Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 16.07.2013
Pronounced on: 19.07.2013
+ FAO (OS) 184/2013, C.M. APPL. 5414/2013 (for stay), C.M.
APPL. 5416/2013 (for delay in filing) & C.M. APPL. 5417/2013
(for delay in refilling)
SCHOLAR PUBLISHING HOUSE PVT. LTD. ..... Appellant
Through: Sh. Akhil Sibal, Sh. Chirag
Jamwal, Sh. Ajay Upadhyay and Sh.
Pradeep Chhindra, Advocates.
versus
M/S. KHANNA TRADERS ..... Respondent
Through: Sh. Sandeep Sethi, Sr. Advocate
with Sh. Samrat Nigam and Ms. Ankita
Mahajan, Advocates.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE NAJMI WAZIRI
% MR. JUSTICE S. RAVINDRA BHAT
1. The question sought to be agitated in the present appeal directed
against the judgment and order of a Learned Single Judge of this court
is whether the award rendered on a dispute referred to arbitration by
the respondent/claimant was legal and binding inasmuch as did the
parties enter into an arbitration agreement.
2. The facts relating to the disputes are that the appellant used to
receive paper supplied by the respondent/claimant, a sole
proprietorship concern. The Appellant is engaged in the business of
printing and publishing. In the normal course of trade, the claimant
FAO(OS)184/2013 Page 1
used to supply paper according to the specification and requirements
of the appellant, and also furnish an invoice for the goods delivered.
The invoice would contain a stipulation which read as follows:
“In case of any dispute including dispute of non-payment
in respect of this bill the same shall be referred to the
“Paper Merchants Association (Regd) Delhi” for sole
arbitration and the judgment given by the
arbitrator/arbitrators appointed by the executive
committee shall be final and binding on both the Parties.
The Civil Suit at Delhi can also be filed at the option of
the Seller.”
3. The Claimant had approached this Court filing an application
under Section 9 of the Arbitration and Conciliation Act 1996,
(hereafter called "the Act") seeking interim relief against the
appellant. The Appellant appeared before the Court on 28.07.2006
and submitted that he was denying existence of the arbitration
agreement. In the meanwhile, the respondent preferred claims before
the arbitrator based on the dispute raised by it, which pertained to
supplies made to the appellant during the period 01.04.2004 and
23.07.2005, based upon the invoices issued for that period towards the
goods supplied. The appellant concededly did not participate in the
arbitration proceedings. Eventually, on 21.12.2006 the arbitrator
published award holding that the appellant had to pay to the
respondent/claimant a sum of Rs. 3,44,28,861/- including pendente
lite interest and future interest @ 12% per annum. The appellant
objected to the award under Section 34 of the Act, contending that it
was unenforceable because the parties had never agreed to submit
their disputes to arbitration. The Learned Single Judge negatived the
Appellant's argument that the stipulation in the invoice, referring to
FAO(OS)184/2013 Page 2
arbitration of disputes was unilateral, and was never consented to. The
Appellant had contended that the mere issuance of an invoice did not
indicate consent for the condition, and the relevant conditions spelt
out in Section 7 with regard to existence of an arbitration agreement
were not fulfilled. In rejecting this submission, the Learned Single
Judge relied upon a previous Single Judge decision of this Court in
Newsprint Sales Corporation v The Daily Pratap. [CS(OS)2630-A of
st
1992 dated 1 September 2006]
4. It is argued by the Appellant’s counsel, Shri Akhil Sibal that
the impugned order is ex facie erroneous. Counsel underlined the fact
that the Single Judge in this case based his conclusions on an entirely
erroneous premise that Newsprint Sales Corporation (supra) had
ruled that printed conditions, stipulating submission of disputes to
arbitration, in invoices can be construed as arbitration agreements,
whereas in truth, the decision holds quite the opposite. Relying
extensively on the decision in Newsprint Sales Corporation (supra),
learned counsel submitted that for a court or arbitrator to hold that the
parties had entered into a legally binding arbitration agreement, it is
necessary to prove consensus ad idem, in that regard. The issuance of
an invoice after conclusion of transaction, essentially an oral
agreement for sale and delivery of goods, cannot evidence such
consensus especially when one party to the transaction disputes the
agreement and enforceability of such clause.
