LexTHE EMPIRE JUTE CO. LTD. & ORS. versus THE JUTE CORPORATION OF INDIA LTD. AND ANR.
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A THE EMPIRE JUTE CO. LTD. & ORS. V. THE JUTE CORPORATION OF INDIA LTD. AND ANR. OCTOBER 12, 2007 B [S.B. SINHA AND HARJIT SINGH BEDI, JJ.) Arbitration and Conciliation Act, 1996: c s. 5-Arbitration agreement-Extent of judicial review- Contract for supply of raw jute-Dispute between parties regarding liability to pay carrying cost and quantum thereof-High Court though held that there existed arbitration clause, however, determined the question of liability to pay carrying charges, and referred the quantum D to be decided in arbitration-HELD: Power ofjudicial review vested in the superior courts undoubtedly has wide amplitude but same should not be exercised when there exists an arbitration clause-Division ,,.\-, ~ Bench of High Court having opined that dispute between the parties was covered under the arbitration clause, it should not have proceeded E to determine a part of dispute itself-As disputed questions of fact and law are required to be determined by arbitrator, all disputes between parties are, in exercise of power under Article 142 of the Constitution, directed to be referred to arbitration in terms of clause 9.0 of the Sale Order and as indicated in the judgment-Constitution of India, 1950- r. Article 142 . .. The Jute Commissioner, pursuant to Jute and Textile Control Order, 2000 made by Government oflndia in exercise of powers under s. 3 of the Essential Commodities Act, 1955, issued Production Control G Orders to various jute mills including the appellant Company directing them to manufacture 'B' Twill Gunny Bags of specified quality upon compulsory purchase of raw jute from the Corporation. The ~. Commissioner fixed the price of the Gunny Bags to be supplied by the appellant-Company as per the Schedule. Thereafter a contract for sale H 388 f EMPIRE JUTE CO. LTD. v. JUTE CORPORATION OF 389 INDIA LTD . .__" ofraw jute was entered into between the appellant-Company and the A respondent Jute Corporation of India Ltd. The appellant did not purchase raw jute from the Corporation alleging the same as of inferior quality, and filed a writ petition before the High Court, inter alia, challenging the power of the Commissioner to order compulsory purchase of raw jute, and prayed for a direction to him to desist from B forcing the company to supply the gunny bags at the price fixed by him. -1 However, before the single Judge the appellant made an offer to clear T the backlog. An interim order was passed. The respondent issued a letter to the appellant to make the payment along with the carrying cost, which was objected to by the appellant. The matter was taken to the Division c Bench, which upheld the liability of the respondent to pay the carrying charges and directed the parties to settle the quantum through arbitration. Aggrieved, the Company filed the instant appeal. Partly allowing the appeal the Court D HELD: 1.1. 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. In the instant case, in clause 9 .0 of the contract for sale of jute, there exists an arbitration agreement. The arbitration agreement is of wide amplitude, by reason E ' whereof not only the dispute relating to quality of the jute sought to be supplied by respondent no.1 may be gone into, but construction, meaning and operation and effect of the contract or breach thereof, if any, would have also fallen for determination of the arbitrator. [Paras 14and18) [399-D; 400-C) F _-,..- Central Banko/India Ltd, Amritsarv. The Hartford Fire Insurance Co. Ltd, AIR (1965) SC 1288, cited. 1.2. Construction of the agreement fell for consideration of the G High Court. The Division Bench 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 costwould, thus, depend H 390 SUPREME COURT REPORTS (2007] 11 S.C.R. A upon construction of clause 2.0 read with clause 5.0 of the sale contract 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. Once the High Court was of the opinion that the dispute between the parti
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