UNION OF INDIA Vs. KISHORILAL GUPTA AND BROS

JUDGEMENT

(1.) This appeal by special leave raises the question of survival of an arbitration clause in a contract after the said contract is superseded by a fresh one. The respondent-firm, styled as "Kishorilal Gupta and Brothers", entered into the following three contracts with the Governor-General-in-Council through the Director General of Industries and Supplies, hereinafter called the Government:(i) contract dated April 2, 1943, for the supply of 43,000 "Ladles Cook"; (ii) contract dated September 15, 1944; for the supply of 15,500 "Bath Ovals"; and (iii) contract dated September 22, 1944, for the supply of 1,00,000 "Kettles Camp" Each of the said contracts contained an arbitration clause, the material part of which was as follows:

(2.) At the outset, a preliminary objection taken by Shri Aggarwal, the learned Counsel for the respondents, may be disposed of. The learned Counsel contends that the special leave granted by this Court should be revoked on the ground that an appeal lay against the order of the learned Judge to an appellate bench of the same High Court both under Cl. 15 of the Letters Patent and S. 39 of the Arbitration Act. It is not, and cannot be, contended that this Court has no jurisdiction to entertain an appeal against the order of a Court when an appeal lies from that order to another Court. The provisions of Art. 136 of the Constitution are not circumscribed by any such limitation. But what is argued, in our view legitimately, is that when an appeal lay to the appellate bench of the Calcutta High Court, this Court should not have given special leave and thereby short-circuited the legal procedure prescribed. There is much force in this argument. If the application for revoking the special leave had been taken at the earliest point of time and if this Court was satisfied that an appeal lay to an appellate bench of the Calcutta High Court, the leave obtained without mentioning that fact would have been revoked. But in the present case, the special leave was granted on March 29, 1954, and the present application for revoking the leave was made five years after the grant of special leave and the learned Counsel could not give any valid reason to explain this inordinate delay. In the circumstances, if we revoked the special leave, the appellant would be prejudiced for if this objection had been taken at the earliest point of time the appellant would have had the opportunity to prefer a Letters Patent appeal to the appellate bench of the Calcutta High Court. The appellant cannot be made to suffer for the default of the respondents. In the circumstances, we did not entertain that application for revoking the special leave and did not express our opinion on the merits of the question raised by the learned Counsel.

(3.) Now coming to the merits, the main contentions of the parties may be stated at the outset. The argument of the Additional Solicitor-General for the appellant may be summarised in the following propositions:(1) The jurisdiction of the arbitrator depends upon the scope of the arbitration agreement or submission; (2) its scope would depend upon the language of the arbitration clause; (3) if the arbitration agreement in question is examined, it indicates that the dispute whether the original contracts have come to an end or not is within its scope; (4) on the facts of the case, there had been no novation or substitution of the original contracts; and (5) if there had been a novation of the original contracts, the non-performance of the terms of the new contract revived the original contracts and therefore the parties to the original contracts could enforce their terms including the arbitration clause. The submission of Shri Aggarwal, Counsel for the respondents may be stated thus:(1) Upon the facts of the case, there had been a recession of the old contracts and substitution of a new, legally enforceable and unconditional contract, which came into immediate effect; (2) the new contract can be legally supported either under S. 62 or S. 63 of the Indian Contract Act or under the general law of contracts; (3) the non-performance of the terms of the new contract did not have the effect of reviving the rights and obligations under the old contracts as they did not remain alive for any purpose; and (6) even if the arbitration clause did not remain alive after the new contract, the arbitrator was bound to decide the case in terms of the new contract, and he having not done so, the error is apparent on the face of the record and therefore the award is liable to be set aside.