General Electric Trading Co. vs Siemens (India) Ltd. on 14 December, 1928

Calcutta High Court
General Electric Trading Co. vs Siemens (India) Ltd. on 14 December, 1928
Equivalent citations: AIR 1929 Cal 177
Author: C Ghose


C.C. Ghose, J.

1. This appeal arises out of an application made by the appellant firm under Section 19, Arbitration Act 1899, for an order for stay of the proceedings in suit No. 2721 of 1927 instituted by the respondent company against the appellant firm on 22nd December 1927 in this Court. The application came on for hearing before my learned brother Pearson, J. on or about 16th March 1928, when by his judgment and order dated 16th March 1928, he dismissed the same.

2. The facts involved in this appeal, shortly stated, are as follows: It appears that on 22nd December 1923, an agreement was entered into between a company known as Gorie, Limited and the appellant firm whereby the latter were appointed distributors of the goods of the Siemens Schuckart Manufacturing Works for Sind and Baluchistan, in January 1925 the respondent company succeeded to the interest of Gorio Limited in its Electrical Department including the been fit of the agreement between Gorio Limited and the appellant firm. Thereafter here were various transactions between the respondent company and the appellant firm, the agreement in question being varied from time to time. In January 1926, the appellant firm instituted a suit against the respondent company in the Court of the Judicial Commissioner of Sind praying for a decree on accounts being taken between the parties. That suit was not proceeded with as a result of a certain settlement being arrived at between the parties, the terms of which were embodie.d in an agreement bearing date 29th June 1926. Clause 3(f) of that agreement ran as follows:

That accounts so far not settled will be settled as soon as possible and all such matters on which Siemens (India) Limited disagree with the General Electric Trading Company will be referred to Mr. Haug and Dharamdas for final decisiou and if they also disagree they will both appoint a third person to decide that matter finally.

3. On 1st October 1927, the respondent company gave a letter of authority to Messrs. Haug and Juerges authorizing them to refer matters in difference between the respondent company and the appellant firm to arbitration in terms of the clause above recited. It is alleged that thereafter there were certain meetings between the representatives of the respondent company and the appellant firm, but no final settlement was arrived at, nor was there an award made by the arbitrators named in the said clause. The appellant firm contended and contends that the respondent company is not entitled to institute the said suit inasmuch as the agreement for reference to arbitration still subsists and as the matters covered by this suit were within the scope of the said submission.

4. In answer to the application under Section 19, Arbitration Act, the respondent company filed an affidavit sworn to by one Noordea, a Director of the said company which contained among other things the following:

Accordingly for the purpose of the said arbitration on the defendant firm’s refusal to accept any other parson in his place, the plaintiff company at considerable expense and inconvenience brought out the said George Hauge from Norway to Karachi and I was informed by the said George Haug that several sittings lasting many days were in fact held by the said George Haug and Dharamdas in their capacity as arbitrators at Karachi. I was further informed by the said George Haug and say that during such sittings certain items out of those in dispute were definitely settled and agreed by the said arbitration. At the time the said Georga Haug came out to India to act as arbitrator as aforesaid he had ceased to be in the employ of the plaintiff company and he was brought out at the expense of the plaintiff company as stated above.

In order to assist that arbitrators in the matter the plaintiff company at considerable expense also sent their Chief Accountant Paul Juerges from their Berlin office who was in India at the time to Karachi to explain to the arbitrators any matters that they might refer to him. “I was also informed by the said George Haug that the said Dharamdas Lilaram having verbally agreed in his capacity as arbitrator to the said settlements and decisions and to the figures of account therein contained and having taken away certain documents on the express promise that he would return the said documents duly signed by him, he refused to put his signature to any one of the said settlements, decisions or agreed figures.

Owing to such misconduct on the part of the said Dharamdas Lilaram as such arbitrator as aforesaid and also owing to the obstructive attitude of the defendant firm it became impossible for the said arbitration to continue. I was informed by the said George Haug that the said Dharamdas Lilaram refused to meet him to sit as arbitrator and continue the arbitration. I was also informed by the said George Haug and Paul Juerges that at the meetings which took place of themselves and the said Dharamdas in or about September 1927, there was discussion about the pro-notes, but the said Dharmdas was of opinion that payment under the agreement was only to be made after settlement of all claims in detail and he persistently refused to go into details at the time although pressed for it.

In the circumstances aforesaid the said George Haug notwithstanding his best endeavours in that behalf was unable to continue to act alone or carry on the said arbitration and the same came to an end. The said George Haug consequently left for Europe about the end, of November 1927 and the said Paul Juerges is now in Burmah and will come back about the end of this mouth on his way to Europe where his presence is urgently required in connexion with the plaintiff company’s business.

