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The Delhi Cloth and General Mills Co. Ltd. Vs. Ulfat Rai Kailash Chand and ors. - Court Judgment

LegalCrystal Citation
CourtDelhi High Court
Decided On
Case NumberSuit Appeal No. 91 of 1972
Reported in19(1981)DLT7A; [1981]19ITR7(Delhi)
ActsArbitration Act, 1940 - Sections 2
AppellantThe Delhi Cloth and General Mills Co. Ltd.
RespondentUlfat Rai Kailash Chand and ors.
Advocates: Jugal Kishore and; S.K. Gupta, Advs
Cases ReferredVide Jubilee Chamberof Commerce Ltd. v. Lola Amrit Shah A. I. R.
.....the parties only - hence, it was held that the petitioner could ask for reference according to the rules of association - section 13: [altamas kabir & cyriac joseph,jj] custody of child - welfare of child vis--vis comity of courts - the minor girl child of 3 1/2 years was brought to india by her mother. the minor girl was a citizen of u.k. being born in u.k. her parents had set up their matrimonial home in u.k. and had acquired status of permanent residents of u.k. the child with her mother was supposed to return to u.k. but the mother cancelled her tickets and remained behind in india. the husband thereupon started procededings before the high court of justice, family division. u.k. praying for an order that the minor child be made a ward of the court and for a direction upon the wife..........printed booklet (exhibit p-6) affirming his testimony. it has beendeposed by him further that the firm ulfat rai kailash chand was registered as a member of the association on 18.3.1960. he brought with himthe original admission form. it has been further proved by him from hisrecords (exhibit p. 2) that on the death of ulfat rai his wife, singari devi,was taken as a partner of the firm ulfat rai kailash chand in place of theformer with effect from 1.9.1970.(9) it is provided by the rules of the association, among other things,that the disputes between its members shall be got settled by reference toarbitrators appointed by it (exhibit p-7) and because the petitioner andrespondent no. 1 are both members of the association they are bound by theaforesaid rules operating as an arbitration.....

M.S. Joshi, J.

(1) The present petition was made by the Delhi Cloth &General; Mills Co. Ltd. against M/s. Ulfat Rai Kailash Chand, a Firm ofCloth Merchants, and its proprietors Kailash Chand and Singari Devi, sonand widow of Ulfat Rai, respectively, under Section 20 of the ArbitrationAct, for filing the arbitration agreement between the parties in Court and forreference of the dispute between them to arbitration in accordance with theRules ramed by the Delhi Hindustani Mercantile Association.

(2) According to the petitioner, it is a Company incorporated underthe Indian Companies Act, 1882 and G. S. Gargya is its principal officer andgeneral attorney having authority to sign, verify and institute suits on behalfo f the Company. The petitioner had owned at the relevant time a shopknown as D, C. M. City Shop at Lal Katra, Nai Sarak, Delhi, and M/s.Ulfat Rai Kailash Chand had been purchasing goods from it. On 26.11.1971they owed a. sum. of Rs. 48,154.72 to the said shop as unpaid price of thegoods and Rs. 7,358.52 on account of interest at the rate of 12/o per annumon the principal amount, i.e. Rs. 55,513.24 in all. They were asked to cleartheir account through a registered A. D. notice, but they avoided to make thepayment. D. C. M. city shop was a member of Delhi Hindustani MercantileAssociation (hereinafter referred to as 'the Association') and so the Firm,M/s. Ulfat Rai Kailash Chand. According to the Constitution and Rules ofthe Association, any dispute arising between two members of the same is tobe decided by the judges appointed by the Association in accordance with its ^Rules. The membership form signed by the partners of the firm and the Rules of the Association constituted anarbitration agreement between D.G.M.City Shop and the respondents for referring the disputes between them to thearbitration of judges to be appointed by the Association and now that adispute has arisen between the parties the same has to be decided in accordance with the Rules of the Association. Because the respondents did notpay the petitioner's dues and they refused to except the notice requiring themto refer the dispute to the Association, the present petition had to be filed.

