w w w . L a w y e r S e r v i c e s . i n


    Suit 619a Of 1976

    Decided On, 11 January 1979

    At, High Court of Delhi


    For the Appearing Parties: Bikram Singh, K.Sawhney Seth, Advocates.

Judgment Text


( 1 ) THIS petition, under S. 20 of the Arbitration Act was filed by Messrs Metal Forgings Private Limited, New Delhi, against Messrs Central a Handlu Zaranizznego, Poland. It was alleged by the petitioner that the parties entered into five contracts for supply of forgings to the respondent, worth Rs. 9,94,750; Rs. 25,75,000; Rs. 27,60,009; Rs. 5,72,800 and Rs. 13,27,910 respectively. It was provided by the five separate agreements that the respondent would furnish to the petitioner drawings of the components and the petitioner would thereon submit samples for the approval of the other party and on obtaining the said approval the goods in question would be fabricated. Ten per cent of the price of the goods, amounting to Rs. 8,23,044, was paid to the petitioner in advance and letters of credit were opened in its favour in respect of four contracts. According to the petitioner there was delay on the part of the respondent in sending the drawings, approving the samples, etc. and in consequence the contracts could not be performed within the contemplated time. Prices of the necessary materials, like steel, furnace oil, went up considerably in the meantime, and that resulted in a loss of about Rs. 25 lacs to the petitioner. Because the respondent rescinded the contracts unreasonably, the petitioner was also deprived of profits to the tune of Rs. 28 lacs. According to the petitioner goods worth Rs. 6,77,753. 40 had already been supplied to the respondent and after calculations a sum of Rs. 48 lacs was claimed to be due to it

( 2 ) THE agreements provided that any disputes arising between the parties in relation to the aforesaid contracts would be got settled through arbitration. The present petition was, therefore, made with a prayer that the agreements containing the arbitration clause in question in possession of the respondent be got filed and the disputes between the parties referred to arbitration.

( 3 ) AS per the averments in the petition, the cause of action for filing the petition arose at Delhi where the contracts were accepted, wherefrom the goods were to be despatched. where the remittances were to be made where the respondent committed breach of the contract and put pressure on the petitioner through the Punjab National Bank to force litigation.

( 4 ) THE respondent opposed the application and raised, inter alia, a preliminary objection as to the jurisdiction of this Court. It was contended that according to the arbitration clause, in case the Polish party is sued the arbitration shall take place in Poland at the Arbitration Court of the Polish Chamber of Foreign Trade in Warszawa or, in application of the rules of the said Arbitration Court, in another town in Poland always in accordance with the rules of the said Court, the competence of ordinary Courts of the countries of both the parties, being excluded.

( 5 ) IN view of the pleadings of the parties, the following issues have been framed:"1. Whether this Court has jurisdiction to entertain this petition? 2. Relief. "

( 6 ) THE parties are agreed that the decision of the crucial issue framed in the case would depend upon the agreement between them. It is provided by the said agreement as follows: ?in case the Polish party is sued the arbitration shall take place in Poland at the Arbitration Court of the Polish Chamber of Foreign Trade in Warszawa or in application of the Rules of the said Arbitration Court in another town in Poland always in accordance with the said Court. In case the Indian party to the contract is sued, the arbitration shall take place at the Tribunal of Arbitration of the Federation of Indian Chambers of Commerce and Industry in New Delhi or upon application by both the parties in Bombay. Calcutta or Madras in India in accordance with the Rules of the Tribunal of Arbitration of the Federation of Indian Chambers of Commerce and Industry. "

( 7 ) NOW the alleged grievance being on the side of Messrs. Metal Forgings Private Limited, the Indian party, it could but for the peculiar arbitration clause in the present case file a suit at Delhi because a part of the cause of action did admittedly arise here and the suit could also be instituted in Poland because of the defendant carrying on business in that country. It is well established that where a suit can be instituted in either of two courts due to cause of action arising partly at the two places or cause of action arising at one place and the defendant residing or carrying on business at the other, the parties can agree between themselves that the disputes arising between them would be tried at one of the said courts only. That was what the parties did in the present case. It was agreed that it the suit was to be instituted against the Polish party the proceedings for arbitration shall be held in Poland and vice versa. As we see it it is the Indian party which has thought fit to initiate litigation and it is duty bound under the agreement to approach the appropriate Court in Poland for the settlement of its claim.

