- Bookmark
- Share
- CaseIQ
Ramdas Dwarkadas v. Orient Pictures
Structured Summary of the Opinion (Blackwell, J.)
Factual and Procedural Background
This matter arises from a written agreement dated May 12, 1941, between Shantiprasad Govindram Khandaria and Gopinath Mahadeo Tendulkar (described as financing and managing partners of Orient Pictures, the defendants) and Mr. Ramdas Dwarkadas (the plaintiff), proprietor of India Cine Laboratory. Under the May 12 agreement (exhibit A to the plaint) the plaintiff agreed to supply raw films and to process, develop and print a picture titled "Sidha-Rasta" for a specified charge; clause 3 gave the plaintiff a right to retain the negative and a first charge on that negative for arrears of bills.
Difficulties arose over editing and a subsequent tripartite arrangement between the plaintiff, the defendants and Bombay Film Laboratories was evidenced by correspondence (exhibit B). The June 26, 1941 letter from the plaintiff to Bombay Film Laboratories (endorsed by Tendulkar) authorised Bombay Film Laboratories to hold picture and sound negatives and positive prints in its custody on behalf of the plaintiff.
The plaintiff sent accounts claiming Rs. 7,309-13-0 and the defendants denied liability and alleged breaches by the plaintiff. The plaintiff filed suit seeking declarations of the debt and of a first charge on the negatives, sound negatives and positive prints, and that the items be sold in default of payment.
The defendants moved to stay the suit and refer the dispute to arbitration relying on clause 9 of the May 12 agreement which provides that disputes "shall be referred to arbitration". Affidavits were filed by both sides: the defendants' affidavit asserted the plaintiff had handed over negatives and released any lien; the plaintiff's affidavit denied inability to perform, asserted the June 26 arrangement placed the negatives and prints in Bombay Film Laboratories' custody on his behalf and denied any release of lien, and he also alleged subsequently learning that the defendants had mortgaged the films to third parties.
The court was asked to decide whether the arbitration clause in the May 12 agreement required a stay of the proceedings and a reference to arbitration, particularly in light of the subsequent arrangement evidenced by exhibit B and the involvement of third-party mortgagees.
Legal Issues Presented
- Whether the arbitration clause in clause 9 of the May 12, 1941 agreement requires a stay of the court proceedings and a reference of the dispute to arbitration.
- Whether the subsequent arrangement evidenced by correspondence (exhibit B) falls within the scope of the arbitration clause in the original agreement or creates new rights and liabilities outside that clause.
- Whether an arbitrator appointed under the original agreement would have jurisdiction to determine the validity or effect of the subsequent alleged arrangement (exhibit B).
- Whether it would be appropriate to split the action — referring matters falling under the original agreement to arbitration while leaving other matters (arising from exhibit B or involving third-party mortgagees) in court.
Arguments of the Parties
Defendants' Arguments (and supporting affidavit/counsel submissions)
- Defendants (affidavit of Shantiprasad G. Khandaria) alleged the plaintiff could not carry out his part of the contract, so the defendants arranged for Bombay Film Laboratories to edit the picture; the plaintiff handed over the negatives and thereby released any lien or charge.
- They contended that disputes between the parties fall to be resolved by arbitration pursuant to clause 9 of the May 12 agreement.
- Counsel for the defendants, Mr. Daphtary, argued (on the assumption that exhibit B was binding) that exhibit B formed part of and was merely a supplementary arrangement to the original agreement and thus the arbitration clause applied equally to the second arrangement; relied upon Wade-Gery v. Morrison to support treating related instruments together for arbitration purposes.
Plaintiff's Arguments (and supporting affidavit/counsel submissions)
- The plaintiff (affidavit sworn March 31, 1942) denied that he could not perform and asserted that the June 26, 1941 arrangement (exhibit B) placed the negatives and positive prints in the custody of Bombay Film Laboratories on his behalf, and that he had not released his lien or charge.
- The plaintiff contended that disputes included matters arising out of both the May 12 agreement and the subsequent arrangement evidenced by exhibit B, placing the subject-matter outside the scope of the submission in clause 9 of the original agreement.
