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Moolchand Kevalchand Daga Vs. Kissindoss Girdhardoss - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtChennai High Court
Decided On
Case NumberLetters Patent Appeal No. 96 of 1956
Judge
Reported inAIR1962Mad52
ActsIndian Arbitration Act - Sections 2, 21, 34, 39, 39(1) and 39(2); Government of India Act, 1915 - Sections 71 and 72; Code of Civil Procedure (CPC), 1908 - Sections 4, 100, 104 and 106; Code of Civil Procedure (CPC), 1882 - Sections 588 and 589; Code of Civil Procedure (CPC), 1877 - Sections 588; Constitution of India - Article 133(3)
AppellantMoolchand Kevalchand Daga
RespondentKissindoss Girdhardoss
Cases ReferredNandram Hanutram v. Raghunath and Sons Ltd.
Excerpt:
trade unions act (xvi of 1926)--employees of government house, guindy--not employed in trade or business as required by act--not even undertaking within meaning of industry in industrial disputes act (xiv of 1947)--not entitled to registration under act xvi of 1926.; in the raj bhavan at guindy, a number of persons are employed in various capacities such as household staff, peons, gardeners, maistries, etc. those persons are employed for doing domestic work and other services and for the maintenance of governor's household, staff and state guests. there are two categories of employees in the staff and they are appointed by and are under the disciplinary control of the comptroller. they formed themselves into an union and seven of them applied to the registrar of trade unions, madras, for..... (1) this appeal originally came before a division bench of this court. a preliminary objection was taken on behalf of the respondent that the appeal was incompetent. the ruling of this court inradhakrishnamurthy v. ethirajulu chetti and co., ilr 1945 mad 564 : (air 1945 mad 184), directly supported the preliminary objection. but, after some argument, it was considered that decision required reconsideration. hence, this reference to a full bench.(2) the appeal purports to be filed under cl. 15 of the letters patent against the judgment of ramaswami, j. in c. m. a. no. 531 of 1954. that appeal was against an order of the city civil court, dismissing an application filed by the respondent under s. 34 of the arbitration act for stay of a suit (o. s. no. 538 of 1954) on the file of the city.....
Judgment:
(1) This appeal originally came before a Division Bench of this court. A preliminary objection was taken on behalf of the respondent that the appeal was incompetent. The ruling of this court inRadhakrishnamurthy v. Ethirajulu Chetti and Co., ILR 1945 Mad 564 : (AIR 1945 Mad 184), directly supported the preliminary objection. But, after some argument, it was considered that decision required reconsideration. Hence, this reference to a Full Bench.

(2) The appeal purports to be filed under Cl. 15 of the Letters Patent against the judgment of Ramaswami, J. In C. M. A. No. 531 of 1954. That appeal was against an order of the City Civil Court, dismissing an application filed by the respondent under S. 34 of the Arbitration Act for stay of a suit (O. S. No. 538 of 1954) on the file of the City Civil Court. Section 39(1) inter alia provider for an appeal form an order staying or refusing to stay legal proceedings where there is an arbitration agreement (cl. (V)).

The question is whether an appeal under the Letters Patent is maintainable against the order of Ramaswami, J. It was not contended before us on behalf of the respondent that the order of Ramaswami, J. Was not a judgment within the meaning of Cl. 15 of the Letters Patent. Prima facie, thererfore, this appeal would be competent. But the respondent's contention is that S. 39(2) of the Arbitration Act prohibits this appeal under the Letters Patent. That provision runs as follows :

"No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court."

As mentioned above, the preliminary objection is supported by the decision in ILR (1945) Mad 564 :(AIR 1945 Mad 184), the material passage form which has already been extracted in the order of reference. Clause 44 of the Letters Patent runs thus :

"And we do further ordain and declare that all the provisions of these our Letters Patent are subject to the legislative powers of the Governor General in Legislative Council, and also the......... Governor-General under S. 71 of the Government of India Act, 1915, and also of the Governor-General, in cases of emergency under S. 72 of that Act, and may be in all respects amended and altered thereby."

