Supreme Court
High Court Division
(Civil Revisional jurisdiction)
Present:
Md. Abdur Rashid J
Hassan Foez Siddique J
Paul Reinhurt Limited and another ………..Petitioners
Vs.
Prime Textiles Spinning Mills Ltd. and others……Opposite Parties
Judgment
November 6, 2001.
Cases Referred To-
Md. Yousuf vs Alhaj G P Mollah and Co. 1987 BLD 77; Tofazzal Hossain Akon vs. Sekeluddin Akon, 1954 PLR 599, State of Bombay vs. Adamjee Hajee Dawood and Co., AIR 1951 Calcutta 147; Serajuddin and Co. vs. Michael Golodetz, AIR 1960 Calcutta 47; Pratambull Rameshwar vs. K Sethia Ltd. AIR 1960 Calcutta 702; Probity Shipping Corporation and another vs. StateTrading Corporation of India (1980-81) 85 CWN 268, times Orient Transport Co. vs. Jaya Bharat C & J Co., AIR 1987 (SC) 2289; Mecca Mills vs. Bangladesh Shilpa Bank, (1999) 4 BLC 169; Salamat Khan vs. QG Ahad, (1978) 30 DLR (SC) 271; Government of India vs. Jamunadhar Rungra and others, AIR 1960 Patna 19; BIWTA vs. United TC, 41 DLR 513; Shafiqur Rahman vs. Mir Nazmul Hossain Khan, 44 DLR 428=46 DLR 165; Satish Kumar vs Suinder Kumar, AIR 1970 (SC) 833;Bhajahari Saha Bankkya vs. Behary Lal Basak. (1909) ILR 33 Cal 881 at page 898; Jugal Kishore vs Goolbai, AIR 1955 (SC) 812; Union of India vs. Rallia Ram, AIR 1963 (SC) 1685; Salamat Khan vs. QG Ahad, 30 DLR (SC) 271.
Lawyers Involved:
Dr. M Zahir with Afreen Mohiuddin and AHM Mizanur Rahman—For the Petitioners.
Rafiq-ul Huq with Ahsanul Karim, M Moniruzzaman and Aneek R Hoque—For Opposite Party No. 1.
Tania Amir—For Opposite Party No. 2.
Civil Revision Nos. 1937, 1938 & 1939 of 1995.
Judgment
Md. Abdur Rashid J.- This order will dispose of the above three Rules.
2. The Rules were obtained by defendant Nos. 1 and 2 upon making three revision applications under section 115 of the Code of Civil Procedure against an order dated 24-5-95 passed by Subordinate Judge, 5th Court at Dhaka in Title Suit No. 139 of 1994.
3. Opposite Party No. 1, a limited company, instituted the suit for following declarations as well as perpetual injunctions:
a. Permanent injunction against the defendants restraining them from taking any legal or other action and/or proceeding on the basis of alleged contracts said to have been entered into between the plaintiff and defendant No. 1 and also on the basis of illegal, malafide and void Award obtained by the defendant No. 1 from the defendant No. 1.
b. declaration that the plaintiff never entered into any agreement in relation to contracts No. 7209 dated 25-8-9 1, Nos. 7228 and 7229 both dated 26-8- 91 and 7311 dated 17-9-91 with the defendant No. 1 and/or its agent defendant No. 2 nor there was any written agreement with defendant No. 1 or its agent defendant No. 2 to refer any dispute to the defendant No. 3 for arbitration
c. declaration that there was no written agreement between the plaintiff and the defendant No. 1 and/or No. 2 giving any jurisdiction to the defendant No. 3 to arbitrate the alleged dispute.
d. permanent injunction restraining the defendant No. 3 from black listing and or otherwise taking any punitive action against the plaintiff relating to and/or in connection with the Award dated 22-10-92 given by them and/or relating to the alleged contracts on the basis of which the Award was given.
e. declaration that ex parte Award dated 22-10-92 given by the defendant No. 3 in favour of the defendant No. 1 is ex facie illegal, without jurisdiction, void and malafide and has no legal basis nor the same can be executed against the plaintiff. (underlined by us)
4. Defendant Nos. 1 and 2 appeared in the suit and made three applications. One of them was for return of the plaint, another was under section 34 of the Arbitration Act, hereinafter referred to as the Act, for stay of further proceedings of the suit and the last one for rejection of the plaint under Order 7 rule 11 of the Code of Civil Procedure, briefly, the Code. In the applications, it is stated that the plaintiff entered into four contracts dated 25-8-91, 26-8-91 and 17-9-91 with said defendants for import of cotton. All the contracts contained arbitration agreement to refer all disputes present and future to the defendant No. 3. There were disputes and defendant Nos. 1 and 2 referred the disputes to the defendant No. 3, which was named in the contracts as the arbitrator. As the plaintiff did not turn up, defendant No. 3 on 22-10-92 made the award ex parte. The plaintiff first on 12-1-93 took an action before the High Court of Justice at England being 1993 Folio No. 41. The action was dismissed for want of steps by the said Court by its order dated 11-11-94.