5. The respondent company also filed an affidavit by Paul Juerges supporting the last-mentioned affidavit of Noordaa. There is thereafter an affidavit in reply by Dharamdas. At the hearing before Pearson, J. various points were gone into. He held inter alia that the reliefs claimed in the suit were substantially within the scope of the agreement to refer to arbitration, but that having regard to the fact that Mr. Haug had refused to act as an arbitrator and that the arbitrators appointed in this case being two in number who had been nominated by mutual agreement, Section 8(1)(b), Arbitration Act, did not apply and that there was no machinery, in the events that had happened, to give effect to the submission. Pearson, J. therefore held that the suit ought not to be stayed because the arbitration would be infructuous and he accordingly dismissed the application

6. On appeal it has been contended before us by Sir Benode Mitter that the construction put upon Section 8(1)(b), Arbitration Act, by Pearson, J. is wrong and that there is nothing in the Arbitration Act which prevents the Courts from stepping in and appointing an arbitrator in place of Mr. Haug, and secondly, that the considerations which may arise on a construction of Section 8(1)(b), Arbitration Act, should not have been taken into account in dealing with an application under Section 19, Arbitration Act.

7. In dealing with Sir Benode Mitter’s contentions it may be useful to set out here under the exact language of Pearson, J. He observed as follows:

It is to be observed that the reference here is not to two arbitrators one to be appointed by each party to which the provisions of Section 9 of the Act would apply for supplying a vacancy. It is here a case of a mutual agreement to refer to two arbitrators’ nomination, that is, specified and named in the clause of agreement itself. The only provision which is cited as applicable to such a case is Section 8(b) of the Act. Taking that
sub-section by itself, it may be that the language is wide enough to cover the present case, but clearly it must be read in conjunction with the rest of the section and the scheme of the Act. In Gopalji v. Morarji [1919] 43 Bom. 809, it is said at p. 830 that Section 8(1)(b) only applies in terms to the case of a single vacancy to be supplied by the parties so far, that would be the case here in filling Mr. Haug’s vacancy. But the judgment goes the length of saying that Clause (b) like Clause (a) relates to the case where the submission provides for the reference to be to a single arbitrator. So, Hayward, J, at p. 883 says that it is not open to the Court to interfere where the reference is to two arbitrators to be appointed not one by each party but the two jointly by the two parties. Again in Russel on Arbitration (11th Edition) in dealing with the meaning of ” an appointed arbitrator ” under the corresponding Section 5, English Act, it is said at p. 126 that the expression must mean a single arbitrator and not one of the two appointed arbitrators, because in the concluding words of the section it is provided that the arbitrator appointed shall have the like powers to act in the reference and make an award as if ha had been appointed by consent of all parties. I am not prepared to hold that the reasoning or the construction of the section given in the above cited case is erroneous particularly because to hold otherwise would seem to make Section 8(b) in certain cases an alternative procedure to that provided by Section 9, which I do not think was intended.

8. Now, in this case two arbitrators have been mutually agreed upon and they have been appointed as such by the parties. Therefore Section 9, Arbitration Act, has no application, because the language used therein has reference to a case where the submission is to two arbitrators one to be appointed by each party. Let us next see whether there is anything in the language used in Section 8, Arbitration Act, which prevents the application of Section 8 to this case, having regard to the events that have happened. Section 8(1)(a) obviously has no application because it deals with the case of reference to a single arbitrator. Turning to 8(1)(b), there is nothing, in my opinion, in the language used therein which would render it inapplicable to this case. To start with, the arbitrator who has refused to act, etc. is an appointed arbitrator. In the second place, the submission does not show that the place of the arbitrator who has refused to act etc., should not be filled up. In the third place, it is clear that the parties have not cared to fill up the vacant place. Therefore I do not see why Section 8(1)(b) should not apply. This is the conclusion I come to on the language used in the section.

