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CASE NO.: Appeal (civil)  4877 of 2007

PETITIONER: The Empire Jute Co. Ltd. and Ors

RESPONDENT: The Jute Corporation of India Ltd. and Anr

DATE OF JUDGMENT: 12/10/2007

BENCH: S.B. Sinha & H.S. Bedi

JUDGMENT: J U D G M E N T [Arising out of SLP(C) No. 862 OF 2007] WITH CIVIL APPEAL NO. 4878  OF 2007 [Arising out of SLP(C) No. 1343 of 2007

AND

CIVIL APPEAL NO. 4879 OF 2007 [Arising out of SLP(C) No. 1602 of 2007

S.B. SINHA, J

1.      Leave granted. 2.      These appeals are directed against the judgment and order dated  15.12.2006 passed by a Division Bench of the Calcutta High Court in APO  No. 291 of 2006, A.P.O.T. No. 401 to 406 of 2006 in WP Nos. 962, 966,  967, 969, 970, 971 & 972 of 2004 and A.P.O.T. No. 399 of 2006 in W.P.  No. 1566 of 2004 and A.P.O.T. No. 400 of 2006 in W.P. No. 973 of 2004  respectively.  Factual matrix being in narrow compass, we will notice the  relevant facts.    3.      First Appellant is owner of a jute mill.  In exercise of power conferred  upon it under Section 3 of the Essential Commodities Act, Government of  India made an Order in the year 2000 known as \023Jute and Jute Textile  Control Order, 2000\024.  By reason of the said order, powers were conferred  on the Jute Commissioner to regulate stock of raw jute, fix price and control  production thereof.  In exercise of the power conferred upon him under the  said Order, the Jute Commissioner issued Production Control Orders (PCO)  to various jute mill owners directing them to manufacture \021B\022Twill Gunny  Bags of specified quality upon compulsory purchase of raw jute from the  Corporation.  Non-compliance of the directions was to result in application  of penal provisions. 4.      Indisputably, the Jute Commissioner sent the particulars of the said  Production Control Order to the Jute Corporation of India Ltd. for the  purpose of issuing necessary sale contract in order to enable the Jute  manufacturers to take delivery of the requisite quantities of raw jute  specified in the production control Order which the jute manufacturers were  required to compulsorily purchase from the Corporation. 5.      Indisputably, again the Commissioner in exercise of its power  conferred under Section 3(3) of the Control Order fixed the price of 50 kg B- Twill jute bags for the delivery in the month of December 2002  provisionally at Rs. 1712.77p per hundred bags.  The price for the said bags  was arrived at upon taking into account hundred percent JCI in raw jute  linkage i.e. the mills should compulsorily purchase raw jutes only from the  Jute Corporation of India.     

6.      The quality of raw jute supplied by the respondent under the contract  of sale was said to be of much inferior quality.  However, factum of entering  into a sale contract by the appellant with respondent No.1 is not in dispute.   

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Admittedly, Appellants did not purchase raw jute from the respondent No.1  for the period of October 2003 to April, 2004.  For fulfilling its  undertakings, allegedly, they had to purchase raw jute on credit from the  open market.   7.      Apprehending that no further raw material would be allotted to it,  and/or punitive action will be taken against them,  a writ petition was filed  by the appellant before the Calcutta High Court inter alia praying for the  following reliefs:- (a)     A declaration be passed that the respondent no. 2  does not have any power, competence and / or  authority to direct and / or order the petitioners to  compulsorily purchase raw jute from the respondent  no. 1 for effecting supply of B-Twill gunny bags of  665 gms.

(b)     A writ of and / or order and / or direction in the  nature of mandamus be issued commanding the  respondents not to force the petitioners to  compulsorily purchase raw jute from the respondent  No. 1 for effecting supply of B-Twill gunny bags of  665 gms under the various production control  orders.

(c)     A writ of and/or order and / or direction in the nature  of mandamus be issued commanding the  respondents to allocate and supply consignment of  raw jute as per productivity norms of Jute  Manufacturers Development Council for  manufacture of B-Twill Jute bags of 665 gms.

(d)     A writ of and/or order and/or direction in the nature  of mandamus be issued commanding the respondent  no. 2 to desist from forcing the petitioners to supply  B-Twill gunny bags at the lower of the price  prevailing for the period/month as mentioned in the  individual Production Control Orders and that  prevailing for the period subsequent thereto in the  event your petitioners are otherwise unable to supply  B-Twill gunny bags within the period as mentioned  in the individual purchase order.

