VARJIVANDAS KHUSHALDAS GANDHI Vs. RAVINDRA MOTILAL SHAH

JUDGEMENT

(1.) THE appellants, who would hereafter be referred to as 'the firm', carry on business at Bombay as share and stock brokers. The firm is a member of an Association which was originally known as the Native Share and Stock Brokers' Association. The respondent, who will hereafter be referred to as Ravindra, was a constituent of the firm. He was not a member of the Native Share and Stock Brokers' Association. In the year 1955 Ravindra entered into contracts for the purchase and sale of stocks and shares through the firm, Contract notes in the form exh. A were executed from time to time in the name of the firm by Ravindra. One of the terms of these contracts was that the contract was subject to the rules and reflations of the Native Share and Stock Brokers' Association. With regard to disputes arising between the parties, the contract note, provides: - In the event of any dispute arising between you and us out of or relating to dealings, transactions, and contracts, the matter shall be referred to arbitration as provided overleaf. It is not necessary to set out the terms printed overleaf at this stage of the narrative. I will refer to them extensively and in detail while discussing the issues in this ease.

(2.) ACCORDING to the firm, a sum of Rs. 19,745 -10 -6 became due to them from Ravindra on account of the transactions put through by them on Ravindra's account. The Native Share and Stock Brokers' Association was recognised by the Government of Bombay under Section 4 of the Bombay Securities Contracts Control Act, 1925 (Act No. VIII of 1925). This Act was repealed by a Central enactment known as the Securities Contracts (Regulation) Act, 1956, (Act No. XLII of 1956). Thereafter the Association assumed an alias name 'The Stock Exchange'. The old name was retained and the new name was an additional title to the Association. The bye -laws and rules were re -cast and the Association was recognised by the Central Government in accordance with the provisions of Section 4 of the Central enactment. The firm served a notice upon Ravindra to pay the amount due to them. It was stated in the notice that, in case Ravindra failed to make the payment, the firm would be required to proceed to recover the dues according to law. Ravindra asked for certain particulars and nothing happened till 1958. On April 26, 1958, the firm wrote a letter stating that they had referred the dispute between the parties to the arbitration of the Stock Exchange and that they had appointed one Mr. C. M. Shah as Arbitrator on their behalf. On April 29, 1958, the Assistant Secretary of the Stock Exchange informed Ravindra about the reference to arbitration made by the firm and asked him to appoint an Arbitrator within seven days. On May 3, 1958, Ravindra asked for time on the ground that he was unable to come to Bombay as one of his relatives was sick and also on the ground that he wanted to obtain legal advice in the matter. On May 28, 1958, the Secretary informed Ravindra that as the latter had failed to appoint an Arbitrator on his behalf, the President of the Stock Exchange had appointed Mr. N. N. Dubash as Arbitrator on behalf of Ravindra. The President also appointed Mr. M. C. Mehta as Umpire. On May 29, 1958, the two Arbitrators, namely C. M. Shah and N. N. Dubash, sent a letter to Ravindra stating that the case was fixed for hearing on June 11, at 3 p.m. in the Board Room of the Stock Exchange. They intimated to him that, in case he chose to remain absent, they would proceed with the case ex parte during his absence. It is not necessary at this stage to refer to the various letters which Ravindra wrote to the Secretary of the Association, At this stage it is sufficient to note that, after stating that there was no valid agreement of reference and also after asking for time on one pretext or the other, the respondent did not choose to remain present on any of the dates of hearing fixed by the Arbitrators. At one stage Ravindra stated that he intended to take part in the proceedings under protest, but he did not act up to that expressed intention. Eventually, on July 30, 1958, the two Arbitrators declared their award, under which Ravindra was called upon to pay a sum of Rs. 19,000 and odd. The Secretary of the Association intimated the fact of the declaration of the award to Ravindra. He also sent a copy of the award along with the letter. On November 18, 1958, the Arbitrators filed the award in the City Civil Court. Ravindra was served with notice on November 22, 1958. On December 19, 1958, he put in his written statement, in which he prayed that the award may be set aside on certain grounds which he set out from (A) to (N). One of these grounds (ground B) was that there was no written agreement of arbitration and that the defendant -petitioner had not accepted and signed the arbitration agreement. Ground (C) was in the following terms: - That the contract notes given by the plaintiff respondent are not according to the Rules of the Association and that, therefore, the contract notes are illegal and the award based therein is also illegal and not binding upon the petitioner. Ground (F) was as follows: - That the arbitrators were not even appointed as required under law and as alleged to have been agreed upon between the parties. The appointment of the arbitrators without Umpire was not proper and, therefore, it vitiates the whole Award. In Ground (L) Ravindra contended that the rules and regulations of the Association were not binding upon him and that he had never submitted to the arbitration proceedings, lie also put in an affidavit in support of the allegations made by him in his written statement. On March 5, 1959, Ravindra made a regular petition praying for setting aside the award on various grounds. One of the contentions raised by him was that the Native Share & Stock Brokers' Association had ceased to exist from 1 -9 -1957. As the Association went out of existence from 1 -9 -1957, the procedure followed by the opponent, by the Secretary and by the President of this defunct Association is illegal, void ab initio and of no legal effect whatsoever.

(3.) MR . Chandrachud, who appeared on behalf of the firm, contended that the trial Court was wrong in holding that the Native Share and Stock Brokers' Association was a creature of the statute and that, as soon as the Act under which it came into existence was repealed, the body ceased to have any kind of existence. He argued that the Native Share and Stock Brokers' Association was a voluntary organisation. Presumably it pre -existed the Bombay Act No. VIII of 1925 and actually came to be recognised by the Bombay Government under Section 4 of the Bombay enactment. He pointed out that it is one thing to say that an association has been recognised by the Government for the purposes of the Act and quite another to say that the Association has been created by the statute. He conceded that the rules and bye -laws were re -cast and modified and new rules and bye -laws came to be framed when an application was made under the Central enactment for recognition. According to him, that would not effect a change or a metamorphosis in the old Association, nor would it mean that a new Association has come into being. The same Association, he says, has continued and only an alias name was added to the old name and there is some modification in the rules and bye -laws.