that there is no reason why the Secretary in the Ministry of Food and Agriculture-in-charge of the department of Food could not be described Secretary. He would be the Secretary in the Ministry of Food and Agriculture concerned with the subject matter of the contract and clearly and indubitably he would be a person intended by the parties to exercise the power of nominating the arbitrator. The parties to the contract obviously could not be expected to use the Words a Secretary in the Ministry of Food and Agriculture because their intent was not that any Secretary in the Ministry of Food and Agriculture should be entitled to exercise the power of nominating an arbitrator but it should only be the Secretary in the Ministry of Food and Agriculture concerned with the subject matter of the contract. The Supreme Court also considered it to be significant that when the Secretary-in-Charge of the department of Food in the Ministry of Food and Agriculture nominated the arbitrator, the respondents did not raise any objection to the appointment of the arbitrator and participated in the arbitration proceedings without any protest. The respondents knew at that time that there were two Secretaries in the Ministry of Food and Agriculture and the appointment of arbitrator was made by the Secretary in charge of the department of Food and yet they acquiesced in the appointment of the arbitrator and took part in the proceedings. It was held that this circumstance is also clearly indicative of the intendment of the parties that the Secretary in the Ministry of Food and Agriculture concerned with the subject matter of the contract should be the person entitled to nominate the arbitrator. Or else the respondent would have objected to the appointment of the arbitrator and declined to participate in the arbitration proceedings or at any rate participated under protest and as such it was held that the arbitrator was validly nominated by the Secretary in charge of the department of Food in the Ministry of Food and Agriculture.

11. The learned Advocate for the respondent also relied upon the judgment and decision in the case of National Fire and General Insurance Co. Ltd. v. Union of India (AIR 1956 Cal 11) (supra). In that case the dispute arose with regard to the scope of the arbitration clause in a fire insurance policy which provided “if any difference arises as to the amount of any loss or damage, such difference shall independently of all other questions be referred to the decision of an arbitrator to be appointed in writing by the parties in difference, or if they cannot agree upon a single arbitrator to the decision of two disinterested persons as arbitrators. Two persons A and B were interested in the policy on a difference arising between the insurance company and the insured as to the amount of loss or damage. The matter was referred to two arbitrators — one of whom was appointed by A and the other was appointed by the company. B did not appoint any arbitrator merely saying that he was unwilling to appoint any arbitrator as his co-insured. A had already appointed an arbitrator. There was no difference between A and B as to the amount of loss; the real difference is between the company and the two co-insured. It was held that the true interpretation of the arbitration clause was that the arbitrators who were only to decide the difference as to the amount of loss or damage were to be appointed by the parties differing on the amount of loss or damage. There was no difference between A and B as to the amount of loss or damage. It was held construing the said arbitration clause that if any difference arises as to the amount of any loss or damage such difference shall independently of all other questions be referred to the decision of arbitrators. No doubt the arbitration clause invests the arbitrators only to decide the question of loss or damage and nothing more. But the words independently of all other questions in the arbitration clause indicate that although there was a stipulation in the insurance policy itself that the amount of loss or damage was alone, to be the subject of arbitration but that does not deter the parties from submitting to the jurisdiction of the arbitrators. The other question was the liability to pay the amount and who should pay to whom. It was further held that all that the arbitration clause framed in that language means is that independently of all other questions, the question of difference about the amount of loss or damage must be submitted to arbitration. It does not mean that this clause prohibits the other question from being submitted to the arbitrator along with the question of quantum. It was held that the scope of arbitration in such case can be easily enlarged. In the facts of this case the scope was in fact enlarged on the basis of the submission of the parties as contained in the statement of claim. The statement in writing of A before arbitrators and the insurance company's own written answer before the arbitrator to such statement together was held to constitute further arbitration agreement valid within the meaning of S. 2(a). Relying upon the said decision the learned Advocate for the respondent submitted that the scope of the arbitration may be enlarged by the parties themselves and since the petitioner himself submitted to the jurisdiction of the arbitrator and accepted the disputes raised therein by the respondent it cannot be said that the arbitrator has no jurisdiction to proceed with the dispute.

12. The Learned Advocate also relied upon the judgment and decision in the case of Waverly Jute Mills Co. Ltd. v. Raymond & Company (India) Pvt. Ltd., (AIR 1963 SC 90) (supra). In that case it was held that a dispute as to the validity of a contract would be subject matter of an agreement of arbitration in the same manner as a dispute relating to a claim made under the contract. But such an agreement would be effective and operative only when it is separate from and independent of the contract which is impugned as illegal, where, however, it is a term of the very contract whose validity is in question, it has no existence apart from the impugned contract and must perish with it. It was further held that an agreement for arbitration is the very foundation on which the jurisdiction of the arbitrators to act rests and where that is not in existence at the time when they enter on their duties, the proceeding must be held to be wholly without jurisdiction and this defect is not cured by the appearance of the parties in those proceedings, even if that is without protest, because consent cannot confer jurisdiction. But in such a case there is nothing to prevent the parties from entering into a fresh agreement to refer the dispute to arbitration while it is pending adjudication before the arbitrators, and in that event the proceedings before them might be upheld as referable to that agreement and the award will not be open to attack as without jurisdiction. But it will make all the difference in the result whether the parties have entered into an arbitration agreement as defined in S. 2(a) of the Arbitration Act or have merely taken steps in the conduct of the proceedings assumed or believed to be valid. In the former case the award will be valid and in the latter a nullity. Therefore, the point to be considered is whether the parties have entered into a fresh agreement during the pendency of the adjudication proceedings. If that is so then the proceedings thereafter might be upheld as referable to agreement. In the present case, however, it does not appear that any such agreement was made pending adjudication although the parties have proceeded with the reference.