8.      Despite, making the aforementioned prayers, the appellant however,  made an offer before a learned Single Judge of the High Court that the  backlog would be cleared within six months in six equal installments after  opening a letter of credit and if any payment is to be made by them, they will  take necessary steps therefor.    Pursuant to or in furtherance of the said  interim order, the appellant deposited the amount, in question.  On or about  6.7.2004, the Corporation issued a letter to the which reads as under :                   \023Re:     T.No. 212 of 2004                          WP No. 962 & 966 to 973 of 2004 Dear Sirs,

With reference to your letter nos. nil dated 30.06.2004  and 02.07.2004 on the above subject we would like to  advise you to make payment arrangement of the 1/6 (one  sixth) quantity of pending contracts along with the  carrying cost within 7 (seven) days from the date of  receipt of this letter, as per Clause 5.0 of the Sale  Contracts which has already been intimated to you vide  our letters dated 7.1.03, 17.11.03, 8.10.03, 4.12.03,  16.12.03, 26.12.03, 13.1.04, 16.1.04, 6.2.04, 19.2.04,  04.03.04, 19.3.04, 22.3.04 and 12.4.03.      

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It may please be noted that since the relevant Sale  Contracts have already been sent to you, the question of  issuance of fresh contract does not arise.  You are,  therefore, advised to make payment arrangement along  with carrying cost enabling us to take further action in  this regard.\024       

9.     The Division Bench by its order dated 15.12.2006 directed :

\023There is no dispute that within the time mentioned in the  said clause the writ petitioners did not take delivery of  the goods and complained before the Court that for not  taking such delivery, they should not be deprived of  future allotment.  We have already indicated that they  themselves realized their fault and decided to take late  delivery by installments on payment of the price fixed  under the contract and prayed for a direction upon the  appellant to allot further raw jutes in terms of the  agreement.  After getting benefit of the interim order,  they cannot now refuse to pay the carrying cost for taking  late delivery.  The learned Single Judge wrongly  interpreted the said clause by holding that the present  case was not one of furnishing defective Letters of Credit  and that Clause 5.0 can be invoked only in cases of  furnishing defective letters of credit.  In the case before  us, undisputedly the writ petitioners had the  responsibility for taking delivery of the goods within the  period mentioned in the said clause.  There is no dispute  that within the same period delivery was not taken.   Subsequently, by virtue of the interim order, they got  delivery and also prayed for a fresh allotment on opening  Letters of Credit.  It is preposterous to suggest that the  purchasers who are under obligation in terms of  agreement to lift the goods within a specified period and  for not taking delivery they are required to pay carrying  cost and delayed surcharges, will not be required to pay  such penalty unless defect is found in the Letters of  Credit even though they lifted the goods beyond the  stipulated time.  If we accept the aforesaid proposition,  the purchasers can avoid that clause by not taking  delivery of goods or without opening any Letters of  credit in favour of the appellant by contending that there  was no defect in the Letters of Credit.

We, thus, find that the learned Single judge erred in law  in holding that the writ petitioners were under no  obligation to pay the carrying cost and other charges  mentioned in clause 5.0 of the agreement even if they do  not lift the goods within the time stipulated therein or if  they do not furnish any letters of Credit in favour of the  appellant.

We, therefore, set aside the order impugned and hold that  the appellant is entitled to get the carrying costs and other  charges mentioned in Clause 5.0 of the agreement for  breach of the terms of the agreement at the instance of  the writ petitioners and that in this case, there has been  violation of that clause at the instance of the writ  petitioners.

We, accordingly, allow these appeals and direct the  learned advocate for the writ petitioners to handover the  entire amount lying in the bank account pursuant to the  interim order passed by the learned Single Judge

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inclusive of interest accrued thereon within a fortnight  from today.\024

10.     Having said so, the Division Bench directed the parties to settle the  amount through Arbitration in terms of agreement in regard to the quantum  of the carrying charges payable by the appellant to the respondents stating;