5. Meanwhile, on 18-11-93 the plaintiff lodged a Notice of Appeal against the Award before the ‘Technical Appeal Committee.” But the plaintiff failed to deposit the necessary fees and other charges and the defendant No. 3 informed the plaintiff by its letter dated 28-10-95 that the appeal was struck out and the award dated 22-10-92 was declared final, and valid and binding on the parties.
6. On the above assertions, it was prayed one application, for return of the plaint on the ground that the plaintiff challenged the award in the garb of a suit without making the statutory security as required under section 33 of the Act.
7. In the second application, may be alternatively, the prayer was for stay of further proceedings of the suit under section 34 of the Act on the ground that as the suit related to arbitration proceedings, and as such, the suit could not proceed.
8. Last prayer, seems to be the main, was for rejection of the plaint under Order 7 rule 11 of the Code.
9. The plaintiff opposed all the applications by filing separate written objections.
10. All the three applications were heard together, and rejected by one order, against which; above three Rules’ were unnecessarily obtained as stated above.
11. Dr. M. Zahir, learned Senior Counsel for the petitioners, submits that the award is sought to be set aside in the suit instead of making an application under section 33 of the Act. Under section 33, before filing any objection, furnishing of statutory security as per provisions of the Law Reforms Ordinance, 1978 was mandatory. Without the statutory security, the plaint is liable to be returned,
12. Secondly, he submits that when the suit relates to and seeks to set aside a valid award, such suit cannot proceed under the provisions of section 34 of the Act.
13. Lastly, he submits that the suit as framed for setting aside a valid award is barred by the provision of section 32 of the Act as well as those of section 11 of the Act. Accordingly, the plaint of the suit is liable to be rejected under Order 7 rule 11(d) of the Code.
14. In support of his submissions, he cited the decision in the case of Md. Yousuf Vs. Alhaj G P Mollah and Co., 1987 BLD 77.
15. Opposing the Rules, Mr Rafiq-ul Huq, learned Senior Counsel for the plaintiff submits, we find rightly, that the trial Court correctly rejected the applications for return of the plaint and stay of further proceedings of the suit since there was no proceeding pending for arbitration.
16. Against the application for rejection of the plaint on the ground of the bar under section 32 of the Act, he submits first that the bar under the provisions of section 32 of the Act does not cover the instant suit. Elaborating, he submits that no one is debarred from instituting a suit of civil nature under section 9 of the Code either impeaching a contract or the existence of a contract. In the plaint of the suit, the plaintiff categorically has denied entering into any of the four contracts (described above) and the plaintiff has also asserted that it never executed or signed any of the contracts. When the contracts were not executed, there was no occasion for the existence of an arbitration agreement and the award passed thereupon must be held to be void.
17. He also submits that the ex parte decision of the High Court of Justice at England or the Award in question cannot bar the suit under the provisions of section 11 of the Code.
18. In support, he cites the decisions in the cases of Tofazzal Hossain Akon Vs. Sekeluddin Akon, 1954 PLR 599, State of Bombay Vs. Adamjee Hajee Dawood and Co., AIR 1951 Calcutta 147, Serajuddin and Co. Vs. Michael Golodetz, AIR 1960 Calcutta 47, Pratabmull Rameshwar Vs. K Sethia Ltd. AIR 1960 Calcutta 702, Probity Shipping Corporation and another Vs. State Trading Corporation of India, (1980-81) 85 CWN 268, Orient Transport Co. Vs. Jaya Bharat C & J Co, AIR 1987 (SC) 2289.
19. It is also submitted that what is the suit for, the purpose of section 32 of the Act or Order 7 rule 11 of the Code could only be ascertained by reference to the averments made in the plaint not to the prayer or relief prayed for since the prayers or relief following the plaint are no part of the plaint Reliance was placed on the decision in the case of Mecca Mills Vs. Bangladesh Shilpa Bank, 4 BLC 169.
