RUNGTA SONS PRIVATE LTD Vs. JUGOMETAL TRG REPUBLIKE

JUDGEMENT

(1.) THIS is an appeal from an order made by G.K. Mitter, J., allowing an application for stay of a suit under Section 34 of the Indian Arbitration Act. By a contract dated 20-11-1956, the appellant, Rungta Sons Private Ltd., a company incorporated under the Indian Companies Act and carrying on business in Calcutta, agreed to sell 10000 Long tons of iron ore to the respondent, Jugometal Trg. Republike of Beograd, Yugoslavia, carrying on business outside India. The contract provides for shipment during January/April, 1957, payment under Letter of Credit to be opened by the buyer in favour of the seller with a validity of 60 days, to be extended, if necessary with a guarantee by the seller of a loading rate of 500 tons, the demurrage and despatch based on this loading rate to be on the seller's account. The contract contains the following arbitration clause:

(2.) ONLY 3,500 tons of ore were shipped during the period January to April, 1957, leaving a balance of 6,500 tons unshipped. The buyer had difficulty in procuring shipping space for the balance goods. The seller repeatedly complained that it might not be allowed to ship any iron ore after June, 1957, having regard to the changing policy of the Government of India, There were exchange of cablegrams between the buyer and the seller in May, June and July, 1957. The buyer requested the seller to load the ore by the vessel Commerz and contended that notice of readiness of the vessel was given to the seller on July 11, 1957. The seller contended that no proper notice had been given and the ore could not be loaded before July 25. A dispute arose between the parties as to the liability to pay the demurrage of the vessel from July 12 to July 25. The buyer contended that notice of readiness was again tendered on July 26. The seller contended that there had been no extension of the Letter of Credit and the notice of readiness was ineffective and inoperative. There were negotiations to resolves the deadlock. It is common case that some arrangement was arrived at between the seller and the buyer through its representative Swetozar Babie on or about August 6, 1957. The terms of the arrangement are in dispute. The seller's version of the arrangement is set out in its letter dated August 9, 1957 addressed to Swetozar Babie, According to the seller the parties then agreed that (1) The vessel Commerz would be available for loading on the loading berth at the latest by 10-8-1957; (2) The seller would load 6500 tons of iron ore therein; (3) The buyer would bear the demurrage of the vessel up to 25-7-1957; (4) Any claim for further demurrage might be decided by arbitration if the parties so like, but the reduction in freight would be taken into account in reduction of any liability for such demurrage; (5) The buyer would extend the Letter of Credit as regards both amount and period; (6) The buyer would furnish guarantee for all amounts payable to the seller and the seller would furnish guarantee for the demurrage, if any, payable by the seller; (7) The buyer would arrange for giving to the seller a clean bill of lading, capable of being negotiated under the Letter of Credit and (8), The buyer would furnish; the seller a copy of the Charterparty and subsequent modification thereof. The buyer's version of me arrangement is set out in the letter dated 9-8-1957, sent by Messrs. Orr, Dignam and Co., to the seller and in the annexure to that letter. According to the buyer the parties had then agreed that (1) the seller would accept notice of readiness to load the vessel effective as and from 25-7-1957 and would immediately commence loading thereon of the balance tonnage of iron ore remaining due for shipment under the contract; (2) the seller would furnish to the buyer an irrevocable banker's guarantee to the satisfaction of the buyer to the extent of 4000 and would pay unconditionally against such guarantee all demurrage accrued subsequent to 25-7-1957; (3) the seller would be responsible for obtaining from the Reserve Bank of India the necessary permission under Foreign Exchange Control Regulations to implement its obligations under the guarantee; (4) the buyer would pay the demurrage for the period 11-7-1957 up to 24-7-1957 both days inclusive subject to reimbursement by the seller, in the event of the matter being referred to arbitration in terms of the provisions in that behalf contained in the contract and the legal liability of the buyer to pay such demurrage not being established in any such arbitration proceedings. The seller instituted the suit on 12-8-1957 impleading as defendants both the buyer and its local representative Swetozar Babie. Paragraphs 1 and 2 of the plaint plead the contract dated 20-11-1956. In paragraph 3 the seller mentions the supply of 3588 tons of iron ore and claims a sum of Rs. 9,666-5-2-being the 5 per cent balance of the price and a further sum of Rs. 9,066-11-2 being the proportionate despatch money. In paragraphs 4 and 5 the seller claims that the buyer committed breaches of the contract and failed to procure the shipping space for the balance 6500 tons of iron ore. In paragraph 6 the seller sets out its version of the arrangement arrived at on August 6, 1957. In paragraph 7 the seller alleges that without prejudice to its contentions, it agreed to accept the terms and conditions of the arrangement. In paragraph 6 and also in paragraph 8 the seller alleges that the contract dated 20-11-1956 in so far as it concerned the balance of 6500 tons of iron ore was substituted by the new arrangement arrived at on 6-8-1957. In paragraph 8 the seller alleges that it was then expressly agreed that the price and specifications of iron ore contained in the earlier contract would continue and form a part of the subsequent contract dated 6-8-1957, but that save as regards the said price and specifications, the earlier contract would stand abrogated and superseded. In paragraph 9 the seller pleads its readiness and willingness to carry out the alleged substituted agreement and also alleges that the buyer committed breaches of that agreement. In paragraph 10 of the plaint the seller alleges that the buyer repudiated that agreement and the seller accepted the repudiation. In paragraphs 11 and 12 the seller claims damages for wrongful breaches and repudiation of the substituted agreement. In paragraph 13 the seller states that it was advised to make Swetozar Babie the defendant No. 2 a party to the suit for greater safety. In the body of the plaint no claim is made against the defendant No. 2 nor is any cause of action pleaded against him. The seller claims a decree for Rs. 18,733/- as pleaded in paragraph 3 of the plaint and Rs. 97,500/- for damages as pleaded in paragraph 11 and for an enquiry into the damages pleaded in paragraph 12 of the plaint and for consequential reliefs. The application for stay of the suit was made by both defendants on 16-11-1957.