\023It appears from the agreement between the parties that  in case of any dispute arising out of the said agreement  there is an arbitration clause.   Whether the amount  deposited with the learned advocate for the writ  petitioners was sufficient to cover the carrying cost and  other charges in terms of clause 5.0, is a question of  fact  and for resolving such disputes detailed investigation is  necessary which is beyond the scope of the original writ  applications.  We were compelled to decide the question  of applicability of the Clause 5.0 only because of the  interim order granted by the learned Single Judge in  favour of the writ petitioners although they ultimately did  not press their grievance taken in the writ application.   In  such a situation, the learned Single Judge ought not to  have granted any interim order in favour of the writ  petitioners.   Interim orders are granted in aid of the final  relief claimed in judicial proceedings so that for not  passing the interim relief, the final relief may not become  inappropriate.   But the law is equally settled that if the  judicial proceedings fail in the long run, the Court  granting interim order in favour of the losing party  should undo the harm, if done to the successful party, in  view of the interim order.   By deciding the question of  applicability of Clause 5.0 and passing direction for  return of the money, we have merely undone the loss  suffered by the appellant for the interim order passed by  the learned Single Judge.

We, therefore, direct the parties to settle the amount  through arbitration in terms of the agreement.  The  arbitration will adjust the amount that will be handed  over to the appellant by the learned advocate for the writ  petitioners by virtue of this order while assessing the  actual amount payable by the writ petitioners to the  appellant due to taking delayed delivery of the goods.\024

11.     Mr. S. Bagaria, learned senior counsel appearing on behalf of the  appellant submitted that although there may not be any dispute with the legal  proposition that a suitor cannot take advantage of interim order passed in his  favour, but it is also trite that the interim order must be given effect to in  terms of the contractual obligations of the parties and, if in terms thereof, the  appellant was not liable to pay the carrying cost, clause 5.0 of the sale  agreement being not applicable, they cannot be fastened with the said  liability.  Strong reliance in this behalf has been placed on Central Bank of  India Ltd., Amritsar Vs. The Hartford Fire Insurance Co. Ltd. [AIR 1965 SC  1288].          12.     Mr. Bikash Bhattacharyya, learned senior counsel appearing on behalf  of the first respondent, on the other hand, would submit that the appellant  had filed a writ petition on the premise that the statutory order is not  applicable.  Such a prayer having been given a complete go-bye and the  appellant having prayed for passing an interim order to its benefit, by  undertaking to clear the backlog of purchases in six instalments, it was  bound to pay the carrying charges.  The Division Bench, Mr. Bikash  Bhattacharyya, would submit has rightly opined that the carrying charges  being payable, only quantum thereof would be subject matter of a dispute

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within the meaning of arbitration agreement entered into and by and between  the parties.    13.     Before embarking upon the respective contentions of the learned  counsel, we may notice the relevant terms of the contract: 2.0 Mode of delivery    :   For EX-GODOWN  DELIVERY:  The responsibility of lifting the goods  at their own cost within ______ will lie with the  buyers.

2.1  In the event of buyer\022s failure to take godown  delivery, within the delivery period indicated above,  an amount of Rs. 25/- per qtl. Per month shall be  levied over and above the price indicated at  Annexure-II.  The Corporation shall have the option  to cancel the contract for the failure of the buyer to lift  the goods by _____ and to exercise any and/or all the  options as stipulated at (i), (ii), (iii) & (iv) of Clause  No. 16.0 of the contract.

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5.0  Payment terms   :  Through confirmed and irrevocable  Letter of Credit and/or Bank Draft/Pay Order  preferably through a nationalized bank at Kolkata  covering the full value of the entire quantity of jute  covered by is contract and other incidental costs to be  signed by the buyers and furnished to us by 26.03.04  at the latest.   In case the Letter of Credit furnished by  the buyer within the stipulated date as indicated  above, was found to be not acceptable to JCI, the  same would be returned to the buyer for amendment  and for the period taken by the buyer for resubmission  of the Letter of Credit after necessary amendment, the  buyer shall be liable to pay carrying cost at the rate of  Rs. 25/- per quintal per month or part thereof.

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8.0  Procedure for claim settlement :  All claims on  account of quality shall be settled according to Bye- Laws & Rules of EIJ&HE.  The allowable moisture  regain percentage shall be 18% for July, August,  September and October and 16 % for the remaining 8  months, November to June.  The buyers shall clearly  indicate the extent of the claims (in terms of  percentage) on quality and condition.  No joint  inspection shall be arranged and no claim shall be  entertained by the Corporation unless the buyers  clearly indicate the extent of claim in the manner  mentioned herein above and within the time specified  in the bye-laws and rules of the EIL&HE.