20. On behalf of the defendant No. 3 an application was made and moved for striking out its name, mainly, on the ground that no relief was prayed for against such defendant nor its presence in the suit is necessary. Moving the application, Mrs. Tania Amir, learned Counsel addressed us on all possible questions raised including res judicata rejection of the plaint, maintainability of the suit, forum shopping etc. We find no objection against the prayer, either from the plaintiff or the defendant Nos. 1 and 2.
21. Dr Zahir, in reply, submits that if the plaint is read as a whole, there was no scope to deny that the suit was instituted challenging the existence of the arbitration agreement and the award given and the suit is therefore barred under section 32 of the Act. He also submits that the case of Mecca Mills does not cover the instant case, for section 32 of the Act bars a suit not a plaint. The suit is solely based on the assertion that the plaintiff did not sign any of the four contracts, he submits, no such signature is necessary for the existence of an arbitration agreement and the award to be made upon such arbitration agreement. He relies upon the authority in the case of Salamat Khan Vs. QG Ahad, (1978) 30 DLR (SC) 271. Finally, he submits, even if the plaint may escape rejection under res judicata but the suit cannot evade the bar of section 32 of the Act.
22. In order to appreciate contradictory submissions of learned Counsels, we need to examine closely the following provisions of the Arbitration Act, 1940.
Section 30.- An award shall not be set aside except on one or more of the following grounds, namely,-
(a) that an arbitrator or umpire has misconduct himself or the proceedings;
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35;
(c) that an award has been improperly procured or is otherwise invalid.
Section 31. (1) Subject to the provisions of this Act, an award may be filed in any Court having jurisdiction in the matter to which the reference relates.
(2) Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this Act, all questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, filed, and by no other Court.
(3) All applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings shall be made to the Court where the award has been, or may be, filed, and to no other Court.
(4) Notwithstanding anything contained elsewhere in this Act or in any other law for the time being in force, where in any reference any application under this Act has been made in a Court competent to entertain it, that Court alone shall have jurisdiction over the arbitration proceedings and all subsequent applications arising out of that reference and the arbitration proceedings shall be made in that Court and in no other Court.
Section 32.- Notwithstanding any law for the time being in force, no suit shall lie, on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be set aside, amended, modified or in any way affected otherwise than as provided in this Act.
Section 33.- Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits:
Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit:
Provided that no application challenging the existence or validity of an award or for having its effect determined shall be entertained by the Court unless the applicant had deposited in the Court the amount which he is required to pay under the award or has furnished security to the satisfaction of the Court for the payment of such sum or for the fulfillment of any other obligation by him under the award.
Section 34.- Where arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings.”
23. The Bar addressed us at length. Many questions were raised over those three applications. We have already expressed ourselves that the trial Court has correctly rejected the applications for return of the plaint and stay of further proceedings of the suit. Order 7 rule 10 of the Code has provided the circumstances in which a plaint of a suit should have to be returned for filing in proper Court. In view of the provisions of section 41 of the Act, even if such provisions for return of the plaint is available but we do not find any of the circumstances for return of the plaint. The submissions of Dr. Zahir that the plaint of the suit is nothing but an application under section 33 of the Act and such application without deposit of the statutory security is not maintainable are wholly misconceived for we do not find any reason so to read.
24. And section 34 of the Act empowers the Court to order stay of the legal proceedings under certain conditions and such order can only be passed pending arbitration in accordance with the arbitration agreement. In the case before us, an award has already been made which the defendant No. 3 claims to be final and binding upon the parties, and there is no proceeding pending for arbitration. In such circumstances, the submissions of Dr. Zahir have no substance. Consequently, the trial Court did not commit any error in rejecting the application for stay of further proceedings of the suit.
25. Now, we shall consider the moot issue raised as to whether the suit is barred by the provisions of section 32 of the Act or hit by the principles of res judicata under section 11 of the Code and the plaint is accordingly liable to be rejected under Order 7 rule 11(d) of the Code.
26. We shall now consider questions in the light of the decisions cited at the Bar. In State of Bombay Vs. Adamjee Hajee Dawood & Co., AIR 1951 Calcutta 147, an appeal from a decree dismissing a suit on a preliminary issue that the suit was not maintainable in view of section 32 of the Arbitration Act, 1940. The suit was instituted for a declaration that a certain contract was not made between the parties and is not binding on it. There was a prayer for an injunction for restraining the defendant, its servants and agents from making any claim or demand on the contract. Banerjee J held,-
“The Arbitration Act lays down a definite procedure for challenging the arbitration agreement and on a plain reading of the sections, I am of the opinion that section 32 does not hit a suit which challenges the validity of a contract though it contains an arbitration clause.”
