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Nandram Hanutram v. Raghunath & Sons Ltd. .
Structured Summary of the Opinion
Factual and Procedural Background
This is an application to declare an arbitration award null and void. The arbitration clause arises from a contract dated 2 January 1952 under which the respondent agreed to sell hessian cloth to the petitioner with deliveries from April to June in equal monthly instalments. The respondent tendered the goods on the due dates but the petitioner failed to take delivery. After giving due notice the respondent re-sold the goods for and on account of the petitioner and submitted bills of difference in price, which the petitioner did not pay. The petitioner remained silent and did not answer several demands made by the respondent.
The respondent referred its claim to arbitration before the Bengal Chamber of Commerce on 7 July 1952. The petitioner did not file any statement before the Bengal Chamber. The Bengal Chamber made an award on 24 September 1952. The petitioner filed the present application (petition) challenging the award on several grounds, including that there was no dispute prior to arbitration and that arbitrators were improperly selected or refused the petitioner an opportunity to present its case.
Legal Issues Presented
- Whether there was a dispute or difference between the parties prior to reference such as to give the Bengal Chamber of Commerce jurisdiction to make the award.
- Whether the arbitrators were duly selected and appointed in accordance with Rule VI of the Rules of Arbitration of the Bengal Chamber of Commerce (i.e., whether the appointment was made in writing under the hand of the Registrar).
- Whether the arbitrators committed misconduct by refusing to give the petitioner an opportunity to submit its statement (an alleged denial of procedural opportunity before the tribunal).
Arguments of the Parties
Petitioner's Arguments
- The petitioner contended that there was no dispute between the parties prior to arbitration and therefore the Bengal Chamber lacked jurisdiction to make the award (this contention appears in paragraphs 9 and 17(C) of the petition).
- The petitioner contended that the arbitrator(s) were not selected or appointed in writing under the hand of the Registrar in accordance with rule VI of the Chamber's rules (this contention is discussed in the petition and in argument).
- The petitioner alleged misconduct by the arbitrators, specifically that they refused to give the petitioner an opportunity to submit its statement (raised in paragraph 17(e) and paragraph 10 of the petition).
Respondent's Position (as reflected in the opinion)
- The respondent's factual position, as set out in the opinion, was that it tendered goods on the due dates, the petitioner failed to take delivery, the respondent re-sold the goods on notice for and on account of the petitioner, and bills of difference were submitted which the petitioner did not pay.
- The respondent referred the claim to the Bengal Chamber of Commerce and proceeded with arbitration; the petitioner did not file a statement before that tribunal.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Chandanmull Ganeshmull v. Nippon Munka Kabushiki Kaisha (33 C.L.J. 545) | Defines "dispute" as an assertion of a right by one party and a repudiation by another. | The court relied on this definition to explain that a dispute can be shown by conduct or silence as well as words. |
| James Finlay & Co. v. Jeshanmal R. Kripalani (12 Indian Cases 188) | Authority cited for the proposition that failure to pay a claim may constitute a difference between parties in appropriate circumstances. | Used with other cases to support the view that non-payment and silence can amount to a dispute. |
| Donald Graham & Co. v. Asumal Khushaldas (12 Indian Cases 187) | Supports that failure to pay can constitute a difference between parties. | Cited as part of a group of authorities demonstrating that non-payment may justify inferring a dispute. |
| Beith Stevenson & Co Ltd. v. Firm of Naroomal Khemchand (A.I.R. 1924 Sind, 117) | Authority on circumstances in which failure to pay may be treated as a difference. | Relied upon to show precedents where silence/non-payment was treated as indicating a dispute. |
| Tyebally Abdul Hos-sain v. James Finlay & Co. (A.I.R. 1924 Sind, 105) | Another case indicating that non-payment can show a dispute. | Used alongside other authorities to support the proposition that silence and failure to pay can amount to repudiation. |
| Uttamchand Saligram v. Mahmood Jewa Mamooji (23 C.W.N. 704) | States that failure to pay under a claim of right is certainly a dispute. | The court cited it to justify holding that the petitioner's non-payment could be treated as evidence of a dispute. |
| Mathuradas Goverdhonedas v. Khusiram Benarsilal (53 C.W.N. 873) | Shows that in certain circumstances a court will not infer a dispute from mere failure to pay. | The court cited it to acknowledge limits on inferring disputes from non-payment and to show that context matters. |