In case of EX-GODOWN DELIVERY, the weight  shall be determined at the point of delivery ex- godown based on weight recorded on lorry challan or  the certificate of weighment signed by the authorized  representative of the buyers and the Corporation.   For  this purpose the certificate to be given may be in the  Form of Annexure-III.          Based on the settlement of claim for quality, condition  and weight if the buyers are found to be entitled to  recover any amount from the Corporation, payment  should be made within 15 days from the date of  receipt of the debit note.

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9.0  Arbitration :  All disputes or differences whatsoever  arising between the parties put of/or relating to the  construction, meaning and operation or effect of this  contract or the breach thereof shall be settled by  arbitration of the Indian Council of Arbitration and  the award made in pursuance thereof shall be binding  on both the parties.

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16.0  In the event of any delay or failure on the part of the  buyer in making payment arrangement acceptable to  JCI within the stipulated period under the contract  and/or his/their failure/refusal to take delivery of the  contracted quantity as per Clause 4.1 of the contract  as also to perform any of the terms of the contract, the  Corporation shall have the right to exercise any and/or  all of the following options:

i)      Canceling the contract;

ii)     Canceling the contract and charging the buyers for  difference, if any, between the contract prices and  the market price on the date of canceling the  contract.

iii)    Canceling the contract and selling the goods in any  manner deemed fit by the Corporation and charging  the buyer for the difference between the contract  price and the not value realized from such after  adjustment of all expenses incurred by the  Corporation in this regard; and  

iv)     To realize any other amount which the Corporation  might have to pay for retaining the goods inclusive  of carrying charges wherever applicable.

14.     Construction of the contract entered into by and between the parties is  in question before us.   There exists an arbitration agreement.  The  Arbitration Agreement is of wide amplitude; by reason whereof not only the  dispute relating to quality of the jute sought to be supplied by the respondent  No.1 may be gone into, the construction, meaning and operation and effect  of the contract or breach thereof, if any, would have also fallen for  determination of an Arbitrator.   15.     It is not correct to contend that clause 8.0 provides for procedure for  claim settlement.   The said provision in regard to the quality of jute supplied  has in our opinion nothing to do with clause 9.0.   The arbitration agreement  entered into by and between the parties is independent of clause 8.0.   It is  now well settled that when there exists an arbitration agreement, the writ  court ordinarily would not exercise its discretionary jurisdiction to enter into  the dispute.       16.     The learned Single Judge embarked upon the question of construction  of the agreement.  In a sense, the Division Bench overturned the said  decision.  Construction of the agreement therefor fell for consideration of the  High Court.  Division Bench, as noticed hereinbefore, itself opined that the  arbitration clause should be taken recourse to for the purpose of computation  of the quantum of the carrying cost.  The question of payment of carrying  cost by the appellant in favour of the respondent would arise provided the  same is payable.  Payability of such carrying cost would, thus, depend upon  construction of clause 2.0 read with clause 5.0 of the sale contract. 17.     Respondent, no doubt, could have taken recourse to clause 16.0 of the  agreement in terms whereof it could realize any amount which the

