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PETITIONER: THE CALCUTTA TRAMWAYS CO. LTD.

       Vs.

RESPONDENT: THE CORPORATION OF CALCUTTA

DATE OF JUDGMENT: 12/03/1965

BENCH: SUBBARAO, K. BENCH: 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]

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JUDGMENT: 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 thereunder.  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

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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

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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 thereunder. In the result, we agree with the view expressed by the  High Court and dismiss the appeal with costs. Appeal dismissed. 358