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

2. The facts are quite simple. The appellants are Engineers and Contractors with their Head Office in Bombay. They have a factory for the manufacture ofprestressedand precast products near Delhi. In December, 1968 the appellants received an order for 20,000prestressedconcrete poles from the Haryana State Electricity Board to be supplied in a period of approximately two years. One of the components of the poles isprestressedconcrete wire made of steel. The appellant required about 400 metric tons of the said wire for meeting the order. The respondents, who are from Calcutta, are manufacturers of such wires. Their representative in Bombay one Mr. L. M. Uppal learnt that the appellants were in need of wires, and so, on behalf of the respondents he contacted the appellants at Bombay. Negotiations were carried on by Mr. Uppal on behalf of the respondents and after obtaining confirmation from his Head Office at Calcutta Mr. Uppal informed the appellants that the respondents were agreeable to the terms discussed. Thereafter the appellants, by way of confirmation of the terms of the contract agreed upon, wrote a letter to the respondents on9 as per Annexure B"In continuation of the discussions, we hereby confirm that:It is not necessary to extract all the terms and conditions here except the one with regard to price. It is as follows:"The above quantity to be supplied at the firm price of Rs. 2450/(Rupees two thousand four hundred fifty only) per Mt. FOR Faridabad inclusive of CST. C form shall be issued by us after receipt of invoice.A special discount of Rs. 50/per M. T. in the price was also allowed for which it was agreed that a credit note would be issued by the respondents along with the invoice and the bill was to be drawn on the bankers only for the net amount3. After recording the terms and conditions, the letter closed with these words:"Please confirm the acceptance of the above order and despatch one wagon load as already requested personally.4. After the receipt of the above letter the respondents sent a telegram dated May 10, 1969 informing the appellants that they can despatch one wagon load of 4 mm wirek and that they would be in a position to send 5 mm wire only after two weeks since the same had to be manufactured. The appellants wrote back on May 13, 1969 telling the respondents that 4 mm wires were of no use for the present and they require only 5 mm wires urgently, for, other wise, their work of manufacturing poles would be held up. So the appellants requested the respondents to arrange for delivery at once of at least one wagon load of 5 mm wires5. On May 16, 1969 the respondents wrote a letter to the appellants as per Annexure F. They referred to the appellants letter dated9 and also to the letter dated9 and stated "kindly note that manufacture of 5 mm wires has already been undertaken and we expect to despatch the same within two weeks. Along with the letter Annexure F the respondents sent to the appellants a copy of what is known as the works order also dated. That is an order to the respondents works unit to supply the agreed quantity of goods. This works order which is Annexure C shows that the manufacturing unit of the respondents had been directed to supply 400 metric tons of wire of 5 mm gauge. Out of this quantity 20 metric tons had to be despatched immediately and for the rest it was stated that despatch instructions would be issued from time to time. The rate at which the supply was to be made was also mentioned as "Rs. 2450/inclusive of CST at 3% less quantity discount of Rs. 50/per metric ton. There was the following note under the works order, "All concerned are requested to check this works order thoroughly and in case of any discrepancies to report the same at once to the company. This works order is being issued subject to the terms and conditions of business printed overleaf and form an integral part of this contract. These terms and conditions apply to all customers including Government departments of what is write, in customers order, indent or A/T etc.  Terms and conditions of business attached to the works order contain the following clause about arbitration:"14. Any dispute arising out of or in any way relating to any contract made with you shall be referred to the arbitration of the Tribunal of Arbitration of the Indian Chamber of Commerce, Calcutta, in accordance with the provisions of the Arbitration Act, 1940 and the rules of the chamber. And in any action or other proceedings at law available upon in any such contract and not precluded by the foregoing provision for arbitration, the parties submit in all respects to the jurisdiction of the High court at Calcutta in West Bengal.The appellants accepted the position as disclosed in the respondents letter dated9 and the works order of that date. In fact as envisaged in the works order the appellants received two consignments of wiresone despatched on6. Further deliveries, however, were not made on time as disputes arose regarding the price. By their letter dated9 the respondents demanded a rise in price from Rupees 2450/per M. T. to Rs. 2680/per M. T. Then by their letter dated9 the respondents asked for further enhanced price of Rs.. By the letter dated0 they demanded a still further increase of Rs. 75/per M. T. The appellants being pressed by their own contract with the Haryana Electricity Board accepted the supply of the quantities at the said enhanced rates, expressly without prejudice to their legal rights under the contract. The respondents were not happy that the appellants should fail to accept formally in writing the respondents right to enhance the price and, hence on January 28, 1970 respondents informed the appellants that since the appellants were raising objection to the price rise the respondents were treating the contract to the extent of the balance of the quantity agreed to be sold as cancelled. By this time it appears that out of 400 tons agreed to be sold the respondents had sold and delivered in all about 88 tons7. After the above letter of the respondents, the appellants on0 referred the dispute to the arbitration of the Indian Chamber of Commerce under the arbitration clause already referred to. The appellants also filed their statement of claim before the Tribunal of arbitration on. Notice was issued to the respondents to file their reply on. But the respondents took extensions of time till. On0 the respondents filed the application out of which the present appeal arises on the original side of the High Court claiming (i) that no contract as alleged by appellants was concluded between the parties; (ii) that consequently there was no arbitration agreement between the parties: (iii) an injunction restraining the appellants from proceeding with the reference and (iv) a declaration that there was a concluded contract including the arbitration clause between the parties not in terms of the price alleged by the appellants but subject to variation as notified to the appellants by letter dated

Court's reasoning:
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