5. Learned Senior Counsel for the respondents submitted that the
appeal lacks in merit. He relied on the observations in Newsprint
Sales Corporation (supra), as well as the decisions reported as Lewis
W. Fernandez v Jivatlal Partapshi & Ors AIR 1947 Bom 65 and Ram
FAO(OS)184/2013 Page 3
Chandra Ram Nag Ram Rice & Oil Mills Ltd v Howrah Oil Mills Ltd.
and Anr. AIR 1958 Cal 620. The respondent/claimants also urge that
the history of transactions between the parties clearly showed that the
appellant had accepted by his conduct, the invoices which contained
the arbitration clause, and on most occasions honored them. It was
therefore, not open for him to contest the existence of an arbitration
agreement. Reliance was also placed on the findings and observations
of the arbitrator in the award published by him.
6. In the award, while dealing with the question of whether the
parties had entered into an arbitration agreement, the arbitrator held as
follows:
“……………..The bills filed with the petition clearly show
that there is an arbitration clause between the parties
and the claimant is the member of the Paper Merchant
Association. The bills/invoices issued by the claimant
have been duly received and acknowledged by the
defendants. The claimant and defendants are working
together since 1996 and the opposite party has made
payment against the supplies made by the claimant prior
to the arising of the present controversy. From 1996
when the business dealings were started the claimant and
defendants were duly placing orders and were receiving
goods and was making the payments. The bills issued
were having arbitration clause as per which this
Arbitrator has got power to adjudicate the dispute.The
rates and terms mentioned on all the bills have been
acknowledged and accepted by the defendants. The
statements of accounts have been signed by the Director
and confirmed by the defendants. The Debit Notes for
interest issued by the claimant were accepted and the
required TDS was deducted and TDS certificates were
issued. The defendants have never made any objection
with regard to the bills, rates and terms or the
adjudication of the dispute by this tribunal, thus, it can
FAO(OS)184/2013 Page 4
be easily said that defendants have nothing to say in their
defence…………”
7. In Newsprint Sales Corporation (supra), the Learned Single
Judge noticed the Bombay and Calcutta High Court decisions, and
concluded correctly, if one may say so, that there is no strait- jacket
formula to say that such invoices cannot or can amount to binding
arbitration clauses. The decision correctly surmised that the views of
the other High Court had stressed the necessity to consider the
conduct of the parties, evident from the record. Thereafter, in
Newsprint Sales Corporation (supra), dealing with the facts in
question, the Learned Single Judge concluded that there was no
agreement. The relevant observations are as follows:
“32. None of the delivery challans refers that the supply
made is on the condition that the disputes, if any, would
be referred to the arbitration of an arbitrator appointed
by the Paper Merchants Association (Regd.).
33. It is a case where pursuant to an oral contract where
goods were delivered, post delivery, bills have been
raised and in the said bills, referred to as debit memo,
terms have been printed, one of which being the term,
that disputes would be referred for sole arbitration.
34. Parties have to be ad idem on material terms of the
contract when they enter into a contract and not post
execution of the contract, unless of course, at the post
execution stage, parties agree on certain terms to vary or
modify terms of the contract.
35. Petitioner has not brought any material on record to
show that before or at the time of effecting supply, it had
made known to the respondent that delivery would be on
a term that dispute, if any, would be referred to
arbitration in terms of the rules and regulations or bye
FAO(OS)184/2013 Page 5
laws of the Paper Merchants Association. In that view of
the matter, the inevitable conclusion is that the
respondent objector cannot be bound by the arbitration
clause contained in the bye laws of the Paper Merchant
Association for the reason parties were not ad idem that
dispute would be referred to an arbitrator to be
nominated by the Paper Merchants Association.”