(3) The learned Judge in ILR (1945) mad 564 : (AIR 1945 Mad 184), took the view that, as the Indian Arbitration Act was an Act of the Central Legislature, the provisions of S. 39 should prevail, with the result that sub-sec. (2) of Sec. 39 would take away the right of appeal conferred by Cl. 15 of the Letters Patent. This decision was followed by another Division Bench in South India Co-operative Insurance Society Ltd. V. Bapiraju, . Krishnaswami Nayudu, J. Dealing with this Point, construed the second appeal contemplated under S. 39(2) as a further appeal and not a second appeal under S. 100, C.P.C.

The same view was taken by the Bombay High Court in Madhavdas Devidas v. Vithaldas Vasudeodas, . In this decision, unlike the decisions of our Court, the question has been discussed at some length.bavdekar, J. Who delivered the judgment on behalf of the Division Bench, referred to the sharp difference of opinion between our court in ILR (1945) Mad 546 : (AIR 1945 Mad 184) and the Lahore and East Punjab High Court, which had taken a contrary view in Hanuman Chamber of Commerce v. Jassaram Hira Nand, AIR 1948 Lah 64 and Banwari Lal v. Hindu College Delhi, AIR 1949 EP 165. It may be mentioned that the decision in AIR 1948 Lah 64, affirmed by a Full Bench of the East Punjab High Court in Mohindra Supply Co., Kashmere Gate, Delhi v. Governor-General in Council, .

After setting out the two possible interpretations which could be placed on the words "second appeal" the learned Judge refused to accept the interpretation, according to which the class of appeals contemplated would be appeals under S. 100, C.P.C. "Second appeal" is a technical expression to denote an appeal under S. 100, C.P.C. Such an appeal is only against a decree as defined in the Civil Procedure Code. An order under any of the provisions of the Arbitration Act would not be a decree.

Therefore, the learned Judge held that it would be inappropriate to construe the expression "second appeal" as referring to the "second appeal" provided in and by S. 100 C.P.C. The learned Judge therefore adopted the other interpretation. He observed at page 577 (of ILR Bom) : (at p. 232 of AIR) :

"When there is an appeal provided from an order in appeal from an order, then that appeal would be numerically and in the dictionary meaning of the word "second" a second appeal."

His conclusion was as follows :

"Sub-sec. (2) of Sec. 39 is obviously, therefore, intended to take away any right of appeal which may lie under any other enactment, and, in our view, therefore, the right of appeal, which was given by Cl. 15 of the Letters patent, is by necessary implication taken away by sub-sec. (2) of Sec. 39."

The decision of the Calcutta High Court in R. Wright and Partner Ltd. V. Governor General in Council, ILR (1948) 2 Cal 265 related to an order passed by a learned Judge of the High Court; by it was not one of the orders mentioned in Sec. 39(1) of the Arbitration Act. It was held that no appeal would lie form such an order under Cl. 15 of the Letters Patent, because the right of appeal given by the Letters Patent should be deemed to have been curtailed, modified and restricted by Sec. 39(1) of the Arbitration Act.

The decision of this court in ILR 1945 Mad 564 : (AIR 1945 Mad 184) and the decision of the Bombay High Court in were

followed by the learned Judges in coming to the conclusion that the right of appeal conferred by Cl. 15 of the Letters patent had been curtailed and modified by S. 39 of he Arbitration Act, because the provisions of Cl. 15 of the Letters Patent had to be taken subject to the legislative powers of the Governor General in Legislative Council. As the order of the single Judge of he High Court was itself the original order, there was no scope for the application of Sec. 39(2) of the Arbitration Act.

(4) A contrary view has been taken by the Lahore High Court and East Punjab High Court, In AIR 1948 Lah. 64 a Division Bench of the Lahore High Court (Abdul Rashid C. J. And Mahajan J.) held that S. 39(2) of the Arbitration Act did not take away the right of appeal conferred by Cl. 10 of the Letters Patent of the Lahore High Court (corresponding to clause 15 of the Madras Letters Patent) either expressly or by necessary implication. In the judgment of Mahajan J. As he then was who delivered the judgment on behalf of the court, express reference is made to the decision of our court in, ILR 1945 Mad 564 : (AIR 1945 Mad 184) and this is what the learned Judge says in dissenting from that decision :

"With great respect, I might observe that, as the decision states no reasons in support of this view, it cannot be used as a precedent for a decision of similar cases when the point arises before another court. I am, therefore, with due deference to the learned Judges who decided the above case, not prepared to follow it, as, in my opinion, it does not lay down sound law."

