PETITIONER:
THE CALCUTTA TRAMWAYS CO. LTD.
Vs.
RESPONDENT:
THE CORPORATION OF CALCUTTA
DATE OF JUDGMENT:
12/03/1965
BENCH:
SUBBARAO, K.
BENCH:
SUBBARAO, K.
SHAH, J.C.
BACHAWAT, R.S.
CITATION:
1965 AIR 1728 1965 SCR (3) 354
ACT:
Calcutta Tramways Act (W.B. Act 25 of 1951), s.
5--Agreements with Arbitration clause--Whether saved.
HEADNOTE:
By the enactment of Calcutta Tramways Act, 1951, the
Government of West Bengal was substituted for the
Corporation of Calcutta (Respondent) in various agreements
entered into between the predecessors-in-interest of the
appellant and the predecessors-in-interest of the
respondent, subject to a reservation that any sum payable
under the agreements shall be payable by the appellant to
the respondent. All the agreements contained an arbitration
clause which provided for refering any disputes arising
under the agreements to arbitration in the prescribed
manner. Disputes arose as regard the track rent payable by
the appellant to the respondent and the dispute was referred
to arbitration in accordance with the terms of the
arbitration clause. The appellant nominated its arbitrator
without prejudice to its rights, and filed an application in
the High Court, for the determination of the question
whether there was a valid arbitration agreement between the
appellant and respondent. The High Court held that there was
an agreement. In appeal by special leave:
HELD: Both the right to the sums payable to the
respondent and the procedure of arbitration were saved under
the Act.
The proviso to s. 5 of the Act, in terms as well as by
necessary implication brings the subject-matter of the sums
payable under the agreements both under the substantive and
procedural aspects within the scope of the exception. The
substantive right to the payment of rent and the procedural
one to have any dispute arising in respect of that right
referred to arbitration embodied in the agreements are
interconnected and are not severable. To preserve the
substantive right and to withhold the procedural right to
enforce it is to save the right and deny the remedy. [357 C-
D, F-G]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 245 of 1964.
Appeal by special leave from the judgment and order
dated February 13, 1963, of the Calcutta High Court in Award
Case No. 8 of 1963.
A.V. Viswanatha Sastri and D.N. Gupta, for the appellant.
S.T. Desai and P.K. Mukherjee, for the respondent.
The Judgment of the Court was delivered by
Subba Rao, J. On or about October 2, 1879, the
Corporation of the town of Calcutta incorporated under
Bengal Act IV of 1876 entered into an agreement in writing
with Dillwyn Parrish, Alfresh Parrish and Robinson Souttar,
hereinafter called the grantees
355
whereunder the Corporation granted to the said grantees the
right to construct, maintain and use certain tramways in
Calcutta on payment of certain rents as provided in the said
agreement.. The agreement contained an arbitration clause
which provided for referring any disputes arising under the
said agreement to arbitration in the manner prescribed
thereunder. The said agreement further provided in cl. 28
that the words “the said Corporation” would include the
Corporation and its successors. Different agreements were
entered into between the successors of the Corporation of
Calcutta and the grantees from time to time, namely, on
November 22, 1879, September 2, 1893 and December 9, 1899,
and were confirmed by appropriate Acts. In all these
agreements the appellant’s predecessor-in-interest agreed to
pay the rents to the respondent’s predecessors-in-interest
in respect of the tramways constructed, maintained and used
by them. All the said agreements contained an arbitration
clause similar to that contained in the first agreement. The
Corporation of Calcutta is now the successor of the
properties of the Corporation of the town of Calcutta
constituted under the Bengal Act IV of 1876. It was
constituted by Bengal Act II of 1888. The appellant, i.e.,
the Calcutta Tramways Co. Ltd., is the successor or the
assignee of the said grantees. On August 30, 1951, the State
of West Bengal entered into an agreement with the appellant
whereby the Government agreed to purchase the undertaking of
the appellant as provided in the said agreement. The said
agreement was subject to an Act being passed by the
appropriate Legislature ratifying the agreement and giving
effect to it. The Calcutta Tramways Act, 1951 (W.B. Act XXV
of 1951) was passed and it came into effect on October 18,
1951. Under that Act the Government of West Bengal was
practically substituted for the Corporation of Calcutta
under the various agreements subject to a reservation that
any sums payable under the said agreements shall be payable
by the appellant to the Corporation.. Disputes arose as
regards the track rent payable by the appellant to the
Corporation and the dispute was referred to arbitration in
accordance with the terms of the arbitration clause. Though
the parties appointed arbitrators in terms of the
arbitration clause of the agreements, the appellant
nominated its arbitrator without prejudice to its rights and
filed on January 7, 1963, an application in the Original
Side of the Calcutta High Court, inter alia, for the
determination of the question whether there was a valid
arbitration agreement between the appellant and the
respondent and for other incidental reliefs. The application
was heared by A.N. Ray, J. who held that there was an
agreement between the appellant and the respondent and that
the appellant was a party to the arbitration clauses
contained in the relevant agreements, that the respondent
could make a reference to arbitration in terms of the said
agreements and that the reference to the arbitrators was
valid, legal and effective. The appellant, by special leave,
has filed the present appeal against the said order of the
High Court.
