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Rambaksh Lachhandas Vs. the Bombay Cotton Company - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai
Decided On
Judge
Reported in(1930)32BOMLR1451
AppellantRambaksh Lachhandas
RespondentThe Bombay Cotton Company
DispositionPetition dismissed
Excerpt:
.....waiver of objection -bombay cotton contracts act (bom. xiv of 1922), section 4-east india, cotton association-by-law 88a-'contract'-'rights and/or responsibilities of commission agents'-interpretation.;in a proceeding before arbitrators once the parties object to the jurisdiction, they do not waive their rights by proceeding with the case before the arbitrators and defending themselves as best they may.; hamlyn v. bttterey (1880) 6 q.b.d. 63, followed. ;where it appears clear from any document or documents that the parties are willing to do business upon certain terms which have been reduced to writing, the acceptance of those terms by conduct may be proved orally. if one of such terms is reference to arbitration, it amounts to 'submission' within the meaning of section 4 of the..........in cotton at khamgarn and other places, and that the respondents are members of the east india cotton association limited, and are doing business in bombay as brokers and commission agents in cotton subject to the rules and regulations of the said association. in paragraph 3 it is alleged that the petitioners had dealings with the respondents both in forward and in ready cotton, and as regards the ready transactions it is stated in paragraph 4 that three separate lots of bales were entrusted to the respondents by the petitioners for sale. disputes, as appears from the petition, took place between the parties, the details of which it is unnecessary to enter into. arbitration was claimed by the respondents who named their arbitrator by their letter dated december 19, 1928. the.....
Judgment:

Blackwell, J.

1. This is a petition to sot aside an award made originally by arbitrators appointed by the East India Cotton Association, subsequently confirmed by the board of appeal of that body, and duly filed in Court.

2. The prayers of the petition pray (a) that the award may be set aside, (6) in the alternative (1) that it may be set aside so far as it relates to the ready transactions, and (2) that it may be remitted back so far as it relates to the forward transactions.

3. At the outset of the case, Mr. Daphtary, who appeared for the petitioners, informed me that he did not propose to challenge the award so far as it related to the forward transactions, and that inasmuch as the award made dealt separately with the ready and forward transactions and was clearly separable in regard to each, he should only ask the Court to set the award aside so far as it related to the ready transactions, if I should be of opinion that he succeeded in proving that the arbitrators had no jurisdiction to enter upon the arbitration in relation to the ready transactions between the parties.

4. The petition begins by alleging that the petitioners dealt in cotton at Khamgarn and other places, and that the respondents are members of the East India Cotton Association Limited, and are doing business in Bombay as brokers and commission agents in cotton subject to the rules and regulations of the said association. In paragraph 3 it is alleged that the petitioners had dealings with the respondents both in forward and in ready cotton, and as regards the ready transactions it is stated in paragraph 4 that three separate lots of bales were entrusted to the respondents by the petitioners for sale. Disputes, as appears from the petition, took place between the parties, the details of which it is unnecessary to enter into. Arbitration was claimed by the respondents who named their arbitrator by their letter dated December 19, 1928. The petitioners did not reply to that letter till January 2,1929, and in that letter they contended that there was no agreement to refer to arbitration any disputes or differences so far as the ready transactions were concerned and they declined to go to arbitration in respect of those transactions.

5. The petitioners having failed to appoint an arbitrator, the East India Cotton Association appointed two arbitrators under by-law 88 (6) of the by-laws of the association. The petitioners contended before the arbitrators that there was no submission by them in respect of the ready transactions, and they objected to the arbitrators dealing with the disputes so far as the ready transactions were concerned.

6. There was for a time some controversy before me as to whether the petitioners, notwithstanding their protest to the jurisdiction of the arbitrators so far as the ready transactions were concerned, nevertheless entered into the merits of the dispute before them. Mr. Phirozsha Sorabji Gazdar, who had deposed to two affidavits in answer to the petition, was called before me, and in cross-examination he very frankly admitted, contrary to what had been stated by him in his affidavit dated August 12, 1929, that he could not remember whether the petitioners had themselves entered into the merits or whether it was not rather the arbitrators who had insisted in going into the merits of the dispute.

7. The arbitrators overruled the objection of the petitioners, and made an award which has been filed in Court, The petitioners appealed against that award, as they are permitted to do under the by-laws of the association, to the board of appeal, which dismissed the appeal and confirmed the award of the arbitrators. The document dismissing the appeal and confirming the award is also filed in Court.

