Loyal Textile Mills Limited vs Allenberg Cotton Company, United States of America and Liverpool Cotton Association Limited

Mishra, J.—24.7.1991- One of the objections raised to the maintainability of the appeal is based upon the language in S. 39 of the Arbitration Act, 1940 which reads,

An Appeal shall lie from the following orders passed under this Act (and from no others) to the Court authorized by law to hear appeals from original decrees of the Court passing the order.

The instant appeal is one under Cl. 15 of the Letters Patent which says that "an appeal shall lie to the said High Court from the judgment of one Judge of the said High Court or one Judge of any Division Court, pursuant to S. 108 of the Government of India Act.

In Indian Oil Corporation Ltd. Vs. State of Bihar and others, , it has been pointed out that although the Letters Patent is a special law, certain provisions of the CPC in the matter of procedure do apply to appeals against the decision of a trial judge to a larger Bench and that the provisions of S. 104 read with Order 43, Rule 1 of the Code of Civil Procedure, 1908 do apply to the Letters Patent Appeals, but the bar in S.104 of the CPC that no appeal shall lie from any order passed under this Section shall not inhibit the appellate jurisdiction of the High Court under Cl. 15 of the Letters Patent.

A Full Bench of this Court in Mary Thomas Vs. Dr. K.E. Thomas, has considered the jurisdiction of the High Court on the Original Side, in the light of the provisions in the Family Courts Act, 1984, taken notice of Art. 225of the Constitution and the pre-existing jurisdiction of the High Court preserved there under and held that the Letters Patent jurisdiction of this Court is not ousted on account of the creation of exclusive Family Courts.

Our attention however has been drawn to a judgment of the Supreme Court in Union of India (UOI) Vs. Mohindra Supply Company, in which it has been noticed that the Arbitration Act which is a consolidating and amending Act, being substantially in the form of a Code relating to arbitration must be construed without any assumption that it was not intended to alter the law relating to appeals and that there is also nothing in the expression "authorized by law to hear appeals from original decrees of the Court" contained in S. 39(1) of the Arbitration Act, which by implication reserves the jurisdiction under the Letters Patent to entertain an appeal against the order passed in arbitration proceedings. Therefore, in so far as Letters Patent deal with appeals against orders passed in arbitration proceedings, they must be read subject to the provisions of S. 39(1) and (2) of the Arbitration Act.

We do find however that situation beyond what is contemplated under S. 39 of the Arbitration Act in which orders/judgments may be delivered by a Judge of this Court under clauses 11 or 12 of the Letters Patent of the Court, may arise for appeals under Cl. 15 thereof. If the principles have to be properly appreciated, it will be necessary to decide whether S. 39(1) of the Arbitration Act restricts the power of the Court under Cl. 15 of the Letters Patent to the appealable orders mentioned therein or not. Any decision on this will have a far- reaching effect. It is a case in which, in our opinion, the matter should be heard and decided by a larger Bench. We accordingly refer the case to a Full Bench. Let the records in this case be placed before the Honorable the Chief Justice with the request to constitute the Bench at the earliest.

FULL BENCH

Mishra, J.

3-10-1991- A petition was filed under S. 33 of the Arbitration Act on the Original Side of this Court for a declaration that there was no arbitration agreement between the petitioner/appellant and the first respondent herein and that the arbitration proceeding entered into by the respondents 3 and 4 under the auspices of the second respondent at the behest of the first respondent was without jurisdiction, illegal, as initio void and non est. A learned single Judge of this Court, after notice and hearing the parties, dismissed the petition. The petitioner/appellant invoked Cl. 15 of the Letters Patent of this Court and preferred an appeal against the judgment of the learned single Judge dismissing his petition. At the final hearing of the appeal, however, learned counsel appearing for the first respondent raised an objection as to the maintainability of the appeal and contended that the order of the learned single Judge rejecting the petition under S. 33 of the Arbitration Act, 1940 is not appealable. The Bench hearing the appeal, however, thought that to give finality to such objection, the matter should be referred to a Full Bench.

The original civil jurisdiction of this Court as to suits is preserved under Cl. 12 of the Letters Patent of this Court in these words:

And we do further ordain that the said High Court of Judicature at Madras, in exercise of ordinary original civil jurisdiction, shall be empowered to receive, try, and determine suits of every description if, in the case of suits for land or other immovable property, such land or property shall be situated, or, in all other cases, if the cause of action shall have arisen, either wholly or in case the leave of the Court shall have been first obtained, in part:, within the local limits of the ordinary original jurisdiction of the said High Court; or if the defendant at the time of the commencement of the suit shall dwell or canyon business or personally work for gain, within such limits; except that the said High Court shall not have such original jurisdiction in cases falling within the jurisdiction of the Small Cause at Madras, in which the debt or damage, or value of the property sued for does not exceed one hundred rupees.

This provision has given to the Court Original Civil jurisdiction to receive, try and determine suits of every description if (a) in the case of suits for land or other immovable property, such land or property is situate within the local limits of the ordinary original jurisdiction of the Court; (b)(i) in all other cases, if the cause of action has arisen wholly within the local limits of the ordinary original jurisdiction of the Court; (b)(ii) if the cause of action has arisen in part and if the leave of the Court has been first obtained; and (c) if the defendant at the time of the commencement of the suit, has dwelt or carried on business or personally worked for gain within the ordinary original jurisdiction of the Court; except the cases falling under the jurisdiction of the Small Cause at Madras. Cl. 15 of the Letters Patent provide for appeal from the original jurisdiction to the appellate jurisdiction of the Court and runs as follows:

And we do further ordain that an appeal shall lie to the said High Court of Judicature at Madras from the judgment (not being judgment passed in the exercise of appellate jurisdiction by a Court subject to the superintendence of the said High Court, and not being an order made in the exercise of provisional jurisdiction, and not being a sentence or order passed or made in the exercise of the power of superintendence under the provisions of S. 107 of the Government of India Act, or in the exercise of criminal jurisdiction) of one Judge of the said High Court or one Judge of any Division Court, pursuant to S.108 of the Government of India Act, and that notwithstanding anything hereinbefore provided an appeal shall lie to the said High Court from a judgment of one Judge of the said High Court or one Judge of any Division Court, pursuant to S.108 of the Government of India Act made (on or after the 1st day of February, 1929) in the exercise of appellate jurisdiction in respect of a decree or order made in the exercise of appellate jurisdiction by a Court subject to the superintendence of the said High Court, where the Judge who passed the Judgment declares that the case is a fit one for appeal, but that the right of appeal from other judgments of Judges of the said High Court or of such Division Court shall be to us, our heirs or Successors in Our or Their Privy Council, as hereinafter provided.

It has thus made a judgment passed on the original side of court appealable. It has not been disputed before us and in our opinion, it could not be disputed that the application under S. 33 of the Arbitration Act, 1940, is entertained as a suit and the judgment passed therein attracts the appellate jurisdiction under Cl. 15 of the Letters Patent of this Court. This clause gives to the Court the appellate jurisdiction not only against the judgment in a suit tried and determined on the original side of the Court but also against the judgment delivered in an appeal from the original decree or order of a Court subordinate to this Court. Prior to the enactment of the Arbitration Act, 1940, arbitration proceedings were governed by the Arbitration Act of 1899 and Schedule II of the Code of Civil Procedure. Arbitration Act, 1940 consolidated, amended and repealed 1899 Act and Schedule 2 of the CPC and class. (a) to (f) of S. 104of the Code of Civil Procedure. It set up machinery for all contractual arbitrations. S. 39 of this Act provides:

(1) an appeal shall lie from the following orders passed under this Act (and from no others) to the Court authorized by law to hear appeals from original decrees of the Court passing the order

An order-

(i) superseding an arbitration;

(ii) On an award stated in the form of a special case;''

(iii) Modifying or correcting an award;

(iv) Filing or refusing to file an arbitration agreement,

(v) staying or refusing to stay vigil proceedings where there is an arbitration agreement;

(vi) setting aside or refusing to set aside an award:

Provided that the provisions of this Section shall not apply to any order passed by a Small Cause Court.

(2) No Second Appeal shall lie from an order passed in appeal under this section, but nothing in this section shall Affect or take away any right to appeal the Supreme Court.

On the question whether the interdict in sub-s. (2) of S. 39 of the Act operated against an appeal under the Letters Patent, there had been divergence of opinion amongst High Courts, but this Court in Penugonda Radhakrishnamurthy Vs. V.A.Y. Ethirajulu Chetty and Co. and Others, took the view that there was no further right of appeal under the Letters Patent when a single Judge of the High Court disposed of an appeal under S. 39(1) of the Act. A Full Bench of this Court in Mulcand Kewal Chand Daga v. Kissan Dass Gridhardass 74 LW. 408 overruled the Judgment in Radhakrishna Murthy v. Ethirajulu Chetty Co. (supra) and held that S. 39 deals only with appeals from orders passed by a Court to a superior court and not with appeals "intra-court" and therefore, S. 39(2) does not operate to prohibit an appeal under the Letters Patent against the order of a single judge exercising appellate jurisdiction in an arbitration matter. The matter, however, was finally settled by a judgment of the Supreme Court in Union of India (UOI) Vs. Mohindra Supply Company, The Supreme Court, dealing with Cl. 10 of the Letters Patent of the Punjab High Court having no ordinary original civil jurisdiction and having the Letters Patent appellate power in these words,

And we do further ordain that an appeal shall lie to the said High Court from the judgment (not being a judgment passed in exercise of appellate jurisdiction in respect of a decree or order made in the exercise of appellate jurisdiction by a court subject to the superintendence of the said High Court and not being an order made in the exercise of provisional jurisdiction...) of one Judge of the High Court.

Said:

By this clause, a right to appeal except in the cases specified from one Judge of the High Court to a Division Bench is expressly granted. But the Letters Patent are declared by Cl. 37 subject to the legislative power of the Governor-General-in-Council and also of the Governor-in-Council under the Government of India Act 1915, and may in all respects be amended or altered in exercise of legislative authority. Under S. 39 (1), an appeal lies from the orders specified in that sub-section and from no others. The legislature has plainly expressed itself that the right of appeal against orders passed under the Arbitration Act maybe exercised only in respect of certain orders. The right to appeal against other orders is expressly taken away. If by the express provision contained in S. 39(l), a right to appeal from a judgment which may otherwise be available under the Letters Patent is restricted, there is no ground for holding that Cl. (2) does not similarly restrict the exercise of appellate power granted by the Letters Patent. If for reasons aforementioned the expression "Second Appeal" includes an appeal under the Letters Patent, it would be impossible to hold that notwithstanding the express prohibition, an appeal under the Letters Patent from an order passed in appeal under sub-s. (1) is competent.