While in concurring, Harries, CJ also held,-
“Sections 32 and 33 on their true construction do not purport to deal with suits for declarations that there never was a contract or that a contract is void. The section must be confined to attacks on arbitration agreements and awards and the fact that an arbitration agreement may fall with contract does not prevent the Court declaring in a properly constituted suit that there never was a contract at all or that the contract is void and of no effect.”
In Serajuddin and Co. Vs. Michael Golodetz and others, AIR 1960 Calcutta 47, an appeal from an order of stay granted by a single judge under section 34 of the Act in staying a suit pending disposal of an arbitration proceeding before American Arbitration Association. The suit was instituted on the Original Side of the Calcutta High Court, claiming, inter alia, the contract in question “be adjudged void and delivered up and cancelled,” buyers be restrained “from taking steps in purported enforcement of the said contract,” and ‘declaration, if necessary, that the said contract stands discharged and that the parties have no rights or obligations thereunder.”
In an elaborate judgment in setting aside order of stay, a division bench also attempted to define the term ‘foreign arbitration‘ as following,-
“What, in the eye of law, is a foreign arbitration, is not very clear. But the decisions, in which the terms, ‘foreign arbitration’ and ‘foreign award’ have been used, appear to have used the same in connection with arbitrations in foreign lands by foreign arbitrators, to which foreign law is applicable and in which a foreign national is involved.”
“The parties, therefore, must be deemed to have adopted the American law for the settlement of their disputes by arbitration. This is confirmed by two other circumstances. The forum or venue of arbitration in the present case is to be New York (vide the arbitration clause itself) and the arbitration also would presumably be by American citizens as arbitrators (vide the Rules) (including ‘Foreward’) of the American Arbitration Association and the actual selection and appointment of arbitrators in the present case). Prima facie then, the parties must have accepted the American law—at least, for purposes of arbitration. In the above view, the Indian Arbitration Act would be excluded and it would be irrelevant, so far as the present arbitration is concerned.”
It reasoned that-
“But, as section 34 does not stand alone as the words ‘arbitration agreement’, as used in that section, must have the same meaning as in the several other sections, which employ the said term, and so section 34 cannot be separately or independently construed, and, as the said other sections and the term ‘arbitration agreement’ as employed therein, if applied to foreign arbitrations, would, on the above view, affect the vires of the Act and place it beyond the legislative competence and powers of the enacting legislature, the above prima facie construction of section 34 would have to be rejected.”
On the above view and reasons, the Division Bench held that section 34 of the Act would not apply in the instant arbitration and accordingly, set aside the order of stay.
In Pratabmull Rameshwar vs KG Sethia Ltd., AIR 1960 Calcutta 702, a suit was instituted for declaration that certain jute contracts (four in number) and the Arbitration agreements contained therein are void and unenforceable, that such awards may be taken off the file, and for perpetual injunction restraining the defendants, their servants and agents from enforcing the award or taking any steps thereunder.
The contracts were made through the exchange of usual Bought Notes. Disputes had arisen, the defendant referred the dispute to the Arbitration of London Jute Association. Defendant’s claims failed before the arbitrators. On appeal therefrom before the Committee of London Jute Association, the Special Committee made an award in the form of a special case. The Court and the Court of Appeal upheld the award and the House of Lords also dismissed the appeal therefrom. Then, the respondent KC Sethia Co. made an application under section 5 of the Arbitration (Protocol and Convention) Act, 1937 to file the foreign award and the appellant brought the suit. The appeal was dismissed on the following view of PB Mukharji, J,-
“I am therefore inclined to hold for these reasons that the appellant has a right to institute this suit but the awards and the judgments on the special case by the English Courts constitute a good valid defence to such action in the facts of the present case under section 4(2) of the Protocol Act.”
In Orient Transport Co. Vs. Messers Jaya Bharat C & J Go, 1987 AIR (SC) 2289, an appeal from a judgment dismissing the suit in view of section 32 of the Act. The suit was for declaration that eight contracts/agreements executed were not ‘Hire purchase agreements but were agreements relating to transaction of loan and for injunction. The Supreme Court of India construed section 32 of the Act as hereunder,-
“Section 32 of the Act stipulates that notwithstanding any law for the time being in force no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be enforced, set aside, amended, modified or in any way affected otherwise than as provided in the said Act.
If the intention of the legislature were that all documents containing an arbitration clause should come within the purview of sections 32 and 33, the legislature would have said so in appropriate words. These sections have a very limited application, namely, where the existence or validity of an arbitration agreement and not the contract containing the arbitration agreement is challenged.”