(3) In their reply to the petition the respondents denied that G.S.Gargya was the principal officer and general attorney of the petitioner, havingauthority to sign, verify and institute the suit and urged that there was noauthority conferred upon him to file the present petition. It was submittedfurther that respondent No.3, Singari Devi, was never enrolled as a memberof the Association inasmuch as she never filled in and signed its membershipform and the Rules of the Association could not, thereforee, be binding on andenforceable against her. Kailash Ghand, respondent No. 2, had no expressor implied authority, it was contended further on her behalf, to refer anydispute of the firm to any arbitrator appointed by the Association. The claimof the petitioner as to the aforesaid amount being due to it by the respondentswas also controverter.

(4) In its replication the petitioner pleaded that it was not open tothe respondents to urge that they were not members of the Association.

(5) In view of the conflicting cases set up by the parties the followingissues were framed in the case by Chawla, J., on 23.11.1972 : '

'1. Whether the petition has been signed, verified and instituted by aduly authorised person on behalf of the petitioner ?

2. Whether the petitioner and its city shop and the respondants aremembers of the Delhi Hindustani Mercantile Association If so,what is the effect ?

3. Whether the membership form and the rules and regulations ofthe Delhi Hindustani Mercantile Association constitute an arbitration agreement between the parties ?

4. Whether the respondent No. 3 signed the application form formembership of the Delhi Hindustani Mercantile Association, andif not, what is the effect ?

5. Whether the respondents are estopped from pleading that theyare not members of the Delhi Hindustani Mercantile Association ?

6. Relief.'

(6) The petitioners have examined Naresh Singh (P.W.1), a clerkof the Association, and J. N. Rastogi (P. W. 2), a clerk employed in theirown law department. They have got proved certain documents as well. Nowitness has been examined by the respondents.Issue No. 1:

(7) EXHIBIT?-11 is a copy of the General Power of Attorney whichShri G. S. Gargya, an officer of the Company, holds from the Cloth &General; Mills Company Limited. It authorises him, inter alia, to sign, verifyand file before any court in India plaints, written-statements, applications,etc., to appear in or before all courts, to represent the company and act onits behalf. Exhibit P. 10 is an extract from a resolution No. 11 passed bythe Board of Directors of the petitioner on 2.2.1965 and it authorises ShriGargya to institute and defend civil, criminal and revenue suits, appeals,revisions and other matters and legal proceedings in and before various courtsin India and outside. Vide Order 29, Rule I, of the Code of Civil Procedure, in suits by or against a corporation any pleading may be signed or verified on behalf of the Corporation by the Secretary or any director or otherprincipal officer of the Corporation, who is able to depose to the facts of thecase. As per Order 3, Rule 2, the recognised agent of a party by whomappearances, applications and acts may be made include persons holdingpowers of attorney. According to Rule 14 of Order 6, every pleading shallBe signed by the party and his pleader (if any) : provided that where a partypleading is, by reason of absence or for other good cause, unable to sign thepleading, it may be signed by any person duly authorised by him to sign thesame or to sue or defend on his behalf. All what Shri Gupta, respondents'learned counsel, had to contend, in the face of the evidence and law referredto above, was that the board of directors of the petitioner should have passeda specific resolution authorising Shri Gargya to institute the instant petition.He has, however, no reason or authority to commend his plea. The petitioner is a big concern and it has to institute and defend numerous legal proceedings. It cannot be expected that the board of its directors shouldassemble every time, authority is to be conferred on somebody to perform anysort of legal act. The issue is decided against the respondents.Issues 2 to 4:'

(8) It has been proved by the statement of P. W. 1 Naresh Singh, anofficial of the Association, that Delhi Cloth Mill's shop in Katra Lal andM/s. Ulfat Rai Kailash Ghand are both members of the Association. He hasproduced a printed booklet (Exhibit P-6) affirming his testimony. It has beendeposed by him further that the Firm Ulfat Rai Kailash Chand was registered as a member of the Association on 18.3.1960. He brought with himthe original admission form. It has been further proved by him from hisrecords (Exhibit P. 2) that on the death of Ulfat Rai his wife, Singari Devi,was taken as a partner of the firm Ulfat Rai Kailash Chand in place of theformer with effect from 1.9.1970.