9. It is said, however, that the matter is concluded by authority and that it is no longer possible to hold that the expression ” an appointed arbitrator ” can mean one of two appointed arbitrators. The case that is referred to in support of this proposition is that of Gopalji, Kuverji v. Morarji Jeram [1919] 43 Bom. 809. It was an appeal from the decision of Marten, J. as he then was ; therein he held that the expression an ” appointed arbitrator ” in Section 8(1)(b), Arbitration Act, was not confined to the case of an appointed sole arbitrator, but that it could apply to the case of two or more arbitrators appointed by the parties jointly. The Court of appeal (Scott, C.J. and Hayward, J.) were, however, of opinion that Section 8(1)(b) could not apply to the case of two or more appointed arbitrators. Scott, C.J., observed as follows:

Section 8(1)(b) does not apply to the case of independent appointments of two arbitrators. In such case when a vacancy occurs it would ordinarily be filled by the original appointer as contemplated in Section 9. Section 8(1)(b) only applies in terms to a single vacancy to be supplied by the parties Section 8 nowhere seems to contemplate the case of two original arbitrators appointed jintly by the parties plus a third of the same class appointed by the two already jointly appointed or by the parties. In short, Section 8 only applies to certain cages of failure to appoint jointly. Where choosers should but do not concur the Court is onabled to assist them by the selection and appointment of an individual falling in one of the following categories–an (i.e., one) arbitrator ; an umpire ; a third arbitrator in the special sense in which the term is used. It follows that in my opinion Clause (b) must be read with Clause (a) and Clause (d) with Clause (c), Section 8. The Court is not at liberty to take upon itself to select an individual whore the selection is by the submission reserved for one of two disputing parties. The Act does not attempt to provide for every case. It only gives assistance in the commoner cases where joint appointment cannot be arrived at. It is said that the present case is not of joint appointment of three arbitrators. That is probably correct but it is not one of the common cases of joint appointment contemplated by the section. It is unusual, except perhaps in references in the course of a suit, to have a triangular submission and the joint appointment of three. In Russell on Awards, Part 2, Ch. 3, Section 3 in the Edns. of 1870, 1882 and 1906 it is said:

In cases of death, refusal to act, or incapacity of a single arbitrator… a Judge may appoint a new one if the parties do not ; and… whore one of two arbitrators fails for the like causes, unless the party appointing him appoints a fresh arbitrator the remaining arbitrator may be appointed to act alone. The authority given for this statement is until 1889 the Common Law Procedure Act, 1854, Sections 12 and 13, and after that date the Arbitration Act, Sections 5 and 6 (Section 8 and 9, Indian Act) which reproduced Sections 12 and 13 of the Act of 1854. ” This, as the pronouncement of the standard text book on Arbitration unaltered through a period of thirty-five years, is a good indication of the understanding of the profession as the scope of these sections.

10. With great respect I am unable to agree with Scott, C.J., in his construction of Section 8(1)(b), Arbitration Act. In my opinion the reasoning of Marten, J., is more correct and the construction put by him on the section should’be followed. The basis of Scott, C.J.’s judgment is the passage in Russell on Awards : see in this connexion, 11th Edn. p. 126, and the English cases which are referred to on p. 832 of I.L.R 43 Bombay. If, however, the matter is scrutinized with some degree of care, it would seem that the passage in Bussell on Awards was originally based on the wards used in the English Common Law Procedure Act of 1854 (17 & 18 Vic. G. 125, Section 12) and has been continued in the later editions of Russel without the change brought about by the English Arbitration Act of 1889 being noticed. Section 12, English Common Law Procedure Act of 1854, is identical in all respects with Section 15, Irish Common Law Procedure Act of 1856 and as appears from the decision of Walker C., Palles, C.B., and Fitz Gibbon and Barry, Lord-Justices in the case of Yeates
v. Caruth [1895] 2 Ir Rule 146, there were good grounds for holding, on the words used in the English and Irish Statutes referred to above, that where the parties referred all matters in dispute to the arbitration of two arbitrators and one of them declined to act, the Court had no power to appoint an arbitrator in place of the arbitrator who had declined. Walker, C., observed as follows:

It is clear the case does not come within Section 16, Common Law Procedure Act of 1856, because though the consent was to refer the matters in dispute to two arbitrators, the arbitrators here are not such as are mentioned in that section, viz. ” one appointed by each party.” Does the case fall within Section 15 of the same Act? “If in any case of arbitration the document authorizing the reference provide that the reference shall be to a single arbitrator, and all parties do not after differences have arisen concur in the appointment of an arbitrator. ” So far the clause deals only with a case where no arbitrator has been appointed but it next proceeds to deal with cases where there has been an arbitrator appointed. ” Or if any appointed arbitrator refuse to act or become incapable of acting, or die, and the terms of such document do not show that it was intended that such vacancy should not be supplied, and the parties do not concur in appointing a new one.” This is the branch of the section which is said by the appellant to include the present case. However, 1 cannot so read it. The words, “such document” give us the key to the true construction of the sentence; these words must refer to the ” document authorizing the reference” in the first branch of the clause and that document is a document authorizing a reference to a single arbitrator. So far, therefore, the section only deals with cases where there is a single arbitrator to be appointed, or a single arbitrator actually appointed.

