The Calcutta Tramways Co. Ltd. Vs. The
Corporation of Calcutta [1965] INSC 65 (12 March 1965)
12/03/1965 SUBBARAO, K.
SUBBARAO, K.
SHAH, J.C.
BACHAWAT, R.S.
CITATION: 1965 AIR 1728 1965 SCR (3) 354
ACT:
Calcutta Tramways Act (W.B. Act 25 of 1951),
s. 5--Agreements with Arbitration clause--Whether saved.
HEADNOTE:
By the enactment of Calcutta Tramways Act,
1951, the Government of West Bengal was substituted for the Corporation of
Calcutta (Respondent) in various agreements entered into between the predecessors-in-interest
of the appellant and the predecessors-in-interest of the respondent, subject to
a reservation that any sum payable under the agreements shall be payable by the
appellant to the respondent. All the agreements contained an arbitration clause
which provided for refering any disputes arising under the agreements to
arbitration in the prescribed manner. Disputes arose as regard the track rent
payable by the appellant to the respondent and the dispute was referred to
arbitration in accordance with the terms of the arbitration clause. The
appellant nominated its arbitrator without prejudice to its rights, and filed
an application in the High Court, for the determination of the question whether
there was a valid arbitration agreement between the appellant and respondent.
The High Court held that there was an agreement. In appeal by special leave:
HELD: Both the right to the sums payable to
the respondent and the procedure of arbitration were saved under the Act.
The proviso to s. 5 of the Act, in terms as
well as by necessary implication brings the subject-matter of the sums payable
under the agreements both under the substantive and procedural aspects within
the scope of the exception. The substantive right to the payment of rent and
the procedural one to have any dispute arising in respect of that right
referred to arbitration embodied in the agreements are interconnected and are
not severable. To preserve the substantive right and to withhold the procedural
right to enforce it is to save the right and deny the remedy. [357 C- D, F-G]
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 245 of 1964.
Appeal by special leave from the judgment and
order dated February 13, 1963, of the Calcutta High Court in Award Case No. 8
of 1963.
A.V. Viswanatha Sastri and D.N. Gupta, for
the appellant.
S.T. Desai and P.K. Mukherjee, for the
respondent.
The Judgment of the Court was delivered by
Subba Rao, J. On or about October 2, 1879, the Corporation of the town of
Calcutta incorporated under Bengal Act IV of 1876 entered into an agreement in
writing with Dillwyn Parrish, Alfresh Parrish and Robinson Souttar, hereinafter
called the grantees 355 whereunder the Corporation granted to the said grantees
the right to construct, maintain and use certain tramways in Calcutta on
payment of certain rents as provided in the said agreement.. The agreement
contained an arbitration clause which provided for referring any disputes
arising under the said agreement to arbitration in the manner prescribed there under.
The said agreement further provided in cl. 28 that the words "the said
Corporation" would include the Corporation and its successors. Different
agreements were entered into between the successors of the Corporation of
Calcutta and the grantees from time to time, namely, on November 22, 1879,
September 2, 1893 and December 9, 1899, and were confirmed by appropriate Acts.
In all these agreements the appellant's predecessor-in-interest agreed to pay
the rents to the respondent's predecessors-in-interest in respect of the
tramways constructed, maintained and used by them. All the said agreements
contained an arbitration clause similar to that contained in the first
agreement. The Corporation of Calcutta is now the successor of the properties
of the Corporation of the town of Calcutta constituted under the Bengal Act IV
of 1876. It was constituted by Bengal Act II of 1888. The appellant, i.e., the
Calcutta Tramways Co. Ltd., is the successor or the assignee of the said
grantees. On August 30, 1951, the State of West Bengal entered into an
agreement with the appellant whereby the Government agreed to purchase the
undertaking of the appellant as provided in the said agreement. The said
agreement was subject to an Act being passed by the appropriate Legislature
ratifying the agreement and giving effect to it. The Calcutta Tramways Act,
1951 (W.B. Act XXV of 1951) was passed and it came into effect on October 18,
1951. Under that Act the Government of West Bengal was practically substituted
for the Corporation of Calcutta under the various agreements subject to a
reservation that any sums payable under the said agreements shall be payable by
the appellant to the Corporation.. Disputes arose as regards the track rent
payable by the appellant to the Corporation and the dispute was referred to
arbitration in accordance with the terms of the arbitration clause. Though the
parties appointed arbitrators in terms of the arbitration clause of the
agreements, the appellant nominated its arbitrator without prejudice to its
rights and filed on January 7, 1963, an application in the Original Side of the
Calcutta High Court, inter alia, for the determination of the question whether
there was a valid arbitration agreement between the appellant and the
respondent and for other incidental reliefs. The application was heared by A.N.
