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Madura Mills Co. Ltd. Vs. N.M.S. Krishna Ayyar - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai
Decided On
Reported inAIR1937Mad405
AppellantMadura Mills Co. Ltd.
RespondentN.M.S. Krishna Ayyar
Cases ReferredIn East and West India Dock Co. v. Kirk
Excerpt:
.....to a failure to exercise his jurisdiction. there is therefore no doubt that the court has the power to give leave to revoke the submission to arbitration in this particular case, and that this is the appropriate remedy if the court is satisfied that the submission was ultra vires the particular provision of the company's articles of association under which it purported to have been made. the defendant company had no reason or justification of any sort not ,to have sent the share certificates to the plaintiff as above stated after 25th november 1929 and the defendant company is liable to make good the loss sustained by the plaintiff......if the court is satisfied that the submission was ultra vires the particular provision of the company's articles of association under which it purported to have been made. the article in question is article 113 which says:the managers shall not take any proceedings at law against any member or members of the company; nor shall any member or members take any such proceedings against the managers or against any other member or members with reference to the affairs of the company or in consequence of any dispute arising out of them; but the same shall be left to the arbitration of any person to be jointly agreed upon between the parties in dispute and failing so to agree then of two arbitrators (one to be appointed by each party).3. there is no question that the present respondent is a.....
Judgment:
ORDER

Cornish, J.

1. The petitioner in this Revision Petition is the Madura Mills Co., Ltd. It presented a petition in the District Court of Madura Under Section 5, Arbitration Act, for leave to revoke a submission to arbitration. The main grounds of this petition were firstly, that the arbitration proceedings had been unduly delayed, and secondly, that the arbitrators had no jurisdiction to entertain the submission to arbitration. The learned District Judge has considered the second of these grounds, but he left it undecided. He did however find that there had been inordinate delay. Undoubtedly there had been, seeing that the arbitration began in 1932 and no award had been reached by 1936. But he thought that after so much labour it would be better to give an extension of time for the making of the award. I think that this was a matter entirely within the discretion of the learned Judge. Section 12, Arbitration Act, enables the Court to enlarge the time for making an award, whether the time for making the award has expired or not. There is nothing in the section to suggest that the Court should not exercise this power unless it has been expressly asked by a party to do so. If the Court thought fit to refuse leave to the petitioner to revoke the submission, there was no other alternative but to extend the time for the making of the award. But the other ground of the petition, viz., the want of jurisdiction of the arbitrators, went to the very root of the matter. The learned Judge has disposed of it in this paragraph:

Whether it is a case falling Under Article 113 of the Articles of Association or not is itself a question that has been raised before the arbitrators as would be seen from the pleadings, Exs. A and B. It has to be decided by them, and there is no use urging this as a ground of revocation of the submission. It is true that the point was raised by the petitioner Company in the written statement, but no such objection was raised when the company nominated their arbitrator.

2. I think it was essentially a question I which the learned Judge should have decided, and his refusal amounts to a failure to exercise his jurisdiction. If a matter in dispute is not within the jurisdiction of arbitrators the proper remedy to a party to the submission is to apply to the Court for leave to revoke the submission. That was the ruling of Baron Alderson in Faviell v. Eastern Counties Ry. Co., (1848) 2 Ex 344. In East and West India Dock Co. v. Kirk (1887) 12 AC 738, Lord Halsbury, in the course of the arguments, stated that there was no doubt that the Court had jurisdiction to give leave to revoke a submission if there was reasonable ground for supposing that an arbitrator was going wrong in point of law even in a matter within his jurisdiction. There is therefore no doubt that the Court has the power to give leave to revoke the submission to arbitration in this particular case, and that this is the appropriate remedy if the Court is satisfied that the submission was ultra vires the particular provision of the Company's Articles of Association under which it purported to have been made. The Article in question is Article 113 which says:

The managers shall not take any proceedings at law against any member or members of the Company; nor shall any member or members take any such proceedings against the managers or against any other member or members with reference to the affairs of the Company or in consequence of any dispute arising out of them; but the same shall be left to the arbitration of any person to be jointly agreed upon between the parties in dispute and failing so to agree then of two arbitrators (one to be appointed by each party).

3. There is no question that the present respondent is a member of the Company, or that his dispute is 'with reference to' or 'arising out of' the affairs of the Company. The dispute arises out of the refusal of the Company, acting through its managers, to recognize a transfer of the respondent's shares and its neglect to send the respondent the share certificate and a cheque payable to him in respect of the transaction whereby the respondent's pharos in a Company known as the Pandiyan Company were taken over by the Madura Co. The crucial question is whether his dispute is with the Company or with the managers of the Company; and this is by no means the same thing. There are no directors of the Madura Mills Co. Article 69 provides that the affairs of the Company shall be managed by the managers and there shall be no Directors; and Article 70 says that the managers of the Company shall be the person or persons for the time being constituting the firm of A. and P. Harvey. It is clear from the respondent's case, as put forward in his plaint, that his claim is against the Company. Throughout this document it is 'the defendant Company' whose conduct is impeached, and it is the defendant Company that he seeks to make liable for damages. Para. 22 summarizes his case:

The plaintiff states that the defendant Company has by its unreasonable conduct and unjustifiable delay caused enormous loss to the plaintiff. The plaintiff by reason of the said conduct of the defendant Company could not completely settle his debts in 1929 and there was loss of interest on the amounts held back by the defendant Company and enormous interest accrued due to the plaintiff's debts and plaintiff put to enormous loss. The defendant Company had no reason or justification of any sort not ,to have sent the share certificates to the plaintiff as above stated after 25th November 1929 and the defendant Company is liable to make good the loss sustained by the plaintiff.

4. This is not a dispute with the managers or a claim against the managers. The dispute is, no doubt, in respect of something which the managers neglected to do; but the managers are not the Company. The claim is against the Company, and the determination of such a claim by arbitration at the instance of a member of the Company is not within the purview of Article 113. Apart from this Article the respondent has no power to compel a submission to arbitration of a dispute arising out of the affairs of the Company. Section 152, Companies Act, empowers a Company to refer to arbitration an existing difference between itself and any other Company or person. But a shareholder of a Company has no such right against the Company. I am therefore of opinion that the respondent's submission of his claim to arbitration was ultra vires Article 113, and that consequently the petitioner is entitled to have the submission revoked. The Civil Revision Petition is accordingly allowed with costs.


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