- He also alleged that the defendants had mortgaged the films to third parties (Messrs Sewaram Tricumdas and Ramchand Tricumdas), meaning third-party interests were involved and that such third parties would need to be joined to any proceeding affecting those interests.
- Counsel for the plaintiff, Mr. J.H. Vakil, relied on Turnock v. Sartoris to argue that the subsequent agreement imposed fresh liabilities and modified rights so as to fall outside the arbitration clause in the original instrument.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Wade-Gery v. Morrison | Where two contemporaneous agreements are to be treated together, an arbitration clause contained in one may be taken to apply to both. | The court distinguished this case from the present: Wade-Gery involved contemporaneous agreements treated as a single arrangement; the judge held that the present facts were different and that Wade-Gery did not support applying the arbitration clause to the subsequent arrangement (exhibit B) here. |
| Turnock v. Sartoris | Where a subsequent agreement imposes fresh liabilities and alters rights under an earlier instrument (such as a lease), disputes concerning those fresh obligations may fall outside an arbitration clause limited to the original instrument; an arbitrator may lack power to determine construction/effect of the later agreement. | The court applied and followed Turnock v. Sartoris as analogous: found that exhibit B conferred rights and imposed liabilities not present in the original May 12 agreement, and therefore the arbitration clause did not cover disputes arising from exhibit B; Turnock supported refusal to stay the court proceedings. |
Court's Reasoning and Analysis
The court began by identifying clause 9 of the May 12 agreement, which requires arbitration of disputes arising "in respect of this agreement". The central inquiry was whether the subsequent arrangement evidenced by exhibit B fell within the scope of that arbitration clause.
The judge examined the terms of the May 12 agreement and noted that by that agreement the plaintiff's rights were limited to retention of the negative of the film and a first charge on that negative for arrears; the plaintiff did not have a right to retain positive prints or a broader possessory interest in prints beyond the negative.
The court analysed the correspondence comprising exhibit B (the June 26 letter and confirmations) and concluded that this later arrangement conferred upon the plaintiff a new and distinct right — specifically, the right to have positive prints retained by a third party (Bombay Film Laboratories) on his behalf — and that it imposed a new liability on the defendants (to sanction such retention by the third party). These rights and liabilities were not found in the original May 12 agreement.
Because exhibit B introduced rights and obligations outside the original contract, the court held that an arbitrator appointed under the May 12 agreement would have no jurisdiction to determine disputes arising out of exhibit B, including whether exhibit B was binding on the parties. The validity of exhibit B was in dispute between the parties and thus raised questions beyond an arbitrator's competence under the original clause.
The court considered the contention (supported by Wade-Gery) that related instruments should be treated together, but distinguished Wade-Gery on its facts and rejected its application here. Instead, the court found Turnock v. Sartoris to be persuasive: where a subsequent agreement imposes fresh liabilities and changes parties' rights, those matters need not be referred to arbitration under the earlier instrument.
The court also reasoned that splitting the action — referring those matters arguably covered by the May 12 agreement to arbitration while keeping other matters in court — would be inappropriate. An arbitrator would have no power to determine the effect of the subsequent arrangement on the original agreement, and, importantly, third-party mortgagees (whose interests were said to exist) could not be made parties to an arbitration between the plaintiff and defendants; that practical inconvenience weighed against a stay.
On these bases, and exercising judicial discretion, the court concluded that the arbitration clause did not require a stay of the entire suit and that the defendants' motion to stay should fail.
Holding and Implications
Holding: The court dismissed the defendants' application to stay the suit and refer the matter to arbitration, and ordered the defendants to pay costs.
Implications and immediate consequences:
- The suit will proceed in court rather than being stayed for arbitration; matters arising under the subsequent arrangement evidenced by exhibit B remain justiciable before the court.
- The court concluded that the arbitration clause in the May 12, 1941 agreement does not extend to the new rights and liabilities created by the June 26, 1941 arrangement (exhibit B), and an arbitrator under the original agreement would lack jurisdiction to determine the validity or effect of that subsequent arrangement.
- The presence (or alleged presence) of third-party mortgagees was a factor militating against a stay because such third parties could not be made parties to an arbitration between the original contracting parties; the court observed that those mortgagees could be added as parties in due course in the court proceeding.