In the Govt., of India Vs. Jamunadhar Rungta others, AIR 1960 Patna 19, appeals from judgment passed in a suit instituted for declaration that the award given was illegal and void, a Division Bench of the Patna High Court held-
“54. The true legal position may, therefore, be formulated as follows:
1. An arbitration agreement or an award can neither be challenged nor enforced by suit.
2. No proceedings or action may be taken which shall affect in any way an arbitration agreement or award otherwise than as provided in the Indian Arbitration Act, 1940
3. The existence of an arbitration agreement or award may be set up as a bar in defence to a suit based on the original cause of action arising out of rights and titles which formed the subject-matter of such an agreement or award.
4. Even if no such defence has been taken but at any stage of suit before a court of law, it comes to its notice that the subject-matter of the suit has been adjudicated upon by arbitration in pursuance of an agreement between the parties according to law and the parties have accepted the award and have acted upon it, or, the prescribed period of challenging the award has elapsed, it is the duty of such a court to refuse to give any relief to the plaintiff or plaintiffs of such a suit.”
In our Jurisdiction, in Md. Yousuf Vs. Alhaj GP Mollah & Co., 1987 BLD 77, the Court on receipt of award through postal mail registered a suit. The Court the application challenging the maintainability of the suit. This Division, in revision, held that “the award filed in Court is not an arbitration award as there was no arbitration agreement between the parties to refer the matter for arbitration.” and upon such finding, dismissed the suit.
In BIWTA Vs. United TC, 41 DLR 513, a suit was instituted for a decree for some amount of money on the basis of an award. A preliminary issue was raised on the maintainability. The Court held that the suit was maintainable on the view that the suit was not barred under section 32 of the Arbitration Act, 1940. This Division, in revision, appears to have considered the section 32 of the Act for the first time. It found that in the garb of a money, suit that was a suit for enforcement of the award, which was barred under section 32 of the Act.
In Shafiqur Rahman Vs. Mir Nazmul Hossain Khan, 44 DLR 428=46 DLR 165, a suit was instituted for declaration that the award dated 5-8-79 given by the defendants 1 to 6 and Mvi. Abdul Sattar was null and void and not binding upon the plaintiff. The defendants made an application for rejection of the plaint on the ground that the provisions of the Act barred the suit. The Court rejected the plaint under Order 7 rule 11(d) of the Code on the ground of limitation but not under the provisions of the Act. In an appeal preferred therefrom, a Division Bench of this Division held that-
“Since section 32 of the Arbitration Act bars such a suit challenging the validity of an award, we find that the suit was barred by the provisions of section 32 of the Arbitration Act. The learned Subordinate Judge should have rejected the plaint on the finding that it was barred by the provision of section 32 of the Arbitration Act, instead he rejected the plaint as being barred under Article 158 of the Limitation Act which is not tenable.”
In Tofazzal Hossain Akon Vs. Sekeluddin Akon, 1954 PLR 599, a Single Bench in exercising revision jurisdiction rejected an application under section 33 of the Act as not maintainable on the view that,-
“Whether a person is a party to the arbitration agreement cannot possibly be a matter that can be referred to the arbitration for their decision and, in fact, as it appears from the Achalnama that it was not referred to the arbitration; therefore, the suit for a declaration that a person has not submitted to arbitration or has not entered into arbitration agreement cannot be barred under section 32. Besides that, the opening words “any party to an arbitration agreement” in section 33 clearly indicate that the relief provided for in the section is for those who are admittedly parties to the arbitration agreement.”
27. In view of the above decisions, we are unable, with respect, to take the view of the learned single judge as the correct statement of law. In Satish Kumar Vs. Suinder Kumar, AIR 1970 (SC) 833, the Supreme Court of India quoted with approval its earlier decision in the case of Messers Uttam Singh Dugal and Co Vs. Union of India, Civil Appeal No. 162 of 1962 on the true construction of section 33 of the Act,-
“The true position in regard to the effect of an award is not in dispute. It is well settled that as a general rule, all claims which are the subject-matter of a reference to arbitration merge in the award which is pronounced in the proceedings before the arbitrator and that after an award has been pronounced, the rights and liabilities of the parties in the respect of the said claims can be determined only on the basis of the said award. After an award is pronounced, no action can be started on the original claim which had been the subject matter of the reference. As has been observed by Mookerjee, J in the case of Bhajahari Saha Bankkya Vs. Behary Lal Basak (1909) ILR 33 Cal 881 at page 898, ‘the award is, in fact, a final adjudication of a Court of the parties’ own choice, and until impeached upon sufficient grounds in an appropriate proceeding, an award, which is on the face of it regular, is conclusive upon the merits of the controversy submitted, unless possibly the parties have intended that the award shall not be final and conclusive in reality, an award possesses all the elements of vitality even though it has not been formally enforced and it may be relied upon in a litigation between the parties relating to the same subject-matter.’ This conclusion, according to the learned Judge, is based upon the elementary principle that, as between the parties and their privies, an award is entitled to that respect which is due to the judgment of a Court of last resort. Therefore, if the award, which has been pronounced between the parties, has in fact or can, in law be deemed to have dealt with the present dispute, the second reference would be incompetent. This position also has not been and cannot be seriously disputed.”