Ray, J. who held that there was an agreement between the appellant and the
respondent and that the appellant was a party to the arbitration clauses
contained in the relevant agreements, that the respondent could make a reference
to arbitration in terms of the said agreements and that the reference to the
arbitrators was valid, legal and effective. The appellant, by special leave,
has filed the present appeal against the said order of the High Court.
L/B(N)3SCI--10 356 Mr. A.V. Viswanatha
Shastri, learned counsel for the appellant, contended that all the rights of
the Corporation of Calcutta under the various agreements stood transferred
under the Tramways Act, 1951, and vested in the Government of West Bengal
except only in regard to the sums payable to the Corporation and that,
therefore, the Corporation could not rely on the arbitration clauses of the
agreements and refer the disputes arising in respect of the sums payable in
terms of the said agreements to arbitration.
The point raised is in a small compass and
turns upon the relevant provisions of the West Bengal Act XXV of 1951,
hereinafter called the Act. Under the Act the agreement entered into on August
30, 1951, between the Governor of West Bengal on the one part and the Calcutta
Tramways Co.
Ltd. on the other part was confirmed. Section
3 of the Act says, "The transfer agreement is hereby confirmed and made
binding on the parties thereto and the several provisions thereof shall have
effect as if the same had been enacted in this Act." "Section 4
enacts that notwithstanding anything to the contrary in any other law, all the
powers and duties of the Corporation of Calcutta. the Commissioners of the
Howrah Municipality, the Commissioners of the South Suburban Municipality and
the Commissioners for the New Howrah Bridge with respect to the construction,
maintenance, use, leasing of or otherwise dealing with tramways are transferred
to and vested in the Government". Section 5, which is the crucial section,
reads:
(1) The several agreements particulars
whereof are set out in the Second Schedule to this Act 'shall have effect as if
the Government were parties thereto in lieu of the respective bodies and
persons set out in column 2 of the said Schedule and any reference in any such
agreement to any of such bodies or persons shall unless the subject-matter or
the context otherwise requires be deemed to be a reference to the Government:
Provided that any sums payable under any such
agreement to any of such bodies or persons shall continue to be payable as if
this Act had not been passed.
The Second Schedule contains a list of the
titles of the various agreements mentioned by us earlier. Under s. 5 of the Act
the Government is statutorily substituted for the respondent or its
predecessors-in-interest in the various agreements stated supra. The fiction is
a well defined one.
The Government replaces the Corporation and
its predecessors-in-interest as a party to the agreements unless the
subject-matter or the context otherwise requires. The natural presumption is
that but for the proviso the enacting part of the section would have included
the subject-matter of the proviso also. The proviso to s. 5 saves from the
operation of the substantive section the sums payable under any such agreements
to any such bodies mentioned therein: it excludes the operation of the 357
fiction in respect of such sums payable. In respect of the said sums payable
the agreements entered into with the said bodies will remain intact as if the
Act had not been passed;
that is to say, the respondent would still
continue to be a party to the said agreements for the said purpose. The
relevant agreements provided for the recovery of the rents and also for the
procedure for the recovery of the sums so payable in accordance with the terms
of the arbitration clauses of the agreements. Had not the Act been passed and
had the Government not been substituted in the place of the Corporation, it
cannot be denied that the Corporation, if a dispute arose in regard to the rent,
could have referred the dispute to arbitration. The substantive right to the
payment of rent and the procedural one to have any dispute arising in respect
of that right referred to arbitration embodied in the agreements are
interconnected and are not severable. To preserve the substantive right and to
withhold the procedural right to enforce it is to save the right and to deny
the remedy. To accept the contention of the appellant is to make out a new
agreement between the parties in respect of the sums payable. The acceptance of
this suggestion compels the Corporation to give up its agreed remedy. The
alternative suggestion, namely, that in respect of the amounts payable to the
Corporation the arbitration clauses of the agreements could be enforced by the
Government against the appellant introduces an incongruity. While the dispute
would be between the appellant and the Corporation, the arbitration would be
between the appellant and a third party. The argument that the Government would
be acting as a trustee of the Corporation in respect of the sums payable to the
Corporation is not supported by any of the provisions of the Act. A fair
construction of the proviso to s. 5 of the Act removes all the anomalies.
Further, in the substantive part of s. 5 of the Act the fiction takes effect
unless the subject-matter or the context otherwise requires. The proviso in
terms as well as by necessary implication brings the subject-matter of the sums
payable under the agreements both under the substantive and procedural aspects
within the scope of the said exception. The fiction in s. 5 of the Act shall
yield. to that extent, to the terms of the contract.
On such a construction we hold, as we have
indicated earlier, that both the right to the said sums payable and the procedure
of arbitration are saved there under.
In the result, we agree with the view
expressed by the High Court and dismiss the appeal with costs.
Appeal dismissed.
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