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1965 SCC OnLine Cal 83 : AIR 1966 Cal 588

Calcutta High Court

(BEFORE A.N. RAY, J.)

Shree Bhowani Cotton Mills

Versus
Union Textile Traders
Matter No. 213 of 1964
Decided on November 19, 1965

Page: 589

ORDER
1. Four questions have been canvassed on the notice of motion. First, that the
arbitration agreement is vague. Secondly, that the rules of Indian Chamber of
Commerce are illegal. Thirdly, that the Registrar, Tribunal of Arbitration, Indian
Chamber of Commerce failed to exercise his discretion. Fourthly, that the arbitrators
are guilty of misconduct.
2. the petitioner and the respondent had dealings and transactions whereby the
respondent sold and the petitioner bought certain quantities of Cone yarn. The
contract contained inter alia the following provisions:
(a) In case of any dispute arising out of this contract the matter in dispute shall be
referred to the arbitration of the Indian Chamber of Commerce whose decision
shall be binding on both the parties.
(b) the Courts at Calcutta alone and no other Courts whatsoever shall have
jurisdiction to entertain and try suits in respect of any claim or disputes arising
out of or under this contract or in any way relating to the same.
3. Counsel on behalf of the petitioner contended that the arbitration agreement is
vague because there are various Indian Chambers of Commerce and secondly Indian
Chamber of Commerce, Calcutta, is not the agreed arbitrator. In aid of these
contentions allegations in subparagraph (b) of paragraph 46 of the petition were relied
upon. It appears from the petition that it is not the petitioner's case that Indian
Chamber of Commerce, Calcutta, is not the Indian Chamber of Commerce referred to
in the agreement. Further, the correspondence indicates that the parties had no
difficulty in identifying the Indian Chamber of Commerce as the agreed arbitral
authority. The petitioner wrote to Indian Chamber of Commerce and the petitioner
received replies and the petitioner appeared before the Indian Chamber of Commerce.
Counsel on behalf of petitioner relied on the decision in C.M. Karanji and Co. v. Indo
China Trading Co. Ltd. reported in (1952) 56 Cal WN 763 where a provision to the
effect that the parties would have the right to call for arbitration on the matter in
dispute under the rules of local Chamber of Commerce was held to be vague. That
decision to my mind is of no assistance to the petitioner, because of the wide
difference in the language of the agreement. It is obvious that the phrase ‘local
Chamber of Commerce’ might refer to any of several Chambers of Commerce whereas
the language in the present case that the arbitral authority is the Indian Chamber of
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Commerce does not suffer from any indefiniteness or vagueness. The Indian Chamber
of Commerce is the agreed arbitral authority and its situation is at Calcutta is amply
proved by the unequivocal appearance of the parties before the authority.
4. the other contention on behalf of the petitioner was that it appeared from a
clause of the agreement that the Courts at Calcutta would have jurisdiction, that it
was open to the parties to come to a Court of law and therefore the agreement as to
arbitration was vague. Settlement of dispute through the medium of arbitration and
through recourse to Court of law are two different aspects. It may be that the parties
envisaged disputes which are not covered by the arbitration clause and in such a case
the parties

Page: 590

might have recourse to a Court of law. That is why the parties stipulated that the
Courts at Calcutta would have jurisdiction. I am unable to find any inconsistency
between the provisions or to hold that there is any vagueness or uncertainty or that
the clause providing for resort to Courts of law in Calcutta nullifies the arbitration
agreement. Further, counsel, for the respondent rightly contended that in a document
of this nature if there was any inconsistency the earlier clause would prevail unlike in a
Will where the later clause would prevail. I make it quite clear that I do not hold that
there is any inconsistency. It should be stated that counsel for the petitioner
abandoned allegations contained in sub-paragraph (c) of paragraph 46.