8. The Bombay High Court, dealing with an identical question in
Lewis. W. Fernandez (supra) about existence of an arbitration
agreement contained in a contract note issued after delivery of the
goods, agreeing to submit disputes to arbitration in terms of Bye laws
of an association, held that the conduct of the parties was relevant and
determinative in that case. The court observed that:
“It is also clear that up to June 30, 1944, and some time
later there was no dispute whatever raised by the
plaintiff as regards the transactions effected by the
defendants for and on behalf of the plaintiff in
accordance with the instructions conveyed by the
plaintiff through the sub-broker and in effect the plaintiff
accepted the contract notes. It was only when the
contract note in respect of the closing transaction of June
30, 1914, was sent by the defendants to the plaintiff and a
demand for the sum of Rs. 11,112-8-0 was made by the
defendants upon the plaintiff by their letter dated July 18,
1944, that the plaintiff came out by his letter in reply of
July 20, 1944, stating that the amount shown as due by
him to the defendants, viz, Rs. 11,112-80 was not correct
inasmuch as it did not show the statement of his sale of
500 bales of September 1944 delivery. It is admitted that
this statement as regards 500 bales of September 1944
delivery was a mistake on the part of the plaintiff and
that really it ought to have been a sale of 1,000 bales of
September 1944 delivery which according to the plaintiff
was outstanding on that date. The plaintiff by his letter
called upon the defendants to send to him a complete
statement of his account with the defendants showing
FAO(OS)184/2013 Page 6
separately the transactions for the month of July and
September settlements after which he stated that he
would settle the account of the defendants. It is
significant to note that in that letter the plaintiff did not
state that he had not received all the contract notes or all
the statements of account in respect of the several
transactions which the defendants entered into for July
1944 and September 1944 settlements as he seems to
have done in the subsequent correspondence. The
defendants wrote to the plaintiff on July 21, 1944,
expressing their surprise at the attitude taken up by the
plaintiff and referred the plaintiff to the contracts and
weekly statements which had been submitted by them to
the plaintiff as usual. The defendants stated that on
perusing the same the plaintiff would be convinced that
there was no outstanding business in his account and
that the total amount of Rs. 11,112-8-0 shown by the
defendants to his debit was correct. The plaintiff replied
by his letter dated July 25, 1944, where he
disingenuously stated that he had not been receiving the
defendants' contracts and weekly statements regularly
and that he had to rely upon verbal information from the
sub-broker who he considered was the agent and sub-
broker of the defendants for information regarding his
position. The plaintiff, therefore, called upon the
defendants to send to him a complete statement of
account showing separately the July and September
transactions. He further expressed his astonishment to
learn that he had no outstanding business with the
defendants and called upon the defendants to let him
know under whose instructions the outstanding sale of
1,000 bales of September had been cut off, again
repeating the mistake as to 500 bales instead of 1,000
bales of September 1944 settlement. It is significant,
however, to note that in this letter also he did not deny
that he had received the contract notes and the weekly
statements of account which the defendants alleged they
had been sending to him as usual, the only allegation
made by him being that he had not been receiving the
same regularly. The statements made by Jivatlal
FAO(OS)184/2013 Page 7
Partapshi, the partner of the defendants' firm in
paragraph 3 of his affidavit in support of this notice of
motion dated september 30, 1944, in that behalf were
also denied in that affidavit of the plaintiff dated October
11, 1944, in the same vague and indefinite manner by
stating:
“I further deny that the defendants had
submitted all the contract notes and
statements of accounts as falsely alleged in
the said affidavit or that I have
acknowledged receipts in respect of contract
notes and statements of accounts in respect
of all my transactions in the office despatch
book of the defendants.”
5. This denial, in my opinion, is not honest and leads me
to the conclusion that the plaintiff in fact received all the
contract notes and the statements of accounts as alleged
by the defendants in the usual course at the address
given by the plaintiff to the defendants in that behalf and
in effect accepted the contract notes which had been so
sent by the defendants to him. I am satisfied on these
materials that the contract notes in respect of all the
transactions except the last disputed one of the purchase
of 1,000 bales of September 1944 settlement on June
30,1944, were sent by the defendants to the plaintiff and
were in effect accepted by the plaintiff by his conduct,
with the result that in respect of all of the contracts
except the last disputed one which I have mentioned
above there were arbitration agreements within the
meaning of the Indian Arbitration Act of 1940.”