After taking note of the conflict of the views of different High Courts, the Supreme Court took notice of the provisions in the CPC particularly, S. 104 and 105thereof and said:

Prior to 1940 the law relating to contractual arbitration (except in so far as it was dealt with by the Arbitration Act of 1899) was contained in the CPC and certain orders passed by Courts in the course of arbitration proceedings were made appealable under the Code of 1877 by S. 588and in the Code of 1908 by S. 104. In 1940, the legislature enacted Act 10 of 1940, repealing Sch. 2 and S. 104 (1), cls. (a) To (f) of the Code of Civil Procedure, 1908 and the Arbitration Act of 1899. By S. 39 of the Act, a right of appeal was conferred upon litigants in arbitration proceedings only from certain orders and from no others and the right to file appeals from appellate orders was expressly taken away by sub-S. (2) and the clause in S. 104 of the Code of 1908which preserved the special jurisdiction under any other law was not incorporated in S. 39. The section was enacted in a form which was absolute and not subject to any exceptions. It is true that under the Code of 1908, an appeal did lie under the Letters Patent from an order passed by a single Judge of a Chartered High Court in arbitration proceedings even if the order was passed in exercise of appellate jurisdiction, but that was so, because, the power of the Court to hear appeals under a special law for the time being in operation was expressly preserved.

There is in the Arbitration Act no provision similar to S. 4 of the CPC which preserves powers reserved to courts under special statutes. There is also nothing in the expression "authorized by law to hear appeals from original decrees of the Court" contained in S. 39(1) of the Arbitration Act which by implication preserves the jurisdiction under the Letters Patent to entertain an appeal against the order passed in arbitration proceedings. Therefore, in so far as Letters Patent deal with appeals against orders passed in arbitration proceedings, they must be read subject to the provisions of S. 39(1) and (2) of the Arbitration Act.

Under the Code of 1908, the right to appeal under the Letters Patent was saved both by S. 4 and the clause contained in S. 104(1), but by the Arbitration Act of 1940, the jurisdiction of the Court under any other law for the time being in force is not saved; the right of appeal can therefore be exercised against orders in arbitration proceedings only under S. 39, and no appeal (except an appeal to this Court) will lie from an appellate order.

The Supreme Court rejected a contention by counsel for the respondents that some provisions in S. 104 of the Code of 1908, which appear to have been deleted by S. 39 (l) of the Arbitration Act, were in fact superfluous and their deletion made no difference in the right of appeal under the Letters Patent. The Supreme Court said:

The clause was enacted with a view to do away with the unsettled state of the law and the cleavage of opinion between the Allahabad High Court on the one hand and Calcutta, Bombay and Madras High Courts on the other, on the true effect of S. 588 of the CPC upon the power conferred by the Letters Patent. If the legislature being cognizant of this difference of opinion prior to the Code of 1908 and the unanimity of opinion which resulted after the amendment, chose not to include the reservation clause in the provisions relating to appeals in the Arbitration Act in 1940 the conclusion is inevitable that it was so done with a view to restrict the right of appeal within the strict limits defined by 5.39and to take away the right conferred by other statutes. The Arbitration Act which is a consolidating and amending Act, being substantially in the form of a Code relating to arbitration must be construed without any assumption that it was not intended to alter the law relating to appeals. The words of the statute are plain and explicit and they must be given their full effect and must be interpreted in their natural meaning, uninfluenced by any assumptions derived from the previous state of the law and without any assumption that the legislature must have intended to leave the existing law unaltered, and in our view the legislature has made a deliberate departure from the law prevailing before the enactment of Act 10 of 1940 by codifying the law relating to appeals in S. 39.

The Supreme Court in Union of India v. Mahindra Supply Co (supra) was considering a case of Letters Patent Appeal against an order in an appeal under S. 39(1) of the Arbitration Act, 1940, and was examining whether the expression "no second appeal shall lie from an order passed in appeal under this section in sub-S. (2) of S. 39" prohibited such Letters Patent Appeal or not. In this judgment the Supreme Court pointed out that as there were are expressions in S. 39(1) and from no others, "the Legislature has expressed itself that the right of appeal against orders passed under the Arbitration Act may be exercised only in respect of certain orders and the right of appeal against other orders is expressly taken away. If by the express provision contained in S. 39 a right of appeal which may otherwise be available under the Letters Patent is restricted, there is no ground for holding that clause (2) does not similarly restrict the exercise of power granted by the Letters Patent" and said "by S. 39 of the Act, a right of appeal was conferred upon litigants in arbitration proceedings only from certain orders and from no others and the right to file appeals from appellate orders was expressly taken away by sub-s. (2) and therefore, in so far as Letters Patent deal with appeals against orders passed in arbitration proceedings, they must be read subject to the provisions of S. 39(1) and (2) of the Arbitration Act." They appear to mean that as in the case of an appeal to any other Court in an arbitration proceeding, there would be appeals only against such orders which are enumerated in sub-s. (1) of S. 39, there would be no appeal under cl.15 of the Letters Patent, if the High Court itself is the trial Court in place of any other Court subordinate to it. Some High Courts have so read the judgment in the case of Union of India v. Mahindra Supply Co. (supra) and held that there is no right of appeal against an order passed in an arbitration proceeding, if the order does not fall under any of the categories enumerated in sub-S. (1) of S. 39 of the Act.

A learned single Judge of the Calcutta High Court rejected certain applications for appointment of an Umpire under S. 8 of the Arbitration Act as well as for appointment of Receiver on the ground that a part of the cause of action had allegedly arisen within the original civil jurisdiction of the Court and leave under cl. 12 of the Letters Patent had not been obtained. Appeals were preferred against the said orders under cl. 15 of the Letters Patent. Three contentions were raised in support of the appeal, namely (1) the order appealed was not an order passed under S. 39 (1) of the Act; (2) under sub-S. (1) of S. 39, only appeal from one Court to another Court is contemplated and not intra-court, and (3) an appeal does not lie under sub-S. (1) of S. 39, but still lies under cl. 15 of the Letters Patent. A Division Bench of the Calcutta High Court in Rebati Ranjan v. Suranjan AIR 1963 Calcutta 642 held on the first point that appointment of a Receiver in an arbitration proceeding can only be made under S. 41 of the Arbitration Act read with Schedule II. It cannot be made under any other provision of law because the Arbitration Act is a complete Code in itself. Where an application is made invoking the Court''s jurisdiction under this provision, then an order allowing such application or dismissing such application for whatever reason must be deemed to be an order made/under the said provision and not outside it and answered the other two contentions saying:

These two points may be conveniently dealt with Together. On both these points, there was a conflict of Decisions between several High Courts, but this conflict has now been set at rest by the Supreme Court in Union of India (UOI) Vs. Mohindra Supply Company, in view of the Supreme Court decision it is unnecessary for us to enter into the merits or demerits of the conflicting decisions of various High Courts. In our opinion, the point raised has now been finally determined by the Supreme Court in the decision aforementioned, and we must respectfully follow the same.

That being so, we must hold that no appeal lies in the present case and the appeal must be dismissed upon this preliminary point.

A Division Bench of the Himachal Pradesh High Court in The State of Himachal Pradesh and Another Vs. H.S. Sobti and Co., , however, considered a preliminary Objection that an appeal against an order granting an interim injunction restraining the appellants from getting a contract executed through another contractor until the dispute was decided by the Arbitrator was not maintainable. The Bench observed:

The power to grant the interim injunction is specifically conferred by S. 41(b), and our brother Chet Ram Thakur traced his power to grant the interim injunction to S. 41(b) Now, an appeal under S. 39(1) of the Indian Arbitration Act lies against only those orders which are specifically enumerated therein and against no other, and a perusal of S. 39(1) will show that an order under S. 41(b) is not an appealable order. It is pointed out by the appellant that the present appeal has been preferred under Clause 10 of the Letters Patent and not under S. 39(1). As to that, it has been laid down in Union of India (UOI) Vs. Mohindra Supply Company, that the Letters Patent cannot be resorted to in order to sustain an appeal against an order under the Indian Arbitration Act. That is also the view taken by the Calcutta High Court in Rebati Ranjan Chakravarti Vs. Suranjan Chakravarti and Others, . For the same reason, in our opinion, no appeal will lie under Order 43 Rule 1 of the Code of Civil Procedure.

Before, however, we advert to the question before us; we may take notice of certain Observations of the Supreme Court in the case of Shah Babulal Khimji Vs. Jayaben D. Kania and Another, ; a judgment which we think, has said a great deal on the subject. In this judgment, a reference has been made to the judgment in the case of Union of India v. Mahindra Supply Co. AIR 1968 S.C. 256 (supra) as well as to S. 39(1) and (2) of the Arbitration Act. A passage has been extracted and incorporated in this judgment from the judgment in Union of India v. Mahindra Supply-Co. AIR 1968 SC 256 (supra) as under,

The intention of the legislature in enacting sub-S. (1) of S. 104 is clear; the right to appeal conferred by any other law for the time being in force is expressly preserved, this intention is emphasized by S. 4 which provides that in the absence of any specific provision to the contrary nothing in the Code is intended to limit or otherwise affect any special jurisdiction or power conferred by or under any other law for the time being in force. The right to appeal against judgments (which did not amount to decrees) under the Letters Patent, was therefore not affected by S. 104(1) of the Code of Civil Procedure, 1908.

and upon this, (the Supreme Court) said:

Thus, this Court has clearly held that the right to appeal against judgments under the Letters Patent was not affected by S. 104(1) of the Code of 1908 and the decision therefore fully supports the argument of Mr. Sorabjee that there is no inconsistency between the Letters Patent jurisdiction and S. 104 read with Order 43, Rule 1 of the Code of 1908.

After saying so and referring to yet another judgment of the Supreme Court in Shankarlal Aggarwal and Others Vs. Shankarlal Poddar and Others, in which, while construing the provisions of S. 202 of the Indian Companies Act, certain observations had been made on the question, namely, what the word ''judgment'' may mean for the purpose of the Letters Patent appeal, the Supreme Court said:

There are a number of other Acts also which center additional powers of appeal to a larger Bench within the High Court against the order of a trial judge. Take for instance a case under the Arbitration Act. Suppose in a suit the matter is referred to arbitration and after the award is filed by the Arbitrator certain objections are taken, under S. 39 of the Arbitration Act an appeal would lay to a larger Bench from the order of a single judge disposing of the objections taken by the parties against the award.

S. 39 runs thus:

It cannot be contended by any show of force that the Order passed by the trial judge being an interlocutory order no appeal would lie to the Division Bench or that the provisions of the Arbitration Act giving a right of appeal to a litigant from the order of a trial judge to the Division Bench in any way fetter or override the provisions of the Letters Patent.

Has the Supreme Court not read in the judgment in Union of India v. Mohindra Supply Co. (supra) that Order 39 Rule 1of the CPC is an enabling provision giving additional right of appeal to a litigant from the order of the trial judge and not a provision, which restricts the appeals to the orders falling under Order 39, Rule 1of the Code of Civil Procedure?