8. Mr. Daphtary contended on behalf of the petitioners that there was no submission within the meaning of Section 4 of the Indian Arbitration Act so far as the ready cotton transactions were concerned. In answer to this, Mr. Engineer, who appeared for the respondents, submitted, having regard to certain letters and the evidence of the witness called before rue, that there was a valid submission within Section 4 of the Indian Arbitration Act. Alternatively, he contended that there was a compulsory reference to arbitration, having regard to the terms of Bombay Act No. XIV of 1922 and the memorandum and articles and by-laws of the East India Cotton Association, in view of the contract which he contends was entered into between the parties Mr. Daphtary, on the other hand, contended that the contract, which was in fact made between the parties, made no reference to the articles of association of the East India Cotton Association, and that, apart from the articles of association, the by-laws were not of such a character as to embrace the transaction, to use a neutral expression, which I will explain later, which was in fact entered into between the parties,

9. There was a third point raised by Mr. Engineer, which I will dispose of immediately, namely, that the petitioners had by their conduct waived their right to object to the jurisdiction of the arbitrators and of the board of appeal. He first based his argument in regard to waiver on the hypothesis that the petitioners had before the arbitrators gone into the merits. But on the evidence of the witness, to which I have referred, I am satisfied that this was not the case. Apart from that, Mr. Engineer contended that by exercising a right of appeal to the board of appeal, which was merely, as he said, a right and not an obligation, instead of applying at once to the Court to set the award aside, the petitioners had thereby waived their right to object to the jurisdiction. I am unable to assent to this argument. I think it is well-established by authority that once parties appearing before arbitrators object to the jurisdiction, they do not waive their rights by proceeding with the case before the arbitrators and defending themselves as best they may : see Russell on Arbitration and Award, 11th Edn., at pages 431. and 482, and the authorities there collected. In particular, I would refer to the remarks of Lord Selborne L. C. in Hamlym v. Betteley (1880) 6 Q.B.D. 63 where he said (p. 65):-.in arbitrations, where a protest is made against jurisdiction, the party protesting is not bound to retire ; he may go through the whole case, subject to the protest he has made.

Having made their protest, 1 am clearly of opinion that the petitioners were entitled not merely to defend themselves before the arbitrators but to go through the whole case by exercising the right of appeal which is given to them by Sub-clause (E) of bylaw 8b of the by-laws of the association. The point of waiver, therefore, in my opinion, fails.

10. I will now turn to the question whether there was a submission within the meaning of Section 4 of the Indian Arbitration Act of 1899. The relevant part of that section is in these terms:-

In this Act, unless there is anything repugnant in the subject Of context....

(b) 'submission' means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not.

In the case before me, the evidence which has been called coupled with the documents which have been put in, establish this to my satisfaction. Mr. Phirozsha Sorabji Gazdar had an interview at Khamgaon with a partner of the petitioners, Mathuradas and another person, Sheth Javermalji, who is stated to have acted as the financier and broker of the petitioners. At that interview there was a discussion as to the terms on which the respondents would be prepared to do cotton business with the petitioners. Mr. Gazdar handed to Mr. Mathuradas a copy of the usual terms upon which the respondents do their business. It is headed ' Particulars as regards Charges and Terms '. That document is divided into two parts. The first part deals with the ready transactions, and contains this provision : ' all sales and every work and business are done in accordance with the rules of the East India Cotton Association'. There is a similar reference to the rules of the association in the document in regard to forward transactions. Then at the very end of the document, there are these words:-

N.B. if there be any kind o dispute or objection raised or if there be any disagreement, the same will be decided by arbitration in accordance with the rules of the East India Cotton Association, So also there will be no jurisdiction of any other Court than that of Bombay.

A copy of that document was left by Mr. Gazdar with Mr. Mathuradas. That interview took place some time in January 1928.

11. After that interview, a representative of the petitioners, whose name Mr. Gazdar could not recollect, called upon the respondents in Bombay and interviewed Mr. Gazdar, and a further discussion took place as to the terms on which the respondents would be prepared to do business. I should have mentioned that Mr. Gazdar stated that at the interview between him and Mr. Mathuradas, various modifications of the terms of the document which had been handed to Mr. Mathuradas were discussed. There was a further discussion as to these modifications when the petitioners' man came to Bombay. It is, in my opinion, quite unnecessary to detail those terms, because they all ultimately appeared in one of the documents to which I am now going to refer.