The Calcutta High Court, in the decision Ram Chandra Ram Nag and
Ram Rice & Oil Mills Ltd echoed the views of the Bombay High
Court, and held as follows:
“2………………………….The first point raised by Mr.
Mukherjee is that it cannot be said that there was any
arbitration agreement between the plaintiff and the
FAO(OS)184/2013 Page 8
defendant No. 1 and consequently the courts below acted
without jurisdiction in making an order of stay under
Section 34 of the Indian Arbitration Act. The contract in
this case was entered into by the delivery and acceptance
of bought and sold notes to the buyer and seller
respectively. The bought notes delivered by the broker to
me defendant No. 1 have been produced by them but the
sold notes, though produced by the plaintiff in the Gaya
Court, have not been produced in the Howrah Court, and
both the Courts have drawn an adverse inference against
the plaintiff for the non-production and have held that
the sold notes, if produced would have shown that they
are the counter parts of the bought notes which have
been produced by the defendant No. 1. The bought notes
which have been produced by the defendant No. 1
contain an arbitration clause which runs as follows: "All
disputes regarding the contract are to be settled by two
Arbitrators one nominated by buyers and one nominated
by sellers respectively in accordance with the Indian
Arbitration Act in Calcutta". The bought notes which
have been produced by the defendant No. 1 also show
that they are signed by the broker only and so it may be
inferred that the sold notes were similarly signed by the
broker only. From this fact Mr. Mukherjee at one stage
sought to argue that the acceptance of these bought and
sold notes by the buyer and seller respectively at best
created a contract between the buyer and the broker on
the one hand and the seller and the broker on the other,
and that it did not create any privity of contract between
the buyer and the seller. When, however, it was realised
that this argument would strike at the very foundation of
the plaintiff's claim against the defendant No. 1, it was
abandoned. It was, however, still argued that the
contract did not create an arbitration agreement between
the plaintiff and the defendant No. 1 within the meaning
of the Arbitration Act. Reliance was placed on the
definition of "arbitration agreement" as given in Section
2(a) of the Indian Arbitration Act, and it was argued that
in order to constitute an arbitration agreement, the
agreement must be signed by both the parties. This view
FAO(OS)184/2013 Page 9
was taken in certain English cases which were followed
by Page, J., in the case of John Batt and Co. v. Kanoolal
and Co. (A). This view, however, was expressly dissented
from by a Division Bench presided over by Rankin, C. J.,
in the case of Radha Kanta Das v. Bearlien Brothers Ltd.
AIR 1929 Cal 97 . After referring to the view taken by
Page, J. in John Batt's case (A), Sir George Rankin
observed as follows :
"In my judgment, the law is the other way. The
Arbitration Act of 1889 and the Indian Arbitration Act,
for the best of good reasons have not required that the
agreement to submit should be signed by both parties."
The same view was taken in the case of Sankar Lal
Lachmi Narain v. Jainey Brothers : AIR1931All136 . In
the case of Keshoram Cotton Mills v. Kunhyalal Bagwani
44 CWN 607 (D), Panckridge, J. also followed this
view.”
9. The Court also notices that Section 7 of the Act does not
compel the parties to adhere to any particular form of agreement or
document. An arbitration agreement can be inferred through a series
of correspondence, or even on demur of one of the parties to an
arbitration proceeding, who can otherwise object to it, on the ground
of absence of agreement; if such party does not urge the contention in
the reply to claim, the arbitration agreement is deemed to exist.
10. In the present case, there is a wealth of material in the form of
more than a decade of commercial relationship during which
identically phrased invoices containing the arbitration stipulation were
accepted and acted upon. It is not the appellant’s case that the
disputed invoices were the only documents containing such
stipulations, which were freshly introduced. Having regard to these
circumstances, the court is of opinion that there is no merit in the
FAO(OS)184/2013 Page 10
appeal; it is therefore dismissed along with pending applications
without any order as to costs.
S. RAVINDRA BHAT, J
(JUDGE)
NAJMI WAZIRI, J
(JUDGE)
JULY 19, 2013
FAO(OS)184/2013 Page 11
Reserved on: 16.07.2013
Pronounced on: 19.07.2013
+ FAO (OS) 184/2013, C.M. APPL. 5414/2013 (for stay), C.M.