| Dawoodbhai Abdulkader v. Abdulkader Ismailji (33 Bom. L.R. 51) | Explains that a defendant who maintains complete silence until suit may face a heavy burden in proving a pre-suit dispute. | Used to illustrate that prolonged silence can impose a burden on the silent party to show there was a dispute prior to proceedings. |
| London and Northwestern Railway Co. v. Jones (1915) 2 K.B. 35 | Illustrates principles relevant to burden and circumstances where silence precedes litigation. | Cited to show differing circumstances where courts may treat silence and non-response as significant. |
| Chandanmull v. Donald Campbell (23 C.W.N. 707) | House of Lords authority illustrating that silence can amount to denial and constitute a dispute; includes Lord Sumner's observations. | The court quoted Lord Sumner and relied on the case to support the proposition that one party's silence in the face of an assertion can be tantamount to a denial and thus constitute a dispute. |
Court's Reasoning and Analysis
The court began by construing the arbitration clause, observing that the clause covered "all matters, questions, disputes, differences and/or claims arising out and/or concerning and/or in connection with and/or in consequence of or relating to this Contract" and that the existence of disputes or differences was an essential prerequisite to the Arbitrator's jurisdiction.
The court then analyzed the meaning of "dispute." It accepted the principle that a dispute implies an assertion of a right by one party and a repudiation by the other, and that repudiation may be express or implied, by words or conduct. The court relied on authorities showing that failure to perform or to pay, coupled with silence, may justify inferring repudiation or denial of the asserted right.
Applying those principles to the facts, the court noted that the respondent had tendered the goods, the petitioner failed to accept delivery and did not explain non-performance, and that the petitioner did not pay the bills of difference nor respond to demands. The petitioner had maintained "stoic silence" and did not file any statement before the Bengal Chamber. Counting these circumstances together, the court concluded that silence plus non-payment reasonably supported the inference that the petitioner was disputing its liability.
The court acknowledged authorities (and academic commentary cited) that in some circumstances mere failure to pay might not support an inference of dispute, but held that the present facts were distinguishable and sufficient. The court further observed that exact disputes need not be specified before an arbitrator because the arbitrator has power to call for specification, points of claim, points of defence and particulars; the arbitration clause itself was wide and conferred authority to decide all such matters.
On the appointment issue, the court examined Rule VI of the Bengal Chamber's Rules (requiring the court to consist of two arbitrators selected by the Registrar and appointed in writing under his hand) and Rule 1(6) (defining "Registrar" to include the Secretary or such other member of the secretarial staff acting for him). The petitioner conceded that Mr. S.J. Phillips, who signed the appointment, was a member of the secretarial staff acting for the Registrar. On that admission, the court held that the selection and appointment complied with Rule VI.
The court also considered the allegation that the arbitrators refused to give the petitioner an opportunity to submit a statement. The court found that the petitioner had ample opportunity to place its case before the Bengal Chamber and rejected the misconduct contention. One ground (paragraph 17(d)) was expressly abandoned by the petitioner's counsel.
Holding and Implications
The court's final adjudication was twofold and dispositive:
(a) The award is not bad on the ground that there was no dispute between the parties prior to the reference.
(b) The award is not bad on the ground that the arbitrators were not duly selected and appointed in accordance with the rules of the Bengal Chamber of Commerce.
Implications:
- The petition's primary challenges to the arbitration award were dismissed; the award stands vis-à-vis the two principal grounds argued in the petition (no pre-reference dispute; improper appointment).
- The petitioner was ordered to pay the costs of the hearing of the previous day, assessed by the court at "5 G.ms" (as recorded in the opinion).
- The opinion does not purport to establish any broader new legal principle beyond applying existing authorities to the facts; its practical effect is the validation of the Bengal Chamber award on the issues litigated in this petition.
[End of reported portion of the judgment included in the provided opinion. The opinion notes that the remainder of the judgment is not relevant to the report.]
1. This is an application to declare an award to be null and void.
2. The arbitration clause is contained in a contract dated January 2, 1952, for sale by the respondent to the petitioner of hessian cloth, delivery April to June in equal monthly instalments.
