Holding

When a valid arbitration clause of wide amplitude exists, courts must refer the entire dispute, including questions of fact and law, to arbitration and cannot adjudicate any part of it.

Summary

The Empire Jute Co. Ltd. entered into a sale contract for raw jute with the Jute Corporation of India, which was subject to a Production Control Order compelling the mill to purchase jute at a fixed price. The appellant alleged the supplied jute was of inferior quality, refused to purchase, and filed a writ petition challenging the Commissioner’s power. After an interim order, the corporation demanded payment of carrying costs under clause 5.0 of the contract. The Calcutta High Court held the corporation liable for the carrying costs but directed the parties to determine the quantum through arbitration, citing the arbitration clause in clause 9.0. The Supreme Court held that, because the contract contained a valid arbitration agreement of wide amplitude, the court could not decide any part of the dispute and must refer the entire matter to arbitration, invoking Section 5 of the Arbitration and Conciliation Act, 1996. Consequently, the High Court’s partial determination was set aside and the appeals were partly allowed, with the dispute referred to arbitration.

Issues considered

The existence and scope of the arbitration clause in the contract and whether it covers the dispute over liability and quantum of carrying costs.
Whether the High Court could exercise judicial review under Section 5 of the Arbitration and Conciliation Act, 1996 to decide part of the dispute despite the arbitration agreement.
Interpretation of contract clauses 2.0, 5.0 and 9.0 in relation to the obligation to pay carrying costs.
The applicability of Article 142 of the Constitution in directing parties to arbitration.

Legislation cited

Arbitration and Conciliation Act, 1996s. 5
Constitution of Indias. 142
Essential Commodities Act, 1955s. 3

Subjects

ArbitrationSection 5 Arbitration ActJudicial reviewEssential Commodities ActCarrying costContract interpretationArbitration clauseArticle 142Jute industry

Judgment

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 ofliability 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 ofdispute itself-As disputed questions offact and
law are required to be determined by arbitrator, all disputes between
parties are, in exercise ofpower under Article 142 ofthe Constitution,
directed to be referred to arbitration in terms ofclause 9.0 ofthe Sale
Order and as indicated in the judgment-Constitution ofIndia, 1950-
. Article 142.
r.

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 ofwide 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 ofthe 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
High Court. The Division Bench itself opined that the arbitration clause G
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 ofclause 2.0 read with clause 5.0 ofthe 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 ofthe opinion
that the dispute between the parties being covered by the arbitration
B clause should be referred to arbitration, it should not have proceeded
to determine a part of the dispute itself.
[Paras 16and18) [399-G-H; 400'"A, C, DJ
Mis. Bisra Stone Lime Co. Ltd etc. v. Orissa State Electricity Board
C and Anr., AIR (1976) SC 127 and Sanjana M Wig (Ms) v. Hindustan
Petroleum Corpn. Ltd, [200S) 8 SCC 242, relied on.
1.3. The legal position has undergone a substantial change, having
regard to Section 5 of the Arbitration and Conciliation Act, 1996 vis-a-
vis provisions ofArbitration Act, 1940. Section 5 of1996 Act takes away
D the jurisdiction of the Court. There cannot be any doubt whatsoever,
the provision of the 1996 Act must be given effect to.
[Paras 22 and 23) [402-C, D, E]
1.4. As the disputed questions of facts as also of law are required
E to be determined by arbitrator, all disputes between the parties are, in
exercise of jurisdiction under Article 142 of the Constitution, directed
to be referred to the arbitration in terms of clause 9.0 of Sale Order
and as indicated in the judgment [Para 24) [402-E-F]

F CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4877 of
2007.
From the final Judgment and Order dated 15.12.2006 of the High
Court of Calcutta at Calcutta in A.P.O. No. 291 of2006@ W.P. No.
962/2004, A.P.O.T. No. 401 of2006@ W.P. No. 969/2004, A.P.O.T.
G No. 402of2006@ W.P. No. 967/2004, A.P.O.T. No. 403 of2006
@ W.P. No. 966/2004, A.P.O.T. No. 404 of2006@ W.P. No. 972/
2004. A.P.O.T. No. ~05 of2006@W.P. No. 971/2004 and A.P.QJ. _
No. 406 of2006@ W.P. No. 970/2004.

