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Gaddarmal Hiralal and anr. Vs. Chandrabhan Agarwal and Co. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAllahabad High Court
Decided On
Case NumberF.A.F.O. No. 101 of 1963
Judge
Reported inAIR1968All292
ActsContract Act, 1872 - Sections 2, 7 and 8; Arbitration Act, 1940 - Sections 2
AppellantGaddarmal Hiralal and anr.
RespondentChandrabhan Agarwal and Co.
Appellant AdvocateT.N. Sapru and ;Lalji Srivastava, Advs.
Respondent AdvocateG.N. Singh, Adv.
DispositionAppeal dismissed
Excerpt:
.....a letter shall amount to acceptance of the transaction - subsequently defendant did not return the contract forms - in eyes of law accepted the proposal - all terms and conditions are binding on the parties - even though not signed by the defendants - contract form expressed in writing provided compulsory arbitration - contract form held to be a valid arbitration agreement. - - gad-darmal hira lal,;that he had not entered into the forward transactions in dispute, that the suit was not maintainable in view of the tact that the defendant-firm had not been sued through the 'karta hira lal, and that the suit was bad for non-joinder of parties. it can thus be laid down as a well-established rule that acceptance of a proposal in a form not strictly covered by sections 7 and 8 of the contract..........him and it was settled that with regard to the forward transactions entered into by the defendant-firm contract forms shall be sent to the defendant-firm for acceptance and the defendant shall either return the forms duly signed or retain them with it. but if the defendant was not accepting any transaction, it shall return the contract form with a letter. the existence of such a contract can be believed not only because phool chand, p.w., who is a partner of the plaintiff-firm, can be believed but also because this version is amply corroborated by the previous conduct of the defendants themselves. the defendant firm had admittedly entered into forward transactions through the acency of the plaintiff at previous occasions also. in such transactions the defendant-firm had made profits and.....
Judgment:

D.S. Mathur, J.

1. This is an appeal by Messrs Gaddarmal Hira Lal through Roshan La! and also by Roshan Lal, defendants, against the order dated 28-2-1963 of the Additional Civil judge of Agra allowing in part the application under Section 20 of the Arbitration Act of Messrs. Chandrabhan Agarwal and Co., plaintiff, by referring the disputes relating to the forward transaction of Laha only to arbitration by a panel of arbitrators to be constituted under the term and byelaws of the Agra Merchants' Chamber, Ltd., Agra (to be referred hereinafter as the 'Chamber').

2. The Chamber has its own byelaws, one of which prescribes compulsory arbitration in disputes not only between the members thereof but also between the members and non-members. The plaintiff firm is a trading member of the Chamber and it carries on the business of for ward transaction through 'dalals registered with the Chamber The plaintiff's case is that the de fendants entered into certain forward transactions with the plaintiff by retaining the contract forms or returning them duly signed One of the conditions of the contract printed on the reverse of the contract forms was thai the rules of the Chamber and also the commercial rules and conditions were acceptable to the defendants. The plaintiff's case further is that numerous contract forms were sent to the defendant firm some of which were returned duly signed and the others were not returned and in view of the contract, non-returu of the contract forms amounted to acceptance, and the contract form* were not only evidence of the transactions in question but also showed that there was an agreement for compulsory arbitration.

3. When disputes arose between the parlies, the plaintiff moved the present petition under Section 20 of the Arbitration Act for the filing of the arbitration agreement and also for reference of the dispute to arbitration.

4. Roshan Lal, defendant, alone contested the proceeding. His case is that he was not the 'karta of the joint Hindu family, the 'karta' of the family being his father. HiraLal, and hence he could not represent the joint Hindu family business carried on in the name of Messrs. Gad-darmal Hira Lal,; that he had not entered into the forward transactions in dispute, that the suit was not maintainable in view of the tact that the defendant-firm had not been sued through the 'karta Hira Lal, and that the suit was bad for non-joinder of parties. It was also pleaded that the Additional Civil Judge had no jurisdiction to In the suit.

5. All these contentions in so far as the Laha' transactions are concerned were repelled and to this extent the application under Section 20 of the Arbitration Act was allowed and the disputes pertaining to the 'Laha' transactions were referred to arbitration. The application under Section 20 in so far as the Chuni-Arhar transactions are concerned was rejected. The plain-tiff has submitted to this order and the defendants alone have preferred an appeal with regard to the 'Laha transactions.

6. The points for consideration are:

(1) Whether Roshan Lal, defendant No. 2, was the karta of the joint Hindu family and hence the karta of the joint family business carried on in the name of Messrs Gaddarmal Hira Lal, defendant No. 1?

(2) Whether Messrs. Gaddarmal Hira Lal had entered into the transactions which are now to be referred to arbitration in accordance with the byelaws of the Agra Merchants' Chambers, Ltd. Agra?