5. the second contention on behalf of the petitioner is based on allegations

contained in sub-paragraphs (d), (e), (f), (g) and (h) of paragraph 46. Reference was
made to Rules 3, 5, 6 and 7 of the Rules of Indian Chamber of Commerce, Tribunal of
Arbitration, in support of the contention that rule No. 3 showed that the Registrar had
the discretion to give the names of the members of the Tribunal of Arbitration to
persons other than members, whereas the names of arbitrators should be open for
inspection by members and therefore, there was discretion between members and non
-members. It was also contended that under Rule 5 the selection made by the
Registrar was to be final and could not be questioned and therefore if any person
appointed as an Arbitrator had any bias or any influence the parties could not question
such appointment and therefore, such a provision violated the provisions of the
Arbitration Act.
6. the other contention on the rules was that the names would not be disclosed and
such non-disclosure would affect the validity of arbitration proceedings and therefore,
such a rule also infringed the provisions of the Arbitration Act. Reliance was placed by
Counsel for the petitioner on the unreported decision D/- 10th April, 1964 in Matter
No. 95 of 1963, Suraj Ratan Benani v. Hindusthan Motors Ltd. In that case one of the
contentions was that the applicant requested the Registrar of the Indian Chamber of
Commerce to give the names of arbitrators constituting the Court and the names were
not given on the ground that under the rules the applicant was not entitled to the
same. It was held in that case that Sections 5, 11 and 30 of the Arbitration Act
referred to arbitrators and if the names of arbitrators were not known to the parties
until the award was filed the parties would not be in a position to know whether the
arbitrators had misconducted themselves within the mischief of purview of S. 5 or S.
11 or S. 30 of Arbitration Act. The agreement in the present case does not take away
the right of any of the contracting parties to resort to a Court of law for redress of
grievances under Sections 5, 11 and 30 the Arbitration Act. These sections do not
indicate that the name of the arbitrator has to be disclosed. Bias is a disqualification
and it is different from misconduct of arbitrators in arbitration proceedings. Misconduct
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is an objective fact and the Court has power to remove arbitrators who are guilty of
misconduct. Misconduct is in relation to proceedings. Names of arbitrators have no
nexus with misconduct in proceedings. It is said that unless names of arbitrators are
known it may not be possible to find out whether they are guilty of bias. Bias will arise
from facts or conduct and they can be proved irrespective of names. Parties have the
freedom to enter into a contract and as long as the contract is not opposed to any
statutory provisions such a contract is enforceable. The contract in the present case
does not infringe any provisions of the Arbitration Act.
7. Counsel for the petitioner relied on the aforementioned unreported decision
dated 10 April, 1964 in Matter No. 95 of 1963 (Cal) where it has been held that Rules
3(3), 5 and 7 of the Arbitration Rules of the Indian Chamber of Commerce are in
violation of the provisions contained in Sections 5, 11 and 30 of the Arbitration Act
because the name of the arbitrator cannot be kept secret. It has been said in the
judgment that it is an essential rule of arbitration that names of arbitrators are known
to the parties and even to the public at any rate before reference proceeds. Counsel for
the respondent submits that proposition is not supported by any authority nor do the
provisions of the Arbitration Act justify such a proposition. Sections 5, 11 and 30 of
the Arbitration Act contemplate that the authority of the appointed arbitrator may be
revoked and that Court may remove any arbitrator, and that Court may set aside an
award on the ground that an arbitrator misconducted himself in the proceedings.
Arbitration Rules of the Indian Chamber of Commerce in the present case do not
offend any of the sections of the Arbitration Act inasmuch as the power of the Court to
revoke the arbitration or to remove an arbitrator or to set aside an award remains.
8. Further, in the present case it appears from the correspondence that the
Registrar of the Arbitration Department by the letter dated 27 July, 1964 informed
that the names of arbitrators could not be disclosed to the parties and further stated
that the case was proceeding. The Registrar by the letter dated 30 July, 1964 informed
the petitioner's solicitor that the Tribunal of Arbitration acted independently of the
Indian Chamber of Commerce and the information sought for by the petitioner's
solicitor in regard to the names of arbitrators concerned the Indian Chamber of
Commerce to whom the petitioner's attorney could refer. The correspondence
thereafter shows that the petitioner's solicitor asked for the information as to whether
the claimant was a member of the Indian Chamber of Commerce. It does not appear
from the correspondence that the petitioner's Attorney took further steps as far as the
Indian Chamber of Commerce was concerned in getting the names of arbitrators. On
these facts it does not appear that the Indian Chamber of Commerce refused to give
the names of arbitrators. As far as the Registrar is concerned he exercised his
discretion and I am unable to accept the contention on behalf of the petitioner that the
Registrar failed to exercise his discretion. In my opinion his discretion was justified in
the facts and circumstances of

Page: 591

this case, and particularly, when the case was pending and the names of arbitrators
were asked for the Registrar was justified in refusing to comply with the request.

