Case: Anderson Wright Ltd Vs. Moran And Company

parent contract.17. We are in entire agreement with the view enunciated above. As we have said already, it is incumbent upon the Court when invited to stay a suit under section 34 of the Arbitration Act to decide first of all whether there is a binding agreement for arbitration between the parties to the suit. So far as the present case is concerned if it is held that the arbitration agreement and the contract containing it were between the parties to the suit, the dispute in the present suit would be one relating to the rights and liabilities of the parties on the basis of the contract itself and would come within the purview of the arbitration clause worded as it is in the widest of terms, in accordance with the principle enunciated by this Court in A. M. Mair and Company v. Gordhandass (1950 S.C.R. 792). If on the other hand in is held that the plaintiff was not a party to the agreement, the application for stay must necessarily be dismissed.18. The appellate Judges of the High Court in our opinion held rightly that the decision in A. M. Mair and Company v. Gordhandass (1950 S.C.R. 792) was not in any sense conclusive in the present case on the question of the dispute in the suit being included in the arbitration agreement. The report shows that the dispute in that case was whether the appellants had made the contract in their own right as principals or on behalf of the Bengal Jute Mill Company as agents of the latter. The decision of this question was held to turn upon a true construction of the contract and consequently it was a dispute under or arising out of or concerning the contract.19. The judgment proceeds on the footing that there was in fact a contract between the parties and the only dispute was in which character they were parties to it, the respondents contending that the appellants were not bound as principals while the latter said that they were. Mr. Justice Fazl Ali in delivering the judgment pointed out that the error into which the learned Judges of the appellate bench of the High Court appeared to have fallen was their regarding the dispute raised by the respondent in respect of the position of the appellants under the contract as having the same consequence as a dispute as to the contract never having been entered into.20. In this case it is certainly not admitted that the respondent was a party to the contract. In fact that is the subject-matter of controversy in the suit itself. But, as has been said already, the question having been raised in this application under section 34 of the Arbitration Act, the Court has undoubted jurisdiction to decide it for the purpose of finding as to whether or not there is a binding arbitration agreement between the parties to the suit. It has been said by Chakravartti C.J. and in our opinion rightly, that if the person whose concern with the agreement is in question is a signatory to the contract and formally a contracting party, that will be sufficient to enable the Court to hold for purposes of section 34 that he is a party to the agreement.21. It was the contention of the respondent in the Court below that this test was not fulfilled in the present case. The point has been canvassed before us also by Mr. Sen and it has been argued on the authority of several decided cases that in cases of this description the Bought Note is a mere intimation to the buyer, that the orders of the latter have been carried out and purchases have been made from other persons and not from them. The writer does not thereby become a party to the contract of purchase. and sale even as an agent. He remains a mere broker or intermediary and the provision of section 230(2) of the Contract Act cannot be invoked against him.22. Mr. Khaitan on the other hand argues that the English law being quite different from the Indian law regarding the liability of an agent contracting on behalf of an undisclosed principal, the English authorities are no guide to a solution of the problem. It is said that the case of Patiram Banerjee v. Kanknarrah Co., Ltd. (1915 I.L.R. 42 Cal. 1050), upon which the respondent relies, was wrongly decided being based upon English authorities which have no application to India.23. The respondent here, it is pointed out, signed an elaborate document setting out in full every particular of the contract entered into and it is impossible to say that he was not an agent executing a contract on behalf of another whose identity he did not disclose but was a mere intermediary conveying an information to the buyer. In our opinion, the point is not free from doubt and requires careful consideration and as it was not decided by the learned Judges of the High Court and we have not the advantage of having their views upon it, the proper course for us to follow would be to send the case back for a hearing of and decision on this point.24. We, therefore, allow the appeal and set aside the judgments of both the Courts below. The matter will go back to the appellate bench of the Calcutta High Court which will decide as an issue in the proceeding under section 34 of the Arbitration Act the question whether the respondent was or was not a party to the arbitration agreement. If the Court is of opinion that the respondent was in fact a party, the suit shall be stayed and the appellant would be allowed to proceed by way of arbitration in accordance with the arbitration clause. If on the other hand the finding is adverse to the appellant, the application will be dismissed. The appellant will have its costs of this appeal. Further costs between the parties will abide the result.