1950 JTR(SC) 41
1951 AIR(SC) 9 ; 1951 AllLJ 124 ; 1950 CalLJ(SC) 123 ; 1951 KLT 35 ; 1951 MWN 284 ; 1951 SCJ 1 ; 1950 SCR 792 ; 1951 KHC 209
SUPREME COURT OF INDIA
Saiyid Fazal Ali, M. Patanjali Sastri, Mehr Chand Mahajan, JJ.
A.M. Mair and Co. – Appellant
Versus
Gordhandas Sagarmull – Respondent
Appeal No. 42 of 1950
Decided On : 30-11-1950
Hindu Law-Widow-Surrender in favour of next heir and stranger.
Held: The doctrine of surrender or relinquishment by the widow of her interest in the husbands estate which has the effect of accelerating" the inheritance in favour of the next heir of her husband is now a well-settled doctrine of Hindu Law which has been established by a long series of judicial decisions. The basis of the doctrine is the effacement of the widows estate and not the ex-facie transfer by which such effacement is brought about. The result merely is that the next heir of the husband steps into the succession in the widows place. This effacement may be effected by any process and it is not necessary that any particular form should be employed. All that is required is that there should be a bona fide and total renunciation of the widows right to hold the property and the surrender should not be a mere device to divide the estate with the reversioners (vide Rangasami Goundan v. Nachippa Goundan, 46 Ind. App. 72). It would be clear from the principle underlying the doctrine of surrender that no surrender and consequent acceleration of estate can possibly be made in favour of anybody except the next heir of the husband. It is true that no acceptance or act of consent on the part of the reversioner is necessary in order that the estate might vest in him; vesting takes place under operation of law. But it is not possible for the widow to say that she is withdrawing herself from her husbands estate in order that it might vest in somebody other than the next heir of the husband. In favour of a stranger there can be an act of transfer but not one of renunciation. The position is not materially altered if, as has happened in the present case, the surrender is made in favour of the next heir with whom a stranger is associated and the widow purports to relinquish the estate in order that it might vest in both of them. So far as the next heir is concerned, there cannot be in such a case a surrender of the totality of interest which the widow had, for she actually directs that a portion of it should be held or enjoyed by somebody else other than the husbands heir. As regards the stranger, there can be no question of renunciation; the transaction at the most may be evidence of an intention to confer a bounty on him, though such intention is not clothed in proper legal form.1
Arbitration Act, J940-Arbitration clause in a contract of sale-Disputes under or arising out of contract- Tests-Dispute within scope of arbitration clause-Jurisdiction of court.
A entered into a contract with B for the sale of 5,000 maunds of jute, which was evidenced by a "sold note" addressed by A to B and a "bought note" addrested by A to the Bengal Jute Mill Company signed by A as brokers. Para II of the "sold note" provided:
"All matters, questions, disputes, differences and/or claims arising out of and/or concerning and/or in connection and/or in consequence of or relating to this contract whether or not obligations of either or both parties under this contract be subsisting at the time of such disputes and whether or not this contract has been terminated or purported to be terminated or completed shall be referred to the arbitration of the Bengal Chamber of Commerce under the rules of its Tribunal of Arbitration for the time being in force and according to such rules the arbitration shall be conducted."
1. Kishan Lal and another v. Bhanwar Lal, (1955) 1 S. C. R. 439.
2. Promotha Nath v. Batliwala of Karani, A. I .R. 1942 Born. 224 approved.
3. See also under Bombay Securities Contracts Control Act, 1925.
Dispute having arisen between the parties relating to this contract, A claimed arbitration under the said para. of the "sold note" and submitted the dispute to the Bengal Chamber of Commerce, and on 6th February, 1947, the Tribunal of Arbitration made their award. On 19th February, 1949, a petition was presented by B under the Arbitration Act, 1940, to the High Court at Calcutta, in its ordinary original civil jurisdiction, praying inter alia that the award may be adjudged to be without jurisdiction and void and not binding on B, and that it may be set aside.
The main point raised by B in the petition was that it was not open to A to invoke the arbitration clause, as the Bengal Jute Mill Company and not A were the real party to the contract and A had acted as mere brokers. A asserted in reply that the allegations made by B in regard to there being no privity between A and B was wrong, and that according to the custom or usage or practice of the trade, they had the right to enforce the terms of the said contract. The application was dismissed by a Single Judge of the High Court but on further appeal by B a Division Bench of the High Court held that having regard to the fact that As own contention was that he had entered into the contract as broker and was entitled to enforce its terms by reason of the usage or custom of the trade, it was not open to the Judge to treat him as principal, and that the award was liable to be set aside on• the ground that the arbitration tribunal had no jurisdiction to make an award at the instance of a person who was not a principal party to the contract. A after obtaining a certificate from the High Court appealed to the Supreme Court against that decision of the High Court.
