RADHAKISON GOPIKISON Vs. BALMUKUND RAMCHANDRA

JUDGEMENT

(1.) This is an appeal from a judgment of Mr. Justice Sir Norman Kemp, and the first point which the learned Judge decided was that the action would not lie because it was a condition precedent to any action that there should be a reference to arbitration.

(2.) The dispute arises on certain contracts made between the plaintiffs and the defendants, all of which are in the same form, the form being Ex. A. That is a document signed by the defendants and addressed to the plaintiff s, dated January 4, 1928, and it says: We request you to execute the following order on our account subject to the Rules and Regulations of the East India Cotton Association Limited is applicable and also subject to the terms and conditions of your contract. Then follow various stipulations for the sale of certain cotton providing for payment and so forth. Upon the question whether there is a condition precedent that the matter should be referred to arbitration, the only material part of the contract is that which I have read. The word "is" in the phrase "is applicable" is not grammatical, but I think it means "so far applicable". Now in order to determine the question what the words " subject to the Rules and Regulations of the East India Cotton Association Limited" mean, and whether they make arbitration a condition precedent, one has to acquaint oneself with the position of that Association. The first thing to look at is the Bombay Cotton Contracts Act of 1922. That Act recites that it is expedient to provide for the regulation and control of transactions in cotton in Bombay. Then Section 3 gives the board, which is the board of directors of the Association, power, subject to the sanction of of Governor in Council, to make by-laws for the regulation and control of transactions in cotton, and a lot of subjects are specified which may be covered by the by-laws. One of them is, " (i) providing for arbitration and appeals against awards", and the last one is, "(m) regulating the course of business between parties to contracts in any capacity whether they be members of the Association or not". Then Sub-section (3) of Section 3 provides that bylaws made by the board under Sub-section (7) and sanctioned by the Governor in Council shall be published in the Bombay Government Gazette. Then Section 4 provides: "The constitution and administrative machinery set out in the Articles of Association of the Association are declared to be lawful". Section 5 provides : Any contract (whether either party thereto is a member of the Association or not) which is entered into after the date on which by-laws under this Act are sanctioned by the Governor in Council and published in the Bombay Government Gazette, and which contravenes any such by-law shall be void. It is to be noticed, therefore, that under that Act, Section 3 and Section 5 both cover the case of non-members, whereas in Section 4 there is no reference to non- members.

(3.) The next document to look at is the memorandum and articles of association of the East India Cotton Association Ltd. Nothing, I think, turns upon the memorandum : the Association is formed as a company limited by guarantee. The articles are for the most part in the common form of articles used by companies registered under the Indian Companies Act, and of course in reading articles one has to remember the provisions of Section 21 of the Indian Companies Act, which provides: (1) The memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by each member and contained a covenant on the part of each member, his heirs, and legal representatives, to observe all the provisions of the memorandum and of the articles, subject to the provisions of this Act. That is a section taken from the English Act, and it is quite clear under that section that the articles are a contract between the company and the members, and between the members inter 8e, but they do not bind outside parties. Now looking at these articles, it is worth observing that in Art. 5 occurs this phrase: Every person, firm or company who having a place of business in Bombay and who up to May 10, 1922, or such extended date as may be fixed by the Board, applies for Membership of the Association agreeing to be bound by these Articles and the By-laws, Rules and Regulations of the Association from time to time in force. The actual words used in the contract to be construed " Rules and Regulations" appear in this article and they seem to be used more in connection with the by- laws than with the articles. So far as I can see, the only articles which may be said to affect persons other than members, that is, persons engaged in the cotton trade other than members, are Articles 13-A, 95 and 96. Art. 13-A provides :- Any person, firm or company who has a place of business in Bombay and in the opinion of the Board is or intends to be engaged in bona fide cotton business may in the discretion of the Board be licensed to trade as a cotton broker. Such license shall not be necessary in order to engage in cotton breking business unless the By- laws so provide. Such license shall be granted and held upon such terms including payment and may be suspended or cancelled or renewed as the By-laws may provide. So that, although that article seems to deal with persons who are not members, it does not have any effect except so far as the by-laws provide. Art. 95 deals with hedge contracts, which are a particular form of contract in the cotton market, but that article is also incorporated in the by-law. Art. 96 provides as follows:- Whenever any difference arises between Members or Associate Members or Special Associate Members or between one or more of them and another or others who are not Members or Associate Members or Special Associate Members touching or in connection with the cotton trade or any transaction therein it shall be referred to arbitration in such manner as shall be prescribed by the by-laws. And it is hereby expressly declared that the holding of such an arbitration (which seems to be an arbitration between members or between members and non-members) and the obtaining of an award thereunder shall be a condition precedent to the right of any Member or Associate Member or Special Associate Member or non Member to commence legal proceedings against any other Member or Associate Member or Special Associate Member or non-Member in respect of any such difference as aforesaid and any Member or Associate Member or Special Associate Member or non-Member shall have no right of action against any other Member or Associate Member or Special Associate Member or non-Member except to enforce the award in any such arbitration.