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Hurdwary Mull Vs. Ahmed Musaji Selaji and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata
Decided On
Judge
Reported in1Ind.Cas.371
AppellantHurdwary Mull
RespondentAhmed Musaji Selaji and ors.
Cases ReferredFerrer v. Oven
Excerpt:
stump act (ii of 1899), sections 5, 6 and 35 and schedule i, article 5 - arbitration act (ix of 1899), section 14--submission to be, valid--arbitration tribunal of the--bengal chamber of commerce, rules of--appointment of arbitrators--notification of time and place of hearing, omission of--evidence, refusal to hear, when amounts to misconduct--award, objections to--jurisdiction of court to set aside award not to be ousted by agreement of parties. - .....of award and keep such other books and memoranda and make such returns as the chamber shall from time to time require and shall render such assistance to the arbitrators in arbitrations as they may require and generally shall carry out the directions of the chamber with regard to the conduct of arbitrations.vi. that in every case where a dispute has arisen in relation to a contract which provides for a decision thereof by the tribunal, an application shall be addressed by either party to the registrar who on receipt of such application shall constitute a court by nominating in writing two or more arbitrators and also, in case of need, an umpire or if both parties in and by such application so desire, a single arbitrator to adjudicate on the dispute. the consent of the arbitrators to.....
Judgment:

Fletcher, J.

1. This is an application for an order that an award made in a certain arbitration be filed in Court under the provisions of the Indian Arbitration Act, 1899.

2. The submission, or rather the two submissions, to arbitration are contained in two contract-notes both dated the 23rd December 1904, relating to the sale of certain B. Twills bags sold on account of Messrs. Hurdwary & Co., to Messrs. Ebrahim Solemon & Co. The submission which is in identical terms in both notes is in the following terms:

Any dispute whatsoever arising on or out of this contract shall be referred to arbitration, under the Rules of the Bengal Chamber of Commerce applicable for the time being, for decision and such decision shall be accepted as final and binding on both parties to this contract. The award may at the instance of either party and without any notice to the other of them be made a rule of the High Court of Judicature at Fort William.

3. The Rules of the Tribunal of Arbitration of the Bengal Chamber of Commerce (so far as material to be here stated) are as follows:

IV. The secretary or officiating for the time being of the Chamber shall and he is hereby appointed to be and act as the Registrar of the Tribunal and his duties as such shall ordinarily consist of or include the following:

He shall by himself or his subordinates receive submissions, references or applications to the Tribunal and payment of fees and costs, notify the arbitrators, give notice of hearing and other notices to parties, keep a register of submissions, references and applications to the Tribunal and a register of award and keep such other books and memoranda and make such returns as the Chamber shall from time to time require and shall render such assistance to the arbitrators in arbitrations as they may require and generally shall carry out the directions of the Chamber with regard to the conduct of arbitrations.

VI. That in every case where a dispute has arisen in relation to a contract which provides for a decision thereof by the Tribunal, an application shall be addressed by either party to the Registrar who on receipt of such application shall constitute a Court by nominating in writing two or more arbitrators and also, in case of need, an umpire or if both parties in and by such application so desire, a single arbitrator to adjudicate on the dispute. The consent of the arbitrators to act shall be obtained by the Registrar and the arbitration shall then be conducted in accordance with, the following rules, with which are incorporated, where not expressly or impliedly provided to the contrary, the provisions of the Indian Arbitration Act:

(b) If any arbitrator or umpire decline or fail to act or if ho die or become incapable of acting, the Registrar may appoint a new arbitrator or umpire in his stead in like manner.

(c) The parties to the reference and all persons claiming through them respectively shall, subject to the provisions of any law for the time being in force, submit to be examined by the arbitrators on oath or affirmation in relation to the matters in dispute and shall, subject as aforesaid, produce before the arbitrators all books, deeds, papers, accounts, writings and documents within their possession or power respectively which may be required or called for and do all other things which, during the proceedings on the reference, the arbitrators may require and, particularly in the case of references relating to piece-goods or jute, shall comply with the arbitrator's requirements as to production and selection of samples and otherwise.

(f) The arbitrators shall have power to appoint a time and place for the hearing of references and within 7 days of notice on that behalf, the parties shall prepare and submit to the Registrar a written statement with regard to the matter in dispute or difference.

(g) No party to a reference shall without express permission of the arbitrators be entitled to appeal in person or by counsel, attorney or other advocate or adviser before the arbitrators or insist on or require the arbitrators to hear or examine witnesses or receive oral or documentary evidence but the arbitrators at discretion may through the Registrar require the parties, with or without witnesses, to attend before them or before any committee or sub-committee of the Chamber to be examined on or without oath or solemn affirmation.'