3. The respondent tendered the goods to the petitioner on the due dates. The petitioner failed to take delivery and thereupon on due notice to the petitioner the respondent re-sold the goods for and on account of the petitioner. Bills of difference in price were duly submitted but the petitioner did not pay those bills. The petitioner maintained an unusual silence throughout and did not send any letters to the respondent in answer to the several demands made by the petitioner. The respondent referred its claim to the arbitration of the Bengal Chamber of Commerce on July 7, 1952. The petitioner did not file any statement before the Bengal Chamber of Commerce. The Bengal Chamber thereupon made its award on September 24, 1952.
4. It is contended on behalf of the petitioner that there was no dispute between the parties prior to arbitration and that therefore the Bengal Chamber had no jurisdiction to make the award. This contention is raised in paragraphs 9 and 17(C) of the petition.
5. The arbitration clause is as follows:—
“13. All matters, questions, disputes, differences and/or claims arising out and/or concerning and/or in connection with and/or in consequence of ox relating to this Contract whether or lot the obligations 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 the arbitration of the Bengal Chamber of Commerce under the rules of its Tribunal of Arbitration for the time being in force and according to such rules of arbitration shall be conducted.”
6. There is no doubt that the existence of disputes or differences contemplated by the arbitration clause is an essential condition of and prerequisite to the exercise of the jurisdiction by the Arbitrator.
7. A dispute implies an assertion of a right by one party and a repudiation thereof by another—Chandanmull Ganeshmull v. Nippon Munka Kabushiki Kaisha (1) (33 C.L.J 545).
8. The repudiation by the other party may be either express or implied and may be by words or by conduct.
9. Failure to perform the contract and to pay the amount claimed may take place under such circumstances as may justly lead to the inference of repudiation and denial of the right of the other party. Such conduct and stoic silence may be more eloquent than words and may show that the party is disputing his liability. Counted with other circumstances, a failure to pay a claim may constitute a difference between the parties. See James Finlay & Co. v. Jeshanmal R. Kripalani (2) (12 Indian Cases 188); Donald Graham & Co. v. Asumal Khushaldas (3) (12 Indian Cases 187); Beith Stevenson & Co Ltd. v. Firm of Naroomal Khemchand (4) (A.I.R 1924 Sind, 117 at pp. 118-119); Tyebally Abdul Hos-sain v. James Finlay & Co. (5) (A.I.R 1924 Sind, 105 at p. 110.
10. Failure to pay under a claim of right is certainly a dispute [Uttam-chand Saligram v. Mahmood Jewa Mamooji (6) (23 C.W.N 704)]. The claim of right need not necessarily foe express It may and should justly be inferred against the defendant from his sphinx-like silence in an appropriate case. It is not the law that a person who desires to evade arbitration may not write letters in answer to a claim explaining and justifying his conduct and then turn round and say, there is no dispute
11. I can well imagine that in certain circumstances the Court will not infer the existence of a dispute from a mere failure to pay (Russell on Arbitration, 14th Edn. 252) Mathuradas Goverdhonedas v. Khusiram Benarsilal (7) (53 C.W.N 873 at p. 875)
12. If the defendant maintains complete silence in answer to demands made against him until a suit is instituted against him may have a very heavy burden of proving that there was a dispute prior to the institution of the suit necessitating a reference to arbitration when he subsequently applies for slay of the suit [Dawood-bhai Abdulkader v. Abdulkader Ismailji (8) (33 Bom. L.R 51)] or when he subsequently contends that the suit is barred by a special statute requiring previous recourse to arbitra tion. London and Northwestern-Railway Co v. Jones (9) [(1915) 2 K.B 35]. The circumstances how ever are quite different.