12. On February 9, 1928, the respondents wrote a letter to the petitioners. In that letter they referred to the visit of the petitioners' man to their office and to the interview that Mr. Gazdar had had with the petitioners at Khamgaon. The letter then states: 'He handed to you our printed form of memo of charges in which are contained the terms on which we do business'. The letter then goes on to set out certain modifications of the terms and then says: ' Except the above, please note that the rest of the terms and charges will be according to our printed form '.

13. On February 18, 1928, the petitioners wrote to the respondents. They began by saying : 'There is no letter from you'. Whether they had not by this time received the letter of February 9,1928, the receipt of which by them has not been disputed, or whether that is a formula which is common in correspondence in this country, I am unable to say. The letter goes on to refer to the conversation between Mr. Gazdar and Sheth Javermalji and asks the respondents to let them know ' by return post whether you are willing to do business according to the talk you had with our Sheth Javermalji in respect of charges, etc., and hundis. After hearing from you, we will consign you bales of Sheogam and Khamgaon cotton...' That letter, in my opinion, is an offer in writing by the petitioners to do business with the respondents provided they heard from them that the terms upon which they were prepared to do the business were in accordance with the previous conversation. There followed a letter from the respondents to the petitioners dated February 20, 1928, acknowledging receipt of the letter of the 1.8th instant to which I have referred. The letter dated February 20, 1928, says : 'you have shown your willingness to send us your cotton for which we are much thankful to you and are greatly pleased. ' It goes on to say : ' We will accept hundis according to the talk that had taken place and will obtain good rates'. Then it goes on: 'We have enclosed herewith our form (printed) of charges. But we will charge commission and brokerage at eight annas (i. e., half per cent). Please note that we will accept and send hundis (for an amount) equivalent to 85%'. That letter encloses the printed form of the terms upon which business will be done, and makes it plain that the business is to be done upon those terms apart from the variations which are made in writing in that letter.

14. It is admitted that there was no acceptance in writing by the petitioners of those terms, It is common ground that business resulted. It is contended by Mr. Daphtary that inasmuch as there was no acceptance in writing of the terms, there cannot be said to be a written agreement between the parties within the meaning of Section 4 of the Indian Arbitration Act, and that accordingly there has boon no submission. I was referred by counsel to a number of authorities. In Hickman v. Kent or Romney Marsh Sheep-Breeders' Association [1915] 1 Ch. 881 Mr. Justice Astbury dealt with the question whether a submission must be an agreement signed by both parties. He reviewed the authorities and said as follows (p. 902) : -

The result of these decisions is, I think, that if the submission is in writing and is binding on both parties us their agreement or as the equivalent in law to an agreement between them the statute is satisfied.

In Anglo-Newfoundland Development Company Limited v. The King [1920] 2 K.B. 214 it was held by the Court of Appeal that, in the circumstances of that case, there was no written agreement to submit differences to arbitration. Bat at page 223, Lord Justice Bankes said as follows :-

It is not necessary that both parties should have signed the written agreement ; if a person has accepted a written agreement and acted upon it he is bound by it for this purpose, although ho may not have set his hand to the document: Baker v. Yorkshire Fire and Life, Assurance Co. [1892] 1 Q.B. 144.

15. The latter was an action upon an insurance policy which had been executed by the insurance company but not by the assured. The assured brought an action against the company on the policy and an application was made to stay the suit upon the ground that the policy contained an arbitration clause. It was argued for the plaintiff that there had been no submission because the agreement had not been signed by both the parties. That contention was overruled by the Court, which held that the policy was an agreement in writing between the parties, and that the plaintiff had acted upon it although he had not signed it

16. In Radha Kanta Das v. Baerlien Brothers, Ltd. ILR (1928) Cal. 118 the question whether an agreement to submit to arbitration must be signed by both parties was considered by Chief Justice Rankin and Mr. Justice C.C. Ghose. In the judgment of the learned Chief Justice the authorities are reviewed. In that case the plaintiff had signed an indent which contained an arbitration clause. That indent had not been signed by the defendants or by any one on their behalf. The offer contained in the indent was telegraphed by the defendants' agent from India to Manchester, though the terms of the indent were not referred to. Further telegrams passed and business resulted. Chief Justice Rankin was clearly of opinion that the indent formed part of the contract entered into between the parties, and that the arbitration clause was binding on the defendants although it had not been signed by them.