Held: (1) The principal dispute raised in the case was whether the extension of time for delivery was granted within the time limited in the contract. That dispute was certainly covered by the arbitration clause. The further dispute that the brokers (A) were not parties to the contract in their own right as principals but entered into the contract only on behalf of the Jute Mill Company did not appear to have been raised until the matter went to the arbitrators. Assuming that at that stage it was open to B to raise such an objection, after the other dispute which clearly fell within the arbitration clause was referred to the arbitrators, this further dispute was also one which turned upon the true interpretation of the contract, and therefore would also seem to be a dispute, under or arising out of or concerning the contract.1
(2) Once the dispute is found to be within the scope of the arbitration clause, it is no part of the province of the Court to enter into the merits of the dispute.
Held: The doctrine of surrender or relinquishment by the widow of her interest in the husbands estate which has the effect of accelerating" the inheritance in favour of the next heir of her husband is now a well-settled doctrine of Hindu Law which has been established by a long series of judicial decisions. The basis of the doctrine is the effacement of the widows estate and not the ex-facie transfer by which such effacement is brought about. The result merely is that the next heir of the husband steps into the succession in the widows place. This effacement may be effected by any process and it is not necessary that any particular form should be employed. All that is required is that there should be a bona fide and total renunciation of the widows right to hold the property and the surrender should not be a mere device to divide the estate with the reversioners (vide Rangasami Goundan v. Nachippa Goundan, 46 Ind. App. 72). It would be clear from the principle underlying the doctrine of surrender that no surrender and consequent acceleration of estate can possibly be made in favour of anybody except the next heir of the husband. It is true that no acceptance or act of consent on the part of the reversioner is necessary in order that the estate might vest in him; vesting takes place under operation of law. But it is not possible for the widow to say that she is withdrawing herself from her husbands estate in order that it might vest in somebody other than the next heir of the husband. In favour of a stranger there can be an act of transfer but not one of renunciation. The position is not materially altered if, as has happened in the present case, the surrender is made in favour of the next heir with whom a stranger is associated and the widow purports to relinquish the estate in order that it might vest in both of them. So far as the next heir is concerned, there cannot be in such a case a surrender of the totality of interest which the widow had, for she actually directs that a portion of it should be held or enjoyed by somebody else other than the husbands heir. As regards the stranger, there can be no question of renunciation; the transaction at the most may be evidence of an intention to confer a bounty on him, though such intention is not clothed in proper legal form.1
Arbitration Act, J940-Arbitration clause in a contract of sale-Disputes under or arising out of contract- Tests-Dispute within scope of arbitration clause-Jurisdiction of court.
A entered into a contract with B for the sale of 5,000 maunds of jute, which was evidenced by a "sold note" addressed by A to B and a "bought note" addrested by A to the Bengal Jute Mill Company signed by A as brokers. Para II of the "sold note" provided:
"All matters, questions, disputes, differences and/or claims arising out of and/or concerning and/or in connection and/or in consequence of or relating to this contract whether or not obligations of either or both parties under this contract be subsisting at the time of such disputes and whether or not this contract has been terminated or purported to be terminated or completed shall be referred to the arbitration of the Bengal Chamber of Commerce under the rules of its Tribunal of Arbitration for the time being in force and according to such rules the arbitration shall be conducted."
1. Kishan Lal and another v. Bhanwar Lal, (1955) 1 S. C. R. 439.
2. Promotha Nath v. Batliwala of Karani, A. I .R. 1942 Born. 224 approved.
3. See also under Bombay Securities Contracts Control Act, 1925.
Dispute having arisen between the parties relating to this contract, A claimed arbitration under the said para. of the "sold note" and submitted the dispute to the Bengal Chamber of Commerce, and on 6th February, 1947, the Tribunal of Arbitration made their award. On 19th February, 1949, a petition was presented by B under the Arbitration Act, 1940, to the High Court at Calcutta, in its ordinary original civil jurisdiction, praying inter alia that the award may be adjudged to be without jurisdiction and void and not binding on B, and that it may be set aside.
The main point raised by B in the petition was that it was not open to A to invoke the arbitration clause, as the Bengal Jute Mill Company and not A were the real party to the contract and A had acted as mere brokers. A asserted in reply that the allegations made by B in regard to there being no privity between A and B was wrong, and that according to the custom or usage or practice of the trade, they had the right to enforce the terms of the said contract. The application was dismissed by a Single Judge of the High Court but on further appeal by B a Division Bench of the High Court held that having regard to the fact that As own contention was that he had entered into the contract as broker and was entitled to enforce its terms by reason of the usage or custom of the trade, it was not open to the Judge to treat him as principal, and that the award was liable to be set aside on• the ground that the arbitration tribunal had no jurisdiction to make an award at the instance of a person who was not a principal party to the contract. A after obtaining a certificate from the High Court appealed to the Supreme Court against that decision of the High Court.