We shall come back to Shah Babulal Khimji''s case and the judgment of the Supreme Court a bit later. Before that we do a little more prospecting under which the law on the subject will give us a better understanding of the problem. Prior to the Code of Civil Procedure, 1908, there were two Codes, one, of 1877 and the other, of 1882. In the 1877 Code, S. 588 provided for appealable orders under clauses (a) to (t) and said that an appeal from any order specified in that section would he to the High Court or when an appeal from any other order is allowed by the chapter, it would lie to the Court to which an appeal would lie from the decree in the suit in respect of which such order was made or when such order is passed by a Court other than the High Court, then to the High Court. S. 588 read with S. 589 of the 1877 Code would show that the statute made no distinction between appeals to the High Court''s from the District Courts in the mousses or internal appeals to the High Court''s under the Letters Patent.

S. 591 of the said Code, however, provided that except the orders mentioned in S. 588, no further appeal could lie from any order passed by any Court in exercise of its original or appellate jurisdiction in these words:

No other appeal from orders, but error therein may be set forth in memorandum of appeal against decrees. Except as provided in this chapter, no appeal shall lie from any order passed by any Court in the exercise of its original or appellate jurisdiction but if any decree be appealed against, any error, defect or irregularity in any such order, affecting the decision of the case, may be set forth as a ground of objection in the memorandum of appeal.

1877 Code thus provided for appeals against certain specific orders and/or against decrees. It did not contemplate any other appeal except those mentioned in Ss. 588 and 591. This Code was replaced by the Code of 1882, but the provisions remained the same.

A Full Bench of the Bombay High Court in Sonbai v. Ahmedbhai Habibhai (1872) 9 Bom HCR 398 and a Bench of this Court in Raj opal In re (1886) ILR 9 Mad 447 took the view that under cl.15 of the Letters Patent, an appeal to the High Court from an interlocutory order made by one of the judges could be filed only in those cases in which an appeal was allowed under the Code of Civil Procedure, that is to say, under Ss. 588and 591. The Privy Council, however, in the case of Harrish Chander Chowdry v. Kali Sundari Debia (1882) 10 IA 4 while considering S. 588 made the following observations:

It only remains to observe that their Lordships do not think that S. 588 of the Act X of 1877, which has the effect of restricting certain appeals, applies to such a case as this, where the appeal is from one of the Judges of the Court to the full Court.

This judgment gave rise to a serious conflict of opinions in the High Courts in India. The High Courts of Calcutta and Bombay as well as this Court took the view that the decision of the Privy Council permitted appeals, under clause 15 of the Letters Patent, against orders which did not fall in the list of the appealable orders under S. 588 of the Code (See Chappan v. Moidin Kutti (1899) ILR 22 Mad 68; Toolsee Money Dassee v.Sudevi Dassee (1899) ILR 26 Cal. 363 and Secretary of State v. Jehangir (1902) ILR 4 Bom 342 The Allahabad High Court, however, took a different view and held that, if an order was not appealable under Ss.588 and 591 of the Code of 1877, it could not be appealed against even under the Letters Patent of the High Court in Banno Bibi v. Mehdi Hussatn (1989) ILR 11 All 375 and re-affirmed in Muhammad Naim-ul-Lahkhan v. Insan Lahkhan ILR 14 All 226.

Commenting upon this conflict, in Shah Babulal Khimji''s case (supra), the Supreme Court has said:

With due respect we would like to point out that the pointed and terse observations of the Privy Council did not leave any room for any doubt or speculation in the matter. While construing S. 588, the Judicial Committee in Hurrish Chunder Chowdry''s case (1882) 10 In App 4 (supra) had made it clear that appeals would lie under S. 588 to the High Court and the Section did not contain any restriction to the effect that appeal against the orders of the trial judge mentioned in S. 588 would not lie to a larger Bench of the High Court. In other words, the Privy Council intended to lay down clearly that S. 588 did not affect nor was it inconsistent with the provisions of the Letters Patent and hence those orders of the trial judge which fell beyond S. 588 could be appealable to a larger Bench under the Letters Patent if those orders amounted to judgment within the meaning of Cl.15 of the Letters Patent. Therefore, the views taken by the Calcutta, Bombay and Madras High Courts, referred to above, were undoubtedly correct. At any rate, since a fresh controversy had arisen, the legislature stepped in to settle the controversy by enacting the new S. 104in the Code of 1908. S. 104 made it clear that appeals against orders mentioned in Order 43, Rule 1were not in any way inconsistent with the Letters Patent and merely provided an additional remedy by allowing appeals against miscellaneous orders passed by the trial judge to a larger Bench. In other words, the legislature gave full statutory effect to the views of the Calcutta, Bombay and Madras High Courts. Even after the introduction of S. 104, the conflict between the various High Courts still continued as to whether or not S. 104would apply to internal appeals in the High Court. That is the question which we shall now discuss.

Proceeding to consider the effect of S. 104 in the Code, the Supreme Court first stated:

To begin with, it is not disputed that a trial judge has to follow the entire procedure laid down by the Code of 1908 starting from the presentation of the plaint right up to the delivery of the judgment. The only difference in the assumption of jurisdiction by the High Court is that a suit of a particular valuation has to be instituted in the High Court rather than in the District Court. Secondly, it is indisputable that any final judgment that the trial judge passes deciding the suit one way or the other amounts to a decree and under the provisions of the Letters Paten: an appeal lies to a larger Bench which normally is a Division Bench as provided for under the Rules made by various High Courts. Thirdly, the Letters Patent itself does not define the term ''judgment'' and has advisedly not used the word ''decree'' in respect of any judgment that may be given by the trial judge.

After referring to S. 5 of the Code of 1908 and extracting it, the Supreme Court has Said:

The importance of this section is that wherever the provisions of the CPC are sought to be excluded by any special enactment which may be silent on the point, the State Government can by notification apply the provisions of the Code to Revenue Courts. A bare perusal of this section would clearly reveal that excepting Revenue Courts all other Civil Courts would normally be governed by the provisions of the CPC in the matter of" procedure. S. 4 (1) of the Code of 1908 which is a saving provision clearly provides that in the absence of any specific provision to the contrary the provisions of the Code do nor limit or affect any special or local law. Thus, the test contained in S. 4 is not applicable in the instant case because even if the Letters Patent of the High Court be deemed to be a special law as contemplated by S. 4, the provisions of S. 104do not seek to limit or affect the provisions of the Letters Patent.

The observations of the Supreme Court extracted above establish that this Court''s View in Chappan v. Moidin Kutti 1899 ILR 22 Mad 68 on the role of S. 588 of the 1877 and 1882 Code is correct. The incorporation of the new provision in S. 104 in 1908 Code or the provision in S. 105 (1) thereof saying:

Save as otherwise expressly provided, no appeal shall lie from any order made by a Court in the exercise of its original or appellate jurisdiction, but where a decree is appealed from, any error, defect or irregularity in any order, affecting the decision of the case, may be set forth as a ground of objection in the memorandum of appeal.

According to the Supreme Court, was intended only to settle the controversy which had arisen on account of the judgments of the Allahabad High Court in Banno Bibi v. Mehdi Hits sain (supra) and Muhammad Naim-ul-lah Khan v. Ihsanul-Lah Khan (supra). The absence of the provisions in S. 104 however was felt of no consequence in determining the effect of the restriction in S. 588 of the Code 1877 or 1882 Code and in the words of the Supreme Court in Shah Babulal Khimji''s case (supra),

We might also reiterate that prior 10 the Code of 1908, in the Code of 1877 an identical provision like Order 43, R. 1, also existed in the shape of S. 588 which was absolutely in the same terms as Order 43, R. 1and its various clauses. Of course, S. 104 was conspicuously absent from the Codes of 1877 or 1882. As indicated earlier the question of the application of S. 588 (now order 43 Rule 1) was considered as early as 1882 in Hurrish Chunder Chowdrys case (1882-10 In App. 4 (supra) where the Privy Council in very categorical terms observed thus:

It only remains to observe that their Lordships do not think that S. 588 of Act 10 of 1877, which has the effect of restricting certain appeals, applies to such a case as this, where the appeal is from one of the Judges of the Court to the Full Court.

The Full Bench of this Court in ChapPan v. Moidin Kutti (supra) answered the reference whether an appeal under S. 591 of the 1882 Code was maintainable when S. 588 had restricted appeals to certain types of orders only. In the Words of one of the Judges constituting the Bench, it was observed,

The words of S. 588 are "from no other such order" and I have no doubt that it is in reference to these words that their Lordships of the Privy Council in their judgment in Hurrish Chunder Chowdry v. Kali Sundari Dob''ta (L.R. 10, I.A. 4; S.C., ILR 9 Cal. 482), say:- "It only remains" to observe that their lordships do not think that S. 588 of Act X of 1877, which has the effect of restricting certain appeals, applies to such a case as this, where the appeal is from one of the "Judges of the High Court to the Full Court." On this reference I conceive that it is no part of our duty to consider the particular order out of which the reference to the Full Bench is made and without doing so it is in my opinion impossible to say whether the order in question is appealable or not.

The result of this judgment (so far as it applies to the question before us) appears to me to come to this, that if the order made by a single Judge only amounts to an order such as is intended by Chapter 43 of the Code, it is not appealable unless it is within S. 588, but if it amounts to more and is a judgment, then it is appealable; in other words, that the right given by S. 15 of the Letters Patent to appeal from the order of a single Judge is only limited by the Code to such orders as do not amount to a judgment whereby the rights of the parties are concluded, but. Where this is the case, the order amounts to a judgment within the meaning of S. 15 of the Letters Patent (Delouse v. Coles (3 M.H.C.R. 384) and an appeal lies.

Cl. 37 of the Letters Patent of this Court which has been referred to in the course of the Arguments states,

Regulation of Proceedings And we do further ordain that it shall be lawful for the said High Court of Judicature at Madras from time to time to make rules and orders for the purpose of regulating all proceedings in civil cases which may be brought before the said High Court, including proceedings in its Admiralty. Vice-Admiralty, testamentary, intestate and matrimonial jurisdiction, respectively: Provided always, that the said High Court shall be guided in making such rules and orders as far as possible by the provisions of the Code of Civil Procedure, being an Act passed by the Governor-General-in Council, and being Act No. VIII of 1859, and the provisions of any law which has been made amending, or altering the same, by competent legislative authority for India.

Art. 225of the Constitution says,

Subject to the provisions of this Constitution and to the provisions of any law of the appropriate Legislature made by virtue of powers/conferred on that Legislature by this Constitution, the jurisdiction of, and the law administered in. any existing High Court, and the respective powers of the Judges thereof in relation to the administration of justice in the Court, including any power to make rules of Court and to regulate the sittings of the Court and of members thereof sitting alone or in. Division Courts shall be the same as immediately before the commencement of this Constitution:

Provided that any restriction to which the exercise of original jurisdiction by any of the High Court''s with respect to any matter concerning the revenue or concerning any act ordered or done in the collection thereof was subject immediately before the commencement of this Constitution shall no longer apply to the exercise of such jurisdiction.