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Corporation might have to pay.  Disputed fact was required to be gone into  before a definite opinion could be arrived at as to whether in the facts and  circumstances, the obligation to pay the carrying cost was applicable. 18.     The power of judicial review vested in the superior courts  undoubtedly has wide amplitude but the same should not be exercised when  there exists an arbitration clause.  The Division Bench of the High Court  took recourse to the arbitration agreement in regard to one part of the dispute  but proceeded to determine the other part itself.  It could have refused to  exercise its jurisdiction leaving the parties to avail their own remedies under  the agreement but if it was of the opinion that the dispute between the parties  being covered by the arbitration clause should be referred to arbitration, it  should not have proceeded to determine a part of the dispute itself.        19.     Similar question arose for consideration in M/s. Bisra Stone Lime Co.  Ltd. etc. Vs. Orissa State Electricity Board and another [AIR 1976 SC 127]  wherein it was held that the High Court may refuse to exercise its  jurisdiction, if there exists a valid arbitration clause stating; \02324.  It is then submitted that this Court should not use its  discretion in favour of arbitration in a matter where it is a  pure question of law as to the power of the Board to levy  a surcharge.  This submission would have great force if  the sole question involved were the scope and ambit of  the power of the Board under Sections 49 and 50 of the  Act to levy a surcharge, as it was sought to be initially  argued.  The question in that event may not have been  within the content of clause 23 of the agreement.   But all  questions of law, one of which may be interpretation of  the agreement, need not necessarily be withdrawn from  the domestic forum because the court has discretion  under Section 34 of the Arbitration Act or under Article  226 of the Constitution and that the court is better posted  to decide such questions.  The arbitration clause 23 is a  clause of wide amplitude taking in its sweep even  interpretation of the agreement and necessarily, therefore,  of clause 13 therein.  We are therefore, unable to accede  to the submission that we should exercise our discretion  to withhold the matter from arbitration and deal with it  ourselves.       20.     A similar view was taken by this Court in Sanjana M. Wig (Ms) Vs.  Hindustan Petroleum Corpn. Ltd. [(2005) 8 SCC 242 holding; \02312. The principal question which arises for consideration is  as to whether a discretionary jurisdiction would be  refused to be exercised solely on the ground of existence  of an alternative remedy which is more efficacious.   Ordinarily, when a dispute between the parties requires  adjudication of disputed question of facts wherefor the  parties are required to lead evidence both oral and  documentary which can be determined by a domestic  forum chosen by the parties, the Court may not entertain  a writ application (See Titagarh Paper Mills Ltd. v.  Orissa SEB and Bisra Stone Lime Co. Ltd. v. Orissa  SEB)\024

13.  However, access to justice by way of public law remedy  would not be denied when a lis involves public law  character and when the forum chosen by the parties  would not be in a position to grant appropriate relief.       21.     Relying on some of the earlier decisions of this Court, this Court   held:         \023It may be true that in a given case when an action of the party is  dehors the terms and conditions contained in an agreement as also  beyond the scope and ambit of the domestic forum created therefore,  the writ petition may be held to be maintainable; but indisputably

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therefore such a case has to be made out.   It may also be true, as has  been held by this Court in Amritsar Gas Service and E.  Venkatakrishnathat the arbitrator may not have the requisite  jurisdiction to direct restoration of distributorship having regard to the  provisions contained in Section 14 of the Specific Relief Act, 1963;  but while entertaining a writ petition even in such a case, the court  may not lose sight of the fact that if a serious disputed question of fact  is involved arising out of a contract qua contract, ordinarily a writ  petition would not be entertained.  A writ petition, however, will be  entertained when it involves a public law character or involves a  question arising out of public law functions on the part of the  respondent.\024

        22.     The legal position has undergone a substantial change,   having regard  to Section 5 of the Arbitration and Conciliation Act, 1996 vis-‘-vis  provisions of Arbitration Act, 1940.  The said provision reads as under:- \0235. Extent of judicial intervention \026 Notwithstanding  anything contained in any other law for the time being in  force, in matters governed by this Part, no judicial  authority shall intervene except where so provided in this  Part.\024

23.     In terms of 1940 Act, even a civil suit could have been entertained  subject of course to exercise of the court\022s jurisdiction under Section 21  thereof.  Section 5 of 1996 Act takes away the jurisdiction of the Court.   There cannot be any doubt whatsoever, the provision of the 1996 Act must  be given effect to.

24.     As the disputed facts as also the law are required to be determined by  the Arbitrator, we are of the opinion that all disputes between the parties  should be directed to be resolved upon taking recourse to the arbitration  agreement contained in clause 9.0 of the Sale Order.    

25.     We therefore, direct;

(a)     In exercise of a jurisdiction under Article 142 of the Constitution, in  the peculiar facts and circumstances of this case, all disputes and  differences between the parties be referred to the arbitration in terms  of clause 9.0 of the contract.  

(b)     Reference to arbitration would be deemed to be one under the 1996  Act.   

(c)     The parties would be at liberty to approach the High Court for any  other or further direction(s).

(d)     The learned Arbitrator would make an Award within a period of four  months from the date of entering into reference.   

(e)     All amount deposited by the appellant with the learned advocate on  record towards the carrying charges should be paid to the second  respondent, wherefor an appropriate receipt would be given.   

(f)     Such payment shall be without prejudice to the rights of the parties  before the Arbitrator and shall be subject to any other or further order  or direction that may be issued by the learned Arbitration in his  Award. 26.     These appeals are allowed to the aforementioned extent.   In the facts  and circumstances of this case, the parties shall pay and bear their own costs.