(9) It is provided by the Rules of the Association, among other things,that the disputes between its members shall be got settled by reference toarbitrators appointed by it (Exhibit P-7) and because the petitioner andrespondent No. 1 are both members of the Association they are bound by theaforesaid Rules operating as an arbitration agreement. It has been urgedon behalf of the respondents by Shri Gupta that as provided by Section 19 ofthe Partnership Act, in the absence of any usage or custom of trade to thecontrary the implied authority of a partner does not empower him to submita dispute relating to the business of the firm to arbitration and becauseSingari Devi did not sign any form to become a member of the Associationthe arbitration agreement embodied in the Rules of the Association did notbecome binding on her. The correct state of affairs, however, is that videExhibit P-3, the Firm M/s. Ulfat Rai Kailash Chand was constituted byUlfat Rai and Kailash Chand and this firm became a member of the Association on 18.3.1960 by the signing of the requisite admission form (ExhibitP-2) by both of its partners. If there is a change in the constitution of amember-firm it has to be communicated to the Association. When Ulfat Raidied his wife Singari Devi took his place (See partnership deed Exhibit P-4)and the Firm, Ulfat Rai Kailash Ghand came to be constituted by KailashChand and herself. This fact was duly communicated to the Associationvide Exhibit P-2. Kailash Chand and Singari Devi submitted to the Association, moreover, a stamped declaration to the effect that they were thepartners of Ulfat Rai Kailash Chand and that they would inform the Association if any of them left the Firm. By executing this declaration (Exhibit P-5)Singari Devi affirmed the fact that M/s. Ulfat Rai Kailash Ghand, of whichshe was a partner, continued to be the member of the Association andremained bound by its Rules.

(10) Section 2 of the Arbitration Act goes to say that arbitrationagreement means a written agreement to submit present or future differencesto arbitration whether an arbitrator is named therein or not. It does not laydown that the arbitration agreement, though required to be in writing, mustbe signed by the parties thereto. Their Lordships of the Supreme Courtobserved in Jugal Kishore. Rameshwardas v. Mrs. Goolbai Hormusji : [1955]2SCR857 that to constitute an arbitration agreement in writing it isnot necessary that it should be signed by the parties and that was stated to bethe settled law. This view was reiterated in later decisions like Union ofIndia v. A. L. Rallia Ram : [1964]3SCR164 . Vide Jubilee Chamberof Commerce Ltd. v. Lola Amrit Shah A. I. R. 1940 Lah 180 a writtencontract means contract the terms of which are expressed in writing andaccepted by the parties either in writing or orally. In the present caseM/s. Ulfat Rai Kailash Chand became a member of the Association througha formally executed admission form and Singari Devi stepped into the shoesof Ulfat Rai as a partner of M/s. Ulfat Rai Kailash Ghand through ExhibitP-4 and confirmed the Association's membership of the Firm after thechange of partners not just by her conduct but by a writing too, as evidencedby Exhibit P-5. The arbitration to be found in the Rules of the Association will, thereforee, govern the dispute between the parties to this case andthe petitioner has every right to ask for a reference in accordance with thesaid Rules. These issues are also decided against respondents.Issue No. 5:

(11) The petitioner's counsel has not pressed the plea of estoppel andthe issue is answered in the negative.

(12) For the foregoing reasons the petition is granted, the arbitrationagreement in the form of the relevant provisions of the Rules of the Association is ordered to be filed and the Association is directed to refer the disputebetween the parties to arbitration as per the provisions of the Rules withinone month. The costs of these proceedings shall be borne by the respondents.

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