APPL. 5416/2013 (for delay in filing) & C.M. APPL. 5417/2013
(for delay in refilling)
SCHOLAR PUBLISHING HOUSE PVT. LTD. ..... Appellant
Through: Sh. Akhil Sibal, Sh. Chirag
Jamwal, Sh. Ajay Upadhyay and Sh.
Pradeep Chhindra, Advocates.
versus
M/S. KHANNA TRADERS ..... Respondent
Through: Sh. Sandeep Sethi, Sr. Advocate
with Sh. Samrat Nigam and Ms. Ankita
Mahajan, Advocates.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE NAJMI WAZIRI
% MR. JUSTICE S. RAVINDRA BHAT
1. The question sought to be agitated in the present appeal directed
against the judgment and order of a Learned Single Judge of this court
is whether the award rendered on a dispute referred to arbitration by
the respondent/claimant was legal and binding inasmuch as did the
parties enter into an arbitration agreement.
2. The facts relating to the disputes are that the appellant used to
receive paper supplied by the respondent/claimant, a sole
proprietorship concern. The Appellant is engaged in the business of
printing and publishing. In the normal course of trade, the claimant
FAO(OS)184/2013 Page 1
used to supply paper according to the specification and requirements
of the appellant, and also furnish an invoice for the goods delivered.
The invoice would contain a stipulation which read as follows:
“In case of any dispute including dispute of non-payment
in respect of this bill the same shall be referred to the
“Paper Merchants Association (Regd) Delhi” for sole
arbitration and the judgment given by the
arbitrator/arbitrators appointed by the executive
committee shall be final and binding on both the Parties.
The Civil Suit at Delhi can also be filed at the option of
the Seller.”
3. The Claimant had approached this Court filing an application
under Section 9 of the Arbitration and Conciliation Act 1996,
(hereafter called "the Act") seeking interim relief against the
appellant. The Appellant appeared before the Court on 28.07.2006
and submitted that he was denying existence of the arbitration
agreement. In the meanwhile, the respondent preferred claims before
the arbitrator based on the dispute raised by it, which pertained to
supplies made to the appellant during the period 01.04.2004 and
23.07.2005, based upon the invoices issued for that period towards the
goods supplied. The appellant concededly did not participate in the
arbitration proceedings. Eventually, on 21.12.2006 the arbitrator
published award holding that the appellant had to pay to the
respondent/claimant a sum of Rs. 3,44,28,861/- including pendente
lite interest and future interest @ 12% per annum. The appellant
objected to the award under Section 34 of the Act, contending that it
was unenforceable because the parties had never agreed to submit
their disputes to arbitration. The Learned Single Judge negatived the
Appellant's argument that the stipulation in the invoice, referring to
FAO(OS)184/2013 Page 2
arbitration of disputes was unilateral, and was never consented to. The
Appellant had contended that the mere issuance of an invoice did not
indicate consent for the condition, and the relevant conditions spelt
out in Section 7 with regard to existence of an arbitration agreement
were not fulfilled. In rejecting this submission, the Learned Single
Judge relied upon a previous Single Judge decision of this Court in
Newsprint Sales Corporation v The Daily Pratap. [CS(OS)2630-A of
st
1992 dated 1 September 2006]
4. It is argued by the Appellant’s counsel, Shri Akhil Sibal that
the impugned order is ex facie erroneous. Counsel underlined the fact
that the Single Judge in this case based his conclusions on an entirely
erroneous premise that Newsprint Sales Corporation (supra) had
ruled that printed conditions, stipulating submission of disputes to
arbitration, in invoices can be construed as arbitration agreements,
whereas in truth, the decision holds quite the opposite. Relying
extensively on the decision in Newsprint Sales Corporation (supra),
learned counsel submitted that for a court or arbitrator to hold that the
parties had entered into a legally binding arbitration agreement, it is
necessary to prove consensus ad idem, in that regard. The issuance of
an invoice after conclusion of transaction, essentially an oral
agreement for sale and delivery of goods, cannot evidence such
consensus especially when one party to the transaction disputes the
agreement and enforceability of such clause.
