I.T.C. LIMITED versus GEORGE JOSEPH FERNANDES & ANR.

Citation: [1989] 1 S.C.R. 469 · Decided: 06-02-1989 · Supreme Court of India · Bench: G.L. OZA · Disposal: Dismissed

Cited by 1 judgment(s) · cites 6 · see the full citation network in Lexace

Judgment (excerpt)

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l.T.C. LIMITED 
v. 
GEORGE JOSEPH FERNANDES & ANR. 
FEBRUARY 6, 1989 
[G.L. OZA AND K.N. SAIKIA, JJ.] 
Arbitration Act, 1940: Sections 32, 33, 34. 
Stay of Legal Proceedings-Whether court has jurisdiction to 
decide validity of contract containing Arbitration clause--Existence of a 
valid agreement-Whether condition precedent. 
'"I: 
Jurisdiction of court to decide on-Validity and legality of 
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contract-Whether to be decided on affidavits and documents or on 
evidence. 
Constitution of India 1950, Article 136. 
Interference by Supreme Court-With discretion of courts under 
Section 34 of Arbitration Act, 1940-When called for. 
Contract Act, 1872: Section 20. 
Mistake of fact-Nature of-An erroneous opinion as to the value 
of the contracted thing-Not a mistake of fact-Common mistake of 
both parties must be about the same vital fact-Common mistake and 
Mutual Mistake-Distinction between. 
A 
B 
c 
D 
E 
) 
Fishing trawlers-Refrigeration system-Deficiency-Required 
F 
temperature Minus 20 Degree F-Attained temperature Minus JO 
Degree F-Whether mutual mistake. 
Words & Phrases: Naturali ratione inunitilis. 
Ex turpi causa non oritur actio--Meaning of. 
Under an import licence dated 3rd March, 1971 issued by the 
Chief Controller of Imports and Exports the respondent imp<trted two 
fishing trawlers with the financial assistance of the second respondent-
Canara Bank. The respondent conducted negotiations with the appel-
lant for a charter-party agreement in respect of the said trawlers. On 
21st March, 1977, an agreement between the parties was executed 
469 
G 
H 
A 
B 
c 
D 
E 
470 
SUPREME COURT REPORTS 
[1989) 1 S.C.R. 
under which the appellant agreed to take on charter hire the said two 
trawlers for the purpose of deep sea fishing for a period of two years 
with an option to continue the hire for a further period of three years. 
Under the terms of the agreement the respondent was to deliver the said 
trawlers 1o the appellant at Vishakhapatnam within seven days of the 
receipt of approval from the Chief Controller of Imports and Exports 
or no objection certificate from the Canara Bank, for making the said 
trawlers fully operational and to ascertain the cost of such repairs. The 
appellant charterer was then to conduct fishing trials to ascertain actual 
conditions and thereafter the charter hiring was to commence from the 
date the fishing trials were ended. 
On 18th August, 1977, the Chief Controller of Imports and 
Exports granted permission to the respondent to charter the said 
trawlers to the appellant on the conditions that the charter rent would 
be Rs.50,000 per month per trawler and that the charter would be for a 
period of three years. On 30th September, 1977, the respondent 
delivered the said two trawlers for repairs to the appellant. 
On 2nd February, 1978, the parties modified the agreement 
revising the rate of charter hire and the date of commencement of hire, 
to the extent that the charter hire would commence from 15th January, 
1978 and the revised rate of hire would be Rs.6,25,000 per trawler per 
year. 
The appellant charterer raised objections alleging that the 
trawlers suffered from inherent and latent defects in the refrigeration 
system which was an essential part of such trawlers and as such the 
trawlers were not fully operational because even after carrying out 
extensive repairs the refrigeration system could not be brought to the 
.lo
F 
required standard of minus 20 degree F but attained only minus 10 degree F. 
On 29.9.1978, the appellant instituted a suit in the original side of 
the Calcutta High Court claiming (i) a decree for a sum of Rs.39,64,341 
towards cost, charges, damages and compensation incurred on the said 
trawlers and, (ii) a declaration that the agreement was contrary to the 
G terms of the permission granted by the Chief Controller of Imports and 
Exports and consequently illegal and against public policy and void; (iii) 
that the Parties had entered into the agreement on the basic funda-
mental assumption that by effecting necessary repairs the trawlers 
would be made fully operational but the assumption was subsequently 
discovered to be mistaken because of the deficiency in the refrigeration 
H system and it rendered the agreement void. 
l.T.C. v. G.J. FERNANDES 
471 
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The respondent tiled an application under Section 34 of the Arbi-
A 
!ration Act, 1940 praying that the suit instituted by the appellant, 
and all proceedings therein be stayed bec

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