Teamco Pvt. Ltd. v. T.M.S. Mani

CITATIONAIR 1967 Cal 168
COURTCalcutta High Court
JUDGES/CORAMJustice Purushottam Chaterjee and Justice A.N. Sen
DATE OF JUDGEMENT18.02.1966

Introduction

Arbitration is fast gaining ground and becoming a popular dispute resolving mechanism. However, improper drafting of the arbitration clauses and agreements, render the object of arbitration futile as the cases ultimately end up in the Courts, which adds on to their burden. In the present case as well, because the arbitration clause was improper and vague, the defendants approached the Courts for help.

Facts

The facts of the case are as follows: The plaintiff, T.M.S Mani, was appointed as a selling agent and sales organizer by the defendant, Teamco Pvt. Ltd. This appointment was done by way of a contract dated 01.04.1961, which contained an arbitration clause. Clause 11 of the contract provided that “In case of any dispute arising between the parties, the matter should be referred to the arbitrators, elected by the parties and their decision on the subject will be final”. The plaintiff filed an application under Section 20 of the Arbitration Act before the Subordinate Judge of 10th Court at Alipore, that the agreement be filed in Court.  By way of appeal against the judgment and decree of Subordinate Judge, the case came before the High Court. The 2-judge bench of the Court held that the arbitration agreement was non-enforceable and hence overturned the impugned judgment.

Issues

The main issues in the case are:

  1. Whether or not the arbitration agreement is vague and uncertain.
  2. Whether or not the suit is maintainable in law.

Contentions of the Appellant

  1. The suit was not maintainable in law, as it was not open to the plaintiff to proceed under Section 20 of Chapter III of the Arbitration Act, the plaintiff having previously taken steps under Section 8 of the said Act.
  2. The arbitration agreement in question was vague and uncertain and the same, therefore, could not be enforced in law
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Summary of court decision and judgment

The Subordinate Judge of 10th Court at Alipore, in his judgment directed that the arbitration agreement be filed in Court and that the same should be decreed. The defendant-appellant appealed against the judgment and decree before the High Court of Calcutta which held that the appeal was allowed as there was no valid arbitration agreement.

Analysis

The arbitration clause in the contract between the appellant and respondent did neither clearly define the number of arbitrators to be appointed, nor did it specify the manner or mode of appointment of the arbitrators. Section 29 of the Indian Contract Act, 1872 clearly states that if agreements are vague, uncertain and incapable of being made certain, they are void. As per the impugned contract, the only thing that could be made certain was that more than one arbitrator had to be appointed, as the word “arbitrators” had been used. Thus, as there was uncertainty regarding the number of arbitrators and their manner of appointment, the clause was clearly vague and uncertain. The High Court held the same and said that the language could not be determined with “any reasonable degree of certainty”. The judges backed their judgment by also stating the multiple explanations possible, of the clause which made it ambiguous.

As there is no valid arbitration agreement (or clause) between the parties, there can be no suit for filing it in the Court, and hence, the second issue is answerable in negative. The Court gave proper and logical reasons for arriving at its decision that there was no valid arbitration agreement and hence, allowing the appeal. The Court was correct in setting aside the judgment and decree of the Subordinate Judge.

Conclusion

By various judicial precedents, it has repeatedly been established that agreements, like in the present case, have to be construed with reference to the language used therein and the surrounding circumstances.

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