- The opinion does not purport to set a broadly framed new legal precedent beyond applying established authorities (the court distinguished Wade-Gery and applied Turnock v. Sartoris); the immediate effect is the dismissal of the stay application and continuation of the suit in court.
Disposition recorded in the opinion: "Motion dismissed." Attorneys for the plaintiff and defendants are noted in the record.
Blackwell, J.:—
This is a notice of motion taken out by the defendants for a stay of this suit upon the ground that the agreement out of which the suit is alleged to arise contains an arbitration clause.
By an agreement in writing made on May 12, 1941, between Shantiprasad Govindram Khandaria and Gopinath Mahadeo Tendulkar described therein as financing and managing partners of the Orient Pictures, Bombay, and Mr. Ramdas Dwarkadas described in the agreement as the proprietor of Messrs India Cine Laboratory, Bombay, Mr. Ramdas Dwarkadas who is the plaintiff in the suit agreed to supply raw films mentioned in the agreement to the other party to the agreement who are the defendants as and when required from time to time for a picture named “Sidha-Rasta. The plaintiff further agreed to process the picture in his laboratory, develop it and print it to the final finish. He was to charge the defendants a sum of Rs. 2,500 for complete developing and printing charges and supplying a Rush-print thereof as well as for giving facility of Moviola machine for editing purposes. This agreement is exhibit A to the plaint.
Clause 3 of the agreement provided that the defendants were to keep the negative of the film in the possession of the plaintiff in their laboratory. It was to be kept in connection with processing and a first charge was created upon the negative for arrears of bills in respect of raw films and processing charges. It is important to observe that by virtue of this agreement the plaintiff was given the right to retain only the negative of the film and had a first charge for arrears of bills in respect of that negative only.
Thereafter difficulties arose between the plaintiff and the defendants in regard to the editing of the film in consequence of which a fresh arrangement of a tripartite character was come to between the plaintiff and the defendants and Messrs Bombay Film Laboratories. This agreement is evidenced by the letters which are exhibit (B) to the plaint. The first letter dated Jane 26, 1941, was written by the plaintiff as the proprietor of the India Cine Laboratory to the Bombay Film Laboratories. It states that the India Cine Laboratory have learned from Mr. Tendulkar, one of the partners of the defendant firm that they had arranged with the Bombay Film Laboratories for the editing of the picture and that the Bombay Film Laboratories had agreed to render them services for the complete editing of the picture for a lump sum of Rs. 250 of which they had so far paid Rs. 100. The letter goes on to request the Bombay Film Laboratories to debit the balance of Rs. 150, to the account of the India Cine Laboratory. The letter then states as follows:—
“We hereby also authorise you with a mutual consent of the said Messrs. The Orient Pictures to hold both Picture and sound negatives as well as positive print relating to the picture referred to above, in your custody on our behalf and account till such time, you receive further instructions on the subject from cur end.”
The letter requests the Bombay Film Laboratories to confirm the arrangement mentioned in the letter. There is an endorsement at the foot of the letter made by the Orient Pictures by Mr. G.M Tendulkar as a partner therein confirming the arrangement set out in the letter. By a letter of July 16, 1041, written by the Bombay Film Laboratories to the India Cine Laboratory the Bombay Film Laboratories confirmed the arrangement set out in the letter of Jane 26, 1941.
Thereafter, as appears from correspondence set out in exhibit (C) to the plaint, the plaintiff sent his accounts to the defendants and made a demand for the payment of Rs. 7,309-13-0. The plaintiff wrote three letters to the defendants, of September 1, 12 and 19, 1941. By a letter dated September 25, 1941, from Messrs Rajpal and Rajpal, advocates, written on behalf of the defendants the defendants denied that the sum of Rs. 7,309-13-0 claimed by the plaintiff was due by them and set out numerous alleged breaches by the plaintiff of the agreement dated May 12, 1941. Thereafter the plaintiff filed the present suit. In the plaint he sets out the material provisions of the agreement of May 12, 1941, and alleges that from time to time he supplied raw films and carried out the developing and printing of the picture as and when required and that from time to time he sent to the defendants debit notes in respect of the raw films supplied and charges for the work done by him, and in paragraph 7 he sets out the further agreement come to on June 26, 1941, whereby among other things it was agreed that the Bombay Film Laboratories should hold both the picture and sound negatives as well as the positive prints relating to the picture on account and on behalf of the plaintiff. The correspondence is then referred to in the plaint, and in paragraph 10 the plaintiff alleges that he learnt from the correspondence that the defendants have taken possession of two positive prints of the picture from the Bombay Film Laboratories. In paragraph 11 the plaintiff alleges that he is entitled to the possession of the negatives, sound negatives and positive prints, and he farther alleges that he has a first charge thereon until the amount due and payable to him is paid by the defendants. In paragraph 12 he alleges that the defendants were not entitled to take possession of the positive prints and that they have wrongfully taken possession thereof. In the prayers he asks for a declaration that Rs. 7,309-13-0 are due and payable and for a declaration that he has a first charge on the picture negatives, the sound negatives and the positive prints, and he asks that in default of payment the said picture negatives, sound negatives and positive prints may be sold, and the proceeds applied to the payment of the decretal amount.