( 8 ) THE counsel for the petitioner has relied upon Bombay Goods Carriers (P) Ltd.

v. Sha Multhanmul Hastimal and Sons (AIR 1974 Kar 1 ). It was held in that case that where two or more courts have jurisdiction to try a suit, an agreement between the parties that the claims shall be settled by only one of such Courts is valid but the parties cannot confer jurisdiction on a Court which does not have it in regard to a particular matter by agreement. The said precedent would not apply to the present case because when the Indian party to the contract is launching litigation the Polish Courts, within whose jurisdiction the respondent State Trading Corporation is carrying on business, would have undisputed jurisdiction to entertain the same. It was held in S. C. Malik v. Union of India (AIR 1972 Delhi 211) that where courts at two places have jurisdiction in a matter and by a clause in the agreement the jurisdiction is vested exclusively in the courts of one place, the application under S. 20 can be filed in the Court of that place only. Vide Hakam Singh v. Gammon (India) Ltd. (AIR 1971 SC 740), it is not open to the parties by agreement to confer by their agreement jurisdiction on a court which it does not possess under the Code, but where two courts or more have jurisdiction to try a suit or proceeding an agreement between the parties that the dispute between them shall be tried in one of such Courts is not contrary to public policy and it does not contavene S. 28 of the Contract Act. This authority too does not, obviously, lend any help to the petitioner.

( 9 ) THE next case quoted by Shri Bikram Singh on behalf of the petitioner is Michael Golodetz v. Serajuddin and Co. (AIR 1963 SC 1044 ). There one of the contracting parties was Serajuddin and Co. , a firm with its principal office in Calcutta, and the other Messrs. Michael Golodetz and Co. of Wall Street, New York. When disputes arose between them with regard to the delivery of goods contracted for the Americal Company referred the same to the arbitration of the American Arbitration Association. Thereon the Calcutta Firm instituted a petition on the original side of the High Court of Calcutta praying, inter alia, that the contract in question be adjudged void and be delivered up and cancelled and the American Company be restrained by a perpetual injunction from taking steps in purported enforcement of the said contract. As a counterblast to this suit, Messrs. Michael Golodetz filed an application under S. 34 of the Arbitration Act for the stay of the said suit. The arbitration clause relied upon by it reads: "any dispute arising out of the contract is to be settled by arbitration in New York according to the rules of the American Arbitration Association". The learned Single Judge, Ray,. , granted the prayer of the applicant but his decision was set aside by a Division Bench in a Letters Patent Appeal. It was conceded before the Court that the entire matter would be governed by the Indian laws and the court held that all the evidence regarding the contract and the disputes was in India, that there were, on account of the restrictions imposed by the Government of India, special difficulties in securing foreign exchange for producing evidence before a foreign Arbitration Tribunal, that it would be impossible for the respondents to produce their evidence and, therefore, the foreign Arbitration Tribunal would not be a safe and convenient forum for a just and proper decision of the disputes between the parties. On an appeal having been taken to the Supreme Court, their Lordships ruled? that where a party to an arbitration agreement commences an action for determination of a matter agreed to be referred under an arbitration agreement the Court normally favours stay of the action leaving the plaintiff to resort to the Tribunal chosen by the parties for adjudication. The Court in such a case is unwilling to countenance, unless there are sufficient reasons, breach of the solemn obligation to seek resort to the tribunal selected by him, if the other party thereto still remains ready and willing to do all things necessary for the proper conduct of the arbitration. Their Lordships further made the following observation (at p. 1046) :"the power enunciated by S. 34 of the Arbitration Act is inherent in the Court: the court insists, unless sufficient reason to the contrary is made out upon compelling the parties to abide by the entire bargain, for not to do so would be to allow a party to the contract to approbate and reprobate, and this consideration may be stronger in cases where there is an agreement to submit the dispute arising under the contract to a foreign arbitral tribunal. A clause in a commercial transaction between merchants residing in different countries to go to arbitration is an integral part of the transaction, on the faith of which the contract is entered into, but that does not preclude the Court having territorial jurisdiction from entertaining a suit at the instance of one of the parties to the contract, even in breach of the covenant for arbitration. The Court may in such a case refuse its assistance in a proper case when the party seeking it is without sufficient reason resiling from the bargain. When the Court refuses to stay the suit it declines to hold a party to his bargain because of special reasons which make it inequitable to do so. The Court ordinarily requires the parties to resort for resolving disputes arising under a contract to the tribunal contemplated by them at the time of the contract. That is not because the court regards itself bound to abdicate its jurisdiction in respect of disputes within its cognizance; it merely seeks to promote the sanctity of contracts, and for that purpose stays the suit. The jurisdiction of the Court to try the suit remains undisputed; but the discretion of the Court is on grounds of equity interposed. The Court is therefore not obliged to grant stay merely because the parties have even under a commercial contract agreed to submit their disputes in a matter to an arbitration tribunal in a foreign country. It is for the Court, having regard to all the circumstances, to arrive at a conclusion whether sufficient reasons are made out for refusing to grant stay. Whether the circumstances in a given case make out sufficient reasons for refusing to stay a suit is essentially a question of fact. "the Court found in the circumstances that case to be peculiar in nature and did not grant the stay asked for by the American Company.