28. On the above authorities, we find that after coming into force of the Arbitration Act in 1940, any suit either for enforcement of an award or challenging the existence or validity of an arbitration agreement or an award is prohibited. Section 32 of the Act as quoted above leaves no manner of doubt that such prohibition is absolute. If anyone wants to challenge the existence, effect or validity of an arbitration agreement or award, he will have to take the proceedings in accordance with the provisions of the Act for no arbitration agreement nor award can be set aside, amended or modified otherwise than as provided in the Act itself. The Arbitration Act is a complete code for all purposes relating to arbitration. Section 30 provides for the grounds upon which an award could be set aside. Section 31 provides that an award may be filed in any Court having jurisdiction in the matter to which the reference relates. All questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by such Court and no other Court will have any jurisdiction in the matter. And section 33 has laid down the procedure as to how all application is to be made for challenging the existence or validity of an arbitration agreement or an award and how the Court will decide the questions raised in such application.
29. It is also now well settled that a suit for declaration that a contract (even though it contains an arbitration agreement) is void or that there was no existence of any such contract is not barred under the provision of section 32 of the Act.
30. In view of above legal position, when we peruse the plaint we find that the declarations and perpetual injunctions sought for in the suit are based upon the challenge against the existence of arbitration agreement and the award made. None of declarations sought for is against the validity or existence of any of the contracts.
31. The cause of action for the suit is also stated to be with reference to the award as hereunder,-
“21. “the cause of action for this suit arose on 25-5-92 when the defendant No. 1 falsely accused the plaintiff to commit breach of the alleged contract, on 3-6-92 when the plaintiff received notice of arbitration from LCA, (defendant No. 3) and on 22-10-92 when the Arbitrators passed the award and on various dates when the defendant No. 1 claimed compensation under non-existing sic, on 3-10-94 when the solicitors of the plaintiff withdrew from the case in London High Court compelling the plaintiff not to continue with the proceeding and the said cause of action is continuing till date.”
32. In the plaint, it is also averred in detail that number of occasions, the plaintiff purchased cotton from defendant No. 1 through the defendant No. 2 under a number of contracts. All those contracts were discharged. In the second week of August, 1991, the Managing Director of the defendant No. 2 came to the office of the plaintiff, the Managing Director of the plaintiff, left quotations and samples. Thereafter, defendant No. 2 took back the sample and the test report. No further discussion took place.
33. The plaintiff received a telex dated 25-5-92 from the defendant No. 2 in which the plaintiff was accused of not honouring the contracts Nos. 7209, 8, 7229 and 7311. The plaintiff on 6-6-92 lied by telex denying the existence of any such contract. The plaintiff received a telex dated 3-6-92 followed by a letter from the defendant No. 3 informing it that defendant No. 2 had already referred the disputes and the plaintiff was accordingly asked to appoint its arbitrator for arbitration of the disputes arising out of Contract No. 7209 dated 25-8-9 1, Contract No. 7228 and Contract No. 7229 dated 26-8-91 and Contract No. 7311 dated 17-9-91. Finally, the plaintiff was requested to appoint an arbitrator by 17-6-92 or else the reference would be disposed of in accordance with LCA rules and arbitration. Plaintiff was also asked to submit written submissions. Whereupon, the plaintiff vide letter dated 22-7-92 sent a brief for the defendant No. 4, Member, Liverpool Association Ltd.
34. Thereafter, the plaintiff received an award made ex parte dated 22-10-92. As the award was invalid, ineffective and not binding upon the plaintiff, the plaintiff decided to challenge the legality of the award before the High Court of England. But the plaintiff was compelled not to continue with the proceeding.