Held: (1) The principal dispute raised in the case was whether the extension of time for delivery was granted within the time limited in the contract. That dispute was certainly covered by the arbitration clause. The further dispute that the brokers (A) were not parties to the contract in their own right as principals but entered into the contract only on behalf of the Jute Mill Company did not appear to have been raised until the matter went to the arbitrators. Assuming that at that stage it was open to B to raise such an objection, after the other dispute which clearly fell within the arbitration clause was referred to the arbitrators, this further dispute was also one which turned upon the true interpretation of the contract, and therefore would also seem to be a dispute, under or arising out of or concerning the contract.1
(2) Once the dispute is found to be within the scope of the arbitration clause, it is no part of the province of the Court to enter into the merits of the dispute.
Shri N. C. Chatterjee, Senior Advocate (Shri B. Sen, Advocate, with him) instructed by Shri P. K. Chatterjee, Agent - for Appellants ; Shri A. N. Grover, Advocate, instructed by Shri B. N. Sachethey, Agent, for Shri M. G. Poddar, Agent- for Respondents.
Judgment
Fazl Ali and Patanjali Sastri J, J. :- This is an appeal from a judgment of a--- Bench of the High Court of Judicature at Calcutta in West Bengal, reversing the decision of a Single Judge of that Court, who had refused to set aside an award given by the arbitration tribunal of the Bengal Chamber of Commerce on a submission made by the respondents. The facts of the case are as follows.
2. On 25-1-1916, the appellants entered into a contract with the respondents for the sale of 5,000 maunds of jute, which was evidenced by a "sold note (Ex. A), which is in the form of a letter addressed to the respondents, commencing with these words : "We have this day sold by your order and for your account to the undersigned, etc." The word "undersigned" admittedly refers to the appellants, and, at the end of the contract below their signature, the word "brokers" is written. On the same day, a "bought note" (Ex. B) was addressed by the appellants to the Bengal Jute Mill Company, with the following statement : "We have this day bought by your order and for your account from the undersigned, etc. In this note also, the word undersigned refers to the appellants, and, underneath their signature, the word "brokers" appears, as in the "sold note . There are various provisions in the sold note, relating to delivery of jute, non-delivery of documents, non-acceptance of documents, claims, etc., but the most material provisions are to be found in Paras. and it. Paragraph 10 provides that the sellers may in certain cases be granted an extension of time for delivering the jute for a period not exceeding thirty days from the due date free of all penalties, and if the contract is not implemented within the extended period, the buyers would be entitled to several options, one of them being to cancel the contract and charge the sellers the difference between the contract rate and the market rate on the day on which the opinion is declared. In the same para, there is another provision to the following effect : Sellers shall notify Buyers that goods will or will not be chipped within such extended period referred to in (a) and in the case of sellers intimating that they will be unable to ship within the extended time Buyers shall exercise their option within 5 working days of receiving notice and notify Sellers. In the absence of any such notice from Sellers it shall be deemed that the goods have not been shipped and Buyers shall exercise their option within 5 working days after expiration of extended date and notify Sellers."
3. The 11th para provides among other things that : "All matters, questions, disputes, differences and, or claims arising out of and /or concerning and/or in 10 connection and/or in consequence of or relating to this Contract whether or not obligations of either or both parties under this contract be subsisting at the time of such disputes and whether or not this contract has been terminated or purported to be terminated or completed shall be referred to the arbitration of the Bengal Chamber of Commerce under the rules of its Tribunal of Arbitration for the time being in force and according to such rules the arbitration shall be conducted."
4. It is common ground that the respondents delivered 2,256 maunds of jute under the contract, but the balance of 2,744 maunds could not be delivered within the stipulated period, and, by mutual agreement, time was extended up to 30-6-1946. On 2-7-1946, the respondents addressed a letter to the appellants stating that the balance of jute could not be despatched owing to lack of wagons, and "extension" was requested for a period of one month. In reply to this letter, which was received by the appellants on or about 3-7-1946, time was extended till 31-7-1946. On the same day on which the reply was received by the respondents, i. e., on 9-7-1946, they addressed a letter to the appellants pointing out that the extension of time had not been intimated within the 5th working day as provided in the contract and therefore the contract was automatically cancelled. After this letter, some further correspondence followed between the two parties, and finally a bill of difference amounting to Rs. 4,116 was submitted by the appellants to the respondents, who, in their turn, denied their liability to pay the sum. The appellants thereupon claimed arbitration under cl. of the sold note and submitted the dispute between them and the respondents to the Bengal Chamber of Commerce. On 6-2-1947, the Tribunal of Arbitration made an award to the effect that the due date of contract had been extended by mutual agreement up to 31-7-1946, and accordingly the respondents should pay to the appellants a sum of Rs. 4,116 together with interest at the rate of 4% per annum from 10-8-1946, until the date of the award. A sum of Rs. 210 was also held to be payable by the respondents on account of costs. Nearly a year later, on 19-2-1949, a petition was presented by the respondents under the Arbitration Act, 1940, to the High Court at Calcutta, in its ordinary original civil jurisdiction, paying inter alia that the award may be adjudged to be without jurisdiction and void and not binding on the respondents, and that it may be set aside. The main point raised by the respondents in the petition was that it was not open to the appellants to invoke the arbitration clause, as the Bengal Jute Mill Company and not the appellants were the real party to the contract and the appellants had acted as were brokers. The appellants asserted in reply that the allegation made by the respondents in regard to there being no privity between them and the appellants was wrong, and in Para. 16 of their affidavit they stated as follows : "With regard to Para. 7 of the petition I crave reference to the said contract for its true construction and effect. I say as I have already stated that according to the custom or usage or practice of the trade the respondent is entitled to charge brokerage and also to enforce the terms of the said contract."