( 10 ) NOW the contract in the suit before me is not as arbitrary as it was in Michael Golodetz's case. There the arbitration was stipulated to take place in New York whichsoever be the aggrieved party. On the contrary, the term of the agreement bearing on arbitration here is equally harsh or lenient to the contracting concerns. Although a sum of more than Rs. 8,00,000. 00 was paid by the Polish Corporation to the petitioner it has not been supplied the goods contracted for by it. The petition itself shows that the respondent is trying to get the advance made by it back by reference to the Bank concerned but it has not started any litigation in Poland to seek that refund because it is precluded by the contract between the parties from doing so. The clause which fetters the hands of the respondent should, in all fairness, apply with the same strictness to the petitioner and compel if to resort to arbitration, if thought necessary, in Polish Courts.

( 11 ) IT has been submitted by the respondent that the petitioner did not prepare samples as per the accepted drawings and made a new set of drawings for the approval of the res

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pondent and thus unnecessarily delayed the preparation of the samples. As such the time schedule specifically provided in the agreement was broken by the petitioner and it was its omission and defaults which compelled the other party to cancel the contracts. It was conceded by the petitioner to its letter dated 2111974 that the delay in the fulfilment of the contract was due to abnormal situation existing in India regarding the supply of steel, fuel, etc. and thus the responsibility for the breach of the contract lay at its door. There were various other parties in India which signed similar contracts with the respondent for supplying the forgings and complied with their obligations whereas it was repudiated by the petitioner on the false pretext of increase in prices. ( 12 ) THE petitioner shall, of course, be put to some hardship in adducing evidence in Poland, but the same would be the case with the respondent if it is asked to come to India to make out its defence. The arbitration clause, as has already been observed, was meant to operate in respect of both the parties in an impartial manner, as against the instance to be found in Michael Golodetz v. Serajuddin and Co. (AIR 1963 SC 1044) (supra) and I see no reason why the petitioner should not stand by its commitments. I would, therefore, hold that this Court has no jurisdiction to entertain the petition in hand and reject the same with costs.