GOOLBAI HORMASJI Vs. JUGALKISHORE RAMESHWARDAS

JUDGEMENT

(1.) This is an appeal from an order of Mr. Khandala walla, Judge of the City Civil Court, dismissing the appellant's petition for setting aside an award. The respondent is a member of the Native Share & Stock Brokers Association, Bombay. The petitioner in a non-member and the employed the respondent in the year 1847 as her broker, and pursuant to her instructions the broker carried out certain transactions. There was a dispute between the broker and the constituent as to what the broker was entitled to and the dispute was referred to arbitration under the Rules of the Native Share & Stock Brokers' Association, and the arbitrator made an award an favour of the broker. This award was challenged by the petitioner. The challenge was made on various grounds, but inasmuch as we are in favour of the petitioner on one of the grounds alleged by her, it is unnecessary to consider the other grounds which were placed before the learned Judge below and which have been dealt with by him in the judgment. The ground we wish to consider, which is the most substantial ground, is that the contract entered into between the constituent and the broker is void and therefore the submission clause which forms part of the contract also becomes 'void, and therefore the arbitrator had no jurisdiction to embark upon the reference and the award made by him should be set aside.

(2.) The contract in question is a contract by which the broker entered into certain transactions of purchase on behalf of the appellant-The contract states: Goolbai Hormasji vs. Jugalkishore Rameshwardas (29.06.1951 -BOMHC) Page 3 of 10 ji vs. Jugalkishore Rameshwardas (29.06.1951 -BOMHC) Page 3 of 10 "This contract is made subject to the rules and regulations of the Native Share and Stock Brokers' Association," aud it also provides thai "in the event of any dispute arising between the parties out of the transaction the matter shall be referred to arbitration as provided by the rules and regulations of the Native Stock & Share Brokers' Association." The contention of the appellant is that this contract is not a ready delivery contract but a forward contract, and being a forward contract, it is void as provided by the Bombay Securities Contracts Control Act, 1925. This Act was enacted to regulate and control contracts for the purchase and sale of securities in the oity of Bombay and elsewhere in the Presidency, and the scheme of the Act is that forward contracts should not be put through by any agency except a recognized stock exchange and pursuant to rules which should receive the equation of Government. Section 3 defines what a ready delivery contract is, and the definition is that it is a contract for the purchase or sale of securities for the performance of which no time is specified and which is to be performed immediately or within a reasonable time, and the explanation says : "The question what is a reasonable time is in each particular case a question of fact." All contracts which do not fall within this definition of ready delivery contract are governed by Sections 4, 5 and 6. Therefore, it will be noticed that in order that a contract should be a ready delivery contract it should satisfy two conditions. It must be a contract for the performance of which no time must be specified and it must also be a contract which is to be performed either immediately or within a reasonable time. It is only when these two conditions are satisfied with regard to the performance of a particular contract that the contract becomes a ready delivery contract. Section 4 deals with recognition of stock exchanges, and Section 5 deals with rules to be framed by a recognized stock exchange with the sanction of the Provincial Government, and the rules which a recognized stock exchange may frame are relating to various matters set out in that section. It may be pointed out that under Section 5 it is only those rules which deal with contracts other than ready delivery contracts that require the sanction of the Provincial Government. Therefore, it is open to al recognized stock exchange to frame rules with regard to transactions and securities which are ready delivery contracts without the sanction of the Provincial Government, but when a stock exchange purports to frame rules dealing with contracts other than ready delivery contracts, the rules can only have validity provided they have received the sanction of the Provincial Government. Then Section 6 provides that every contract for the purchase or sale of securities other than n ready delivery contract entered into after a date to be notified in this behalf by the Provincial Government shall be void, unless the same is made subject to and in accordance with the rules duly sanctioned under Section 5, and every such contract shall be void unless the same is made between members or through a member of a recognized stock exchange. Therefore the only contracts other than ready delivery contracts which are recognized by law are those contracts which are made subject to and in accordance with the rules sanctioned under Section 5, and the further condition laid down for the recognition of what might be called forward contracts is that these contracts must be made between members or through a member of a recognized stock exchange. It is only when these conditions are satisfied that a forward contract or a contract other than a ready delivery contract is valid; and the section further provides that no claim shall be allowed in any civil Court for the recovery of any commission, brokerage, fee or reward in respect of any Goolbai Hormasji vs. Jugalkishore Rameshwardas (29.06.1951 -BOMHC) Page 4 of 10 ji vs. Jugalkishore Rameshwardas (29.06.1951 -BOMHC) Page 4 of 10 such contract.

(3.) Now, what is contended on behalf of the appellant is that the contract we have before us is not a ready delivery contract; further that it is not in accordance with the rules framed by a recognized stock exchange; and therefore it attracts the application of Section 6 and is void. As the matter was of considerable importance, we thought it advisable to give notice to the Native Share & Stock Brokers' Association, and Mr. Amin has appeared before us and has given valuable assistance to the Court in helping us to come to a conclusion aa to whether the contract in this application and appeal is or is not a ready delivery contract. In order to decide whether this contract satisfies the definition of a ready delivery contract given in the Act, we have got to look at the rules framed by the Native Share & Stock Brokers' Association, because admittedly the contract was governed by these rules.