This suit having been filed the defendants have applied to stay the suit upon the ground that the arbitration clause in the agreement of May 12, 1941, applies.
That cl. 9 is in this form:—
“If any dispute arises between the parties in respect of this agreement, the same shall be referred to arbitration, each arbitrator to be appointed by both the parties whose award will be final and binding upon both the parties.”
The defendants have supported their application by an affidavit of Shantiprasad Govindram Khandaria sworn on March 23, 1942. In that affidavit the deponent alleges that as the plaintiff could not carry out his part of the contract by developing and editing the picture the defendants had to arrange for the same with the Bombay Film Laboratories, and the plaintiff on June 21, 1941, handed over to the defendants the picture negatives and the sound negatives of the said picture and the defendants handed over the same to the Bombay Film Laboratories. The deponent alleges that the plaintiff has released his lien or charge, if any, under the said agreement by his handing over the negatives and picture to the defendants. The deponent goes on to allege that there are disputes between the plaintiff and the defendants and that they should be referred to arbitration pursuant to cl. 9 of the agreement of May 12, 1941. The plaintiff made an affidavit in reply sworn on March 31, 1942. He denied the allegation that he could not carry out his part of the contract. He alleged that the negative of the picture was handed over by him to the Bombay Film Laboratories on June 26, 1941, in pursuance of the agreement which is contained in exhibit B to the plaint, and that under that agreement the Bombay Film Laboratories with the consent of the defendants agreed to hold the picture and sound negative and positive prints of the film in their safe custody on his behalf. He denied that he had released his lien or charge. He alleged that disputes had arisen between him and the defendants not only with regard to the agreement dated May 12, 1941, but with regard to the agreement recorded in the correspondence exhibit B to the plaint. He submitted that the subject matter of the suit comprised the disputes between him and the defendants both with regard to the agreement dated May 12, 1941, and the agreement recorded in the correspondence exhibit B to the plaint. He contended that the subject-matter of the suit was therefore outside the scope of the submission contained in the agreement dated May 12, 1941. Further he alleged that he had come to know from Messrs Sevaram Tricumdas on March 28, 1942, that the defendants had mortgaged the films to Messrs Sewaram Tricumdas.
Mr. Shantiprasad G. Khandaria filed an affidavit in rejoinder sworn on March 31, 1942. In paragraph 9 he alleged that the suit was based only on the agreement dated May 12, 1941, and not on the arrangement which appears in exhibit B to the plaint. He alleged that the arrangement had never been accepted by the defendants and that it was not binding upon them. He thereto re submitted that the alleged arrangement and disputes arising out of that alleged arrangement cannot affect the rights of the parties to the agreement. It is to be observed therefore that the validity of the agreement which is set out in exhibit B to the plaint is actually challenged by the defendants to this suit. He goes on in the affidavit to allege that in November, 1941, the defendants created a mortgage on the film in question inclusive of negative films and positive prints in favour of Tricumdas Sevaram and Ramchand Tricumdas, and he alleges that the interests of third parties who are not parties to the suit are concerned, and that for that reason the defendants intend to oppose the plaintiff's application for a receiver and an injunction which is being made by another motion.
