UNION OF INDIA versus SALWEEN TIMBER CONSTRUCTION (INDIA) & ORS.

Citation: [1969] 2 S.C.R. 224 · Decided: 25-09-1968 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

UNION OF INDIA 
v. 
SALWEEN TIMBER CONSTRUCTION (INDIA) & ORS. 
September 25, 1968 
[J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.] 
Arbitration-Arbitration clause in 
contract-Dispute whether arises 
out of contract-Test for determining. 
There was a dispute between the appellant and respondent re,garding 
the supply of timber. In pursuance of the clause in the contract which 
provided that in the event of any question or dispute arising under the: 
contract or in connection with the contract it should be referred to arbi-
tration, the dispute was so referred. 
One of the items in dispute was a 
claim by the respondent that there was an excess supply of timber to 
cover up possible rejection; which .should be returned by the appellant 
with compensation for deterioration, or that payment should be made 
for it at. the market value. The appellant contended that tho terms of 
the contract did not require the respondent to tender for inspection any 
quantity in excess of the contracted quantity, that the claim was in 
detinue relating to an involuntary bailment and not in relation to any-
thing done in the performance, implementation or execution of the con-
tract; and therefore, it was not a dispute arising out of the contract or 
in connection with the contract. 
On the question whether the arbitrators had jurisdiction to adjudicate 
A 
B 
c 
D 
upon the claim, 
E 
HELD : The test for determing the question is whether recourse to 
the contract, by which both the parties 
are 
bound, 
was 
necessary 
for the purpose of determining 
whether the claim of the respondent 
was 
justified 
or 
otherwise. 
Since 
it 
was 
necessary to have 
recourse to the terms of the contract for the purpose of deciding the 
matter in dispute, the matter was within the scope of the arbitration 
clause and the arbitrators had jurisdiction to decide it. 
F 
Ruby General Insurance Co. 
Ltd. v. Peary 
Lal Kumar, 
[1952] 
S.C.R. SOI, followed. 
Piercy v. Young, 14 Ch.D. 200 and Turnock v. Sartoris 43 Ch.D. 
150, explained. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 549 of 
1966. 
Appeal by special leave from the order dated October 23, 
1964 of the Punjab High Court, Circuit Bench at Delhi in Civil 
Revision No. 438-D of 1964. 
V. A. Seyid Muhammad and S. P. Nayar, for the appellant. 
S. V. Gupte and A. K. Nag, for respondents Nos. 1 and 2. 
A. G, Ratnaparkhi, for respondent No. 5. 
G 
H 
). __ i 
• 
>-
' 
• 
• 
• 
A 
B 
c 
UNION v. SALWEEN TIMBER (Ramaswami, J.) 
225 
The Judgment of the Court was delivered by 
Ramaswami, J. This appeal is brought by special leave 
against the judgment of the Punjab High Court in Civil Revision 
No. 438-D of 1964 by which the revision petition of the appellant 
against the order of Shri D. R. Khanna, Subordinate Judge, 1st 
Class, Delhi dated 20th April, 1964 in Suit No. 128 of 1963 was 
dismissed in limine. Suit No. 128 of 1963 was an application 
by the Union of India under sections 5, 12(2), 31 (3), 32 and 
33 of the Arbitration Act, 1940 for obtaining a declaration that 
the reference of the claim of the respondent firm in respect of 
excess quantity of timber alleged to have been delivered and cer-
tain other matters was not covered by the arbitration agreement 
and for leave to revoke the authority of the Arbitrators and the 
Umpire. 
The petition was rejected by the Subordinate Judge by 
his order dated 20th April, 1964. 
By a savingram dated 21st December, 1953 the Union of 
India (hereinafter called the appellant) entered into a contract 
of purchase of 1,01,750 cubic feet of teak logs at Rs. 9/12/- per 
D 
c.ft. to be delivered F.0.R. Halisahaar and Lillooah, both in West 
Bengal near Calcutta. 
The consignee was the District Controller 
of Stores, Eastern Railway. 
The formal acceptance of tender 
confirming the savingram and containing the other terms of the 
contract was issued on 13th January, 1954. Besides the quantity 
of teak logs originally contracted to be supplied, the respondent 
E 
firm subsequently supplied a quantity of 1676.95 c.ft. 
Burma 
teak squares at the same rate and the contract was accordingly 
amended on 13th December, 1957. 
It was provided in clause 
17 ( c) of the acceptance of tender that the respondent firm was 
to offer the timber for inspection at its own premises at Halisahaar 
and Lillooah. 
Althou~h the delivery time was extended from 
time to time, upto 26th January, 1958, the respondent firm sup-
F 
plied only 77,211.89 cubic feet of timber and the contract

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