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]17. We are in entire agreement with the view enunciated above. As we have said already, it is incumbent upon the Court when invited to stay a suit under section 34 of the Arbitration Act to decide first of all whether there is a binding agreement for arbitration between the parties to the suit. So far as the present case is concerned if it is held that the arbitration agreement and the contract containing it were between the parties to the suit, the dispute in the present suit would be one relating to the rights and liabilities of the parties on the basis of the contract itself and would come within the purview of the arbitration clause worded as it is in the widest of terms, in accordance with the principle enunciated by this Court in A. M. Mair and Company v. Gordhandass (1950 S.C.R. 792). If on the other hand in is held that the plaintiff was not a party to the agreement, the application for stay must necessarily be dismissed.18. The appellate Judges of the High Court in our opinion held rightly that the decision in A. M. Mair and Company v. Gordhandass (1950 S.C.R. 792) was not in any sense conclusive in the present case on the question of the dispute in the suit being included in the arbitration agreement. The report shows that the dispute in that case was whether the appellants had made the contract in their own right as principals or on behalf of the Bengal Jute Mill Company as agents of the latter. The decision of this question was held to turn upon a true construction of the contract and consequently it was a dispute under or arising out of or concerning the contract.19. The judgment proceeds on the footing that there was in fact a contract between the parties and the only dispute was in which character they were parties to it, the respondents contending that the appellants were not bound as principals while the latter said that they were. Mr. Justice Fazl Ali in delivering the judgment pointed out that the error into which the learned Judges of the appellate bench of the High Court appeared to have fallen was their regarding the dispute raised by the respondent in respect of the position of the appellants under the contract as having the same consequence as a dispute as to the contract never having been entered into.20. In this case it is certainly not admitted that the respondent was a party to the contract. In fact that is theof controversy in the suit itself. But, as has been said already, the question having been raised in this application under section 34 of the Arbitration Act, the Court has undoubted jurisdiction to decide it for the purpose of finding as to whether or not there is a binding arbitration agreement between the parties to the suit. It has been said by Chakravartti C.J. and in our opinion rightly, that if the person whose concern with the agreement is in question is a signatory to the contract and formally a contracting party, that will be sufficient to enable the Court to hold for purposes of section 34 that he is a party to the agreement.21. It was the contention of the respondent in the Court below that this test was not fulfilled in the present case. The point has been canvassed before us also by Mr. Sen and it has been argued on the authority of several decided cases that in cases of this description the Bought Note is a mere intimation to the buyer, that the orders of the latter have been carried out and purchases have been made from other persons and not from them. The writer does not thereby become a party to the contract of purchase. and sale even as an agent. He remains a mere broker or intermediary and the provision of section 230(2) of the Contract Act cannot be invoked against him.23. The respondent here, it is pointed out, signed an elaborate document setting out in full every particular of the contract entered into and it is impossible to say that he was not an agent executing a contract on behalf of another whose identity he did not disclose but was a mere intermediary conveying an information to the buyer. In our opinion, the point is not free from doubt and requires careful consideration and as it was not decided by the learned Judges of the High Court and we have not the advantage of having their views upon it, the proper course for us to follow would be to send the case back for a hearing of and decision on this point.24. We, therefore, allow the appeal and set aside the judgments of both the Courts below. The matter will go back to the appellate bench of the Calcutta High Court which will decide as an issue in the proceeding under section 34 of the Arbitration Act the question whether the respondent was or was not a party to the arbitration agreement. If the Court is of opinion that the respondent was in fact a party, the suit shall be stayed and the appellant would be allowed to proceed by way of arbitration in accordance with the arbitration clause. If on the other hand the finding is adverse to the appellant, the application will be dismissed. The appellant will have its costs of this appeal. Further costs between the parties will abide the result.