Case: M/s. R.N. Ganekar &amp; Company Vs. M/s. Hindustan Wires Limited

more tons of steel wire were delivered in pursuance of this original contract although the appellants were required to pay a higher price owing to the respondents refusal to make the deliveries at the price originally fixed. Even in January, 1970 when the respondents refused to make any further supply it was not because there was no contract between them but because, the appellants, though requested for a long time to formally confirm in writing the price variation clause referred to above, had not done so. The respondents letter dated January 28, 1970 puts the whole controversy beyond the pale of doubt. The relevant portions of that letter are as follows."Your order was subject to the terms and conditions as per our letter No. W/8/11 dated 16th May 1969, according to which the prices of wires were subject to price variation.... "As and when we have informed you regarding the increase in price on account of above said condition you have not accepted the increase and every time you raised objections and given clearance partially for some quantities. To keep business relationship with you we had all the times kept your requests even though you have given your confirmation for partial quantity although under no circumstances, we were obliged to accept the same and could treat your order as cancelled, in the absence of confirmation regarding increase in the price.... "Even the last confirmation which you gave vide letter No. DLW/53/69 dated 22-11-1969 was only for 2 wagons and naturally we have taken it as granted that you are not interested in the balance quantity against your order. However, even vide your letter No. DLW/653/69 dated 30-12-1969, you had confirmed the increase in price only in respect of 3 wagons. This clearly shows that at no stage you had been interested in confirming the increase in price as per price variation clause, in spite of the fact that the price variation clause was accepted by you. "We regret at this stage it is not feasible for us to supply the balance quantity of your order and till writing of this letter, you have not confirmed the increase in price which we have asked for from time to time as per price variation clause and as such we are treating the balance quantity of your order as cancelled. The word order in the above letter clearly refers to the original agreement for the supply of 400 metric tons of steel wire. The letter charges the appellants that they had accepted the price variation clause and still for some reason or the other they were not confirming in writing the acceptance of the increase in price as per the price variation clause. Therefore, the respondents thought that they were entitled to "treat the balance quantity of your order as cancelled that is to say that the respondents were relieved of the necessity of supplying the balance quantity of steel wire under the original contract. It is evident that the respondents accepted the main contract for the supply of 400 tons of steel wire as recorded in the letter of the appellants dated 7-5-1969, but put forward the plea that the original price of Rs. 2450/- fixed between the parties as the firm price was subject to the price variation clause mentioned in Annexure G dated May 16, 1969 and which, the respondents alleged in their petition, had been accepted by the appellants on or about May 22, 1969. See para 6 of the respondents petition in the High Court. In other words, it was common ground that there was a completed contract for the sale and delivery of 400 metric tons of steel wire, but whereas the appellants said that the price per ton was Rs. 2450/- the respondents countered that that price was subject to variation. The respondents had refused to deliver the remaining portion of goods under the contract only because the appellants, though they had orally agreed to accept the price variation clause, had not formally accepted that clause in writing. The respondents petition in the High Court shows at every step that there was a concluded contract and in fact they wanted a declaration from the court in the following terms:"that the court may be pleased to determine that a contract was concluded between your petitioner and the respondent on the terms and conditions mentioned in the correspondence consisting of the letter dated May 7, 1969 written by the respondent to your petitioner, telegram dated May 10, 1969 from your petitioner to the respondent, letter dated May 13, 1969 from the respondent to your petitioner and the two letters both dated May 16, 1969 and copy of works order dated May 16, 1969 written by your petitioner to the respondent and accepted by and between the petitioner and respondent and that an arbitration agreement exists between your petitioner and the respondent on the basis of such contract having been concluded between the parties in terms of cl. 14. of the said works order. This clearly goes to show that there was really no difference as to the subject matter of the contract between the parties except that while the respondents alleged that the appellants had agreed to the price variation clause the appellants alleged that they had not. Apart from this there was no dispute between the parties whatsoever with regard to the terms of the contract. Both parties agreed that in accordance with the works order there was an arbitration clause and this arbitration clause was binding on both. In these circumstances it is difficult to see how the respondents were entitled to approach the court under Section 33 of the Arbitration Act. There is no challenge to the existence or validity of the arbitration agreement, nor was the application made with a desire to have the effect of the arbitration agreement determined. The learned Judge, with respect, was in error in thinking that the respondents petition was competent under Section 33 of the Arbitration Act, 1940.

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

Explanation:
1[ds]It is clear from the provision that the court had jurisdiction under this Section (i) when it is desired to challenge the existence of an arbitration agreement;(ii) when it is desired to challenge the validity of that agreement and (iii) when it is desired to have the effect of the arbitration agreement determined. In all these cases it is the arbitration agreement only which is the subject matter for consideration before the court. Indeed if an arbitration agreement forms one of the clauses in a contract and that contract is for some reason invalid in law ort in law, it would automatically follow that the arbitration agreement also was invalid ort in the eye of the law. But when it is not the case that the arbitration agreement has becomet or invalid for that reason, the court under Section 33 is merely concerned with the three questions relating to the arbitration agreement onlyThe word order in the above letter clearly refers to the original agreement for the supply of 400 metric tons of steel wire. The letter charges the appellants that they had accepted the price variation clause and still for some reason or the other they were not confirming in writing the acceptance of the increase in price as per the price variation clause. Therefore, the respondents thought that they were entitled to "treat the balance quantity of your order as cancelled that is to say that the respondents were relieved of the necessity of supplying the balance quantity of steel wire under the original contract. It is evident that the respondents accepted the main contract for the supply of 400 tons of steel wire as recorded in the letter of the appellants dated, but put forward the plea that the original price of Rs. 2450/fixed between the parties as the firm price was subject to the price variation clause mentioned in Annexure G dated May 16, 1969 and which, the respondents alleged in their petition, had been accepted by the appellants on or about May 22, 1969. See para 6 of the respondents petition in the High Court. In other words, it was common ground that there was a completed contract for the sale and delivery of 400 metric tons of steel wire, but whereas the appellants said that the price per ton was Rs. 2450/the respondents countered that that price was subject to variation. The respondents had refused to deliver the remaining portion of goods under the contract only because the appellants, though they had orally agreed to accept the price variation clause, had not formally accepted that clause in writingThis clearly goes to show that there was really no difference as to the subject matter of the contract between the parties except that while the respondents alleged that the appellants had agreed to the price variation clause the appellants alleged that they had not. Apart from this there was no dispute between the parties whatsoever with regard to the terms of the contract. Both parties agreed that in accordance with the works order there was an arbitration clause and this arbitration clause was binding on both. In these circumstances it is difficult to see how the respondents were entitled to approach the court under Section 33 of the Arbitration Act. There is no challenge to the existence or validity of the arbitration agreement, nor was the application made with a desire to have the effect of the arbitration agreement determined. The learned Judge, with respect, was in error in thinking that the respondents petition was competent under Section 33 of the Arbitration Act, 1940