(3.) THE seller's version of the arrangement of 6-8-1957 has varied from time to time. In its letter of 8-8-1957, the seller nowhere alleged that the arrangement of 6-8-1957 was a substituted new agreement and that the contract dated 20-11-1956 was abrogated or superseded. Subsequently to paragraphs 6 and 8 of the plaint the seller alleged that the contract dated 20-11-1956 in so far as it concerned the balance of 6500 tons of iron ore was substituted by the new arrangement and that the parties expressly agreed that the parent contract would save as regards the price and specifications stand abrogated and superseded. Curiously enough the allegation of an express agreement of superseding and abrogating the parent contract is not repeated in the affidavit of Tribeni Prosad Rungta affirmed on 6-12-1957. In paragraph 9 of that affidavit the sets put the alleged terms of the new arrangement and after referring to the letter dated 8-8-1957 alleges that the new arrangement was in substitution of the earlier contract, which had been broken by the buyer and that the rights and liabilities of the parties were governed by the new substituted contract. In paragraph 10 of that affidavit he then alleges that under the facts and circumstances of the case the whole of the contract dated 20-11-1956 including the arbitration agreement was given a complete go-by for all intents and purposes and the same stood abrogated and superseded. I do not read this somewhat halting and cautious allegation as a plea of an express agreement of abrogation and supersession of the arbitration agreement. Paragraphs 9 and 10 of the affidavit seem to be a plea that there was an implied rescission of the arbitration agreement by reason of the subsequent arrangement and that in law the subsequent arrangement amounted to a substitution of the previous agreement dated 20-11-1956. On the materials on the record I am clearly of the opinion that the arrangement of 6-8-1957, as pleaded in the letter dated 8-8-1957, and the affidavit of Tribeni Prosad Rungta affirmed on 6-12-1957, did not amount to an implied rescission of the arbitration agreement contained in the parent contract. THE terms of the new arrangement as pleaded in that letter and affidavit are in no way inconsistent with the continuance of the arbitration agreement. On the contrary Clause 4 of the terms indicates that the arbitration agreement continues to exist. THEre being no new arbitration agreement the arbitration could only take place under the arbitration agreement contained in the parent contract. THE issue whether the arbitration agreement was rescinded by an express oral agreement on 6-8-1957 does not really arise on the affidavits filed in the proceedings for stay of the suit. Assuming for a moment that such an issue does arise we are satisfied on the materials before us that there was no such oral agreement, and we decide that issue against the appellant. THE assertion that there was no oral rescission of the arbitration agreement on 6-8-1957 is an afterthought. We do not consider it necessary that the matter should be tried on oral evidence. In an application under Section 34 of the Indian Arbitration Act the Court has the power to decide such an issue on affidavit. This power should be exercised sparingly and with caution. In the exercise of our discretion we are satisfied that the power should be exercised in this case.