17. I may here refer to the case of Morgan v. William Harrison, Limited [1907] 2 Ch. 137, There lessees had been in possession of a colliery under a lease which contained an arbitration clause. They had power to request the lessors to extend the lease provided they did so within a certain period before the expiration of the lease. They failed to exercise this right in time, and wrote a letter asking for an extension. That letter amounted to an offer which was not accepted by the lessors, who made a counter-offer in a letter signed by their manager, the effect of which was that the lessees were to be at liberty to remain in possession as tenants-at-will until an arrangement could be come to. There was no acceptance in writing of that counter-offer, but the lessees stayed on it was held that that counter-offer must have been made with reference to the terms of the lease, and that, accordingly, the arbitration clause contained in that lease continued to apply to the parties. But it is important to observe that the acceptance of that counter-offer was attributable to the conduct of the lessees in remaining in possession of the mine.

18. I am free to confess that I have felt great doubt as to whether M. 4 of the Indian Arbitration Act does not require the agreement between the parties to be in writing in the sense that both offer and acceptance must appear in a written document or documents between the parties. On the whole, however, having regard to the authorities to which I have referred, I am not satisfied that this is the meaning of the expression 'written agreement' within Section 4 of the Act. I have come to the conclusion that, provided it appears clear from any document or documents that the parties are willing to do business upon certain terms which have been reduced to writing, the acceptance of those terms by conduct may be proved orally. In this case, I am satisfied by the evidence of Mr. Gazdar that no further communication passed between the parties after the letter of February 20 and that by their conduct the petitioners assented to the terms which are contained in the respondents' memo of charges and that letter. It must be borne in mind that in their letter of February 18 the petitioners had written to the respondents requesting the respondents to inform them in writing upon what terms they would be willing to do business, and that the respondents so informed them in writing of all the terms in the letter of the 20th. Thereafter the petitioners assented to those terms by conduct. In my opinion, that is sufficient to constitute a written agreement within the meaning of Section 4 of the Indian Arbitration Act.

19. I will now deal with another point which was argued by counsel. It is common ground that the by-laws of the East India Cotton Association do not require ready transactions to be in writing. Bombay Act No. XIV of] 922, called the Bombay Cotton Contracts Act, 1922, defines ' contract' in Section-2,as follows: ' ' Contract' means a transaction in cotton to be -carried-out in whole or in part in Bombay.' It is to be observed that the words used are wide, namely, ' a transaction in cotton to be carried out.' Section 3 provides that ' the Board may, subject to the sanction of the Governor in Council, make by-laws for the regulation and control of transactions in cotton,' Sub-clause (i) being as follows-' providing for arbitration and appeals against awards.' Section 4 is in these terms:-

The constitution and administrative machinery set out in the Articles of Association of the Association are declared to be lawful.

It has been contended by Mr. Engineer on behalf of the respondents that the effect of the words ' are declared to be lawful' is to subject all transactions in cotton in Bombay to the provisions of the articles of association of the East India Cotton Association. He submits that unless this effect is given to that section, no meaning can be attributed to the words 'are declared to be lawful', inasmuch as the constitution and administrative machinery set out in the articles would be lawful under the Indian Companies Act. In my opinion, there is great force in this contention, and inasmuch as I am unable to attribute any reasonable meaning to those words at all except that for which Mr. Engineer contends, on the whole I think his argument in that regard is sound. Section 5 provides that any contract (whether either party thereto is a member of the association or not) which contravenes any by-law of the association is void. It is contended by Mr. Engineer in reference to that section that though the section merely says that any contract contravening any by-law is void, the implication necessarily involved therein is that any transaction entered into must be entered into in accordance with the by-laws, otherwise it is a nullity. Section 7 provides that contracts for the purchase and sale of cotton entered into on the dates as therein referred to 'under the rules or by-laws of the association shall be subject to the provisions of this Act and of by-laws made thereunder'. Mr. Daphtary has pointed out that the words there are ' contracts for the purchase and sale of cotton', and Mr. Engineer has drawn a distinction between those words and the much wider words of the definition of 'contract' comprised in Section 2 (a).