The learned Judge was inclined to construe the expression "second appeal" in Sec. 39(2) of the Arbitration Act as meaning appeals falling under Sec. 100 C.P.C. He pointed out that the expression "second appeal" has seldom been used in respect of appeals which arise within the High Court and which are very commonly described as inter-court appeals. In there is an elaborate discussion by a Full Bench of the Punjab High Court. Kapur, J. (As she then was) delivered the leading judgment. The learned Judge's reasoning and conclusion can be summed up in his own words :

"I am therefore of the opinion that :

1. Section 39 Arbitration Act is re-enactment of Sec. 588 and second part of Sec. 589 of the Code of 1882 and also of Sec. 104 of the Code of 1908 minus the phrase added in that Code and a portion of Sec. 106 and the interpretation which has been put on Ss. 588 and 589 of the Code would apply equally to Sec. 39 of the Arbitration Act;

2. In Sec. 39 of the Arbitration Act as in Sec. 588 of the Code of 1882 or Sec. 104 of the Code of 1908, the word used is "order" and therefore this section cannot restrict an appeal which would fall under Cl. 10 of the Letters Patent of this court which is against a judgment;

3. The mere fact that a saving clause was introduced in Sec. 104(1) of the Code of 1908 and words similar to that saving clause do not find place in Sec. 39 is no ground for interpreting Sec. 39 in manner different from the interpretation which was put on Sec. 588 of the Code of 1882;

4. The Arbitration Act is not a special Act vis-a-vis the Letters Patent; on the other hand, it is cl. 10 which is a special Act as it provided for intra-court appeals;

5. The word "second appeal" must be construed in its ordinary connotation as it is understood by lawyers;

6. Even if it were to be used in the sense that it was used in cases decided under Sec. 588, it applies only to appeals form an appellate order of District Judge to the High Court, but it is not used in the sense of an appeal form one Judge of High Court to two or more Judges of same court;

7. There is no modification of Cl. 10 of the Letters Patent by Sec. 39 of the Arbitration Act either expressly or by necessary intendment; and

8. The fact that appeals were expressly provided to the King in Council presupposes that an appeal would lie from the judgment of a single Judge to two or more Judges of that court under Cl. 10 of the Letters Patent, otherwise the appeal to the King in Council would be only an illusory right. The same argument would apply to appeals to the Supreme Court."

No other decision of any court directly bearing on the point was brought to our notice.

(5) Having regard to this pronounced conflict of judicial opinion, we would discuss the question as if it were res integra. The order under appeal is a judgment within the meaning of Cl. 15 of the Letters Patent, and, therefore, prima facie, this appeal is competent under that clause. The contention that the appeal is incompetent is ultimately founded on Cl. 44 of the Letters Patent, read of course, with sub-sec. (2) of Sec. 39. Clause 44 is in general terms and is of an omnibus nature. It does not specifically refer to any right of appeal conferred by any of the clauses of the Letters Patent. It declares that the provisions of the Letters Patent are subject to the legislative powers of the Governor General in Legislative Council and the Governor General in Council under Sec. 71 of the Government of India Act, 1915 and of the Governor General in cases of emergency under Sec. 72 of that Act.

What can be done in the exercise of such legislative power is also mentioned in Cl. 44 itself namely, that all the provisions of the Letters Patent may in all respects be amended and altered. Clause 15 is one of the provisions of the Letters Patent and it must be conceded that this clause may in all respects be amended and altered in exercise of the legislative powers of the Governor General in Council. It is not pretended that Cl. 15 has been expressly amended and altered so as to take away the right of appeal conferred by it in certain cases arising under the Indian Arbitration Act. All that is contended is that, by necessary intendment, the clause should be deemed to have been amended and altered by Sec. 39(2) of the Arbitration Act, which is no doubt an Act passed by the Governor General in Legislative Council.

Before we can hold that such an important provision as clause 15 of the Letters Patent has been amended and altered by necessary implication, we should be satisfied beyond doubt that the implication is so compelling that to hold other wise would be practically rendering a provision of an Act of the Central legislature useless and inoperative. The question which falls for our decision, therefore, is whether Sec. 39(2) of the Arbitration Act compels us to hold that clause 15 of the Letters Patent must have been intended to be amended and altered. It is clear that Sec. 39 of the Arbitration Act is a section generally dealing with appeals form orders passed under the Arbitration Act. "Court" is defined in Sec. 2 of the Act thus:

" 'court' means a civil court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not except for the purpose of arbitration proceedings under S. 21, include a Small Cause Court."