21-a. It is enough for our purpose to notice that Letters Patent jurisdiction of this Court is saved under this Article of the Constitution and that its jurisdiction to regulate its proceedings including its appellate power is preserved, subject to the provisions of the Constitution and to the provisions of any law of the appropriate Legislature made by virtue of powers conferred on that Legislature by the Constitution. Until any contrary legislation, Letters Patent will continue to provide for appeals against judgments on the Original Side of the Court and judgments of a judge of this Court in appeals against the original decree of a Court subordinate to this Court. In Shah Babulal Khimji''s case (supra), the Supreme Court has clearly indicated that appeals against appealable orders under Order 43, Rule 1of the CPC are permissible under Cl. 15 of the Letters Patent of the Court not because the Code provides for such appeals only, but also because it is fair to hold that such orders which are declared appealable by the Court are judgments. The Supreme Court has, in the judgments, referred to a Full Bench judgment of the Calcutta High Court in Mathura Sundari Dassi v. Haran Chandra Shahs AIR 1916 Cal 361 to come to the said conclusion and quoted a passage from that judgment which reads:

By the terms of S. 117, the Code is made applicable to the High Court, and Order 43, Rule 1gives a right of appeal in the very case under discussion. But it is said that this Code and the rules made under it do not apply to an appeal from a learned judge of the High Court. I cannot follow that argument. It is part of the defendant''s case that Order 9, Rule 8applies. That order is in effect a part of the Civil Procedure Code. It seems to me strange that the plaintiff should be subjected to Order 9, Rule 8and be liable to have his suit dismissed for want of appearance, yet when he has had his suit dismissed under one of the rules of the Code and wants to call in aid another of the rules which when his application for reinstatement has been refused-gives him a right of appeal against that refusal, he is met with the argument that he cannot call in aid that rule because there is no appeal from the learned Judge of the High Court under the Civil Procedure Code. I think this is not a true view or a reasonable construction to put upon the Code and the rules made under it. In my judgment, the Code and the rules do apply and the plaintiff has a right of appeal and Woodruff, J. made similar observations:

Whether or not as a question of jurisdiction an appeal lies under clause 15 of the Letters Patent in a case in which an appeal is allowed under the Code, I think it may be said that there are prima facie grounds for holding that an appeal should be held to lie under the Letters Patent where it is allowed under the Code; for the fact that the legislature has in the Code allowed an appeal in a particular case, affords to my mind prima facie ground for supposing that that case is of a class which this Court considers appealable under its Letters Patent. Looking at the nature of the order appealed from, I think I should hold that it is appealable as a ''judgment'' under the Letters Patent.

And Mookherjee, J., observed thus:

The term "Rule" which finds a place in S. 117 is defined in clause (18) of S. 2 of the Code to mean" a rule contained in the First Schedule or made under S. 122 or S. 125". Our attention has not been drawn to any such rule which makes Order 43, Rule 1, clause (c) inapplicable. On the other hand, Order 49, R.3which excludes the operation of other rules, lends support to the contention of the appellant that Order 43 Rule 1, clause (c) is applicable to the present appeal.

S. 104 of the Code of 1908 is materially different from S. 588 of the Code of 1882. It provides that "an appeal shall lie from the orders mentioned in the first clause of that section and, save as otherwise expressly provided in the body of the Code or by any law for the time being in force, from no other orders." The effect of S. 104 is thus, not to take away a right or appeal given by clause 15 of the Letter, Patent, as not applicable hold accordingly that this appeal is competent under clause (c), Rule 1, Order 43 of the Civil PC.

I am further of opinion that the appeal is competent also under clause 15 of the letters Patent.

The procedural law relating to arbitration which had previously been codified under the Code has since been codified and amended in the Arbitration Act, 1940. If a reference is made to the provisions in S.104 of the 1908 Code and then the words in S. 39 (1) of the Arbitration Act are taken notice of, one may have the impression that the Arbitration Act has intended to exclude from the appellate Letters Patent jurisdiction of the Court quite a few types of orders which otherwise were judgments, appealable under clause 15 of the Letters Patent. But when we make a closer examination and take notice of the provisions in the Code of 1877 and the Code of 1882 and find that Ss. 588 and 591 together carried on almost a similar inhibition to appeals against orders in the arbitration proceedings, which were not covered by the orders providing for appeals like S. 39(1) of the Arbitration Act, 1940, we are made to think that it cannot be contended by any show of force that the words in S. 39(1) that "an appeal shall lie from the following orders under this Act and from no others to the Court authorized by law to hear appeals from original decree of the Court passing the order" would fetter or override the provisions of the Letters Patent. It is in this way only that the observation of the Supreme Court in Shah Babulal Khimji''s case (supra).

It cannot be contended by any show of force that the provisions of the Arbitration Act giving a right of appeal to a litigant from the order of la trial judge to the Division Bench in any way fetter or override the provisions of the Letters Patent.

has been made.

We have already noticed that the arbitration rules which were originally in the CPC have been separately codified in the Arbitration Act. It is no doubt an act of competent legislature. In sub-S. (2) of S. 39, it is said that no second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court. The legislature has in this clearly introduced a bar to the second appeal, whether under the Letters Patent or otherwise. In sub- S. (1), however, it has given a right to litigate in providing for appeals against specific types of orders and from no others. Can this be held to be a provision inhibiting like sub-S. (2) any right of appeal available under any other statute? This was not a question before the Supreme Court in the case of Union of India v. Mahindra Supply Co. (supra). This was also not a question directly arising in Shah Babul Khimji''s case (supra). In the latter case, the Supreme Court was greatly concerned with the types of orders which are appealable as judgments under clause 15 of the Letters Patent.

In Umaji Keshao Meshram and Others Vs. Radhikabai and Another, a Bench of the Supreme Court became concerned with the question whether under clause 15 of the Letters Patent of the Chartered High Court, an appeal lay to a Division Bench against a judgment in a proceeding under Art. 226or Art. 227of the Constitution. While so, coming to the clause 15 of the Letters Patent in this judgment, the Supreme Court has said:

Clause 15 forms pair of a group of clauses consisting of clauses II to 18 headed "Civil Jurisdiction of the High Court." Clause 12 deals with original jurisdiction as to suits and clause 13 with extra-ordinary original civil jurisdiction while clause 14 deals with joined of several causes of action. Though the marginal note to clause 15 was the same as that to the old clause 14, a most material change was made in clause 15 by providing that intra court appeals would lie "from the judgment (not being a sentence or order passed or made in any criminal trial) of one Judge of the said High Court, or of one Judge of any Division Court." The word "Judgment" in clauses 15 is not qualified in anyway as to the jurisdiction in which it is given except that it should not be a sentence or order passed or made in any criminal trial, thus excluding judgments given in the exercise of criminal jurisdiction. Criminal jurisdiction is provided for in clauses 22 to 29. Various other jurisdictions conferred upon the High Courts, except ordinary and extraordinary civil jurisdiction, also feature in clauses subsequent to clause 15. Marginal notes or headings to groups of sections cannot control the meaning of a section if the section is unambiguous and its meaning plain. Not only is the wording of clause 15 unambiguous but there is a strong intrinsic evidence in that clause itself to show that it applies to all jurisdictions mentioned in different clauses of the Letters Patent, whether preceding clause 15 or subsequent thereto, except those expressly excluded by clause 15 itself. Had it not been so, there would have been no need to exclude expressly a judgment from a sentence or order passed or made in any criminal trial from the purview of clause 15. Further, under clause 15 an appeal also lies against the judgment of one judge of any Division Court where the Judges are equally divided in opinion. Under the unlamented clause 36, in such a case the opinion of the senior judge was to prevail and under clause 15 an appeal lay against has judgment. A Division Bench may hear an original matter or an appeal from a Subordinate Court. The omission from clauses 15 of the words.

"in all cases of original civil jurisdiction" which occurred in clause 14 made the judgment of the senior judge of the Division Bench appealable whether it was given in an original matter or in an appeal from a subordinate Court even though the appellate jurisdiction of the High Court in respect of decisions given in civil cases by subordinate courts is conferred by clause 16 which in numerical order follows clause 15. Such was the view taken by a Full Bench of seven Judges of the Calcutta High Court in Ranee Shurno Moyee v. Luchmeepat Doogur (1867) 7 Seth WR52 as far back as January 23, 1867. Since then all the Chartered High Courts have taken the same view and have held that unless excluded from the purview of clause 15, an intra court appeal lies under that clause against the judgment delivered in the exercise of any of the jurisdictions conferred by the Letters Patent, whether by a clause preceding or succeeding clause 15. When clause 15 was substituted by Letters Patent dated December 9, 1927, the marginal note was changed to "Appeal to the High Court from the Judges of the Court." This change brought the marginal note in conformity with what clause 15 provides.

There has also been unanimity among the Chartered High Courts that the word "judgment" in clause 15 embraces not only judgments given in the exercise of jurisdictions specifically mentioned in the Letters Patent but also in the exercise of jurisdictions not so mentioned. For instance, the jurisdiction to commit for contempt is not expressly mentioned in the Letters Patent but the Calcutta High Court in Mohendra Lai Milter v. Anizndo Cornrnar Miner (1897) ILR 25 Cal 236 and the Bombay High Court in The Collector of Bombay Vs. Issac Penhas, have held that an order made by a single Judge committing a person for contempt is appealable under clause 15. Similarly, in Mahomedalli Allabux Vs. Ismailji Abdulali, the Bombay High Court held that an appeal lay from an order passed by a single judge directing a writ of habeas corpus to issue and in Raghunath Keshav Khadilkar Vs. Poona Municipality and Another, it held that an appeal lay under clause 15 of the Letters Patent against the issue of a writ of certiorari by a single Judge.

Re-visional jurisdiction is not expressly mentioned in clause 15 but as the Chartered High Courts were entertaining intra court appeals from judgments given in the exercise of re-visional jurisdiction, when the Letters Patent were amended in 1919 an intra court appeal from an order made in the exercise of re-visional jurisdiction was expressly excluded. Similarly, to prevent intra court appeals from an order passed by a single judge in the exercise of the power of superintendence under the provisions of S.107of the Government of India Act of 1915-1919, an appeal from such an order was expressly barred by the amending Letters Patent of March 11, 1919. It should be remembered that the Government of India Act of 1915-1919 was a Constitution Act and, therefore, the jurisdiction which was conferred upon the High Court''s by S. 107 of that Act was a jurisdiction conferred upon them by a Constitution Act.

