1965 (3) TMI 74 - SC - Indian Laws

Supreme Court affirms arbitration clauses post transfer of rights under Tramways Act, emphasizing rent payment connection.

CALCUTTA TRAMWAYS CO. LTD. Versus CORPN. OF CALCUTTA

The Supreme Court of India upheld the High Court's decision in a case involving the interpretation of arbitration clauses in agreements post transfer of ... - Issues:Interpretation of arbitration clauses in agreements post transfer of rights under the Tramways Act, 1951.Analysis:The judgment delivered by the Supreme Court of India involved a dispute regarding the interpretation of arbitration clauses in agreements following the transfer of rights under the Tramways Act, 1951. The case originated from an agreement dated October 2, 1879, between the Corporation of Calcutta and certain grantees for the construction and use of tramways in Calcutta. Subsequent agreements confirmed by Acts were made between the successors of the Corporation and the grantees, including an arbitration clause for resolving disputes. The appellant, Calcutta Tramways Co. Ltd., became the assignee of the grantees.The State of West Bengal entered into an agreement with the appellant in 1951 for the purchase of the tramway undertaking, subject to the Tramways Act, 1951. The Act confirmed the transfer agreement and vested powers and duties in the government, while also statutorily substituting the government for the Corporation in the agreements. However, the proviso in Section 5 of the Act preserved the sums payable under the agreements to the Corporation, allowing them to continue as if the Act had not been passed.The Court held that the government's substitution did not affect the arbitration clauses in the agreements regarding rent payments. The substantive right to payment and the procedural right to arbitration were deemed interconnected and inseparable. Enforcing the arbitration clauses against the appellant was necessary to preserve the Corporation's agreed remedy. The Court emphasized that the proviso to Section 5 of the Act saved both the right to sums payable and the arbitration procedure, ensuring the Corporation's rights were not compromised. Consequently, the Court upheld the High Court's decision and dismissed the appeal, affirming that the arbitration clauses remained valid and enforceable in resolving disputes over rent payments.