5. Learned Senior Counsel for the respondents submitted that the
appeal lacks in merit. He relied on the observations in Newsprint
Sales Corporation (supra), as well as the decisions reported as Lewis
W. Fernandez v Jivatlal Partapshi & Ors AIR 1947 Bom 65 and Ram
FAO(OS)184/2013 Page 3
Chandra Ram Nag Ram Rice & Oil Mills Ltd v Howrah Oil Mills Ltd.
and Anr. AIR 1958 Cal 620. The respondent/claimants also urge that
the history of transactions between the parties clearly showed that the
appellant had accepted by his conduct, the invoices which contained
the arbitration clause, and on most occasions honored them. It was
therefore, not open for him to contest the existence of an arbitration
agreement. Reliance was also placed on the findings and observations
of the arbitrator in the award published by him.
6. In the award, while dealing with the question of whether the
parties had entered into an arbitration agreement, the arbitrator held as
follows:
“……………..The bills filed with the petition clearly show
that there is an arbitration clause between the parties
and the claimant is the member of the Paper Merchant
Association. The bills/invoices issued by the claimant
have been duly received and acknowledged by the
defendants. The claimant and defendants are working
together since 1996 and the opposite party has made
payment against the supplies made by the claimant prior
to the arising of the present controversy. From 1996
when the business dealings were started the claimant and
defendants were duly placing orders and were receiving
goods and was making the payments. The bills issued
were having arbitration clause as per which this
Arbitrator has got power to adjudicate the dispute.The
rates and terms mentioned on all the bills have been
acknowledged and accepted by the defendants. The
statements of accounts have been signed by the Director
and confirmed by the defendants. The Debit Notes for
interest issued by the claimant were accepted and the
required TDS was deducted and TDS certificates were
issued. The defendants have never made any objection
with regard to the bills, rates and terms or the
adjudication of the dispute by this tribunal, thus, it can
FAO(OS)184/2013 Page 4
be easily said that defendants have nothing to say in their
defence…………”
7. In Newsprint Sales Corporation (supra), the Learned Single
Judge noticed the Bombay and Calcutta High Court decisions, and
concluded correctly, if one may say so, that there is no strait- jacket
formula to say that such invoices cannot or can amount to binding
arbitration clauses. The decision correctly surmised that the views of
the other High Court had stressed the necessity to consider the
conduct of the parties, evident from the record. Thereafter, in
Newsprint Sales Corporation (supra), dealing with the facts in
question, the Learned Single Judge concluded that there was no
agreement. The relevant observations are as follows:
“32. None of the delivery challans refers that the supply
made is on the condition that the disputes, if any, would
be referred to the arbitration of an arbitrator appointed
by the Paper Merchants Association (Regd.).
33. It is a case where pursuant to an oral contract where
goods were delivered, post delivery, bills have been
raised and in the said bills, referred to as debit memo,
terms have been printed, one of which being the term,
that disputes would be referred for sole arbitration.
34. Parties have to be ad idem on material terms of the
contract when they enter into a contract and not post
execution of the contract, unless of course, at the post
execution stage, parties agree on certain terms to vary or
modify terms of the contract.
35. Petitioner has not brought any material on record to
show that before or at the time of effecting supply, it had
made known to the respondent that delivery would be on
a term that dispute, if any, would be referred to
arbitration in terms of the rules and regulations or bye
FAO(OS)184/2013 Page 5
laws of the Paper Merchants Association. In that view of
the matter, the inevitable conclusion is that the
respondent objector cannot be bound by the arbitration
clause contained in the bye laws of the Paper Merchant
Association for the reason parties were not ad idem that
dispute would be referred to an arbitrator to be
nominated by the Paper Merchants Association.”
