FIRM OF TATAVARTI NAGAPOTHA RAO Vs. BALABHADRA RAMAKRISHNAYYA
HIGH COURT OF MADRAS
FIRM OF TATAVARTI NAGAPOTHA RAO
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Venkatarama Aiyar, J. -
(1.) THIS revision petition has been referred by Basheer Ahmed Sayeed J. to a Bench in view of the conflict between his judgment reported as --'Ramdayal Rameshwarilal v. Chandra Narasimham', (A) and the judgment of Panchapakesa Aiyar J. in -- 'C. R. P. Nos. 941 and 942 of 1949 (Mad) (B).
(2.) THE facts relevant for the purpose of this revision are these: THE plaintiff is a merchant carrying on business at Ellore. Defendant 1 is a firm carrying on business at Masulipatam and defendants 2 and 3 are its partners. On 1-1-1944 the defendants entered into a contract with the plaintiff at Vijayawada, Ex. P-1. Under that contract, the defendants agreed to supply the plaintiff 30,000 gunnies or 75 bales at Rs. 56-12-6 per 100 gunnies. THEre is a note in the contract in these words:
"Terms and conditions as per Chittavalasa or Nellimarla Jute Mill company's contract."
THE plaintiff filed the suit to recover Rs. 998-8-0, as damages for breach of contract. THE suit was filed on the Small Cause Side of the Sub-Court, Vijayawada. THE defendants filed an application under Section 34, Arbitration Act for staying the suit. THEy alleged that the Chittivalasa or Nellimerla Jute Mill Company contract contained clauses for arbitration and that accordingly the plaintiff was a party to an agreement in writing for arbitration and therefore the suit ought to be stayed under Section 34, Arbitration Act. THE plaintiff denied knowledge of the terms of this contract and stated that he was not furnished with a copy of this contract THE Subordinate Judge held that the plaintiff had no clear knowledge of the existence of the arbitration clause and following the decision in -- 'Ramlal Murlidhar v. Haribux Puranmull', AIR 1934 Cal 796 (C), he dismissed the application. Against that order, the defendants have preferred this civil revision petition.
It came up for hearing before Basheer Ahmed Sayeed J. The petitioner contended that it was immaterial whether the plaintiff had actual knowledge of the existence of the arbitration clause or not and that having signed Ex. P-1, the contract, and there being a reference in that contract to Chittavalasa or Nellimarla Jute Mill company's contract all the terms of that contract must be deemed to have been incorporated in the contract between the parties and as there were also arbitration clauses in those contracts, the plaintiff must be held in law to have been a party to an arbitration agreement, Irrespective of the fact whether he had read those clauses or not. It was also argued that the decision in -- 'AIR 1934 Cal 796 (C)', had been overruled by a Full Bench of the Calcutta High Court in the decision in -- 'Dwarkadas v. Daluram'. In this Court Basheer Ahmed Sayeed J. had held in --', that when parties to a contract refer to another contract the terms of that contract must be deemed to have been incorporated by reference in their own contract and that in that view an arbitration clause contained in another agreement must be taken to be part of the agreement between the parties if that agreement is referred to in their contract. He also held on the facts of that case that there were sufficient materials for holding that the plaintiff had knowledge of the existence of the arbitration clause. In -- 'C. R. P. Nos. 941 and 942 of 1949 (Mad) (B)' Panchapakesa Aiyar J. held that whea an arbitration clause in another contract is sought to be used as incorporated by reference there must be evidence that the party had knowledge, actual or constructive; of the existence of the arbitration clause in the other contract and in the absence of such notice, it could not be said that there was an arbitration agreement such as would attract Section 34, Arbitration Act. It was in view of this difference of opinion that the matter has been placed before us.
On the facts of this case, we consider it unnecessary to express any opinion on the point on which these two judgments differ. When a contract in writing is signed by parties, they are bound by the terms contained therein whether they take the trouble of reading them or not This principle has been extended to cases where the contract does not actually contain the terms but a reference is made to another document or contract where those terms are to be found. The reason for holding that those terms must be taken to have been incorporated by reference in their signed agreement is that it was possible for any of them to look into that document and ascertain the terms. An examination of the authorities in which this view has been adopted shows that they are either cases in which the other contract is one between the same parties and therefore the terms including the arbitration clause might be taken to have been within the knowledge of the parties; or cases in which there is a reference to a specific document which was in existence and whose terms could easily be ascertained if the parties wanted to. It is reasonable to hold that when the parties had referred to a document which was in existence they had knowledge or what comes to the same thing, could have had knowledge, of all the terms contained in that document and an arbitration clause contained in that document must, therefore, be held to be binding on them exactly as If it had been incorporated in extenso in the signed contract. The foundation of this reasoning is the existence of another specific document containing an arbitration clause. It is essential that the terms of an agreement must be precise and definite. This applies as much to an arbitration agreement as to other agreements. Before holding that the parties have agreed in writing to refer their dispute to arbitration & in the absence of such a clause in the agreement actually signed by the parties there must at least be a specific contract or document containing such a clause in respect of which it might be said that it had been Incorporated in the agreement of the parties by reference. In this case, admittedly no specific document was before the parties. No specific document is referred to in the agreement. The N. B. merely states
"terms and conditions as per Chittivalasa or Nellimarla Jute Mill company contract."
It is obvious that the terms and conditions of Chittivalasa contract may not be the same as the terms and conditions of the Nellimarla Jute Mills Company contract. Further it is not any particular contract of Chittivalasa or Nellimarla that is referred to. There might be contracts and contracts. Some of them might contain clauses for reference to arbitration and others might not and therefore reference to a contract of Chittivalasa or Nellimarla Jute Mills is anything but specific. One can conceive of contracts in which there are no arbitration clauses. Under the circumstances it cannot be said that there is any specific contract with reference to which the suit agreement must be deemed to have been made. In fact, what the defendants did was not to produce any contract of their own either but to produce some contract between the mills and a stranger and it was filed as Ex. P-2. A reference to that document shows that some of the terms were introduced in slips showing variation of the terms in the printed form. One of the terms is that the reference should be to the Bengal Chamber of Commerce. If as is suggested before us, the arbitration by the Bengal Chamber of Commerce will be open only to the members of that institution, then neither the plaintiff nor the defendants could act under this clause because they are not members of the Bengal Chamber of Commerce. Another clause is that the award should be filed in the Calcutta High Court and be made a rule of Court in that Court. A reference to these conditions shows that the parties could not have contemplated such a clause as this before they entered into this agreement. We are of opinion that unless there is another contract in existence and specifically referred to, its terms cannot be deemed to have been incorporated in the agreement between the parties by reference. As it is, the reference to a non-existing contract is too vague and uncertain to be treated as an agreement to refer to arbitration.
(3.) IN this view the civil petition fails and is dismissed with costs.;
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