I T C LTD Vs. GEORGE JOSEPH FERNANDEZ

JUDGEMENT

(1.) THIS is an appeal from a judgment and order passed by Mr. Justice Salil Kumar Roychoudhury on 11th of February, 1981 granting the stay asked for and directing the parties to take immediate steps for initiation of the reference under the arbitration agreement contained in the contract mentioned in the plaint. The judgment was passed on an application under Section 34 of the Arbitration Act, 1'940 for stay of Suit No. 736 of 1978 instituted by I.T.C. Ltd. v. G. J. Fernandez. Before I refer to the relevant averments in the plaint it will be important to understand the background under which this application came to be made. The suit was filed on 29th of September, 1978 by the Charterer, for a declaration that the contract and modifications mentioned in the plaint were void and illegal and a decree for Rs. 39,64,341/- or an enquiry as to what amount was due to the plaintiff. In that suit instituted by I. T. C. Limited there were two defendants namely, G. J. Fernandez who was defendant No. 1 and secondly, Canara Bank, defendant No. 2. George Joseph Fernandez being the defendant No. 1 made an application on 24th of April, 1979. George Joseph Fernandez was the absolute owner of two fishing Trawlers Avemaria I and Ave Maria II registered under Nos. 1567 and 1568 dated the 30th of January, 1974 with the Registrar of Indian Ships, Cochin. The said trawlers were imported by the said petitioner under an import licence No. P/CG/ 2062299 dated 3rd of March, 1971. As good deal of arguments were advanced on the conditions of licence it would be relevant to refer to some of the relevant provisions of the licence. The licence was headed "Industry Processed Food (Fishing)". Under Column No. 2 the description and quality of the goods were indicated as two Nos. of fishing trawlers as per list. The approximate value of CIF was stated to be Rs. 23,55,000/-only. The period of shipment was indicated 12 months the date of issue and revalidated up to 6th of January, 1973. The licence was granted, under Govt of India, Ministry of Commerce and Industry Order No. 17/55 dated 7th of December, 1955 as subsequently amended, issued under the Import and Export Control Act, 1947 and was without prejudice to the application of any other prohibition or regulation affecting the importation of the goods which might be enforced at the time of their arrival. In the instruction columns it was stated that the provision which was inapplicable should be struck off. It was further stated that the licence was issued from file No. CGIII/25/143/71. In column I which was not struck off, indicated as follows: --

(2.) BY a letter dated 22nd November 1977 the owner again asked the charterer to pay the rental of the two vessels from 1st October 1977 and also for depositing Rs. 2,00,000 and it was stated that Mr. Sundaram who was engaged to carry out the refrigeration work at the instance of the charterer had neither the capacity nor the organisational set up even to commence the work in right earnest. In the letter dated 28th of November, 1977 from the charterer to the owner it was informed that the trawlers had been insured for one year from 30th Sept., 1977 to 28th Sept., 1978. On 2nd of Feb., 1978 there was an agreement between the owner and the charterer modifying the Charterparty dated 21st March, 1977 in certain respects. The said agreement dated 2nd of February, 1978 after reciting the past events stated, inter alia, as follows :--

(3.) IN support of this appeal it was urged on behalf of the appellant that in order to decide whether stay under Section 34 of the Arbitration Act should be granted or not it was necessary for the Court to consider whether the case as pleaded or the issues as raised in the plaint were within the ambit of the arbitration clause to be adjudicated by the arbitrator and for this purpose the Court must confine itself to the pleadings in the suit and not embark upon the examination of the question whether the case pleaded was correct or genuine or not. It was, secondly, urged that where the issue arose as to whether the contract was void ab initio, and as such the same was not arbitrable, then whether that issue should be decided in a suit or in an application was a matter of procedure and the Court must exercise its discretion properly, having regard to the magnitude and the nature of the evidence required to adjudicate the question. It was submitted that in the instant case it should not have been decided on affidavits in the application because it was urged that the issue as to mistake should not be disposed of summarily, in the facts and circumstances of the case it was better to decide the same in the suit and the issues involved in the suit should not have been decided piecemeal. It was, thirdly, urged that in view of the nature of the pleadings the plea of illegality of the contract as raised in the instant case was not a pure question of law because it involved the adjudication of the facts whether the parties had agreed to obtain the permission. Therefore, in view of the nature of the pleadings and the letters between the parties it was submitted that the question as to mistake which went to the root of the contract or as to illegality involved in this case could not. and should not havo been decided in this manner. IN the premises, it was urged that in exercising his discretion in the manner he has done the learned Judge had proceeded erroneously. It was, further, submitted in support of this appeal that if the suit was stayed and the parties were directed to go before the arbitrator the claim of the plaintiff might be considered to be barred by law of limitation and if that was so then, this was a factor which should be taken into consideration in exercising the discretion of this Court even at the appellate stage in the matter of grant of stay under Section 34 of the Arbitration Act. It was, lastly, urged that the learned Judge overemphasised and was mistaken in taking a wrong view of the conduct of the plaintiff and basing his judgment on hypothesis that the plaintiff had pleaded the case in the manner it had done in order to avoid the jurisdiction of the arbitrator within the arbitration clause. It was, then, urged that the mistake which was pleaded in the facts and in the circumstances of the case was a mistake of such magnitude and was a mutual mistake which went at the root of the contract and made the contract void,