In support of the application for a stay Mr. Daphtary arguing upon the assumption that the second arrangement evidenced by exhibit B to the plaint was binding upon the defendants contrary to the contentions of Mr. S.G Khandaria contended that it formed part and parcel of the original agreement and was merely a supplementary arrangement giving further security to the plaintiff in reference to the subject-matter of the first agreement. Consequently he contended that the arbitration clause would be equally applicable to the second agreement. He referred to and relied upon Wade-Gery v. Morrison. In that case however there were two contemporaneous agreements, one of which contained, though the other did not, a reference to arbitration, and the learned Judge decided that those two agreements must be treated as together forming one agreement and that the arbitration clause consequently must be taken as applying to both. That case is in my opinion very different from the present.
Mr. J.H Vakil in opposing the application for a stay relied upon Turnock v. Sartoris. In that case a lease Pictures contained an arbitration clause. Some years after the date of the lease disputes having arising between the parties a written agreement was entered into binding the lessor to take certain steps with a view to securing a better water supply and in some points varying the rights of the lessee as to the supply which the lessor had covenanted to give him under the lease. The lessee commenced an action alleging that the steps mentioned in the agreement had not been taken, and also alleging that the lessor had not supplied the stipulated quantity of water, and claiming an enquiry as to the damages sustained “by reason of the matters aforesaid”. The defendant moved to stay the proceedings and refer the dispute to arbitration. The Court held that as the arbitration clause applied only to matters arising under the lease, it did not cover the whole subject-matter of the action. As Mr. Justice Cotton said in his judgment the subsequent agreement imposed upon the lessor certain fresh liabilities and to some extent modified the rights of the plaintiff.
In my opinion the case relied upon by Mr. Vakil is applicable to the facts of the present case. I think that the subsequent agreement evidenced by exhibit B conferred upon the plaintiff a right which he had not previously got, viz., to have possession of the positive prints retained on his behalf by a third party and imposed upon the defendants a liability which they had not previously undertaken, viz., to sanction the retention by third parties of the positive prints on behalf of the plaintiff. This new arrangement imposed liabilities upon the defendants and conferred rights upon the plaintiff which are not to be found in the original agreement at all. In my opinion the arbitration clause has no applicability whatever to these new rights and liabilities so imposed and conferred. In my opinion an arbitrator or arbitrators appointed under the original agreement would have no jurisdiction to entertain any dispute arising between the plaintiff and the defendants in respect of the new agreement. Moreover the validity of the fresh arrangement evidenced by exhibit B to the plaint is disputed by the defendants. The arbitrator or arbitrators appointed under the first agreement would certainly have no jurisdiction to determine whether the second alleged arrangement was or was not binding upon the plaintiff and the defendants, or what effect it had upon the provisions of the suit agreement.
Mr. J.H Vakil drew my attention to part of the judgment in Turnock v. Sartoris, where the Court discussed the question whether it would be right to split up the action by referring to arbitration the matters arising under the lease and leaving the action to proceed as to the other matters. The Court took the view that even if the arbitration clause could be construed so widely as to cover all the matters in respect of which damages were claimed it would not be proper to refer them to an arbitrator as he would have no power to determine the construction of the agreement and its effect upon the provisions of the lease. I am of opinion that argument applies to the present suit. I do not think that I ought to stay the suit to the extent to which it can be said to be a suit arising under the agreement of May 12, 1941, inasmuch as it is contended by the plaintiff that the rights under that agreement are materially affected and altered and modified by the second agreement, and an arbitrator or arbitrators appointed under the first agreement would have no power to entertain that question.
Mr. Vakil informed me that when this suit was instituted the plaintiff did not know that the defendants had mortgaged the film to third parties. If the plaintiff had been aware of that fact those third parties would no doubt have been made party defendants to the suit. Mr. Vakil said that the necessary steps would in due course be taken to add them as parties. It would, I think, be manifestly most inconvenient to stay this suit and to allow the arbitration to be held between the plaintiff and the defendants to which the mortgagees could not be made parties.
For the reasons above given and in the exercise of my discretion I have come to the conclusion that this application to stay fails and I accordingly dismiss it with costs.
Attorneys for plaintiff: Messrs Dabholkar and Jeshtaram.
Attorneys for defendants; Messrs Rustomji and others.
Motion dismissed.
N.K.A
Alert