20. Under Article 96 of the articles of association of the East India Cotton Association it is provided that:-

Whenever any difference arises between Members or Associate Members or Special Associate Members or between one or more of them and another or others who are not Members or Associate Members or Special Associate Members touching or in connection with the cotton trade or any transaction therein it shall be referred to arbitration in such manner as shall be prescribed by the by-laws.

Mr. Daphtary in view of the vary wide provision of that clause has admitted that if the effect of Section 4i of the Act is to make this Clause 96 applicable to all cotton transactions, then the arbitrators in this case would have jurisdiction to enter into the reference in respect of ready transactions whether the submission was in writing or not. He, however, contends that that is not the proper meaning to be attributed to Section 4 of the Act. As I have already indicated, I am unable to agree with him and I hold that the arbitrators had jurisdiction even if the submission was not in writing.

21. Next, upon the supposition that he was wrong in his contention that Article 96 of the articles of association did not apply to this case, Mr. Daphtary referred to the wording of by-law 38(A) of the rules and by-laws, He contended that, assuming that the evidence establishes, as I have held it does, that the parties agreed to enter into transactions, both forward and ready, subject to the by-laws of the association, then by-law 38 (A) does not apply to the facts of the present case. The relevant words of by-law 38 (A) are as follows :-

All disputes...arising out of, or in relation to (a) contracts (whether forward or 'ready' and whether between members or between a member and a non-member) made subject to these by-laws or (b) the rights and/or responsibilities of commission agents, muceadums and brokers not parties; to such contracts, shall be referred to the arbitration of two disinterested persons one to be chosen by each party.

Mr. Daphtary contended with regard to (a) that the word ' contracts' there meant contracts of purchase and sale between principal and principal. He submitted that it would have no application to a case of this kind, where an up-country constituent forwarded to Bombay bales of cotton to be sold by respondents for and on his behalf as agents. I am unable to assent to this contention having regard to the definition of 'contract' contained in Section 2 (a) of the Bombay Cotton Contracts Act.

22. Then Mr. Daphtary contended that Clause (6) which relates to the rights and/or responsibilities of commission agents also had no application to this case on the ground that it referred to rights and/or responsibilities in connection with contracts of purchase and sale. Here again, I am unable to assent to this contention. In my opinion this sub-clause refers to rights and/or responsibities in connection with transactions in cotton to be carried out in whole or in part in Bombay. This would clearly cover the despatch of the bales of cotton in this case by the petitioners from Kharngaon to Bombay for sale by the respondents. In my opinion, therefore, the parties having agreed, as I hold that they did, to refer their disputes to arbitration in accordance with the by-laws of the East India Cotton Association, the arbitrators had jurisdiction, whether the submission was in writing or not.

23. Mr. Engineer has contended that these by laws themselves amount to a submission in writing, coupled with the agreement between the parties to abide by them. These by-laws have statutory effect having regard to the Bombay Cotton Contracts Act. It has been laid down that a statute is an instrument in writing: see the opinion of Lord Blackburn in River Wear Commissioners v. Adamson (1877) 2 App. Cas. 743. In my opinion this argument of Mr. Engineer is well founded. Accordingly, I think that even on this part of the case, there would be a submission within the meaning of Section 4 of the Indian Arbitration Act.

24. One further point remains. Mr. Daphtary has contended that unless there is a written agreement and submission within the meaning of Section 4 of the Indian Arbitration Act, the award could not properly be filed as contemplated by Section 15 of the Act. He therefore, contended that upon this assumption it ought to be set aside. I, however, pointed out to him that, even if I were wrong in my conclusion that there was a valid submission within Section 4 of the Indian Arbitration Act, I was nevertheless clearly of opinion that, having regard to the Bombay Cotton Contracts Act, there was a valid statutory agreement by these parties to refer their disputes to arbitration in accordance with the by-laws of the Association, and that the award would, as regards the ready transactions, be valid and binding, even though it could not properly be filed under the Indian Arbitration Act, I further pointed out that if the award were set aside, this would prevent the respondents from enforcing it by action. Mr. Daphtary thereupon conceded that in that event the proper course would have been to ask that the award should be taken off the file. That has not been asked for in the present petition, and I should not feel disposed at this stage, particularly having regard to the form of the petition and the affidavits in answer, this point never having been raised except in the course of the argument, to allow any amendment of the petition in this respect.

25. In the result this petition will be dismissed with costs.


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