It is obvious that, in the majority of cases, the "Court" would be one of the subordinate courts in the country, though some of the orders might be passed by the High Court itself. All that we wish to stress upon is that Sec. 39 covers not only appeals from orders passed by the High Court, but also appeals form orders passed by the other courts. In some cases, the 'court' might be the court of the subordinate Judge. The "appellate Court" in certain cases may be the District court, though in other cases it may be the High Court.

Under Sec. 39(1), the "appellate Court" is described as the court authorised by law to hear appeals form original decrees of the court passing the order. When a single learned Judge of this court hears and disposes of an appeal preferred against one of the orders specified in Sec. 39(1) and passed by a subordinate court, the learned Judge would constitute the court authorised to here appeals from the original decree of the sub-ordinate court passing the order, namely, the High Court.

There is no provision in the C.P.C.or in the Arbitration Act for an appeal form the order passed by a Subordinate court to a single learned Judge of this court. The appeal lies to the High Court as such. There is nothing to prevent the Chief Justice of a High Court directing appeals preferred under Sec. 39(1) of the Arbitration Act to be disposed of by a Division Bench. The appellate Side Rules may provide for certain of the appeals, having regard to the value of the subject-matter involved, being heard by a single learned Judge and others by a Division Bench. Whether an appeal under Sec. 39(1) is heard by a single learned Judge or by more than one learned Judge, the matter is entirely one of internal arrangement of he High Court and is not provided by the Arbitration Act.

(6) There has been a great controversy as to the meaning to be attached to the expression 'second appeal' in Sec. 39(2) of the Arbitration Act. Some of the learned Judges were prepared to construe that expression as referring to appeals falling under Sec. 100 C.P.C. It cannot be denied that, in common parlance, the expression "second appeal' is used to describe appeals falling under that section. But, with great deference to the learned judges who would construe that expression in Sec. 39(2) as referring to appeals under Sec. 100 C.P.C., we are unable to agree with them and for this reason. A second appeal under Sec. 100 C.P.C. Is only against a decree passed in appeal by any court subordinate to High Court.

None of the orders mentioned in Sec. 39(1) of he Arbitration Act would be a decree within the meaning of the definition in the C.P.C. Therefore, even without any specific provision, no second appeal would lie to the High Court under Sec. 100 C.P.C. We are inclined to agree with those learned Judges who held that "second appeal" means further appeal, that is, numerically second appeal.

(7) At the same time, we are clearly of opinion that the second appeal contemplated is a further appeal in court of a higher grade. Section 39(1) refers to an appeal form an original order to an appellate court, which is a court of a higher category. So, when there is a reference to a second appeal from an order passed in appeal under the section, that is, Sec. 39(1), the second appeal contemplated is a further appeal to a court higher than the court which passed the order in appeal. To illustrate : If the original order was passed by the court of a Subordinate Judge and an appeal has been preferred under Sec. 39(1) of the Act to the District Judge, there will not be a further appeal to the High Court against the appellate order of the District court.

In our opinion, an appeal under Cl. 15 of the Letters Patent from one learned Judge of a High Court to two or more Judges of the same High Court cannot fall within the category of "second appeal" mentioned in Sec. 39(2) of the Act. This point is really covered by the high authority of the Judicial Committee of the Privy Council in the early case of Hurrish Chander v. Kalisundari Debi, ILR 9 Cal. 482 (PC). It was held therein that a decision by a single Judge of the High court appointed to dispose of matters relating to appeals to Her Majesty in Council, refusing to transmit for execution her order restoring a decree, is a judgment within the meaning of Sec. 15 of the Letters Patent of 1865 and was appealable to a Division Bench of the High Court. It was contended before the Judicial Committee that Sec. 588 C.P.C. Of 1877 restricted appeals against orders to the list of orders enumerated therein. Their Lordships repelled this contention briefly, but clearly, thus:

"It only remains to observe that their Lordships do not think that Sec. 588 of Act Xof 1877 which has the effect of restricting certain appeals, applies to such a case as this, where the appeal is from one of the Judges of the court to the Full court."