13. In Chandanmull v. Donald Campbell (10) (23 C.W.N 707, foot-note) A drew bills on B on the basis of certain award made previously and binding upon A and B.B dishonoured the bills on presentation A then made a further reference to arbitration. B did not appear before the arbitrators and an award was made against B.B then contended that the award was invalid. The House of Lords negatived the suggestion of his counsel that there was no dispute prior to reference. Lord Sumner observed thus— “It is true that Mr Chandanmull when required to pay in accordance with the first award, preserved a sphinx-like silence It is true also that it takes two to make a quarrel But a dispute may perfectly well arise when only one disputant is articulate and the other stands mute when called upon to plead. What is required is that one party should affirm and the other deny and conduct will do this as well as words. The respondents said in effect “You owe the money and have no excuse for not paying it.” The appellants to my mind in effect retorted none-the-less eloquently though he held his tongue “I owe you nothing, I have a defence under the contract.”
14. It is suggested that the appellant really disputed nothing but simply could not or would not pay; in other words he lacked either money or honesty. My Lords, I cannot assume in Mr. Chandanmull's favour that he was wanting in either. If it be the case that no further dispute arises out of the contract when nothing capable of being disputed is to be found and nothing is alleged to be disputable, I think still that if the appellant's attitude can be explained consistently with any recognition of his business application this should be done.”
15. In the present case repeated demands for performance of contract were made upon the petitioner. He did not perform the contract and gave no explanation for his non-performance. Repeated demands for payment of the difference were made upon the petitioner. He did not pay the amount claimed and gave no answer why he was not making the payment. The petitioner is a firm apparently of good credit. In fairness to the petitioner it is to be assumed that he was disputing his liability on some ground.
16. I cannot assume in his favour that he was dishonestly avoiding liability or that he was insolvent. In fact even now in the petition he maintains that the admission for performance was wrongful. The exact disputes need not be specified. If the dispute is a vague one the arbitrator has jurisdiction to call upon the parties to specify the disputes. The arbitrator can order points of claim and points of defence as also particulars. The arbitration clause is very wide and confers jurisdiction upon the Bengal Chamber of Commerce to decide all matters, questions, disputes, differences and/or claims arising out of the contract. In my judgment there was a sufficient dispute or difference prior to the reference attracting the jurisdiction of the Bengal Chamber of Commerce to arbitrate upon these disputes.
17. It is contended that the arbitrator was not selected or appointed by the Registrar by his own hand. Reliance is placed upon rule VI of the Rules of the Arbitration of the Bengal Chamber of Commerce. Rule VI is as follows:—
“VI. Unless the agreement to refer the dispute or difference to the Chamber or Tribunal otherwise expressly provides, the Court shall consist of two arbitrators, who shall be selected by the Registrar from the Tribunal and appointed in writing under his hand.”
18. The argument here has proceeded upon the footing that the selection and appointment in writing was made under the hand of one Mr. S.J Phillips. Mr. Sethia on behalf of the petitioner has conceded and formally admitted that Mr. Phillips was at the relevant time a member of the secretarial staff of the Chamber and acting for him at the relevant time.
19. Rule 1(6) of the Rules of Arbitration of the Bengal Chamber of Commerce is as follows:—
“1. (6) “Registrar”—The Registrar of the Tribunal shall he the Secretary for the time being of the Chamber or such other member of the Secretarial staff of the Chamber as shall be acting for him from time to time”.
20. On the admission made by Mr. Sethia it must be held that Mr. Phillips was at the relevant point of time for the purpose of appointment and selection of arbitrators the Registrar and as such the appointment and selection of the arbitrators were duly made in accordance with rule VI.
21. It is next contended that the arbitrators were guilty of misconduct because they refused to give an opportunity to the petitioner to submit its statement. This contention is raised in paragraph 17(e) and paragraph 10 of the petition. I am satisfied that the petitioner had ample opportunity to place its case before the Bengal Chamber and there is no substance in the present contention.
22. The contention raised in paragraph 17(d) is not pressed and expressly abandoned by Mr. Sethia.
23. The only dispute therefore now outstanding for adjudication is that raised in paragraph 17(a) and paragraphs 3, 4, 5 and 6 of the petition.
24. I adjudge and declare:—
(a) That the award is not bad on the ground that there was no dispute between the parties prior to the reference.
(b) That the award is not bad on the ground that the arbitrators were not duly selected and appointed in accordance with the rules of the Bengal Chamber of Commerce.
25. The petitioner must pay the costs of hearing of yesterday which I assess at 5 G.ms
26. [The rest of the judgment is not relevant to the report—Ed.]
P.S
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