13. The next case cited is Prasun Ray v. Calcutta Metropolitan Development Authority, (AIR 1988 SC 205) (supra). In the instant case both the parties got extension of arbitration proceedings at least 14 times. The arbitrator held 74 sitting which were attended by both the parties and their counsel and a large amount of time and money spent at the cost of the public. Under such circumstances it was held that in view of the acquiescence of the parties one of them could not be allowed to challenge arbitration proceedings on the ground that because of some disability the matter could not have been referred to arbitration. The question in this case was in view of the fact that the arbitrator was unaware if in terms of the agreement Court could appoint an arbitrator and thereafter the proceedings can continue. The Supreme Court held if the parties were aggrieved by the order appointing an arbitrator from amongst the members of the Bar without appointing the named arbitrator under the agreement the parties could have preferred an appeal. But no such appeal was preferred. Parties accepted the position. Proceedings were carried on and award was passed and only after coming to know that the award has been passed against the party concerned raised the objection that such an award cannot valid as the named arbitrator under the agreement was not appointed and the arbitrator appointed by the Court was appointed contrary to the agreement. Under such circumstances the Supreme Court following the decision of this Court reported in the case of Arbn. Jupitar General Insurance Co. Ltd. v. Corporation of Calcutta, reported in AIR 1956 Cal 470, held that the party who has accepted the position participated in the proceedings cannot be allowed to change his stand only after he becomes aware of the position that the award has gone against him. In the facts of the case it was held that there was no demur but something which can be called acquiescence on the part of the respondent or which precludes them from challenging the participation. Accordingly the learned Advocate argued following the said decision of the Supreme Court that this Court should also hold that since the respondent has participated in the proceedings and in fact filed its counter statement accepting the position he should not be allowed to shift his stand. The Learned Advocate further submitted referring to the said arbitration agreement that the exception provided in the agreement relates only to the rights of the owners to seize the articles and the other part is really relatable and other disputes are really covered under the arbitration clause. He also drew my attention to the latter portion of the arbitration agreement which provides as follows:—

“The award of the said arbitrator shall be final and shall be binding on the parties to this agreement and the said HIRE PURCHASE AGREEMENT executed today, provided that regarding the right of the owners to seize and take possession of their vehicle at any time under the provisions of the said HIRE PURCHASE AGREEMENT, the decision of the owners shall be final and irrevocable and not subject to this reference to the ARBITRATOR.”

14. It was submitted that had the arbitration agreement really intended to exclude all other disputes other than the right of the owner to seize the vehicle, the aforesaid portion relating to the owner's right to seize the vehicle would not have been mentioned. The learned Advocate further submitted that it is true that another learned Judge of this Court has passed an order relating to the same form of arbitration agreement and also considered the scope of such an arbitration clause and held that not a single dispute referred to arbitration is arbitrable under the Arbitration Act but it appears from the said judgment that all the points which have been urged in this application were not really argued before the said learned Judge. The learned Advocate also submitted that the disputes which have been referred under the statement of claim, viz., arrears of payments of instalment and other disputes cannot really be included within the exceptions provided under the arbitration clause even if the excepted portion of the arbitration clause is given a wider meaning. The learned Advocate submitted that such a contention as made out by him does not appear to have been made before the learned Judge. Accordingly the learned Advocate urged that it is open for this Court to pass a judgment independently as all the points were argued in the present case does not appear to have been argued or considered by the previous decision of this Court passed on Mar. 17, 1988.

15. I have considered the respective submissions of the parties and all the decisions cited above. Although the learned Advocate for the petitioner laid much emphasis on the said unreported single Judge's decision in Bijoy Kumar Pande v. Auto Trade Finance Corporation it appears to me on perusal of the said unreported decision that the same does not enunciate any principle of law which has to be followed as precedent in subsequent cases. The learned Judge in the said case held “that reading the statement of claim and the language of the arbitration agreement, it appears that not a single dispute referred to arbitration (in that case) is arbitrable under the arbitration agreement and that as a matter of fact all the disputes which have been referred to the arbitrator have been excluded by express terms of the arbitration agreement”. Assuming the arbitration agreement in that case and in the case at hand before me are similar, nothing is said in the judgment cited as to the nature of disputes referred therein to arbitrator or the reasons for holding those disputes to be not arbitrable as being excluded by express terms. As pointed out by Lord Halsbury in Quinn v. Leathern, 1901 AC 495 quoted with approval by the Supreme Court in the case of State of Orissa v. Sudhanshu Sekhar Misra, AIR 1968 SC 647 at p. 651 “a case is only an authority for what it actually decides” and not “for a proposition that may seem to follow logically from it”. The learned Judge found that none of the disputes referred to therein were arbitrable but what the disputes were not mentioned in the judgment. It appears that the learned Judge in the said decision considered the statement of claim in that case and on the basis of the disputes referred to therein found that none of the disputes in that case to be arbitrable. But in the instant case as already indicated by me that at least the disputes referred to the arbitrator are clearly arbitrable and not included within the exception clause. As I have already noted that in the instant case the petitioner appeared before the arbitrator contested the proceedings and never raised the question as to jurisdiction. Under the circumstances as aforesaid, it does not appear to me to be fit and proper to set aside the said award on the ground that none of the disputes can be said to be arbitrable. Accordingly this application is dismissed. There will, however, be no order as to costs.

Application dismissed.