Some of the learned Judges appear to have treated this pronouncement of the Privy Council as in the nature of an obiter dictum. We think otherwise. It is a definite and unambiguous pronouncement on the scope of Sec. 588 of Act X of 1877. We need only refer to the following observation of Subramania Aiyar J. In Chappan v. Moidin Kutti, ILR 22 Mad 68 at p. 84 :

"This contention is, however, opposed to the ruling of the Judicial Committee in ILR 9 Cal 482 (PC), in which their Lordships laid down that section does not apply to a case such as the present, where the appeal is from one of the judges of the court to the Full Court. I am unable to persuade myself, as I have already stated on a previous occasion that the observations of the Committee on the point are mere obiter dicta. The contention that Sec 588 modified Cl. 15 was not only distinctly raise, but was also strongly pressed by counsel in the argument. Their Lordships had therefore to give a decision upon the soundness or unsoundness of the contention. That, it appears to me, they did in unmistakable terms."

(8) The importance of the dictum of the Privy Council lies in the fact that Sec. 39 is substantially a re-enactment of Sec. 588 and second part of S. 589 of the old Code of Civil Procedure and the corresponding Section 104 of the Code of 1908 except for slight alteration.

(9) Section 104 of the Code of 1908 has been construed by this court as not restricting the right of appeal conferred by Cl. 15 of the Letters Patent. A full Bench of this court in Parasivan Pillai v. Ramaswami Chettiar, ILR 56 Mad 915 : (AIR 1933 Mad 570) held that Sec. 104 of the Code did not control clause 15 of the Letters Patent. Anantakrishna Aiyar J. After referring to the earlier decisions of this court in Sabapathi Chetti v. Narayanaswami Chetti, ILR 25 Mad 555, Muthuvaian v. Periasami Iyen, 13 Mad LJ 497 and ILR 22 Mad 68, summed up the position in the following way :

"It was remarked that the prohibition contemned in the C.P.C. Related only to the entertainment of a further appeal by another court of a higher grade in such cases, and that the provisions of the Letters Patent conferring a right of appeal from the judgment of one Judge of the High Court to the same............. court were not in any way interfered with by the provision of the Code of Civil Procedure. That view has been accepted all along in this court."

(10) Learned counsel for the respondent tried to whittle down the effect of the Full Bench ruling in ILR 56 Mad 915 : (AIR 1933 Mad 570) by supporting it by reference to Sec. 4 of the C.P.C. However plausible may be the argument based on Sec. 4, the fact remains that the actual decisions of the Full Bench in ILR 56 Mad 915 : (AIR 1933 Mad 570) is not based on Sec. 4, but is based on the principle that the appeal under Cl. 15 of the Letters Patent is not an appeal form a subordinate court to a higher court.

(11) The saving provision in sub-sec. (2) of Sec. 39 regarding the right of appeal to the Privy Council, and now to the Supreme Court, appears to have given a little difficulty to some of the Judges. It is probably unnecessary: but, having regard to the use of the general expression "second appeal" it was necessary in any event by way of abundant caution. The first part of Sec. 39(2) prohibits a second appeal form an order passed in appeal preferred under Sec. 39(1) of the Act. Where the High Court passes such an order on appeal, an appeal therefrom to the Supreme Court would numerically be a second appeal, and it may be open to argument that the prohibition of a second appeal might be understood as a restriction on the right to appeal to the Supreme Court.

This was not the intention of the legislature, and that was made plain by the saving clause that nothing in the section shall affect or take away right to appeal to the Supreme Court. We may advert to an anomaly, if the contention of the respondent is accepted. If the judgment of a single learned Judge cannot be carried in appeal to a Division Bench then, the aggrieved party would not be entitled to prefer an appeal to the Supreme Court. Art. 133(3) of the Constitution specifically provides that no appeal shall, unless parliament by law otherwise provides, lie to the Supreme Court from the judgment, decree or final order of one judge of a High Court.

On a consideration of all the aspects of the question, we have arrived at the conclusion that the expression "second appeal" in Sec. 39(2) of the Arbitration Act would not apply to an appeal under Cl. 15 of the Letters Patent form one Judge of the High Court to two or more Judges of the same court. We are therefore of opinion that there is nothing in Sec. 39(2) of the Arbitration Act which compels us to hold that Cl. 15 of the Letters Patent has been amended and altered there by and the right of appeal conferred by that clause restricted in any way. It follows that the decision in ILR 1945 Mad 564 : (AIR 1945 Mad 184) cannot be accepted as good law. The preliminary objection is overruled.