(j) The arbitrators may, at their own instance at any time or times before making a final award, consult, refer to and act on and adopt the advice, recommendations or suggestions of any committee or sub-committee of the Chamber having or exercising special jurisdiction or powers relating to the particular industry, commodity, produce or branch of trade concerned in the reference or of any experts whether members or not and may also at the expense of the parties consult and adopt the advice of solicitors or counsel upon any question of law, evidence, practice or procedure arising in the course of the reference.

(l) The arbitrators shall make their award in writing within 14 days after entering on the reference or on or before any later day to which the arbitrators by any writing signed by them may, from time to time, enlarge the time for making the award.

(o) No award shall be set aside or varied or attempted to be set aside or varied by reason or on account of any informality, omission or delay or error of the proceedings in or about the same or in relation thereto or on any other ground or for any misconduct short of collusion or fraud on the part of the arbitrators.

(q) The Indian Arbitration Act, 1899, so far as the provisions thereof are not inconsistent with these Rules, shall apply to all references to the Tribunal.

4. The facts relating to the reference appear to be as follows:

5. On the 30th March 1908, Messrs. Hard-wary & Co. forwarded to the Registrar of the Chamber of Commerce the two contract-notes which contain the submissions to arbitration and informed him of the dispute that had arisen between the parties. On the same day, the Registrar wrote to Messrs. Ebrahim Soleman & Co., and informed them of this fact. This letter also contained the following statement--'I shall be glad to receive your statement of the case at your early convenience but not later than week from date,'

6. Not receiving any answer to this letter, the Registrar again, wrote to Messrs. Ebrahim Soleman & Co., asking their immediate attention to the former letter and ending as follows--1 am constituting a Court to adjudicate upon this dispute.'

7. The attorneys for Messrs. Ebrahim Soleman & Co. wrote to the Registrar on the 14th April stating certain grounds of objection which may shortly be stated as follows: (1) that the contracts were void having been entered, into through a conspiracy between Hurdwary & Co., and one E.I. Timol, who was formerly in the employ of Ebrahim Soleman & Co.; (2) that the contracts were not for the bona fide sale of goods but were mere gambling transactions; (8) that the persons constituting the firm of Ebrahim. Soleman & Co. are, owing to death of parties and other circumstances, different to those constituting the firm in 1904.

8. On the 21st of April, the Registrar appointed the two arbitrators who both accepted the office on the same day. No notification of the appointment of or acceptance of office by the arbitrators was given, to either of the parties. It was admitted before me that neither of the parties know the names of the arbitrators until this matter came on in Court. It appears that it is the practice of the Chamber to withhold notice of the appointment and names of the arbitrators from the parties to the reference.

9. On the 22nd April, the Registrar sent the papers which ho had in his possession to the arbitrators, and on the same day, the arbitrators directed the Registrar to send the papers that had been lodged by each party to the other side and giving time up to the 80th. April for remarks to be sent in and the papers returned, accordingly. On the 25th April, the Registrar wrote to both of the parties similar letters directing them to send in their answers by the 30th April, but prohibiting them from, raising any new matter. On the 27th April, Messrs. Hurdwary & Co. sent in their answer, and on the same date, the attorneys for Messrs. Ebrahim Soleman & Co., wrote to the Registrar reiterating the objection they had raised in their former letter.

10. It appears that, on the 29th April, Messrs. Orr, Dignam. & Co., solicitors to the Chamber, were consulted by the arbitrators as to the objections that had been raised by the attorneys of Messrs. Ebrahim Soleman & Co.

11. On the 22nd of May, the Registrar wrote to the attorney of Ebrahim Soleman & Co., stating that the arbitration must proceed and disagreeing with their objections. This letter, as appears by the record., was drafted by Messrs. Orr, Dignam & Co. and one of the statements in this letter is of importance, viz.,--The arbitrators have, as empowered by the miles that govern the reference, obtained legal advice on the law points raised, in your letter.' No notice, however, was taken, of this letter from the Registrar.

12. On the 18th May, the arbitrators, by writing under their hands, purported to extend the time for making the award till the 15th June.