L/B(N)3SCI–10
356
Mr. A.V. Viswanatha Shastri, learned counsel for the
appellant, contended that all the rights of the Corporation
of Calcutta under the various agreements stood transferred
under the Tramways Act, 1951, and vested in the Government
of West Bengal except only in regard to the sums payable to
the Corporation and that, therefore, the Corporation could
not rely on the arbitration clauses of the agreements and
refer the disputes arising in respect of the sums payable in
terms of the said agreements to arbitration.
The point raised is in a small compass and turns upon
the relevant provisions of the West Bengal Act XXV of 1951,
hereinafter called the Act. Under the Act the agreement
entered into on August 30, 1951, between the Governor of
West Bengal on the one part and the Calcutta Tramways Co.
Ltd. on the other part was confirmed. Section 3 of the Act
says, “The transfer agreement is hereby confirmed and made
binding on the parties thereto and the several provisions
thereof shall have effect as if the same had been enacted in
this Act.” “Section 4 enacts that notwithstanding anything
to the contrary in any other law, all the powers and duties
of the Corporation of Calcutta. the Commissioners of the
Howrah Municipality, the Commissioners of the South Suburban
Municipality and the Commissioners for the New Howrah Bridge
with respect to the construction, maintenance, use, leasing
of or otherwise dealing with tramways are transferred to and
vested in the Government”. Section 5, which is the crucial
section, reads:
(1) The several agreements particulars whereof
are set out in the Second Schedule to this Act
‘shall have effect as if the Government were
parties thereto in lieu of the respective
bodies and persons set out in column 2 of the
said Schedule and any reference in any such
agreement to any of such bodies or persons
shall unless the subject-matter or the context
otherwise requires be deemed to be a reference
to the Government:
Provided that any sums payable under any such
agreement to any of such bodies or persons
shall continue to be payable as if this Act
had not been passed.
The Second Schedule contains a list of the titles of the
various agreements mentioned by us earlier. Under s. 5 of
the Act the Government is statutorily substituted for the
respondent or its predecessors-in-interest in the various
agreements stated supra. The fiction is a well defined one.
The Government replaces the Corporation and its
predecessors-in-interest as a party to the agreements unless
the subject-matter or the context otherwise requires. The
natural presumption is that but for the proviso the enacting
part of the section would have included the subject-matter
of the proviso also. The proviso to s. 5 saves from the
operation of the substantive section the sums payable under
any such agreements to any such bodies mentioned therein: it
excludes the operation of the
357
fiction in respect of such sums payable. In respect of the
said sums payable the agreements entered into with the said
bodies will remain intact as if the Act had not been passed;
that is to say, the respondent would still continue to be a
party to the said agreements for the said purpose. The
relevant agreements provided for the recovery of the rents
and also for the procedure for the recovery of the sums so
payable in accordance with the terms of the arbitration
clauses of the agreements. Had not the Act been passed and
had the Government not been substituted in the place of the
Corporation, it cannot be denied that the Corporation, if a
dispute arose in regard to the rent, could have referred the
dispute to arbitration. The substantive right to the
payment of rent and the procedural one to have any dispute
arising in respect of that right referred to arbitration
embodied in the agreements are interconnected and are not
severable. To preserve the substantive right and to
withhold the procedural right to enforce it is to save the
right and to deny the remedy. To accept the contention of
the appellant is to make out a new agreement between the
parties in respect of the sums payable. The acceptance of
this suggestion compels the Corporation to give up its
agreed remedy. The alternative suggestion, namely, that in
respect of the amounts payable to the Corporation the
arbitration clauses of the agreements could be enforced by
the Government against the appellant introduces an
incongruity. While the dispute would be between the
appellant and the Corporation, the arbitration would be
between the appellant and a third party. The argument that
the Government would be acting as a trustee of the
Corporation in respect of the sums payable to the
Corporation is not supported by any of the provisions of the
Act. A fair construction of the proviso to s. 5 of the Act
removes all the anomalies. Further, in the substantive part
of s. 5 of the Act the fiction takes effect unless the
subject-matter or the context otherwise requires. The
proviso in terms as well as by necessary implication brings
the subject-matter of the sums payable under the agreements
both under the substantive and procedural aspects within the
scope of the said exception. The fiction in s. 5 of the Act
shall yield. to that extent, to the terms of the contract.
On such a construction we hold, as we have indicated
earlier, that both the right to the said sums payable and
the procedure of arbitration are saved thereunder.
In the result, we agree with the view expressed by the High
Court and dismiss the appeal with costs.
Appeal dismissed.
358