The above view consistently held by the High Courts has found favors with this Court. In National Sewing Thread Co. Ltd. Vs. James Chadwick and Bros. Ltd. (J. and P. Coats Ltd., Assignee), this Court, after considering the relevant provisions of the Government of India Act of 1915-1919, which are in their content similar to the corresponding provisions of the Constitution of India, held that under that Act the Bombay High Court possessed all the jurisdictions that it had at the commencement of that Act and could also exercise all such jurisdictions that would be conferred upon it from time to time by the legislative power conferred by that Act and, therefore, unless the right of appeal was otherwise excluded, an intra court appeal lay under clause 15 of the Letters Patent of the Bombay High Court. The same, of course, would apply to the Letters Patent of the Calcutta and Madras High Courts. The Letters Patent establishing the Lahore High Court constitute the Charter of the Punjab High Court. Clause 10 of those Letters Patent is in pair material with clause 15 of the Letters Patent of the Chartered High Courts.

The words in clause 44 of the Letters Patent and in Art. 225of the Constitution of India, which undoubtedly make the appellate jurisdiction of the Court subject to the law" made by a competent Legislature; however, have to be understood as explained by the Supreme Court in Umaji''s case (supra) as follows:

Article 225 of the Constitution is by its term made "subject to the provisions of this Constitution and to the provisions of any law of the appropriate Legislature made by virtue of powers "conferred on that Legislature by this Constitution." Thus, under Article 225the jurisdiction of the existing High Court and the law administered by them and the powers of the High Courts to make rules and to regulate the sittings of the Court and of members thereof sitting singly or in Division Courts have been preserved and continued subject to the provisions of the Constitution and of any law made by the appropriate Legislature. According to the Full Bench the words "subject to" create a limitation upon the jurisdiction and powers of the existing High Courts. This is not a correct interpretation. Article 225follows a pattern established by earlier legislation. Under S. 9 of the Indian High Courts Act, 1861. The jurisdiction and powers of the High Courts were made subject to the legislative powers of the Governor General of India in Council. Clause 44 of the Letters Patent of 1865 earlier made the provisions of the letters Patent subject to the same legislative powers and after the amendment of the said clause by the amending letters Patent of March 11,1919, subject to the legislative powers of the Governor-General in Legislative Council and also of the Governor General in Council. Under S. 106 (1a) of the Government of India Act, 1915-1919, the Letters Patent of a High Court could be amended from time to time by the Crown by further letters Patent. S. 223 of the Government of India Act, 1935. Continued the jurisdiction of the existing High Courts subject to the provisions of part IX of that Act, the provisions of any order in Council made under the Act or any other Act and the provisions of any Act of the appropriate Legislature enacted by virtue of the powers conferred on that legislature by the Act. In the same way, Article 225is made subject to the provisions of the Constitution and the provisions of any law of the appropriate Legislature made by virtue of powers conferred on that Legislature by the Constitution. The opening words of Article 225 "subject to the provisions of this Constitution and to the provisions of any law of the appropriate legislature made by virtue of the powers conferred on that Legislature by this Constitution" only mean that Article 225is subject to what is provided in the Constitution and in any law made by an appropriate legislature. The words "subject to" cannot be construed, as the Full Bench has done, as referring only to a provision limiting or restricting the jurisdiction of the existing High Courts. They also include a provision which enlarges the jurisdiction and powers of the existing High Courts. Article 225, therefore, comprehends within its scope not only the jurisdiction which the existing High Courts possessed immediately prior to the commencement of the Constitution but also the jurisdiction and powers which the other Articles of the Constitution, such as Articles 226, 227and 228. Confer upon the High Courts....

All that the qualifying phrase in Article 225means is that if a particular jurisdiction of an existing High Court is one conferred by ordinary legislation, it can be affected, either by way of abridgement or enlargement, by a law made by the appropriate Legislature and if it is one conferred by the Constitution, it can only be so affected by a Constitutional amendment. What has escaped the notice of the Full Bench is that a provision for a right of appeal is not one which in any manner limits, abridges, takes away or adversely affects the power of the High Court under Article 226or 227. Such a provision merely regulates the exercise of (he powers under these Articles....

The position which emerges from the above discussion is that under clause 15 of the Letters Patent of the Chartered High Courts from the judgment (within the meaning of that term as used in that clause) of a single Judge of the High Court an appeal lies to a Division Bench of that High Court and there is no qualification or limitation as to the nature of the jurisdiction exercised by the single Judge while passing his judgment, provided an appeal is not barred by any statute (for example, S. 100-A of the Code of Civil Procedure, 1908) and provided the conditions laid down by clause 15 itself are fulfilled. The conditions prescribed by clause 15 in this behalf are: (1) that it must be a judgment pursuant to S. 108 of the Government of India Act of 1915, and (2) it must not be a judgment falling within one of the excluded categories set out in clause 15.

The decision in Umaji Keshao Meshram and Others Vs. Radhikabai and Another, on the nature of the appellate power of the Court under Clause 15 of the Letters Patent of this Court thus concludes that an appeal will lie against the judgment of the single Judge of the Court to a Division Bench if the conditions prescribed by clause 15 in this behalf are satisfied and when there is no specific bar by any statute for filing such appeal like one under S. 100-A of the Code of Civil Procedure, a provision similar to one in S. 39(2) of the Arbitration Act, 1940 and not sub-S. (1) thereof.

In the context of the origin of the Letters Patent appellate power of this Court and the scope and ambit of the appeal against a judgment on the Original Side of the Court, we have no hesitation in holding that, if all the conditions for an appeal against a judgment under clause 15 of the Letters Patent are satisfied and when there is no specific bar, merely because some other law is providing appeals against certain types of orders and says that against the other orders, there shall be no appeal to a Court, it cannot be inferred that even if it is appealable under clause 15 of the Letters Patent, since it is not appealable under S. 39(l) of the Arbitration Act, 1940, there shall be no appeal. The Letters Patent law being a special law, it shall prevail against any general law, so long as there is no specific abridgement, amendment or repeal by a competent Legislature. The reference is answered accordingly.

An oral prayer for a certificate for leave to appeal to the Supreme Court has been made. Since in our opinion, there is no question of law to be decided by the Supreme Court and nothing of public importance is involved in this case, which has not already been decided by the Supreme Court, we do not find any merit in the prayer. The prayer is accordingly rejected.

Pursuant to the above OPINION of the Full Bench, the case coming up for hearing before the Division Bench (Mishra and Janarthanam, JJ), the Court delivered the following judgment:

Janarthanam, J.

23-4-1992- Loyal Textile Mills Limited (in short ''Indian Company'') is registered under the Companies Act, having its office located at No. 855, Anna Salami, Madras-600 002. It is engaged inter alia in the manufacture of textiles. It imports cotton from foreign countries, including United States of America, African countries and Pakistan, for the manufacture of textiles. It negotiated for the purchase of foreign cotton with one M/s. Gill & Co., Pvt. Ltd., Bombay (negotiator).

Allen berg Cotton Company (in short ''American Company'') and Estevez Bros., Co., Inc., are the two companies located at United States of America engaged in the sale of American cotton. The negotiator, purporting to be the agent of the said two American Companies, started negotiating with the Indian Company as respects the purchase of American Cotton. In the course of negotiations, the negotiator forwarded the terms of contract, purporting to be from American Company. Subsequently, negotiations between them continued mainly over telephone.

In the process of such negotiation, the Indian Company opened Letters of Credit for the Purchase of cotton from the two American Companies. M/s. Estevez Bros., Co., Inc. supplied the requisite cotton on the Letters of Credit as per the Understanding. However, the American Company wanted certain amendments to the terms of the Letter of Credit before ever cotton was to be supplied. The amendments, as suggested were not acceptable to the Indian Company. Consequently, the American Company treated the Indian Company as having committed breach of the contract and thereafter, sought to refer the matter for arbitration, pursuant to a clause in the terms of the contract.

The American Company is a member of the Liverpool Cotton Association Limited (in short ''the Association'') situate at 620, Cotton Exchange Building, Edmund Street, Liverpool L3 9LH, England. Under the Rules prescribed, the Association purported to conduct arbitration under its auspices at the instance of the American Company. Mr. R. B. Davies of England had been appointed by the American Company as their Arbitrator while R.J. Anderson of England had been appointed by the Association as the Arbitrator for the Indian Company, which is not its member.

The arbitration clause in the terms of the contract provided for the jurisdiction of English Courts and application of English Law. On receipt of a message from the Association as to arbitration proceedings, the Indian Company sent a reply message informing the Association that the Indian Company had not signed any contract to buy cotton from the American Company and therefore, it was not subjected to arbitration.

The Indian Company thereafter filed O.P. No. 373 of 1988 on the file of this Court under S. 33 of the Arbitration Act, impleading the American Company, the Association and the arbitrators, namely, R.B. Davies and R.J. Anderson of England respectively as respondents 1 to 4, seeking the relief of declaration that there is no arbitration agreement between the Indian Company and the American Company and that the arbitration proceedings initiated are clearly without jurisdiction, illegal, ab-initio void and non-est. and for the consequential relief of permanent injunction, besides filing an application in Application No. 4719 of 1988 for the relief of ad interim injunction, raising inter alia the following contentions:

(1) There is no concluded contract between the parties and in such a contingency, the question of placing reliance by reference to arbitration clause in the terms of the contract can, by no stretch of imagination, be stated to arise for consideration.

(2) Even otherwise, the arbitration clause in the terms of the contract cannot at all be construed as an ''arbitration agreement'' under the salient provisions adumbrated under S. 2 (a) of the Arbitration Act.

(3) The conferring of jurisdiction of such an ''arbitration agreement'' on a Court in England, which had no jurisdiction otherwise, could never be construed as legal and binding on the parties

(4) No part of cause of action had arisen at all in England, inasmuch as the parties to the terms of the contract are admittedly residents of either India or United States of America, where the entire cause of action for the subject matter of the purported arbitration could, if at all, be stated to have arisen.

(5) To require the Indian Company to participate in arbitration in Liverpool in England is quite unjust, inequitable, opposed to all canons of justice and balance of convenience.

The American Company alone entered appearance through a counsel of its choice and resisted the said petition by repelling every one of the contentions raised therein.

It appears that when the application for ad interim injunction came up for orders before learned single Judge, it was agreed to by learned counsel on both sides that the main original petition itself could be disposed of, as it is a matter, which largely depends upon the correspondence available on record and consequently, the Original Petition itself was taken up for disposal.

Learned counsel for the Indian Company, it appears, ventured to make his submissions before learned single Judge, by placing reliance on the correspondence available and also sought permission to let in oral evidence, in proof of the projection of the claim of the Indian Company as to the non-existence or the validity or otherwise of the so-called arbitration agreement and such submission of learned counsel, as had been penned down in the order of learned single Judge, is to the following effect:

Lastly, it was argued that the petitioner should be allowed to let in oral evidence to prove the agreed terms between the petitioner and M/s. Gill & Co., as the contract was entirely negotiated and agreed only between the petitioner on one hand and M/s. Gill & Company on the other and that there was no contract between the petitioner and the first respondent.