8. The Bombay High Court, dealing with an identical question in
Lewis. W. Fernandez (supra) about existence of an arbitration
agreement contained in a contract note issued after delivery of the
goods, agreeing to submit disputes to arbitration in terms of Bye laws
of an association, held that the conduct of the parties was relevant and
determinative in that case. The court observed that:
“It is also clear that up to June 30, 1944, and some time
later there was no dispute whatever raised by the
plaintiff as regards the transactions effected by the
defendants for and on behalf of the plaintiff in
accordance with the instructions conveyed by the
plaintiff through the sub-broker and in effect the plaintiff
accepted the contract notes. It was only when the
contract note in respect of the closing transaction of June
30, 1914, was sent by the defendants to the plaintiff and a
demand for the sum of Rs. 11,112-8-0 was made by the
defendants upon the plaintiff by their letter dated July 18,
1944, that the plaintiff came out by his letter in reply of
July 20, 1944, stating that the amount shown as due by
him to the defendants, viz, Rs. 11,112-80 was not correct
inasmuch as it did not show the statement of his sale of
500 bales of September 1944 delivery. It is admitted that
this statement as regards 500 bales of September 1944
delivery was a mistake on the part of the plaintiff and
that really it ought to have been a sale of 1,000 bales of
September 1944 delivery which according to the plaintiff
was outstanding on that date. The plaintiff by his letter
called upon the defendants to send to him a complete
statement of his account with the defendants showing
FAO(OS)184/2013 Page 6
separately the transactions for the month of July and
September settlements after which he stated that he
would settle the account of the defendants. It is
significant to note that in that letter the plaintiff did not
state that he had not received all the contract notes or all
the statements of account in respect of the several
transactions which the defendants entered into for July
1944 and September 1944 settlements as he seems to
have done in the subsequent correspondence. The
defendants wrote to the plaintiff on July 21, 1944,
expressing their surprise at the attitude taken up by the
plaintiff and referred the plaintiff to the contracts and
weekly statements which had been submitted by them to
the plaintiff as usual. The defendants stated that on
perusing the same the plaintiff would be convinced that
there was no outstanding business in his account and
that the total amount of Rs. 11,112-8-0 shown by the
defendants to his debit was correct. The plaintiff replied
by his letter dated July 25, 1944, where he
disingenuously stated that he had not been receiving the
defendants' contracts and weekly statements regularly
and that he had to rely upon verbal information from the
sub-broker who he considered was the agent and sub-
broker of the defendants for information regarding his
position. The plaintiff, therefore, called upon the
defendants to send to him a complete statement of
account showing separately the July and September
transactions. He further expressed his astonishment to
learn that he had no outstanding business with the
defendants and called upon the defendants to let him
know under whose instructions the outstanding sale of
1,000 bales of September had been cut off, again
repeating the mistake as to 500 bales instead of 1,000
bales of September 1944 settlement. It is significant,
however, to note that in this letter also he did not deny
that he had received the contract notes and the weekly
statements of account which the defendants alleged they
had been sending to him as usual, the only allegation
made by him being that he had not been receiving the
same regularly. The statements made by Jivatlal
FAO(OS)184/2013 Page 7
Partapshi, the partner of the defendants' firm in
paragraph 3 of his affidavit in support of this notice of
motion dated september 30, 1944, in that behalf were
also denied in that affidavit of the plaintiff dated October
11, 1944, in the same vague and indefinite manner by
stating:
“I further deny that the defendants had
submitted all the contract notes and
statements of accounts as falsely alleged in
the said affidavit or that I have
acknowledged receipts in respect of contract
notes and statements of accounts in respect
of all my transactions in the office despatch
book of the defendants.”
5. This denial, in my opinion, is not honest and leads me
to the conclusion that the plaintiff in fact received all the
contract notes and the statements of accounts as alleged
by the defendants in the usual course at the address
given by the plaintiff to the defendants in that behalf and
in effect accepted the contract notes which had been so
sent by the defendants to him. I am satisfied on these
materials that the contract notes in respect of all the
transactions except the last disputed one of the purchase
of 1,000 bales of September 1944 settlement on June
30,1944, were sent by the defendants to the plaintiff and
were in effect accepted by the plaintiff by his conduct,
with the result that in respect of all of the contracts
except the last disputed one which I have mentioned
above there were arbitration agreements within the
meaning of the Indian Arbitration Act of 1940.”