5. The case was heard by Sinha J., who dismissed the petition on the ground that the contract was directly between the respondents and the appellants. The learned Judge also observed that if the right of the appellants to enforce the contract depended upon the existence of custom it would have been necessary to take evidence and the arbitrators would have had jurisdiction to decide the question of the existence of custom.
6. The respondents being dissatisfied with the judgment of Sinha J., preferred an appeal, which was heard and disposed of by a Division Bench of the High Court consisting of the learned Chief Justice and Chakravarthi J. The learned Judges held that having regard to the fact that the appellants own contention was that they had entered into the contract as brokers and were entitled to enforce its terms by reason of the usage or custom of the trade, it was not open to Sinha J. to treat them as principals, and the award was liable to be set aside on the ground that the arbitration tribunal had no jurisdiction to make an award at the instance of a person who was not a principal party to the contract. The appellants thereafter having obtained a certificate from the High Court under S. 109 (c), Civil P. C., preferred this appeal.
7. It seems to us that this appeal can be disposed of on a short ground. We have carefully read the affidavit filed on behalf of the appellants in the trial Court, and we are unable to bold that their case was that they were not parties to the contract or that they had asked the Court to proceed on the sole ground that they were entitled to enforce the contract by virtue of the custom or usage of the trade. In our opinion, the position which was taken up by the appellants may be summed up as follows: (1) They did not accept the allegations made by the respondents that they were not parties to any arbitration agreement with the respondents. (2) They asked the Court to construe the contract and its effect and asserted that they were entitled to enforce it. (3) They also stated that they were entitled to enforce the contract according to the custom or usage of the trade. 11
8. The principal dispute raised in this case was whether the extension of time for delivery was granted within the time limited in the contract. That dispute is certainly covered by the arbitration clause. The further dispute that the brokers (appellants) were not parties to the contract in their own right as principals but entered into the contract only on behalf of the Bengal Jute Mill Company does not appear to have been raised until the matter went to the arbitrators. Assuming that at that stage it was open to the respondents to raise such an objection, after the other dispute which clearly fell within the arbitration clause was referred to the arbitrators, this further dispute is also one which turns upon the true interpretation of the contract, so that the respondents must have recourse to the contract to establish their claim that the appellants were not bound as principals while the latter say that they were. If that is the position, such a dispute, the determination of which turns on the true construction of the contract, would also seem to be a dispute, under or arising out of or concerning the contract. In a passage quoted in Heyman v. Darwins Ltd., (1942) A. C. 356, Lord Dunedin propounds the test thus: "If a party has to have recourse to the contract, that dispute is a dispute under the contract." Here, the respondents must have recourse to the contract to establish their case and, therefore, it is a dispute falling within the arbitration clause. The error into which the learned Judges of the appellate Bench of the High Court appear to have fallen was their regarding the dispute raised by the respondent in respect of the position of the appellants under the contract as having the same consequence as a dispute as to the contract ever having been entered into.
9. If, therefore, we come to the conclusion that both the disputes raised by the respondents fall within the scope of the arbitration clause, then there is on end of the matter, for the arbitrators would have jurisdiction to adjudicate on the disputes, and we are not concerned with any error of law or fact committed by them or any omission on their part to consider any of the matters. In this view, it would not be for us to determine the true construction of the contract and find out whether the respondents contention is correct or not. Once the dispute is found to be within the scope of the arbitration clause, it is no part of the province of the Court to enter into the merits of the dispute.
10. In the result, we allow this appeal, set aside the judgment of the appellate Bench of the High Court and restore the order of Sinha J. The appellants will be entitled to their costs throughout.
11. Mahajan, J. :- I agree with my brother Fazl Ali that this appeal be allowed with costs.
Appeal allowed.
For Citation : AIR 1951 SC 9