PRATAPRAI MANMOHANDAS Vs. SHEO NARAYAN BALAL AND CO

JUDGEMENT

(1.) THIS revisional application raises a Short point of jurisdiction. A suit has been filed against the petitioners in the Court of Small Causes, at Bombay and in this suit Rs. 1,859-8-0 is claimed by the Opponents in respect of forward transactions of bullion that took place in June 1949. The petitioners and the Opponents were and are members of the Bombay Bullion Association Ltd. , and the point which was raised by the Petitioners in the trial Court was that under bye law 38 of the Association the suit was incompetent inasmuch as a dispute like the present between members of the Association had to be submitted to arbitration. The learned trial Judge upheld this plea. Oil appeal a different view has been taken. In the result, the dismissal of the suit has been set aside and the matter has been sent back to the trial Court for disposal in accordance with law.

(2.) IT is common ground that both the parties were and are members of the Association and that bye-law 38 governs their dealings. This bye-Jaw provides that "in connection with ready or forward transactions, between members of the company or between members and non-members, in gold, silver and sovereigns, done in accordance with the rules and bye-laws of the Association, or whether a ready or forward transaction in gold, silver and sovereigns has been entered into or not, all the claims or disputes or differences of opinion of any sort arising out of the contracts in respect thereof shall be settled by reference to arbitration". Mr. Justice Gokhale and I have recently had occasion to consider the legal position with regard to bye-laws like this and we have held that a bye-law like the present amounts in law to an agreement in writing to refer disputes between persons governed by the bye-law to arbitration within the meaning of Section 2 of the Indian Arbitration Act. 'vide our judgment in First Appeal No. 548 of 1955 delivered on 16-9-1955 (Bom) (A)'. We have also held that if a contract has taken place between members of an association whose bye-laws or articles of association provide for an arbitration agreement, then the disputes must be resolved by the domestic tribunal contemplated by the bye-laws and articles of association and a suit in respect of them cannot be filed. We have pointed out in the said judgment that this question has given rise to a sharp conflict of opinion, but having, given our best consideration to the problem we decided to accept the view expressed by Bhaewati J. ,. In -- 'mohanlal Chhaganlal v. Bissesaralal', AIR 1947 Bom 268 (B ). This view of the matter is really decisive of the dispute before me in the present revisional application. The status of the parties as members of the association is not disputed. A claim has been made with regard to a forward transaction in bullion by the plaintiffs, and the defendants argue that this claim must go to arbitration. Under the judgment to which I have just referred, the plea that a suit would not be competent cannot be resisted.

(3.) IT has, however, been urged before me on behalf of the opponents that the validity of the contract itself was challenged by the petitioners in correspondence, and since it would not be open to the arbitrators to entertain a plea that the contract was invalid, the opponents were advised to file a suit in the Court of ordinary civil jurisdiction. I would like to add that Mr. Kapadia for the petitioners lairly gave up all his contentions as regards the invalidity of the alleged transaction. Mr. Kapadia told me expressly that he was not going to raise any question that the contract was invalid, though that is not to say that he admits the claim made by the plaintiffs. There is a dispute as to the rates and there may be other incidental disputes in respect of the claim made against the Opponents by the petitioners. That is the position adopted by the petitioners before me. Besides, I do not see how the Opponents could file a suit in Court notwithstanding bye-law 38 merely because they anticipated that the validity of the contract would be challenged by the petitioners. If the dispute arising under the transaction alleged by the plaintiffs has to be resolved by recourse to a domestic tribunal under bye-law 38, the only course open to the plaintiffs is to invoke the jurisdiction of the domestic tribunal. It would then have been open to the plaintiffs to contend that the domestic tribunal had no jurisdiction to hear the dispute because the validity of the contract itself was impeached. At that stage the defendants would have had to take recourse to the provisions of Section 32 of the Arbitration Act. But the dispute must still be taken by the plaintiffs before the arbitrators because, as I have just mentioned, bye-law 38 amounts to an arbitration agreement as required by Section 2 of the Arbitration Act. But this point has now become technical because Mr. Kapadia has given up his allegation that the transaction was invalid. It is now a simple dispute between two members in respect of a transaction which has taken place according to the rules and bye-laws of the association. Therefore, I see no escape from the conclusion that this suit must be tried under bye-law 38 by the domestic tribunal appointed by the association.