(3) Whether agreement, it any, amounts to (sic) arbitration agreement?

7. The agreement originally arrived at between Rosban Lal, defendant No. 2, on behalf of the firm Messrs. Gaddarmal Hira Lal on one side, and the plaintiff firm Messrs Chandrabhan Agarwal & Co., on the other, prior to the defendants entering into the forward transactions. was oral The term 'arbitration agreement' has been defined in Section 2(a) of the Arbitration Act to mean a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not This definition is applicable unless there is anvthing repugnant in the subject or context There is nothing repugnant to tbis definition in Section 20 of the Arbitration Act, nor in any other provision of the Act, and hence 'arbitration agreement' within the meaning of this Act must be in writing. As an arbitration agreement is an agreement, both the parties must be consenting parties to the agreement. To put it in the words of the Contract Act, there must be a proposal followed by acceptance. Consequently, all that happened before the despatch of the contract forms in dispute cannot convert the agreement into an arbitration agreement, for the simple reason that the agreement was oral and was not reduced to writing.

8. With regard to the contract forms the plaintiff's case is that prior to the defendant-firm entering into forward transactions, Roshan Lal, defendant, has come to Agra when the terms of the transactions and also the byelaws of the Agra Merchants' Chambers, Limited, Agra, were communicated and explained to him and it was settled that with regard to the forward transactions entered into by the defendant-firm contract forms shall be sent to the defendant-firm for acceptance and the defendant shall either return the forms duly signed or retain them with it. But if the defendant was not accepting any transaction, it shall return the contract form with a letter. The existence of such a contract can be believed not only because Phool Chand, P.W., who is a partner of the plaintiff-firm, can be believed but also because this version is amply corroborated by the previous conduct of the defendants themselves. The defendant firm had admittedly entered into forward transactions through the acency of the plaintiff at previous occasions also. In such transactions the defendant-firm had made profits and such profits were realised , through two hundis, paper Nos. 73 and 74. Nothing has come on record to show that the practice in vogue that time was different to the mode of completion of the transactions in dispute. In other words, the plaintiff has established that the byelaws of the Chamber had been read over and explained to Roshan Lal, as representative of the defendant firm Messrs. Gaddarmal Hira Lal, and there was an agreement that the contract forms unless returned with a letter shall be deemed to have been accepted and the transactions finalised. It is also proved that this mode of acceptance was acted upon by the defendants at earlier occasions.

9. Now that disputes have arisen between the parties, the law must have its course and a finding favourable to the plaintiff cannot be recorded simply because at previous occasions the contract forms were deemed to amount to a valid agreement which were not only valid but were enforceable. The previous transactions, though not admissible in laying down the proposition of law, can, however, be utilised in deciding what veracity to attach to the oral testimony of Roshan Lal, defendant No. 2.

10. The case of Roshan Lal, defendant, is that the various contract forms in dispute never reached the defendant-firm. This cannot be accepted not only because the oral testimony of Roshan Lal does not inspire confidence but also because the defendant-firm has not produced its account books in which the entries of such transactions had been made. The reply given by the defendants to the plaintiffs' notice can also be utilised in holding that the contract forms had been received by the defendant-firm.

11. It is on the basis of these contract forms and the conduct of the defendants in not returning the contract forms with a letter, as stipulated, that it is contended on behalf of the plaintiff that the 'terms and conditions' printed on the reverse of the contract forms were, by implication, unconditionally accepted by the defendants and hence the contract forms, even though not signed by the defendants, amount to an agreement and as therein there is a provision for compulsory arbitration, for purposes of the Arbitration Act also, they amount to an arbitration agreement.

12. The first point which deserves consideration is whether in the circumstances of the present case omission on the part of the defendant-firm or the conduct of the defendants in not returning the contract forms can amount to acceptance of the proposal within the meaning of Section 7 of the Contract Act?

13. Sections 7 to 9 of the Contract Act are material on this point. Section 7 provides that, 'In order to convert a proposal into a promise the acceptance must be absolute and unqualified and be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted'. Section 9 lays down that, 'In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied'. The Contract Act thus recognises both express and implied acceptance of a proposal. Implied acceptance is when acceptance of a proposal is not made in words. Section 8 of the Contract Act is an illustration of an implied acceptance of a proposal. The word 'implied' has not been used in Section 8 but as acceptance is not made in words, but by an act, Section 8 can be deemed to lay down instances of implied acceptance of a proposal.

