BENGAL JUTE MILL CO. LTD. Vs. LALCHAND DUGAR

JUDGEMENT

(1.) THIS is an appeal against an order made by Ray, J. dated the 29th May, 1962 staying the suit filed by the respondent -appellant being suit No. 1432 of 1961 (Bengal Jute Mill Co. Ltd. v. Lalchand Dugar) and all proceedings thereunder. The facts are as follows: On or about 10th October, 1960 the petitioner agreed to buy from the respondent and the respondent agreed to sell to the appellant 80,000 bags of 8. Twills manufactured by the respondent, at the rate of Rs. 160/ - per 100 bags, free alongside export vessel in the Port of Calcutta. The contract, being contract No. 280 dated 10th October, 1980, was made by an exchange of bought and sold notes made in the usual form of the East India Jute and Hessian Exchange Ltd., Calcutta through a broker S. N. Goenka who is a licensed broker of the said Exchange. Both the bought and sold notes contained a written condition that delivery of the goods was to be given against payment in cash positively on 10th October, 1960 against Mill's pucca delivery order. There is the usual Arbitration clause for reference of disputes under the contract to the arbitration of the Bengal Chamber of Commerce and Industry. On the 22nd March, 1961 the petitioner submitted certain disputes between the parties to the arbitration of the Bengal Chamber cf Commerce and Industry. On the 29th August, 1961 the respondent filed a suit in this Court being suit No. 1432 of 1961 (Bengal Jute Mill Cc., Ltd. v. Lalchand Dugar). On the 18th November, 1961 the petitioner made an application for stay of the suit and all further proceedings under Section 34 of the Indian Arbitration Act. It is this suit which has been stayed by an order dated 29th May, 1962. I regret to say that the learned Judge has given no reasons for making the order. With respect, I think that in such cases it is essential to set out the reasons. A stay of a suit, is in a way, an adjudication of the rights of the parties. Although such an order is discretionary, the Court must exercise a judicial discretion and inasmuch as such a stay can be ordered on a number of grounds, it is extremely difficult for a Court of appeal to decide the correctness cr otherwise of the order made, unless it knows the precise grounds upon which the learned Judge has acted, in ordering a stay of proceedings. It would be convenient here to state certain facts. The case of the respondent is as follows : Pursuant to tne contract, the respondent duly tendered Mill's pucca delivery order in respect of the said 80,000 bags of B. Twills on 10th October, 1960 and demanded payment in cash against such presentation, but the petitioner failed and neglected to make payment in cash and to take delivery of the said pucca delivery order. According to the respondent, the petitioner committed a breach of the said contract and the respondent accepted the breach and treated the contract as cancelled, which thereby became void. It is further stated that on the 12th October, 1960 the parties again entered into a fresh contract in respect of the identical goods but at a different price, through the same broker, being contract No. 281 of 1960. It is stated that the petitioner has committed a breach of this contract also. The case for the petitioner is as follows: According to the petitioner, the terms as to payment was not by cash but by crossed cheque. It is stated that on the 10th October, 1960 the respondent sent a darwan to the office of the petitioner with the Mill's pucca delivery order together with a bill for Rs. 1,28,000/ - after the usual office hours. The cheque was being drawn tip and was going to be signed by a partner of the firm, who had gone to answer a nature's call. The sellers' darwan was requested to wait but did not do so and left the bill promising to collect the cheque on the next morning. On the next day, as the darwan failed to turn up, the petitioner contacted the sellers' office over the phone when it demanded cash payment Instead of cheque. This was complied with, but the seller refused to accept payment or to deliver the pucca delivery order as the market price of the goods had risen to a substantial extent in the meanwhile. It is admitted that on the 11th October, 1960 the seller wrote to the buyer purporting to cancel the contract, but it is stated that the cancellation was not accepted. It is alleged that by their failure and neglect to deliver the goods or the pucca delivery order within the stipulated time, the seller had committed a breach of contract and was liable to damages. It is admitted that a fresh contract, namely, contract No. 281was entered into on the 12th October, 1960, but It is said that this has nothing whatsoever to do with the contractNo. 280 of 1960 mentioned above.

(2.) IT will be observed that the whole dispute hinges on the question as to the term as to payment. According to the seller the express stipulation for payment was payment in cash positively on the 10th October, 1960 against Mill's pucca delivery order. Both the bought note and sold note actually contain this condition. In spite of this, the case of the buyer is that the condition of payment was by crossed cheque on 10th October, 1960 and not by cash. The term actually appearing on the bought and sold note Is explained as follows T According to the buyer, the term as to payment was by crossed cheque against Mill's pucca delivery order. Although this was the contract between the parties, the seller in collusion and conspiracy with the broker Goenka caused it to be recorded in the bought note and sold note that payment was to be in cash positively on the 10th October, 1960. It is further stated that the broker, wrongfully and in collusion and conspiracy with the seller and under their dictation submitted to the buyer the bought note, after 27th October, 1960 and not earlier. It Is also stated that the broker was a mere tool in the seller's hand and the seller, tn collusion and conspiracy with the said broker, has wrongfully, and with a view to suit their purpose, caused the broker to write out the delivery and payment clause, viz., clause 4 of the bought note, by substituting the condition as to payment in 'cash' positively on 10th October, 1960 instead of by 'cheque'. With regard to the subsequent contract, namely, contract No. 281 of 1960 it is said that this has nothing to do with the contract No. 280 of 1960 and It is stated upon solemn affirmation that the letter, purported to be written by the broker dated 1st November, 1960 to the buyer, a copy whereof has been produced by the seller, was a letter fabricated by the seller in conspiracy and collusion with the broker who is a mere tool in the hands of the seller.

(3.) IN the plaint, of course the plaintiff has not plead -ed 'fraud'. In fact, fraud is not the case of the plaintiff but that of the defendant, Naturally, the defendant has taken no step in the suit as yet and has not filed a written statement. He has, however, filed various affidavits as also statements of fact and a rejoinder before the Arbitrators in which he has made out the case of collusion and conspiracy mentioned above. In the application for stay also, he has made out a case of collusion and conspiracy. The question is whether under these circumstances the petitioner is entitled to an order staying the suit. The conditions necessary for the stay of legal proceedings have now beenclearly laid down. Firstly, there must be a valid and subsisting Arbitration agreement. Secondly, the subject -matter in question in the legal proceedings must be within thescope of the Arbitration agreement and the application for stay should be made at the earliest stage of the proceeding and the Court is to be satisfied that there was no sufficient reason why the matter should not be referred to arbitration. Various grounds have been canvassed before us, but the real ground is that the buyer has made out a case of fraud, collusion and conspiracy, or to be accurate, conspiracy and collusion amounting to fraud, even going to the extent of charging the fabrication of documents. Under the circumstances, the seller desires that the determination of such issues should not be left to Arbitrators but should bedecided in open Court. These charges and allegations are serious reflections on its honesty and integrity in business and it is claimed on behalf of the seller that it is entitled to vindicate its good name at a public trial in an open Court.