11. Let us now see what the language of Section 5, English Arbitration Act is, Section 5 runs as follows:

In any of the following cases, (a) Where a submission provides that the reference shall be to a single arbitrator, and all the parties do not after differences have arisen concur in the appointment of an arbitrator, (b) If an appointed arbitrator refuses to act, or is incapable of acting or dies, and the submission does not show that it was intended that the vacancy should not be supplied and the parties do not supply the vacancy: (c) Where the parties or two arbitrators are at liberty to appoint an umpire or third arbitrator and do not appoint him. (d) Whore an appointed umpire or third arbitrator refuses to act, or is incapable of acting, or dies and the submission does not show that it was intended that the vacancy should not be supplied and that parties or arbitrators do not supply the vacancy,

any party may serve the other parties or to arbitrators, as the case may be, with a written notice to appoint an arbitrator, umpire or third arbitrator. If the appointment is not made within seven clear days after the service of the notice, the Court or Judge may, on application by the party who gave the notice, appoint an arbitrator, umpire or third arbitrator, who shall have the like powers to act in the reference and make an award as if ho had been appointed by consent of all parties.

12. It is not necessary to pursue the matter further but it is sufficient to observe that the language used in Sections 5 and 6, English Arbitration Act is different from the language used in Sections 12 and 13, English Common Law Procedure Act of 1854. As regards the English cases referred to above, the case of Smith & Service v. Nelson & Sons [1890] 25 Q.B. D. 545, was not a ease of named arbitrators at all. In my opinion that case has no application to the facts of the present case. Nor does the case of Manchester Ship Canal Co. v. S. Pearson & Son Ltd. [1900] 2 Q.B. 606, assist the respondent company at all. The only matter for consideration in that case was whether there was refusal or incapacity so far as the arbitrator was concerned. The case In re Baballdas A.I.R. 1921 Bom. 185, is not really in point. There the submission provided for a reference to three arbitrators. Pratt, J., referred to the case Gopalji v. Morarji [1919] 43 Bom. 809 which was binding on him, and observed that though it had been decided in the Bombay High Court that Section 8 or 9 did not apply to the case of a reference to three arbitrators, yet if the Court could not give direct assistance by nominating an arbitrator, it could do so indirectly on an application under Section 19 of the Act by staying a suit filed in defiance of the submission.

13. On all these considerations I am of opinion that the construction put by Pearson, J., on Section (8)(1)(b) of the Act cannot be supported and ought not to be followed. I am not prepared to say that in dealing with an application under Section 19, Arbitration Act, the Court is not entitled to take into consideration the effect which the other sections of the Act may have on the facts of a particular case brought before the Court. I desire to reserve this point for fuller and further consideration. The point, however, is immaterial in view of the final conclusion on the present application under Section 19, Arbitration Act, to which I have come and which is referred to hereinafter. In my opinion there is no substance whatsoever in the point taken by Mr. Page on behalf of the respondent company, namely, that the respondent company have accepted the repudiation of the contract in question (which includes the submission to arbitration) and, therefore in the events that have happened the arbitration would be infructuous and that the Court should not interfere. This point is referred to in paras. 12 and 13 of the plaint filed by the respondent company. In my opinion, the facts stated in those paragraphs do not conclude that matter at all and can have no bearing on matters which had taken place before 7th December 1927.

14. The appellants, however, are in very great difficulty on this application. It is true that Pearson, J., mainly proceeded on the view taken by him of Section 8(1)(b) of the Act, but on appeal before us the entire matter is open and we have been taken by learned Counsel on both sides through the merits of the application itself. No doubt, the matter is one entirely in the discretion of the Court. The discretion again has to be judicially exercised in accordance with the ordinary rules of law and I am not unmindful of what has been laid down by eminent Judges from time to time that where the parties have agreed to refer a dispute to arbitration and one of them notwithstanding that agreement commences an action to have the dispute determined by the Court, the prima facie leaning of the Court is to stay the action and leave the plaintiff to the tribunal to which he has agreed. It is unnecessary for me to reiterate the facts in this case once more. In my view the record discloses a state of things in which in the exercise of my discretion I do not feel called upon to stay the suit commenced by the respondent company. I have carefully considered the merits of the present application but in view of the order I propose to make, I refrain from going into the matter in detail and expressing an opinion on the merits because such a course may be embarrassing to the parties when the suit comes on for trial. The result, therefore, is that in my judgment the appeal fails and must be dismissed with costs.

Buckland, J.

15. I agree.

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