H
EMPIRE JUTE CO. LTD. v. JUTE CORPORATION OF 391
INDIA LTD. [SINHA, J.]
WITH A
C.A. Nos. 4878 and 4879 of2007.
S. Bagaria, Ashok Jain, Pankaj Jain and Bijoy Kumar Jain for the
Appellants.
Bikash Bhattacharya, Nandini Mitra, Subimal Mukherjee, Swati Sinha B
and Jayasree Singh (for Fox Mandal & Co.) for the Respondent.
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.
c
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 of2006, A.P.O.T. No. 401to406 of2006 in WP Nos.
962, 966, 967, 969, 970, 971 & 972 of2004 and A.P.O.T. No. 399 of
2006 in W.P. No. 1566 of2004 and A.P.O.T. No. 400 of2006 in W.P. D
No. 973 of2004 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, E
Government of India made an Order in the year 2000 known as "Jute
and Jute Textile Control Order, 2000". 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 F
Control Orders (PCO) to various jute mill owners directing them to
manufacture 'B 'Twill 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 G
Production Control Order to the Jute Corporation oflndia 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
H,
),"' "
392 SUPREME COURT REPORTS [2007] 11 S.C.R.
-'(A

A 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
B
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 r-
the Jute Corporation of India. ""!'

6. The quality of raw jute supplied by the respondent under the
c 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. l is
not in dispute. Admittedly, Appellants did not purchase raw jute from the
respondent No. l for the period of October 2003 to April, 2004. For
fulfilling its undertakings, allegedly, they had to purchase raw jute on credit
n 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:-
E
(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
th~ respondent no. 1 for effecting supply of B-Twill gunny bags
F of665 gms.
'1-
(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
G 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
H of Jute Manufacturers Development Council for manufacture
EMPIRE JUTE CO. LTD. v. JUTE CORPORATION OF 393
INDIA LTD. [SINHA, J.]
ofB-Twill Jute bags of 665 gms. A
(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 B
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 , C
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., D
On or about 6.7.2004, the Corporation issued a letter to the which reads
as under:
"Re: T.No. 212 of2004
WP No. 962 & 966 to 973 of 2004
E
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 canying cost within 7 (seven) days F
from the date of receipt ofthis 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. G
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 H
A.
394 SUPREME COURT REPORTS [2007] 11 S.C.R. ·
--(4 •
A action in this regard."
---- ...

9. The Division Bench by its order dated 15.12.2006 directed:
"There is no dispute that within the time mentioned in the said
clause the writ petitioners did not take delivery of the goods and
B 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
'-T'
take late delivery by installments on payment of the price fixed
under the contract and prayed for a direction upon the appellant
c 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 inteipreted the said clause by holding that the present case
was not one of furnishing defective Letters of Credit and that Clause
D 5.0 can be.invoked only in cases of furnishing defective letters of
credit. In the case before us, Wldisputedly 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 viltue of the
E 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 Wlder 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
F be required to pay such penalty unless defect is found in the Letters
of Credit even though they lifted the goods beyond the stipulated '1-
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
G 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 carryfug
cost and other charges mentioned in clause 5.0 of the agreement
H even if they do not lift the goods within the time stipulated therein
EMPIRE JUTE CO. LTD. v. JUTE CORPORATION OF 395
INDIA LTD. [SINHA, J.]
or if they do not furnish any letters of Credit in favour of the A
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 tenns B
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 C
in the bank account pursuant to the interim order passed by the
learned Single Judge inclusive of interest accrued thereon within a ,
fortnight from today."
10. Having said so, the Division Bench directed the parties to settle D
the aniount through Arbitration in tenns of agreement in regard to the
quantum of the carrying charges payable by the appellant to the'
respondents stating;
"It appears from the agreement between the parties that in case of
any dispute arising out of the said agreement there is an arbitration E
clause. Whether the amount deposited with the learned advocate
for the writ petitioners was sufficient to cover the canying cost and
other charges in tem1s 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 F
compelled to decide the question of applicability of the Clause s:o
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 G
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 becmp.e
inappropriate. But the law is equally settled that if the judicial
H
396 SUPREME COURT REPORTS [2007] 11 S.C.R.