The appeal will be posted for hearing before a Division Bench in the usual courses. (This appeal coming on for final hearing on 27th February 1961, before Rajamannar C. J. And Kailasam, J. The court delivered the following Judgment:-)

Rajamannar, C.J.

(12) This is an appeal against the judgment of Ramaswami J. In C. M. A. No. 531 of 1954, which arose in the following circumstances. The appellant and the respondent were parties to certain transactions which consisted of contracts for purchase of art silk yarn. Disputes arose between them and the parties appear to have settled their disputes amicably. The terms of the settlement were that the respondent should pay to the appellant a sum of Rs. 4000 in full quit of all claims in respect of the 150 Japan Art silk yarn thirty cases purchased and sold to the respondent during the month of July 1951.

Out of this, an amount of Rs. 2000 was paid by the respondent to the appellant by cheque on Indian Bank on 8-8-1951. For the balance a promissory note was executed by the respondent in favour of the appellant. There was a letter which was passed by the appellant to the respondent, setting out these facts and also containing the following statement. "We have not any claim on you in the art silk transactions upto date." It was agreed that there would not be a demand of the amount due under the promissory note for a period of one year from the date of execution. The appellant filed a suit in the city civil court, Madras O. S. No. 538 of 1954, for recovery of the amount due for principal and interest under the abovesaid promissory note.

(13) In the plaint, no doubt, there was only a bare averment in accordance with the recital in the promissory not that in had been executed for value received. The respondent filed a written statement, but also took out an application under Sec. 34 of the Arbitration Act, praying that the court should stay the suit, because the proper remedy of the appellant was to resort to the arbitration of the special panel of arbitrators constituted by the Madras Yarn Merchants Association.

(14) In the affidavit filed in support of this application the respondent alleged that the parties were members of the Madras Yarn Merchants Association and there was a caluse in the contract between the parties that all disputes in respect of contracts between members of the Association should be decided only by arbitration because of rule 10 (a) to (c) of the Madras Yarn Merchants Association, Madras. That rule runs thus:

"10(a) All disputes between members, brokers, members and non-members and vice-versa, relation to or incidental to yarn trade such as "ready business" "shipment" " forward (vaida)" 'f. O. R. ' 'exgodown', 'ex mill' and any other contracts shall be decided by arbitration under these rules.

(B) Every written contract between members, non-members and a member, relating to yarn business of any description shall contain the arbitration clause as provided for in Rule 12 (a) herein: and no member shall enter into any written contract with a non-member without expressly including in the contract the said Arbitration Clause.

(C) The clause shall cover all disputes including disputes arising out of non-payment of money due for the sale of yarn or such other dues which are incidental to the yarn trade."

(15) Presumably, the contract between the parties contained the arbitration clause as provided under these rules. The contention on behalf of the respondent was that the subject matter of the suit was really a claim for non-payment of money in respect of art silk yarn forward business. Therefore, it was covered by the arbitration agreement between the parties and the rule mentioned above. The application for stay was opposed by the appellant on the ground that the promissory note, on the foot of which a suit had been brought, was executed for an amount actually found due after mutual settlement between the parties and therefore there was no dispute or difference relating to the contract as such.

The learned Judge of the City Civil Court dismissed the application. The learned Judge held that the suit was based only on a claim arising out of a promissory note which had remained unpaid and it did not in any way relate to the contract between the parties. On appeal to this court, in C. M. A. No. 531 of 1954, Ramaswami, J. Set aside the order of the learned City Civil Judge and allowed the application for stay. This Letters Patent Appeal has been filed against this order of Ramaswami, J.

(16) At the outset, there was a preliminary objection raised by the respondent to the maintainability of the appeal, which was filed under Cl.15 of the Letters Patent. The question was referred to a Full Bench of this court, which has since decided that the appeal was competent. It now comes up before us for final disposal on the merits.