13. On the 4th June, the Registrar sent copies of the award to each of the parties but omitting from the copy the names of the arbitrators. The awards both, bear date the 4th of June and simply award a sum of money to be paid by Messrs. Ebrahim Soleman & Co., to Messrs. Hurdwary & Co. Messrs. Hurdwary & Co. have presented a petition to this Court for leave to file awards in Court. This application is opposed, by Messrs. Ebrahim Soleman & Co. Several objections have been taken on behalf of Messrs. Ebrahim Soleman & Co. to the filing of the awards. The first objection that appears to me from, the record to have any substance in it is that the submissions to arbitration are insufficiently stamped. Now, each of the contract-notes containing the submissions bears a one-anna stamp only, being stamped under Article 43 of Schedule 1 to the Indian Stamp Act, 1899.

14. It will be noticed that Article 48 refers only to a note or memorandum by a broker or agent to his principal intimating the purchase or sale on account of such, principal of any goods exceeding in value Rs. 20.

15. Section 5 of the Indian Stamp Act, 1899, enacts as follows;--Any instrument relating to several distinct matters shall be changeable with the aggregate amount of the duties with which separate instruments, each comprising or relating to one of such matters, would be chargeable under this Act.' And, Section 6 of the same Act enacts: 'Subject to the provisions of the last preceding section, an instrument so framed as to come within two or more of the descriptions in Schedule I shall, where the duties chargeable thereunder are different, be only chargeable with the highest of such duties.'

16. Do then the contract-notes comprise or relate to several distinct matters, or, are they so framed as to come within two or more of the descriptions in Schedule I to the Indian Stamp Act?

17. The contract-notes, in addition to the intimation by the broker of the purchase or sale of the goods, contain a submission in writing by the buyer and seller to refer disputes to arbitration signed by the broker, as the authorised agent of the parties. To hold otherwise would mean that, in this case, there is no submission in writing signed by either of the parties, in which case, the award could not, in any event, be tiled in Court, as not, being within the provisions of the Indian Arbitration Act.

18. If, then, the contract-notes contain a submission to arbitration, they fall within the provisions of Section 6 of the Indian Stamp Act. A submission to arbitration is chargeable with an eight-annas stamp under Schedule I, Article 5 of the Indian Stamp Act as an agreement not otherwise provided for (see. Bagabai v. Shie Ram Bom. P.J. 151 (1883) referred to in K. Seshadri Aiyangar's Stamp Law in British India, Part I, Schedule I, p. 46. I may also refer to Russell on Arbitration, 9th Edition, p. 56, where the learned author states that a submission to arbitration requires an agreement stamp under the provisions of the English Stamp Act, 1891. There is no distinction on this point between the English and the Indian Stamp Act.

19. I am of opinion, therefore, that each of the contract-notes should have borne a stamp of eight-annas. This being so, it becomes material to consider Section 35 of the Indian Stamp Act, 1899, which is in the following terms:

No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence or shall be acted upon, registered or authenticated by any such person or by any public officer unless such instrument is duly stamped.

20. The arbitrators, even though the parties do not take the objection, are bound by the Indian Stamp Act to take notice of any omission or insufficiency in the stamping of any document produced before them. They are also to require under proviso (a) to Section 35 of the Indian Stamp Act, before they receive in evidence or act under the submission, the payment of the necessary duties and penalties (see Russell on Arbitration, 9th Edition, p. 157). In the present case, the arbitrators being persons having by the consent of the parties, authority to receive evidence, acted upon the two submissions to arbitration, without the same being duly stamped, contrary to the provisions of Section 35 of the Indian Stamp Act.

21. Under the old practice, an award had to be enforced in a suit, and in such a suit, the plaintiff had to prove the submission under which the arbitrators acted [Ferrer v. Oven 7 B. & C, 427 (1827)], and though, under the provisions of the Indian Arbitration Act, an award may be enforced in the same manner as a decree, yet, it is still necessary to prove that the arbitrators acted under a valid submission.

22. The Arbitration Act has only in this respect made the procedure for enforcing an award simpler than that under the former practice. Section 35 of the Indian Stamp Act is, however, clear in its provisions and forbids any person having by law or consent of the parties authority to receive evidence (as the arbitrators have in the present case) from acting upon it until it is duly stamped. How, then, can I say on the evidence before me that the arbitrators acted on a valid submission, when the statute expressly says they shall not act upon it until sufficiently stamped? I must confess that I have been unable to see any way out of this difficulty. It may, however, be that if this were the only objection, the Court could remit the matter to the arbitrators.

23. The next objection is that the award was made out of time.

24. Rule VI (j) authorises the arbitrators to consult and adopt the advice of solicitors upon any question of law arising in the course of the reference, that is, after the arbitrators have entered upon the reference. Now, it appears from the record that Messrs. Orr, Dignam & Co., were consulted on the 29th April and they gave their advice on the 1st of May. That that advice was given to the arbitrators in the course of the reference appeal's from the letter of the Registrar to the attorneys of one of the parties dated the 2nd May in which it is stated that the arbitrators have, as empowered by the rules which govern the reference, obtained legal advice on the law points raised in your letter.' Therefore, on the 29th April the arbitrators had entered on the reference.