9. When the parties appear before the arbitrator they know how the proceedings are
being conducted. As far as misconduct is concerned, it will appear from the
proceedings and nothing attaches to the name. Therefore, I am unable to accept the
contention on behalf of the petitioner that a party's ignorance of the name of the
arbitrator by itself will deprive a party of making an application for setting aside the
award on the ground of misconduct. As far as revocation of authority of the arbitrator
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is concerned, it is a question of fact and if parties come to know that the arbitrator is
disqualified by reason of certain facts and circumstances the rules do not prevent any
party from bringing to the notice of the Court such features.
10. Counsel for the petitioner contended on the authority of the unreported decision
referred above that the rules were bad. Counsel for the respondent on the other hand
contended relying on the authority of the decision in D.L. Miller and Co. Ltd. v. Daluran
Goganmull, (S) AIR 1956 Cal 361 that where parties enter into a contract providing for
arbitration according to certain rules, the same would be the basis of contractual
justice and to that extent the principles of natural justice in the abstract or in vague
form would not apply. The contention on behalf of the petitioner that there is
discrimination in not supplying the name to non-members is, in my opinion,
unacceptable. Counsel for the respondent in my view rightly contended that the
provisions contained in Article 14 of the Constitution of India would apply in relation to
State and other statutory bodies, and as far as individuals were concerned, they were
left free to enter into a contract on such terms as they thought fit and proper. Further,
there is a good deal of reason in making certain things available to a member and not
making the same available to a non-member.
11. On a consideration of the unreported decision in Matter No. 95 of 1963 dated 10
-4-1964 (Cal) and the decision in AIR 1956 Cal 361 I am of opinion that in the facts
and circumstances of the present case the rules do not offend any provision of the
Arbitration Act and there is no discrimination on the basis of Article 14 of the
Constitution of India and the parties are at liberty to enter into such a contract and
bargain for contractual justice. The decision in Maclean v. The Workers' Union, 1929
(1) Ch. 602 held that a person who joins an association governed by rules under which
he may be expelled, has no legal right of redress if he be expelled according to the
rules provided that there is good faith and there is an inquiry and the fundamental
principles of fair play are observed. The same view is taken in Lee v. Showmen's Guild
of Great Britain reported in 1952 (2) Q.B. 329. Counsel for the petitioner contended
that the decision in Maclean's case, 1929-1 Ch. 602 was doubted in Lee's case, 1952-2
QB 329 but 1 am unable to find that there was any doubt as to the broad principles
enunciated in Maclean's case, 1929-1 Ch. 602. As long as there was good faith and an
inquiry, and the principles of fair-play were observed there could be (sic) any occasion
to take the view that natural justice was not observed or denied. In Lee's case, 1952-2
QB 329 it was said that the Court could always examine if the rules were lawful. In the
present case parties bargained to go to arbitration in accordance with the rules of the
Indian Chamber of Commerce. The rules envisage that the names of arbitrators may
not be furnished. On facts it appears that the petitioner was referred to the Indian
Chamber of Commerce to ascertain the name of the arbitrator. The petitioner did not
pursue the matter. There is an abstract contention that the rules offend the principles
of natural justice.
12. I am unable to hold that the rules, violate provisions of the Arbitration Act.
There is no violation of principles of natural justice in the facts and circumstances of
the case. The rules are a bargain between the parties. As far as discrimination is
concerned I have already expressed my opinion against the contention of the
petitioner.
13. the last contention on behalf of the petitioner was that the arbitrator is guilty of
misconduct, and in support of that contention reliance was placed on allegations
contained in sub-paragraph (i) of paragraph 46 of the petition. It is alleged that one or
the arbitrators was found to be holding discussion. It is not stated what the
discussions were. I am unable to hold that such allegations amount to any averment
of misconduct. They are too general and vague to merit any foundation of fact to be
gone into. Further, I am of opinion that the petitioner has given no evidence of
misconduct of arbitrators. For these reasons I am of opinion that the application
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should fail. The application is dismissed with costs.

DJ/D.H.Z.
14. Application dismissed.
———
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