Learned single Judge Negative the permission so sought for to let in oral evidence and the rationale for such a course adopted is reflected in the order as below:

After going through the entire correspondence placed before me by both sides, I am of the view that there is no necessity for letting in any oral evidence in this case. The documents available on record prove beyond doubt that there has been an agreement for reference to arbitration as contended by the first respondent.

The terms of the contract had been established, as learned single Judge would say, by the plethora of correspondence that got exchanged between the parties and therefore, in such a contingency, it would be plain that the terms of the contract, as stated to have been established, cannot be expected to contain the signatures of the parties. The moot question, in such circumstances, that would arise for consideration is as to whether the terms of such an agreement, not containing the signatures of the parties would, in law, constitute an arbitration agreement, in Terms of the provisions of the Arbitration Act. In answering such a moot question, learned single Judge, of course, placing reliance on the rulings- three emerging from the apex of the judicial administration of this country and one from the High Court of Judicature, Allahabad, namely, Jugal Kishore Rameshwardas Vs. Mrs. Goolbai Hormusji, ; Banarsi Das v. Cane Commissioner, U.P. AIR 1963 SC 1695 Gaddartnal v. C. Agarwal & Co. AIR 1963 SC 1417; Gaddarmal Hiralal and Another Vs. Chandrabhan Agarwal and Co., held that to constitute an arbitration agreement in writing, it is not necessary that it should be signed by the parties and it is sufficient if the terms are reduced into writing and the agreement of the parties thereto established.

After having held so, learned Judge said in paragraph 14 of his order thus:

Applying the above principles, it is clear that in the present case the petitioner not having returned the contract forms sent to him after duly signing the same cannot take advantage of his own lapse and contend that there was no agreement for arbitration.

With reference to the contention of the Indian Company as to the incalculable hardship and inconvenience that would be caused, if the arbitration is referred to in a foreign country, learned Judge would say in paragraph 15 thus:

It is not possible to accept the contention of learned counsel for the petitioner that his client would be put to great hardship if arbitration is referred to in a foreign country. That argument is not available in a petition under S. 33 of the Arbitration Act.

In meeting the contention of the Indian Company as to the impassibility of its being subjected to arbitration by an arbitrator appointed by the Association, learned single Judge stated in paragraph 16 thus:

It is next contended by learned counsel for the petitioner that his client is not a member of the Liverpool Cotton Association Limited and therefore he cannot be subjected to arbitration by an arbitrator appointed by the said Association. In view of the clear terms of the agreement, this contention is not available to the petitioner.

Further, learned counsel for the first respondent has produced before me the By-laws of the Liverpool Cotton Association Limited. The relevant portion of By-law reads as follows:

Notwithstanding that a contract may incorporate the By-laws and Rules of the Liverpool Cotton Association and/or refer disputes to settlement by Arbitration by the Liverpool Cotton Association, the Association will not recognize or extend its Arbitration or other facilities to the parties to the contract unless:

(a) at the date when the contract is entered into at least one of the parties is registered in the Register of Registered Firms, provided that the Directors nay, in their absolute discretion and subject to such conditions, if any, as to the registration of either such party or as to other matters such as the Association may, in its absolute discretion, formally impose, waive this sub-paragraph (a) in those cases where they consider it appropriate to do so;

There is no dispute that the first respondent is a member of the Liverpool Cotton Association. Even if both the parties are not members, Clause 4 referred to above gives a discretion to the Association in the matter of reference to arbitration. Hence this contention of learned counsel for the petitioner has to fail.

After recording the findings as above, on all the contentions urged, learned single Judge, and dismissed the Original Petition as well as the Application, without costs, giving rise to the present action by the Indian Company.

Mr. C.A. Sundaram, learned counsel for the appellant Indian Company, would submit that learned single Judge failed to approach the respective contentions projected by the parties in giving a legal fitment, in the light of the salient provisions adumbrated under S. 33 of the Arbitration Act, which resulted in causing prejudice to the cause of justice, in the sense of dismissal of the Original Petition and therefore, he would say that he would not feel reluctant in reiterating before this Bench, the very same contentions, as urged by him in the petition and argued before the learned single Judge dehorns the contention and projection of a submission therefore, a relatable to the subscribing of the signatures of the parties to the terms of the contract containing the arbitration clause by giving a fresh look to them, in the light of the pronouncements of superior courts of jurisdiction, in the shape of decisions emerging from this Court, other High Courts and the apex of the judicial administration of this country as well, to which course, Mr. R. Krishnamoorthy, learned Senior Counsel appearing for the first respondent- American company would however express very strong disapproval, in the sense of supporting the impugned order.

The terms of the contract, as adverted to earlier, admittedly though had been reduced into writing were however, not signed by the parties. But, none the less, the terms of the contract are sought to be established by the American Company by the materials available on record, in the shape of correspondence that were exchanged between them. The Indian Company on their part, would contend that the materials available on record, if properly scanned, in the broad spectrum analysis, could by no stretch of imagination, be stated to establish the subsisting nature of a contract. Of course true it is, the Indian Company filed an. affidavit denying the entering into of any contract with the American company and what all took place between them is nothing but the process of negotiation for the culmination of a contract through the medium of the negotiator.

The American Company, on their part, filed an affidavit categorically asserting the coming into existence of the contract with the Indian Company through the medium of the negotiator and the Indian Company, on their part committing a breach of a contract, necessitating them to refer the dispute to arbitration by the invocation of the arbitration clause contained in the terms of the contract. Thus, as to the issue of a fact rentable to the existence of a contract, there is assertion by the American company and flat denial by the Indian company, by incorporating necessary averments therefore in the respective affidavits filed by them. In such a contingency, it is rather difficult and remote, if not impossible, to decide the truth or validity or otherwise of the existence of the contract between them, and the Court, in such a situation, would be rather pushed to the necessity of taking evidence, oral and documentary, to determine the truth, validity or otherwise of the existence of such a contract.

In the instant case, learned single judge had not decided such a vexed question by taking into consideration the affidavits alone filed therefore and the methodology adopted was to take into consideration the documentary evidence also, in the shape of correspondence exchanged between them. It is not as if the parties consented for the determination of the question exclusively or solely on consideration of the documentary evidence alone, that are available on record. The Indian Company, in fact, sought permission for adduction of oral evidence, as revealed by the projection of the argument of their learned counsel and such permission, in fact, had not been granted, as revealed from the extract of the impugned order as had been done earlier. It is in this context, the statutory provision, as adumbrated under S. 33 of the Arbitration Act, dealing with the arbitration agreement or award to be contested by application calls for consideration to decide the question as to whether the refusal of the permission for adduction of oral evidence by learned single Judge is justifiable. The section reads thus:

Arbitration agreement or award to be contested by application:-Any party to an arbitration agreement or any person claiming under him designing to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits:

Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit.

The section, as extracted above, in simple words may mean that the Court shall decide the existence or validity of an arbitration agreement on affidavits or may in appropriate cases whenever it deems just and expedient, set down an application for hearing on other evidence also and it may pass such orders for discovery and particulars, as if it may pass in a suit. It is in the discretion of the Court to set down the application for being decided on evidence. Having once exercised its powers under the proviso, it goes without saying that such a discretionary power, if at all, has to be exercised not partially, but wholly on well recognized judicial principles and guidelines and not in an arbitrary, capricious, whimsical or fanciful manner.

Once learned single judge has elected or opted to exercise the discretionary power under the proviso, he ought not to have shut in evidence, either oral or documentary, other than the correspondence as available on record, in proof of the existence or validity or otherwise of the arbitration agreement by the affected parties, when especially the success or dismal failure depended upon the establishment of the existence or otherwise of such an agreement.

From the narration of the incorporation of the averments made by the parties in their respective affidavits as to the existence or otherwise of the terms of the contract containing an arbitration clause, it is patent enough, as stated earlier, that the parties have joined issues on certain facts, with regard to the existence or otherwise of the arbitration agreement. Whenever there is an issue of fact, the fact to be asserted or denied in the answer to such issue is a fact in issue (per S. 3 of the Evidence Act). It is the right of the parties to give evidence of the existence or nonexistence of every fact in issue and such other facts as are declared in the Evidence Act as ''relevant facts'' (vide S. 5 of the Evidence Act). The laws of evidence as to what is receivable or not are sounded on a compound consideration of what abstractedly considered, is calculated to throw light on the subject in dispute, and of what is practicable. The object of a trial in every case is to ascertain the truth in respect of the matter. For this purpose it is necessary that the court should be in a position to estimate, at its true worth, the evidence given by each witness. Proof, logically defined, is sufficient reason for assignment to a proposition as true (per Wharton). Practically considered, it is the establishment of facts in issue by proper legal means to the satisfaction of the court (Best on Evidence). This is done by the production of evidence, the law relating to which is to all legal principles what logic is to reasoning, whatever subject it may be concerned about. Proof is the effect or result of evidence, while evidence is the medium of proof. Bentham used the word ''evidence'' in its broadest sense:

Any matter of fact, the effect, tendency or design of which is to produce in the mind a persuasion, affirmative or disaffirm alive of the existence of some other matter of fact.

It seems properly from S. 3 of the Evidence At that ''proof means anything which serves, either immediately or mediate, to convince the mind of the truth or falsehood of a fact or proposition and as truths differ, the proof adapted to them also differ. Thus, as regards quid probed, it is incontestable that the Indian Company has a right to prove the fact in issue and the facts relevant to it.

A learned judge of this Court in A. Sankarasadasivam and Another Vs. A. Kumaravel and Others, jade in paragraph 10 thus:

The contention of the learned counsel for the appellants is that in the event of the Court not accepting the affidavits filed by them to prove the existence of the agreement, they must be given an opportunity to establish the existence of the agreement by other evidence, oral and documentary, but, that the lower Court has not granted any opportunity to the appellants to establish the existence of the agreement. Perhaps, the lower Court proceeded on the basis that the question as to the existence of the arbitration agreement has to be decided only on affidavits in view of S. 33. It is true that S. 33 says that the Court shall decide the question as to the existence or validity of the arbitration agreement on the basis of affidavits. But the proviso to that section, enables the Court, when it deems just and necessary, to take further evidence. If the lower Court felt that no decision could be rendered on the basis of the affidavits or the affidavits filed are quite inconclusive on the question in dispute, it could call upon the parties to substantiate their case by adducing further evidence. In view of the above provisions, the lower Court should have granted an opportunity to both sides to prove or disprove the existence of an agreement, as the case may be.

In this view of the matter, we are rather constrained to feel and say that the refusal of learned single Judge in permitting the adduction of other evidence, oral and documentary, as prayed for by the Indian Company, caused immeasurable prejudice to them, in the eye of law, in the sense of depriving them of their very valuable right of possible proof of their case.

As regards the stipulation as to the choice of foreign tribunal, learned counsel appearing for the Indian Company drew our attention to a catena of decisions, which may fall for consideration one by one in the arena of discussion.