25. Rule VI. (l) provides that the arbitrators shall make (heir award in writing within 14 days after entering on the reference or on or before any later day to which the arbitrators by any writing signed by them, may from time to time enlarge the time for making the award. The arbitrators purported to enlarge the time for making the award on the 18th of May. 13th, on that date, the time for making the award had expired, and an enlargement by the arbitrators after their original time has expired is inoperative (see Russell on Arbitration, 116).

26. But then, it is said that Rule VI (n) provides that no award shall be set aside or varied except for collusion on the part of the arbitrators. It is sufficient for me with regard to this objection to say that the present application is not one to set aside or vary an award.

27. I am, therefore, of opinion that the award was made out of time and is inoperative.

28. Now the next objection is that the reference was not conducted according to the Rules applicable thereto.

29. On this objection, the first point raised is that the arbitrators improperly concealed their names and the fact of their appointment. It is common ground between the parties that the arbitrators did conceal their names and that neither of the parties know the names of the arbitrators until this application was made to the Court.

30. By Rule IV, one of the duties of the Registrar is to notify arbitrators and give notice of hearing. Rule VI (g) provides that certain things may only be done with the express permission of the arbitrators.

31. It is clear to my mind that the Rules contemplate the parties being notified of the appointment of the arbitrators, so that they may apply to the arbitrators for the express permission mentioned in Rule VI (g). Again, if the names of the arbitrators are withhold from the parties, how can they apply to set aside the proceedings for fraud or collusion on the part of the arbitrators as contemplated by Rule VI (o)?

32. The next objection on the Rules is that the arbitrators did not appoint a time and place for the hearing of the reference.

33. In my opinion, they failed in their duty in not doing so. 13y Rule VI (f) the parties have 7 days from the notice of appointment of a time and place for the hearing of the reference to submit their written statement. This period of 7 days does not begin to run until notice of appointment of a time and place for hearing of the reference has been given to the parties. 1 also think that the permission mentioned in Rule VI (g) to appear before the arbitrators is a permission to appear before them at the time and place appointed for the hearing under Rule VII (f).

34. Next, it is said by the party opposing this application that Rule VI (g) is ultra vires. In my opinion, it is not. I doubt very much whether this Rule goes further than the general rule of law. Whether the arbitrators should or should not hear evidence and the parties by counsel or otherwise must depend on the particular circumstances in every case. The Rule vests a discretion in the arbitrators which, like every other discretion vested in a person exercising judicial functions, must be exercised in a judicial manner. Thus, there are many arbitrations where the arbitrators are experts, where it is not necessary for them to hear evidence or the parties as the arbitrators have themselves the expert knowledge rendering them capable of deciding the matter without hearing evidence or the parties. On the other hand, the reference may be such that the arbitrators cannot decide the matter in dispute without hearing evidence, and the refusal to hear evidence, in such a case, would amount to misconduct on the part of the arbitrators. In the present case, the arbitrators were correct in declining to hear evidence on the allegation of fraud which went to the invalidity of the submission. On the other hand, they acted improperly in not taking evidence to ascertain who were the parties liable on the contracts. The arbitrators have never considered this matter at all and the form of the award is made against a firm and there is nothing to show who the members of that firm are.

35. The section of the Contract Act referred to by the solicitors to the arbitrators has nothing to do with the matter.

36. The present application is to file the award in Court so that it may have the effect of a decree of this Court. But, this Court cannot make a decree against a firm when it is ignorant as to what persons constitute the firm. This being so, I am of opinion that, not only did the arbitrators act improperly in not taking evidence on this issue, but also that the award is bad on the face of it. But then it is said by the applicant that whatever misconduct there may have been on the part of the arbitrators, that is cured by Rule VII (o). As I have already pointed out, this Rule does not apply, as the present application is not one to set aside or vary the award. But even if the application were one to set aside the award, I am of opinion that Rule VI (o) would be no bar to the jurisdiction of the Court to do so, if misconduct on the part of the arbitrators were shown or if it wore shown that the award were improperly procured.

37. Section 14 of the Indian Arbitration Act vests in the Court a discretion to do so in any case where the arbitration is proceeding under that Act and it is not competent for the parties by agreement to oust this jurisdiction, if they desire that the award should be enforced under the provisions of that Act. For the above reasons, I am of opinion that the present application fails.

38. The applicant must pay the costs of this application.


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