Decided on April 02,1957



- (1.) THIS is a first appeal under Section 39 of the Arbitration Act from the order of the Subordinate Judge 1st Class, Amritsar, rejecting the application of the appellants Messrs Narain Cold Storage Ltd. Amritsar, instituted a suit for the recovery of Rs. 56,767/- as the principal sum and interest relating to the price of potatoes supplied in excess of the contracted quantity. The appellants who were defendants in the trial Court presented an application under Section 34 of the indian Arbitration Act of 1940 alleging that the agreement dated the 19th January, 1951, entered into between the parties provided that a difference or dispute arising between them was referable to the arbitration of the officer sanctioning the contract. It was also alleged that the appellants were willing and ready to make a reference to the arbitrator and that the suit should not proceed in view of the provisions of Section 34 of the Act.
(2.) EXHIBIT D. 2 is tender dated the 19th January, 1951, whereby the defendants agreed to supply a quantity of potatoes, it being agreed that the approximate requirements which were to be deemed only as a rough guide were 4,88,400 lbs. at tendered rates. Para 22 Exhibit D. 2. provided.-the provisions of this contract, settlement of which is not herein before provided for, shall be referred to the arbitration of the officer sanctioning the contract, whose decision shall be final and binding. "a demand for arbitration in respect of a claim shall be in writing and made within six months of the date of the termination of the contract and where this provision is not complied with, the claims shall be deemed to have been waived and absolutely barred. " In this case "the officer sanctioning the contract" was AA and QMG/aqmg Area/brig i/c Adm. (Command/aqmg/q-1 Army HQ. The tender was accepted on behalf of the President of India by the General Officer Commanding, East Punjab Area, jullundur Cantt. In July, 1951, there' were movements of military troops in amritsar area and the plaintiffs were called upon by C. A. S. C. Jullundur cantonment to sign a declaration to the effect that the plaintiff company would not claim compensation for any excess supply of potatoes over and above the contracted quantity. As the plaintiff-respondent was unwilling to do so the military authorities pressed the view that the contractors were bound to supply any excess quantity on the ground that the quantity mentioned in the tender was only approximate. The contracting firm was also told that in case the demand of the military authorities is not met the provision of clause 11 would be attracted. On this the extra quantity of potatoes over and above the contracted quantity was supplied under protest, the total excess being 8,19,539 lbg. The plaintiffs Instituted the suit claiming the price of the excess quantity supplied at the market rate with interest at six per cent per annum. On behalf of the defendants an application was submitted under Section 34 of the Indian Arbitration Act for staying legal proceedings in view of the presence of an arbitration agreement. The position which was taken by the plaintiffs to this contention of the defendants was that there was no valid and subsisting agreement between the parties relating to the quantity supplied in excess and even if so, no reference could be made to the arbitrator as the period for the said reference had expired. It was also contended that the defendants were never ready or willing to dp everything for the proper conduct of the arbitration. The plaintiffs also urged that the officer sanctioning the contract was not only himself a party but he had rejected the claim of the plaintiff, and as arbitrator could not bring to bear on the matter an attitude of strict impartiality. The contractor pleaded that in these circumstances it would not be in the interests of justice, fair play and equity that the dispute should be placed before the arbitrator
(3.) THE trial Court framed the following issues:-1. Whether there is valid subsisting arbitration agreement between the parties to the suit relating to the matter in dispute? O. D. 2. Whether the defendants were ready and willing at the time of the institution of the suit to do everything for the proper conduct of the arbitration? O. D. 3. If issues 1 and 2 are proved, should the suit be not stayed? O. P. The trial Court by its order held on the first issue that the dispute between the parties was covered by clause 22 of the tender and that there was a valid subsisting arbitration agreement between the parties relating to the matter in dispute. The first issue was, there fore, decided in favour of the defendant. The second issue was also decided in favour of the defendants and it was held that the department was ready and willing to a reference to arbitration. On the third issue the trial Court held that the plaintiff-respondent had discharged the burden of showing that there was sufficient reason for not staying the suit and the dispute should not be referred to arbitration. The trial Court very rightly conceded the principle that it was the duty of the Court to uphold the agreement between the parties and to refer them to the forum which they have deliberately selected for reference of their disputes. But it held that there were circumstances in this case which indicated that there was no likelihood of getting substantial justice at the hands of the tribunal at the parties' choice as the plaintiffs' claim which was preferred with the defendants had already been rejected by the sanctioning authority within the meaning of the clause and there was no likelihood of the sanctioning authority changing decision which it has already come to by itself during the course of exchange of correspondence.;

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