(1) Messrs. Black Sea State Steamship Line represented by its Black Sea State Steamship Line Vs. Minerals and Meta''s Trading Corporation of India Ltd., : In view of the foreign jurisdiction clause contained in a bill of lading, the petitioner, a Russian Steamship concern, objected to the jurisdiction of the Court of Small Causes at Madras to try the suit brought by the respondent for damages for short delivery. That Court, however, in the first instance, by one of its Judges overruled the preliminary objection and with this conclusion, the New Trial Judges, functioning under the procedure provided under the provisions of the Presidency Small Cause Courts Act, concurred. The defendant canvassed the correctness of the view before this Court. Veer swami, C.J. who happened to decide the case said:

I have no doubt that, on the facts of this case, the only conclusion the courts below could rightly arrive at, in the circumstances, is the one which they did.

And consequently dismissed the petition with costs.

For reaching such a conclusion, learned Chief Justice happened to consider the effect of the two stipulations found printed on the back of the bill of lading pertaining to foreign jurisdiction clause. The stipulations were to the following effects:

All claims and disputes arising under and in connection with this bill of lading shall be judged in the U. S. S. R.

All questions and disputes not mentioned in this bill of lading shall be determined according to the Merchant Shipping Code of the U. S. S. R.

In considering and interpreting the aforesaid two clauses, learned Chief Justice said:

So, it is clear that the parties entered into a binding contract as between them that the Russian Courts should adjudicate the disputes arising under and in connection with the bill of lading and that the questions and disputes not mentioned in the bill of lading should be determined according to the Merchant Shipping Code of the U. S. S. R. At the moment this Court is not so much concerned with the law that should govern the contract but with the jurisdiction of the Small Cause Court at Madras....

The parties who made their choice of the Tribunal should normally be bound by their contract. That should especially be the case as to the choice of the law applicable to the contract. But it seems to me that enforcement by the Indian courts of the choice of a foreign tribunal cannot be ruled as imperative; but it should depend on the balance of convenience in particular circumstances and the exigencies of justice.

After having so stated, learned Chief Justice would at this juncture refer to a passage by Cheshire in his Private International Law, 6th Edition, page 222 thus:

As distinct from the express or implied choice of the proper law, the express choice of a foreign tribunal is not absolutely binding. In accordance with the excellent principle that a contractual undertaking should be honored, there is indeed, a prima facie rule that an action brought in England in defiance of an agreement to submit to arbitration abroad will be stayed. The Cap Blanco (1913 p. 130), Austrian Lloyd Steamship Co. v. Gresham Life Assurance Society Ltd. L.R. (1903) 1 KB 249), but nevertheless the Court has a discretion in the matter and where the parties are amenable to the jurisdiction, as for example, where the defendant is present in England, it will allow the English action to continue if it considers that the ends of justice will be better served by a trial in this country (The Athena (1922) 11 LlR 6-, The Fehmam (1958) 1 WLR 159)

Learned Chief Justice in furtherance of highlighting the points, observed thus:

In a case of foreign jurisdiction clause, the question is not so much of freedom of contract and the parties being bound by their choice as of expediency in the light of what may be called the rule of balance of convenience and the ends of justice in the case on hand. Referring to The Athanee (1922) 11 LIR 6), The Fehmam (1958) 1 WLR 159), Cheshire seems to apprehend that unless the discretion of the court in favor of allowing the English action to continue is exercised sparingly, there is a danger that foreign merchants will lose faith in the efficacy of arbitration clauses. It may be that, according to Cheshire that case went to the verge of the law. While courts are certainly expected to use their discretion judicially and on proper grounds keeping in view the balance of convenience and the ends of justice, the exercise cannot be guided by the prospect of the danger apprehended by Cheshire. The consideration is more from the stand point of justice than lo ignore the necessity to hold the parties to the contract as to the forum for adjudication.

The Fehmam case (1958) 1 WLR 159), is nearer to this case, for, it was concerned with a foreign jurisdiction clause identical to what appears in this case. It applied the rule of ends of justice to sustain an English action notwithstanding the foreign jurisdiction clause binding between the parties to the dispute. The view was also based on the balance of convenience. The Court of Appeal in Mackender v. Feldia, A.G., (1967) 2 WLR 119) declined the English jurisdiction. But in doing so, it was obviously led by the peculiar facts of the case. The defendant there had already started proceedings in accordance with the foreign jurisdiction clause which did not appear to be unjust or inconvenient to the parties and the stakes involved were considerable unlike in this case. Lord Denning, M.R. however recognized:

But although there is jurisdiction to give leave, it is a matter of discretion as to whether it should be granted.

He also says later on in his judgment:

The foreign jurisdiction clause is a positive agreement by the underwriters that policy is governed exclusively by the Belgian law. Any dispute under it is to be exclusively subject to Belgian jurisdiction. That clause still stands and is a strong ground why discretion should be exercised against leave to serve out of the jurisdiction.

This observation taken by it may possibly give the impression that his decision was solely rested on it. But obviously the observation was made in the course of repelling an argument that certain non-disclosure on the part of the assured struck out the whole contract.

I should think rather that the decision of the Master of Rolls was induced not solely by the consideration of giving respect to the contract entered into by the parties but also the other circumstances, particularly the pendency of the defendant''s suit in the Belgian Court and also the fact that a large stake was involved in the dispute.

It did not also appear that there were circumstances which would make it unfair or inconvenient to the plaintiffs in England to face the Belgian Court. Dip lock, L.J., in dealing with the question whether an agreement which would be illegal under the English law is void under the contract observed:

The prima facie rule of English Conflict of Laws, more liberal in this respect than many continental systems, is that the proper law of a contract is that system of law which the parties themselves agreed shall regulate the legally enforceable rights and duties to which their agreement gives rise.

But having said that, he went on to say:

The Belgian Courts are not only a convenient forum for its resolution; they are the forum to which both parties agreed to submit.

That gives the basis of his decision. In my view Mackender v. Feldia, AG. (1967) 2 WLR 119), is not against the proposition that local enforcement of a foreign jurisdiction clause is discretionary.

The Court of Appeal in that case definitely found the Belgian Courts were the convenient forums for the parties. Reference was made before me to Lloyds Triestino Societa Per Azinni di Navigazione Sede in Triesta and Others Vs. Lakshminarayan Ramniwas, , Lakshminarayan Ramniwas Vs. Compagnia Genovese D'' Esportazione and Others, and New Great Insurance Co. of India Ltd. Vs. Aktiselskaleet Set Astasiatsske Kampagni, Bombay, , but each of them decided on its facts relating to the balance of convenience and ends of justice. These cases have all kept in view that proposition in approaching the particular circumstances and in giving effect to or not the foreign jurisdiction clause.

(ii) Far East Steamship Line, Vladivostok and U.S.S.R. and Others Vs. The Union of India, : The question in the civil revision petition was whether the Union of India should be compelled to have recourse to the Russian courts in view of the foreign Jurisdiction clause in the contract entered into between the Union and the petitioners, Far East Steamship Line, Vladivostok, Black Sea Steamship Line Odessa. It was a Russian ship which when called at the Nagapattinam port, made a short delivery. The Union brought the suit in the Court of the District Munsif of Nagapattinam. The suit was resisted by the Russian shipping company on ground, inter alia, that the foreign jurisdiction clause in the contract excluded jurisdiction of that Court to try the suit. The Munsif did not accept that view, and went upon consideration of Ss. 19 and 20, Civil Procedure Code. Doubting that the cause of action arose at Nagapattinam, he directed that the plaint should be returned for presentation to the City Civil Court, Madras, within whose jurisdiction the defendants reside, including the clearing agent.

The Civil revision petition against that petition was, in the first instance, before Kailasam, J., (as he then was), who, after taking notice of the decision in Black Sea Steamship Line v. Minerals and Metals Trading Corporation of India Ltd. (1970) I MLJ 548 = 83 L.W. 56 referred the matter to the Division Bench for giving a fresh look in view of the Eleftheria (P. D. A.) (1969) 2 WLR 1073 and Untermeyer Rendered, C. M. B. H. v. Zapata Off Shore Co. (The Chaparral) (1968) 2 Lloyd''s Rep. 15. In doing so, learned Judge observed that while balance of convenience was a matter to be taken into consideration, the effect on international trade was also very important and that some of the leading shipping and air companies, if the clause in the bill of lading was not given effect to, might not choose to have business at any of the Indian ports.

The reference came before a Division Bench of this Court, consisting of Veeraswami, C.J. and Raghavan, J. The Division Bench considered the reference from the angles so focused by learned single Judge making the reference. While doing so, the Bench referred to what the Probate Court pointed out in the Eleftheria (P.D.A.) (1969) 2 WLR 1073, namely. while exercising the discretion, the Court should take into consideration all the circumstances of the particular case, and then proceeded to say:

In particular, but without prejudice to taking into account all the circumstances of the particular case, the following matters, where they arise, may properly be regarded

(i) in what country the evidence on the issues fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign courts;

(ii) whether the law of the foreign court applies, and. if so, whether it differs from English law in any material respects;

(iii) with what country either party is connected and how closely;

(iv) whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages,

(v) Whether the plaintiffs would be prejudiced by having to sue in the foreign court because they would (a) be deprived of security for that claim, (b) be unable In enforce any judgment obtained, (c) be faced with a time-bar not Applicable in England, or (d) for political, racial, religious or other reasons be unlikely to get a fair trial.

After extracting the aforesaid principles, the Bench further said:

In the view of that Court, therefore, the situation in the conflict of laws and jurisdictions does not demand that a foreign jurisdiction clause should invariably be enforced as. Always binding on the parties thereto. We do not think that such a view may necessarily hamper or obstruct or impede international trade.

(iii) Lakhinarayan Ramniwas Vs. Lloyd Triestino Societa Per Azinni Di Navigaziene Sede in Triesta and Others, The plaintiff is an Indian merchant. He placed an order for certain bundles of Mild Steel Round bars with certain Italian shippers. The Italian shippers shipped those goods under three bills of lading. The goods were shipped by S.S. Alga, a steamship belonging to the first defendant Messrs. Lioyd Triestino Societa per Azinni Di Navigazione Sede in Triesta. The goods were to be conveyed from Italy to the port of Calcutta. The steamship S. S. Alga duly arrived at the port of Calcutta. The plaintiff alleged that 22 bundles of the goods were short-landed. In support of its contention, it relied on a short-landing certificate issued by the Commissioner for the port of Calcutta. The plaintiff as a holder of the three bills of lading instituted a suit against the steamship company, defendant No. l. as also its agents, Messrs. Turner Morrison and Co., Private Ltd., defendant No. 2, for short-landing. The Commissioners for the port of Calcutta have also been imp leaded as defendants to the suit.