14. The wording of Section 8 further makes it clear that the provisions contained therein are not exhaustive but are illustrative. An implied acceptance of a proposal can thus be in a form other than those contemplated by Sections 7 and 8 of the Contract Act. The existence of other forms of implied acceptance of a proposal was recognised in Gaddar Mal v. Tata Industrial Bank, Ltd., Bombay : AIR1927All407 , where Ashworth, J., added one more instance of an implied acceptance of a proposal based on trade or mercantile usage or local usage. In fact, this was regarded to be a case where the promise by the promisee was not made either expressly or impliedly. It can thus be laid down as a well-established rule that acceptance of a proposal in a form not strictly covered by Sections 7 and 8 of the Contract Act is permissible and such an implied acceptance shall render the transaction into a valid and enforceable contract.

15. In the instant case, the contract forms were retained by the defendants. In other words, the defendant-firm omitted to return the contract forms as a token of not accepting the transactions. Acceptance of the proposal contained in the contract forms is thus by omission or by silence on the part of the defendants. My attention has been drawn to a few cases where such an omission or silence was held not to amount to acceptance, I shall refer to these cases one by one; but at the very outset it may be observed that they are all distinguishable on facts. Therein there was no previous agreement between the parties as to how future transactions shall be undertaken. The transactions were independent ones and were not, in any manner, correlated to the earlier transactions or to any prior agreement, oral or in writing. In : AIR1927All407 (supra), it was observed that:

'it is well established in law that the manner prescribed cannot be mere silence. Assent must be by express words or positive conduct. No duty is cast by the law upon the person to whom an offer is made to reply to that offer. Consequently, an omission to reply will not constitute an illegal omission and, therefore, cannot fall within the definition of act as contained in the General Clauses Act. Section 3(2). Act 10 of 1897.'

The above observations are clearly based upon the definition of 'act' as contained in the General Clauses Act, and consequently if on the facts and circumstances of the case an omission amounts to an illegal omission, a contrary view can be taken, and hence an act. That would clearly be a case where acceptance of the proposal can be assumed from mere silence. In such circumstances, silence shall amount to assent by positive conduct.

16. A similar proposition of law was laid down in Alfred William Domingo v. L. C. De'Souza : AIR1928All481 . Except for the observation no comments were made, appa rently, because the question had been considered in detail in the earlier decision of this Court. This later decision thus does not re quire any further comment

17. In Haji Mohomed Haji Jiya v. E. Spin ner & Co., (1900) ILR 24 Bom 510, at all the previous occasions indent was signed by the purchaser. It was only in the transaction in dispute that no such indent had been signed. Apparently, there was no prior general agreement as to the terms and conditions of the sub sequent transactions. Consequently, each transaction had to be considered independently of others and in the circumstances acceptance by silence or omission could not be recognised.

18. Acceptance of an offer by silence or omission was also not recognised in Paul Felt-house v. Bindley, (1862) 142 ER 1037, but this is an instance of a single transaction and hence no detailed comments are necessary.

19. Before making further comments on the facts of the instant case it shall be desirable to cite an instance which will clearly bring out in what circumstances acceptance by silence or omission can be recognised. For example, there can be an agreement between A, an individual, and B, bookseller, to send all the books on a subject which B may have or may receive in the future, with the condition that if the books so supplied are not returned within three days 'A shall be deemed to have purchased them. Such a contract cannot be said to be against the public policy nor is vague or unreasonable. In fact, such an agreement is more to the benefit of the purchaser than of the seller. I personally see no difficulty why such an agreement cannot be enforced by the Courts of law.

20. Considered from one angle, there is only one agreement enforceable till the supply of books is finally stopped, or one can say there is a continuing agreement between the parties leading to the various transactions. At each occasion B makes an offer to sell a book to A and A has the right to accept the offer and pay for the book or to reject the offer and return the book within the stipulated period. All the transactions flow out of the original agreement, and hence at each occasion acceptance of the offer can be assumed from mere omission or silence as if could at the time of the first transaction. In other words, the initial agreement shall determine whether the subsequent transactions amount to a 'promise' and hence an 'agreement' The initial agreement can be oral or in writing. Similarly, the subsequent offer and acceptance thereof can be in writing or by mere offer and non-return of the books.

21. There is no reason why the above rule be not applied to forward transactions in which goods are purchased or sold, not forthwith, but subsequently. In case the provisions of the Contract Act regarding implied acceptance of a proposal were exhaustive, the Courts of law could not be justified in extending the scope of the enactment; but where the provisions are merely illustrative, the Courts can adopt a view which is equitable and reasonable.