(17) We find it impossible to sustain the order of Ramaswami J. The suit is based expressly on a promissory note. We shall assume that, for the purpose of disposing of this appeal, we can taken into account the actual circumstances under which the promissory note came to be executed. Even so, all that can be said is that the promissory note was executed for an amount which was agreed to be paid by the respondent to the appellant to carry out the terms of the settlement arrived at between the two in respect of certain yarn transactions. The basis of the liability of the respondent is the compromise. The basis is not the primary liability of the respondent under the contracts. Learned Counsel for the respondent was unable to draw our attention to any authority which lays down that, where there is an arbitration clause and rule like R. 10 of the Madras Yarn Merchants Association the parties, if they happen to be members of the Association, are precluded form coming to an amicable settlement of disputes between them.

It is really an extraordinary contention to accept, if advanced. Once therefore, there is no impediment in the way of parties having disputes in respect of contracts settling there disputes, we fail to see how the carrying out of the terms of the settlement can form the subject-matter of arbitration proceeding by virtue of the arbitration clause in the original contracts. Learned counsel for the respondent would have us to go this length, namely, that, even if the entire amount of Rs. 4000 has been paid in cash, there may be still the possibility of having recourse to arbitration by the person receiving the said sum. Logically, it should be so. We are, however, not constrained to hold that this is the legal effect of the arbitration clause.

(18) Learned counsel for the respondent cited to us certain decisions which have absolutely no bearing on the question which falls for decision in this appeal. The first is the decision of the House of Lords reported as a footnote to the case of Uttam Chand Saligram v. Mahmooda Jewa Mamooji, ILR 46 Cal 534 : (AIR 1920 Cal 143). The facts of that case (Chandanmull v. Donald Cambell and Co.) are extremely peculiar. Disputes having arisen under a contract of sale of jute, they were referred to the arbitration of the London Jute Association under the arbitration clause contained therein. The arbitrator determined the default of the sellers and also fixed the default prices., but failed to make an award directing one party to pay to the other party a specific sum.

In pursuance of the basic principles of the award, there was a demand made by the appellants therein; but the respondents did not make the payment. Apparently, the Award could not straightway be enforced in execution, because of the technical defect that the Award did not direct the respondents to pay any specific sum of money to the appellants. Therefore the appellants again resorted to a second arbitration alleging that there was a dispute, that is, there was no consensus of opinion as regards the actual amount and made a direction for the payment of a definite sum of money.

It was contended that this second arbitration and award were illegal because there was no dispute between the parties. The House of Lords overruled the contention and held that the second award was valid because a dispute must be deemed to have existed as regards the actual sum of money payable by the respondents to the appellants. Lord Sumner thus disposed of the objections:

"The question how much Mr. Chandanmol should pay was not submitted to Mr. Ritchie (the first arbitrator); as is usual in trade, he was only asked to fix default and the market value as the basis, if default, of a calculation for damages. The clerks were left to do the rest. Mr. Ritchie's award was valid, but, in view of the appellant's attitude towards it a second dispute arose and a second award was needed to resolve the first. That second award of Mr. Nevill was duly made".

Nothing like this has happened in the present case. The next decision cited by learned counsel for the respondent is that of the Calcutta High Court in ILR 46 Cal 534 : (AIR 1920 Cal 143).

He referred us to this case only because there is a reference in it to the House of Lords' case mentioned above. The decision itself is not very relevant. We are unable to follow how the decision in Nandram Hanutram v. Raghunath and Sons Ltd., helps the

respondent in any way. All that was laid down in that case is that the existence of disputes or differences contemplated by an arbitration clause is an essential condition of and prerequisite and the failure to perform the contract and to pay the amount claimed may lead to the inference of a dispute.

The fallacy in applying the principle of this case to the case under consideration lies in overlooking that, in the present case, the plaintiff does not sue for the recovery of any sum payable under any contract. He only sues to recover the amount due under a promissory not which was executed in pursuance of a settlement between the parties.

(19) The respondent contended that there would be valid defence to the claim, because the contract was in the nature of a wagering contract which could not be enforced. We are not concerned with that defence so far as this appeal is concerned. All that we are concerned with in this appeal is to find if under Sec. 34 of the Arbitration Act the suit filed by the appellant on the promissory note should be stayed and the matter referred to arbitration. We are clearly of opinion that Sec. 34 has no application to this case. The application for stay was misconceived. This appeal is allowed and the other of the learned City Civil Judge dismissing the application is restored with costs throughout.

(20) Appeal allowed.


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