Clause 31 of each Bill of lading contained the following terms:

All requests for compensation in respect of damage, shortage, deterioration, loss of goods loaded shall be submitted for friendly statement to the agencies of the shipping company at the place of discharge, falling a friendly agreement, both the sniper and the receiver as well as any other party interested in the cargo, if intending to take legal steps against the company for the above mentioned causes and in general for whatsoever other causes may summon them before Judicial Authorities of Tristan or Genoa hereby expressly renouncing the competence of any other Judicial Authorities. No exception must be made to this exclusive competence even if the company is sued party (defendant) by reason of connection or contingency of the law suits.

On the strength of this clause, the defendants applied to the Original side of the High Court of Calcutta for an order staying all further proceedings in the suit. G.K. Mitter, J., made the order prayed for. The plaintiff has preferred an appeal from that order.

On behalf of the plaintiff it was argued that the several contracts contained in the bills of lading were hit by the provisions of S. 28of the Indian Contract Act. The Division Bench consisting of S. C. Lahiri, C.J., and R.S. Bachawat, J., considered and met that argument thus:

The essential validity of the contracts will have to be judged and determined by the proper law of the contracts namely the Italian law. There is neither any allegation nor any proof that the Italian law in anyway renders C1. 31 invalid. S. 28 of the Indian Contract Act cannot and does not render invalid a contract entered into in Italy between two Italian subjects for the carnage of goods from Italy to India on board a steamer flying the Italian Flag.

Though Cl. 31 contained in those several contracts are valid, they cannot be pleaded as a bar to the jurisdiction of an Indian Court which otherwise has jurisdiction to try a suit instituted before it. The suit was instituted on the Original Side of this Court upon the allegation, inter alia, that a part of the cause of action arose in Calcutta. Leave under Cl. 12 of the Letters Patent to institute the suit was duly obtained and be court had undoubted jurisdiction to try the suit. The jurisdiction of the Court to try such a suit is vested in it by the Letters Patent and by the Constitution. Parties cannot by a private agreement, whether such agreement has been entered into in India or outside India, take away a jurisdiction which is vested in this Court to try the suit just as the parties could not by such agreement confer upon it jurisdiction to try. Clause 31 of the contract remains valid as a contractual stipulation, but it cannot be pleaded as a bar to the jurisdiction of the Court. When the attention of the court in which the suit is instituted is drawn to a contractual stipulation of this kind, the Court may in the exercise of its discretion stay its hands and refuse to try the suit until the competent judicial authority to whose decision the parties have agreed to submit their disputes has pronounced its decision. The Court acts upon the principle that in general the Court will compel the parties to abide by their contracts. Instead of driving the defendant to a separate suit to enforce the covenant, the court may for the purpose of preventing multiplicity of litigation enforce the contract summarily on an application made to it in the suit instituted before it. The prima facie leaning of the Court is that the contract should be enforced and the parties should be kept to their bargain. Subject to this prima facie leaning, the discretion of the Court is guided by consideration of justice. The balance of convenience, the nature of claim and of the defense, the history of the case, the proper law which governs the contract, the connection of the dispute with the several countries and the facilities for obtaining even handed justice from the foreign Tribunal are all material and relevant considerations. If on a consideration of all the circumstances of the case the Court comes to the conclusion that it will be unjust or unfair to stay the suit, the Court may refuse to grant the stay asked for.

On review of all the circumstances which were placed before him, G.K. Mitter, J. in the exercise of his discretionary power has granted a stay of the suit. There have been lengthy arguments before us and we have been taken through the entire record. I have come to the conclusion that G.K. Mitter, J., has come to a correct decision.

(iv) Venkatasamiappa v. Srinidhi Ltd (1950) 1 MLJ 709 = 63 L.W. 468: The respondent is a limited company with its office at Madras (and also a subsidiary office at Bangalore where the payments were made) carried out various works in Bangalore for the Public Works Department of the Government of India. The appellant, a resident of Bangalore was a subcontractor supplying at the outset labor and subsequently various materials for the work which the respondent was executing in Bangalore. The appellant claimed that in respect of his dealings with the respondent he was entitled to be paid a sum of about Rs.36, 000/-. The respondent however asserted that if the accounts between the parties were looked into it would be found that far from their owing any money to the appellant, he would be found liable to pay them large sums of money. The disputes were referred to arbitration by an agreement apparently executed at Madras and the arbitrators were all residents of Madras. The arbitrators gave an award where under they directed the appellant to pay the respondent the sum of Rs. 22,346/-. The arbitrators then filed a petition under S.14(2) of the Arbitration Act on the Original Side of this Court praying for the award being received, notice of filing of the award being sent to the parties and a decree in terms of the award being passed. In the context of the facts, though the judgment in that case had been delivered by Balakrishna Ayyar, J., yet Howell, J., concurring with his brother Judge, minute his views, which may usefully be referred to here:

I have had the advantage of reading the judgment that my learned brother is about to deliver and respectfully agree with its reasoning. It seems to me that much of the difficulty that has arisen in this and similar cases is due to the overlooking of the fact that S. 2(c) of the Act merely defines the word "court" and that if one has to decide which of the courts satisfying the definition of the word "court'''', in S. 2(c) is the court in which the award has to be filed, one must look to S. 31(1) and that Section alone. S. 2(c) does not purport to prescribe the court in which the award should be filed. It restricts the meaning of the word "court" to the class of civil, courts that can decide the questions forming the subject-matter of the reference if they had arisen in a suit properly before the court. The difficulty in the construction of this section arises only from the circumstance that the word "court" would have meanings which would vary with the subject-matter of the reference. In the present case, for example, District Munsif''s courts would not be courts within the definition. If now we have regard to S. 31(1) to ascertain in which court, as the word is defined in S. 2(c), the award has to be filed, we find that it is the court that has jurisdiction over the subject-matter of the award, the omission of any reference to residence being presumably for the reason that in filing an award there is no plaintiff and no defendant. If the subject-matter of the reference alone determines jurisdiction, then admittedly this appeal will have to be allowed.

Balakrishna Ayyar, J., after quoting the provisions of Ss. 2(c) and 31(1) of the Indian Arbitration Act, aired his views on the combined effect of those provisions as:

In order to determine which is the Court having jurisdiction in the matter, you should first of all ascertain what the questions are, which form the subject matter of the reference to arbitration. You then proceed to ask; supposing these questions had arisen in a suit, which is the Court which would have jurisdiction to entertain the suit? That Court would be the court having jurisdiction under the Arbitration Act also. It was admitted before us that in the present case the contract between the appellant and the respondent was entered into in Bangalore. The appellant supplied the labor and the materials in Bangalore; the respondent had also a subsidiary office in Bangalore and the payments made were also at Bangalore. The questions between the parties arose out of this contract and what the arbitrators had to determine was how much on a settlement of the accounts was due to one side or the other. Obviously, if these questions had arisen in a suit, the Court, which would ordinarily have had jurisdiction in the matter is not this Court, but the court of Bangalore. That result cannot be avoided if the jurisdiction of the Court were made dependent on the subject-matter of the action.

(v) Hakam Sing Vs. Gammon (India) Ltd., The appellant agreed to do certain construction work for the respondent a company registered under the Indian Companies Act and having its principal place of business at Bombay on the terms and conditions of a written tender. Clause 12 of the tender provided for arbitration in case of dispute. Clause 13 provided that notwithstanding the place where the work under the contract was to be executed, the contract shall be deemed to have been entered into by the parties at Bombay and the Court at Bombay alone shall have jurisdiction to adjudicate thereon. On disputes arising between the parties the appellant submitted a petition to the court at Varanasi for an order under S. 20 of the Arbitration Act, 1940 that the agreement be filed and an order of reference be made to an Arbitrator or arbitrators appointed by the court. The respondent contended that in view of clause 13 of the arbitration agreement only the Courts at Bombay had jurisdiction. The trial court held that the entire cause of action had arisen at Varanasi and the parties could not by agreement confer jurisdiction on the courts of Bombay which they did not otherwise possess. The High Court at Allahabad in exercise of its re-visional jurisdiction held that the courts at Bombay had jurisdiction under the general law and hence could entertain the petition. It further held that in view of clause 13 of the arbitration agreement, the petition could not be entertained at Varanasi. Against the order of the High Court directing the petition to be returned for presentation to the proper court, the appellant appealed to the Supreme Court by Special Leave. The questions that fell for consideration were: (i) whether the courts at Bombay alone had jurisdiction over the dispute; (ii) whether Explanation II to Section 20(a) of the CPC refers only to Government corporations and not to companies registered under the Indian Companies Act.

The Supreme Court, on consideration of those two questions, expressed that the CPC in its entirety applies to proceedings under the Arbitration Act by virtue of S. 41 of the latter Act. The jurisdiction of the courts under the Arbitration Act to entertain a proceeding for filing an award is accordingly governed by the provisions of the Code of Civil Procedure. By the terms of S. 20 (a) of the CPC read with Explanation II thereto, the respondent company which had its principal place of business at Bombay, was liable to be sued at Bombay. It is not open to the parties by agreement to confer jurisdiction on any court which it did not otherwise possess under the Code. But, where two courts have under the CPC jurisdiction to try a suit or proceeding, an agreement between the parties that the dispute between them shall be tried in one of such courts is not contrary to public policy. Such an agreement does not contravene S. 28 of the Contract Act. Since in the present case the courts at Bombay has jurisdiction under the CPC the agreement between the parties that the courts in Bombay alone shall have jurisdiction to try the proceedings relating to arbitration was binding between them. Order 29of the CPC deals with suits by or against a corporation and there is nothing in the Code to support the contention that a Corporation referred to under S. 20 means only a statutory corporation and not a company registered under the Indian Companies Act.

In the light of what we have discussed and stated as above, it goes without saying that learned single Judge had not at all considered the sanguine provisions adumbrated under S. 33of the Arbitration Act in the proper perspective and provided adequacy of opportunity to the parties, especially Indian Company in the matter of the placing of evidence before Court as respects the existence, validity or otherwise, of the contract containing arbitration clause, which is the pivot or fulcrum, on which the other questions of balance of convenience and jurisdiction of foreign court or tribunal which has otherwise no jurisdiction hinge or rotate and even on the assumption that there was a contract containing an arbitration clause, as stated by the American Company, there is emergence of non-application of mind in all splendors on all those aspects of the matter and in such state of affairs, the best course to be adopted is to remit the matter back to learned single Judge to consider afresh the whole matter, by giving adequacy of opportunities to the parties to let in evidence, oral and documentary, as respects the proof or otherwise of the existence or validity of the contract containing arbitration clause and other matters involving balance of convenience of parties and jurisdiction of foreign court or tribunal and arrive at a decision in the light of the principles evolved by various judicial pronouncements referred to above and other precedents, if any, that could be relied upon by the parties before him. In fine, the appeal is allowed; the order of learned single Judge is set aside and the case shall go back to him for fresh decision, after giving adequacy of opportunities to the parties to adduce evidence, oral and documentary and in the light of the principles evolved by judicial pronouncements as indicated in this judgment as well as some other precedents, if any, that may be relied upon by the parties before him. Costs of this appeal shall abide by the fresh result of the petition.