22. To put it differently, if there exists a prior agreement among the parties laying down how the transactions shall be undertaken, that agreement shall determine whether in the subsequent transactions governed by or flowing out of such agreement there was acceptance of proposal, i.e., the proposal became a promise ana hence a fresh agreement enforceable independently of the earlier transactions. Further, if the agreement makes a provision for acceptance of the proposal by mere omission or silence, failure to return the goods or papers, as the case may be, shall signify acceptance of the proposal. But if there was no prior agreement as to the implied acceptance of the proposal by not returning the goods or papers mere nonreturn, i.e., omission or silence shall not signify acceptance of the proposal

23. Coming to the instant case, there was prior agreement between the plaintiff and Roshan Lal, acting for the defendant-firm, that the contract forms if not returned unsigned with a lettet shall imounl to acceptance of the transactions noted therein. All the subsequent transactions must be read in the light of this agreement and consequently when the defendants did not return the contract forms. In the eye of law, they accepted the proposal i.e, had entered into the transactions noted in the contract forms. On similar grounds, the terms and conditions of the contract printed on the reverse of the contract forms shall be binding on the parties, all the more when they are not repugnant to the original oral agreement.

24. When the contract forms, even though not signed by the defendants, can, and in fact do amount to an agreement it shall also be an arbitration agreement provided that a clause for compulsory arbitration is contained therein. It is a settled law that to constitute an arbitration agreement it is not necessary that it be signed by all the parties to the agreement: it is sufficient if the terms are reduced to writing and the agreement of the parties thereto is established. Sree Jugal Kishore Rameshwardas v. Mrs. Goolbai Hormusji : [1955]2SCR857 . The agreement arrived at prior to the defendants entering into the forward transactions was oral and can never amount to an arbitration agreement; but each contract form not returned unsigned with a letter can amount to an arbitration agreement provided that it contains a clause for compulsory arbitration and such an agreement had earlier been arrived at between the parties. As already mentioned above, in the circumstances of the present case, non-return of the contract forms amounts to acceptance of the proposal contained in such forms, When a proposal is accepted, it becomes a promise and hence an agreement. The contract forms being in writing containing the terms of the agreement, shall, therefore, amount to arbitration agreement.

25. In Jubilee Chamber of Commerce Ltd., Rawalpindi v. Lala Amrit Shah, AIR 1940 I.ah 180, the rules and terms of business (shari-at-ka form) read over by the other party and acted upon were held to constitute a valid arbitration agreement. This view was dissented from by this Court in Firm Narain Das Balak Hum v. Bhagwan Das Kedar Nath, : AIR1951All860 , and it was held that oral acceptance of the rules of the Association including the one relating to arbitration was not sufficient to constitute written agreement within the mean-ing of Section 2(a) of the Arbitration Act. iN the instant case, however, oral acceptance of the rules of the Chamber was followed by nonreturn of contract forms which by itself amounted to a fresh agreement in writing.

26. A similar question was considered in Varadam Shetty Jambulanna v. Narshi Mulji and Co., ATR 195R Bom 720. where it was held that:

'There ,nt: instances where a non-member vould be bound by the arbitration rules of the agreement, where, for instance, the non-member enters into a contract with a member in the prescribed form. Where the contract it under the prescribed form, then the reference to arbitration is implied by the conduct of the party, namely, signing that particular form but until that is done there could be no imposition of the rules as regards arbitration on a third party.'

In substance, what has been laid down is that unless the parties agree to refer the disputes to arbitration, i. e., the agreement contains a clause for compulsory arbitration, the rules and byelaws of an Aiiociation cannot be bindiag on non-members. In the instant case, the nonreturn of the contract forms takes the place of signing the prescribed form, and hence the rules and byelaws of the Chamber can be binding on non-members also.

27. Condition No. 2 printed on the reverse of the contract forms makes it clear that the defendants were accepting the rules of the Chamber and also the commercial usages and rules. In the circumstances, the rules of the Chamber shall be binding on the parties and shall determine the mode of settlement of the disputes. Rule 179 of the Byelaws of the Agra Merchants Chamber, Ltd., Agra, makes a provision tor compulsory arbitration even when out of the parties is a non-member of the Chamber. Consequently Rule 179 shall be binding on the defendants and the disputes can, on the application of any party, be referred to arbitration in accordance with the rules of the Chamber.

28. From the deposition of Roshan Lal, defendant No. 2, it is clear that he was throughout acting for the defendant-firm., which admittedly is a joint Hindu family firm. In a vaka-latnama filed in a case he signed the document as 'karta of the iamily. It is true that the father of Roshan Lal is alive but he is an old person and, in such circumstances, the son could act as the 'karta', i.e., manager of the joint Hindu family firm. I, therefore, agree with the lower Court that Roshan Lal functioned as the 'karta' of the joint Hindu family business and as such the transactions undertaken by him shall be binding on the detandant-firm. Such transactions shall also be deemed to have been entered into by or on behalf of the defendant-firm and the disputes can be referred to arbitration.

29. The learned Civil judge has thus taken a correct view of the law and also of the facts of the case, The F.A.F.O. has no force and it is hereby dismissed with costs. The stay order is vacated.


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