35. Throughout the plaint, the plaintiff averred that there was no existence of any contract with the defendant No. 1 But we did not find any positive statement to the effect that there was no existence of any arbitration agreement. The positive case is that the plaintiff did not sign and/or execute any contract with defendant No. 1 or 2. The difference between the existence of a contract and existence of an agreement is quite, which we will deal with shortly. The plaintiff has also admitted that there was an award given by the defendant No. 3. On perusal of the plaint, we are convinced that in the suit, the plaintiff left no manner of doubt in challenging the existence of the arbitration agreement and the validity of the award made thereupon and sought relief accordingly against, the award, and award only. No relief is sought for in respect of any of the aforesaid contracts. Such a suit is clearly barred by the provision of section 32 of the Act.
36. On behalf of the plaintiff, we are asked to read the averments in the plaint only minus the prayers following the plaint for, according to them, the prayers or relief sought for in a suit are not the part of a plaint. In support, reliance is placed upon the case of Mecca Mills Vs. Bangladesh Shilpa Bank, 4 BLC 169. A Division Bench of this Division upon an application under Order 7 rule 11 of the Code for rejection of the plaint held,-
“But the cause title and the prayer portion does not come within the ambit of averments made in the plaint. The defect must be found out from the averments made in the plaint.”
37. Submission appears to be thought provoking. Let us see what the law says. Order 7 rule 1 has enumerated the particulars to be contained in a plaint. It reads as hereunder,
1. the plaint shall contain the following particulars:
a……………………………………………
b……………………………………………
c…………………………………………..
d……………………………………………
e……………………………………………
f. ………………………………………….
g. the relief which the plaintiff claims ;
h……………………………………; and
i.………………………………………….
38. Clause (g) of the above rules made it mandatory to include the relief in the plaint. A suit is generally known or categorised by the relief prayed for in the plaint. A Court gives a final adjudication upon the plaint by either granting or refusing such of the reliefs as is established in the trial of the suit. The prayer or relief sought for is therefore an important and integral part of the plaint. May be, the attention of the Division Bench to the above provisions was not drawn at all. Consequently, the above view might have been expressed. Such view being contrary to the express requirement of the law is, with due respect, not the correct statement of law.
39. Now, we shall see the law on execution of an arbitration agreement. The case as made out in the plaint is wholly based upon the premise that the plaintiff did never ever sign or execute any of the aforesaid contracts. The law on the proof or existence of an arbitration agreement is well settled. Though an arbitration agreement must be in writing but the parties need not sign it. What is necessary is that the terms must be reduced into writing and the fact that the parties had agreed should be established.
40. Relying on decisions in the case of Jugal Kishore Vs. Goolbai, AIR 1955 (SC) 812 and Union of India Vs. Rallia Ram, AIR 1963 (SC) 1685, the then Supreme Court of Pakistan held in the case of Salamat Khan Vs. QG Ahad, 30 DLR (SC) 271 that “Arbitration agreement” is a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not.
41. On acceptance of an offer, it also held that it is again well settled that an acceptance of an offer to constitute an agreement, what is necessary is that the offeree has expressed its acceptance and no writing is necessary. It may be oral or inferred from the conduct of the parties.
42. It also noticed the decision of The House of Lords in the case of Brohden Vs. Metropolitan Railway Company, 1877 (2) Appeal Cases, that the circumstances in the conduct of two parties may establish a binding contract between them, although the agreement, reduced into writing as a draft, has not been formally executed by either.
43. If a valid arbitration agreement is there, then there need not be a formal agreement executed by the parties, nor is it required of the parties to sign. The agreement must be in writing and accepted by the parties. No particular form is necessary, it may be inferred from a set or series of documents.
44. Lastly, we shall consider the submission that the provisions of section 32 of the Act do not cover a foreign award. Learned Counsels for the plaintiff pinned their whole thrust upon this point. What is a foreign award is not defined in the Act. The Act has defined arbitration agreement and award as hereunder:
Section 2(a) “arbitration agreement” means a written agreement to submit present or future difference to arbitration, whether an arbitrator is named therein or not;
(b) “award” means an arbitration award;
and
(c) “Court” means a Civil Court having jurisdiction to decide the question forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not, except for the purpose of arbitration proceedings under section 21, include a Small Cause Court.