The Calcutta High Court, in the decision Ram Chandra Ram Nag and
Ram Rice & Oil Mills Ltd echoed the views of the Bombay High
Court, and held as follows:
“2………………………….The first point raised by Mr.
Mukherjee is that it cannot be said that there was any
arbitration agreement between the plaintiff and the
FAO(OS)184/2013 Page 8
defendant No. 1 and consequently the courts below acted
without jurisdiction in making an order of stay under
Section 34 of the Indian Arbitration Act. The contract in
this case was entered into by the delivery and acceptance
of bought and sold notes to the buyer and seller
respectively. The bought notes delivered by the broker to
me defendant No. 1 have been produced by them but the
sold notes, though produced by the plaintiff in the Gaya
Court, have not been produced in the Howrah Court, and
both the Courts have drawn an adverse inference against
the plaintiff for the non-production and have held that
the sold notes, if produced would have shown that they
are the counter parts of the bought notes which have
been produced by the defendant No. 1. The bought notes
which have been produced by the defendant No. 1
contain an arbitration clause which runs as follows: "All
disputes regarding the contract are to be settled by two
Arbitrators one nominated by buyers and one nominated
by sellers respectively in accordance with the Indian
Arbitration Act in Calcutta". The bought notes which
have been produced by the defendant No. 1 also show
that they are signed by the broker only and so it may be
inferred that the sold notes were similarly signed by the
broker only. From this fact Mr. Mukherjee at one stage
sought to argue that the acceptance of these bought and
sold notes by the buyer and seller respectively at best
created a contract between the buyer and the broker on
the one hand and the seller and the broker on the other,
and that it did not create any privity of contract between
the buyer and the seller. When, however, it was realised
that this argument would strike at the very foundation of
the plaintiff's claim against the defendant No. 1, it was
abandoned. It was, however, still argued that the
contract did not create an arbitration agreement between
the plaintiff and the defendant No. 1 within the meaning
of the Arbitration Act. Reliance was placed on the
definition of "arbitration agreement" as given in Section
2(a) of the Indian Arbitration Act, and it was argued that
in order to constitute an arbitration agreement, the
agreement must be signed by both the parties. This view
FAO(OS)184/2013 Page 9
was taken in certain English cases which were followed
by Page, J., in the case of John Batt and Co. v. Kanoolal
and Co. (A). This view, however, was expressly dissented
from by a Division Bench presided over by Rankin, C. J.,
in the case of Radha Kanta Das v. Bearlien Brothers Ltd.
AIR 1929 Cal 97 . After referring to the view taken by
Page, J. in John Batt's case (A), Sir George Rankin
observed as follows :
"In my judgment, the law is the other way. The
Arbitration Act of 1889 and the Indian Arbitration Act,
for the best of good reasons have not required that the
agreement to submit should be signed by both parties."
The same view was taken in the case of Sankar Lal
Lachmi Narain v. Jainey Brothers : AIR1931All136 . In
the case of Keshoram Cotton Mills v. Kunhyalal Bagwani
44 CWN 607 (D), Panckridge, J. also followed this
view.”
9. The Court also notices that Section 7 of the Act does not
compel the parties to adhere to any particular form of agreement or
document. An arbitration agreement can be inferred through a series
of correspondence, or even on demur of one of the parties to an
arbitration proceeding, who can otherwise object to it, on the ground
of absence of agreement; if such party does not urge the contention in
the reply to claim, the arbitration agreement is deemed to exist.
10. In the present case, there is a wealth of material in the form of
more than a decade of commercial relationship during which
identically phrased invoices containing the arbitration stipulation were
accepted and acted upon. It is not the appellant’s case that the
disputed invoices were the only documents containing such
stipulations, which were freshly introduced. Having regard to these
circumstances, the court is of opinion that there is no merit in the
FAO(OS)184/2013 Page 10
appeal; it is therefore dismissed along with pending applications
without any order as to costs.
S. RAVINDRA BHAT, J
(JUDGE)
NAJMI WAZIRI, J
(JUDGE)
JULY 19, 2013
FAO(OS)184/2013 Page 11