A proceedings fail in the long run, the Court granting interim order in
favour of the losing party should undo the hann, 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
B 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
c 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."
11. Mr. S. Bagaria, learned senior counsel appearing on behalf of
D 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
E 5.0 of the sale agreement being not applicable, they cannot be fastened
with the said liability. Strong reliance in this behalfhas been placed on
Central Bank ofIndia Ltd., Amritsar v. The Hartford Fire Insurance
Co. Ltd., AIR (1965) SC 1288.
F 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,
G 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
within the meaning of arbitration agreement entered into and by and
H between the parties. -
EMPIRE JUTE CO. LTD. v. JUTE CORPORATION OF 397
INDIA LTD. [SINHA, J.]
13. Before embarking upon the respective contentions of the learned A
counsel, we may notice the relevant tenns 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.
B
2.1 In the event of buyer's 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-11. The Corporation shall have the
option to cancel the contract for the failure of the buyer to lift c
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.
xxx xxx xxx
D
5.0 Payment terms: Through confirmed and irrevocable Letter
of Credit and/or Bank Draft/Pay Order preferably through '3-
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 E
us by 26.03.04 at the latest. In case the Letter of Cre~it
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 F
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.
xxx xxx xxx
8.0 Procedure for claim settlement : All claims on account of G
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
H
398 SUPREME COURT REPORTS [2007] 11 S.C.R.

A clearly indicate the extent of the claims (in tenns 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
B bye-laws and rules of the EIL&HE.
In case of EX-GODOWN DELIVERY, the weight shall be
detennined 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
c Corporation. For this purpose the certificate to be given may
be in the Fonn of Annexure-Ill.
Based on the settlement of claim for quality, condition and
weight if the buyers are found to be entitled to recover any
D amount from the Corporation, payment should be made within
15 days from the .date of receipt of the debit note.
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
E 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.
xxx xxx xxx
F 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
G 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
H
EMPIRE JUTE CO. LTD. v. JUTE CORPORATION OF 399
INDIA LTD. [SINHA, J.]
difference, if any, between the contract prices and the A'
market price on the date of canceling the contract.
(rii) 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 B
realiz.ed 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 canying
charges wherever applicable. C
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 D
respondent No.I may be gone into, the construction, meaning and
..-1 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 E
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. F
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, G
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 H
400 SUPREME COURT REPORTS [2007] 11 S.C.R.

A with clause 5.0 of the sale contract. ~ ~
'
17. Respondent, no doubt, could have taken recourse to clause 16.0
I-
of the agreement in terms whereof it could realize any amount which the
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
B
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
c 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
D '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 ;-_ j.

19. Similar question arose for consideration in Mis. Bisra Stone
Lime Co. Ltd. etc. v. Orissa State Electricity Board and Anr., AIR
E
(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;
J::
''24. 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
F 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
G 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
H
EMPIRE JUTE CO. LTD. v. JUTE CORPORATION OF 401
INDIA LTD. [SINHA, J.]

posted to decide such questions. The arbitration clause 23 is a: 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. 'B
20. A similar view was taken by this Court in Sanjana M Wig (Ms)
V. Hindustan Petroleum Corpn. Ltd., [2005] 8 sec 242 holding;
"12. The principal question which arises for consideration is as to
whether a discretionary jurisdiction would be refused to be C 1

exercised solely on the ground of existence of an alternative remedy
which is more efficacious. Ordinarily, when a dispute between the
=I 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! D
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)"
13. However, access to justice by way of public law remedy would E
not be denied when a lis involves public law character and when
the forum e;hosen 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: F
"It may be true that in a given case when an action of the party
is dehors the tenns 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 G
indisputably 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. Venkatakrishna that the arbitrator may not have the
requisite jurisdiction to direct restoration of distributorship havin~
regard to the provisions contained in Section 14 of the Specific H
402 SUPREME COURT REPORTS (2007] 11 S.C.R.

A 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
B character or involves a question arising out of public law functions
on the part of the respondent."
22. The legal position has undergone a substantial change, having
regard to Section 5 of the Arbitration and Conciliation Act, 1996 vis-a-
C vis provisions of Arbitration Act, 1940. The said provision reads as under:-
"5. Extent of judicial intervention - 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."
D
23. In terms of 1940 Act, even a civil suit could have been
entertained subject of course to exercise of the court's 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
E 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.
F
25. We therefore, direct; 'i-
(a) In exercise ofajurisdiction 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
G 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
EMPIRE JUTE CO. LTD. v. JUTE CORPORATION OF 403
INDIA LTD. [SINHA, J.]
any other or further direction(s). A
(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 a
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. C
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.
RP. Appeal partly allowed. D

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