45. The Arbitration Act, 1940 extends to the whole of Bangladesh. But the above definition of an arbitration agreement has not excluded any agreement between a national of Bangladesh and a foreign national or corporation from its ambit. No such definition as foreign arbitration agreement is conceivable under the law of arbitration. Similarly, foreign award has not been defined. We find section 2(6) of the Code has defined ‘foreign judgment’ as means a judgment of a foreign Court’ and section 2(5) ‘foreign Court’ ‘means a Court situated beyond the limits of Bangladesh which has no authority in Bangladesh and is not established by the Government.’ We have seen earlier in the case of Serajuddin, a Division Bench of the Calcutta High Court attempted to give an idea about ‘foreign arbitration’ as hereunder-
“What, in the eye of law, is a foreign arbitration, is not very clear. But the decisions, in which the terms ‘foreign arbitration’ and ‘foreign award’ have been used, appear to have used the same in connection with arbitrations in foreign lands by foreign arbitrators, to which foreign law is applicable and in which a foreign national is involved.”
46. In modem practice, arbitration agreement between the parties of more than one country generally names the arbitrator, the forum and the law to be followed in arbitration. The impugned arbitration agreements are no exception. Before coming into force of the Arbitration Act, 2001, only law available for enforcement of a foreign award was the Arbitration (Protocol and Convention) Act, 1937. But a Division Bench of this Division held that law was not applicable in Bangladesh. The dispute was however never resolved.
47. Coming back to the real issue on the maintainability of the suit, we are clearly of the view that no suit shall lie on any ground whatsoever to challenge the existence, validity or effect of an arbitration agreement or award. An arbitration agreement or award can only be set aside, modified or amended in accordance with the law of arbitration. The principles behind such bar appear to be universal. Facts of the case do not suggest that the plaintiff is not aware of the forum and the law to pursue. In October 1992, the plaintiff lodged a notice of appeal against the award before the appellate forum of defendant No. 3. On 12-1-93 it also took a civil action against the award in 1993 Folio No. 41 before the High Court of Justice in England. Each of the actions was the most appropriate in the facts of the case but both of them were allowed by the plaintiff to be concluded against them. Now, if the plaintiff can challenge the validity of the award or the existence of the arbitration agreement in the municipal forum, then we find no absence of intention of the legislature behind the municipal law on arbitration to take care of such a suit.
48. The Bar addressed us that the international endeavours are also very alive under the stewardship of the UNO for codification of a uniform arbitration law. In this era of globalisation, there is no alternative to such a uniform and universal law for the smooth transaction of international trade and commerce. Our law on arbitration has already been updated by the Arbitration Act 2001. In this Act, there are provisions for enforcement or recognition of a foreign award.
49. Besides, the provisions of section 14 of the Code enjoin upon a Court in Bangladesh to presume that foreign judgment was pronounced by a court of competent jurisdiction unless the contrary appears. However, such presumption may be rebutted on proof of want of jurisdiction or may not be conclusive on any matter within the exception of section 13 of the Code. Certified copy of the judgment of the High Court of Justice in England in 1993 Folio No. 41 was annexed. We cannot shut our eyes to the conclusions as arrived at by such Court of competent jurisdiction. The decision is though ex parte yet is no doubt binding upon the plaintiff until set aside in accordance with law. The High Court in England has given the following adjudication and declarations:
i. The plaintiffs were parties to contracts No. 7209 dated 25-8-91, Nos. 7228 and 7229 dated 26-8-91 and No. 7311 dated 17-9-91;
ii. Each of the contracts contained a written agreement between the plaintiffs and the defendants to resolve any disputes arising thereunder by arbitration in accordance with the Rules of the Liverpool Cotton Association Limited (defendant No. 3 herein); and
iii. The Arbitration Award dated 22-10-92 was a valid Award which was binding on the plaintiffs.
50. The above declarations were given by the High Court of England on the cause brought by the plaintiff before it. The plaintiff has not yet challenged the decision. Not even in the instant suit. Even if we can avoid the legal effect of the decision of the High Court of England for the time being but we cannot allow the suit to continue in view of the bar of section 32 of the Act. The suit has already wasted more than six years’ time, toil and money of all the parties including the Court.
51. In the view of the matter that we have taken, the impugned order cannot be sustained in law, which has no doubt resulted in failure of justice. We must allow the application of the defendant Nos. 1 and 2 for rejection of plaint as we find the suit is barred by the provisions of section 32 of the Act and the plaint is therefore liable to be rejected under Order 7 rule 11 clause (d) of the Code.
52. In the result, the Rule in Civil Revision No. 1939 of 1995 is made absolute while other Rules are discharged. No order as to cost. The plaint of Title Suit No. 139 of 1994 of 5th Court of Subordinate Judge at Dhaka is hereby rejected. Order of stay as granted at the time of issue of the Rule is recalled and vacated.
Plaint of the suit having been rejected, no separate order needs to be passed on the application of defendant No. 3 for striking out its name.
Ed.