PIROJSHAW R VAKHARIA Vs. BANDEALLI ISMAIL AND CO

JUDGEMENT

(1.) This case raises a question of some importance which, counsel tell me, is not covered by authority. The question is, whether when a person in Bombay instructs another person in Bombay to effect a contract of sale or purchase of cotton in New York or Liverpool, that transaction is subject to and governed by the Bombay Cotton Contracts Act, XIV of 1922, and the by-laws made thereunder. Another question of importance which is raised in this case is, whether when a contract of the kind referred to in question No. 1 is made subject to the rules of the New York Cotton Exchange or the rules of the Liverpool Cotton Association Limited, the arbitration and award thereunder are a condition precedent to the institution of a suit in a Court of law for determination of the disputes between the parties.

(2.) There is no dispute as regards the main facts in the case. The plaintiffs are carrying on business in Bombay as merchants and commission agents and are members of the East Indian Cotton Association, Limited, and as admitted by Mr. Coltman, are registered agents of a member of the Liverpool Cotton Association. The defendants also carry on business as merchants and commission agents in Bombay, It is admitted that on February 2, 1931, the plaintiffs under instructions of the defendants purchased 500 bales of American cotton of July 1931 delivery at New York, and on February 5, 1931, purchased 500 bales of American cotton of July 1931 delivery at Liverpool. Then there were various transactions effected by the plaintiffs under instructions from the defendants for the sale and purchase of Broach cotton for April-May 1931 delivery. On May 22, 1931, the plaintiffs covered the outstanding sales of Broach cotton by purchasing a thousand bales at Rs. 176- 2 per khandi. As to this transaction at one stage the parties were at issue. But the question now on the merits does not survive. As to the foreign transactions the defendants were informed of the due date, but failed to put the plaintiffs in funds in due time so as to take delivery of the cotton purchased, and accordingly the said transactions were closed; the one of New York July contract on June 24, and the Liverpool July contract on June 30,1931. And as the result of these transactions the plaintiffs claim a sum of Ra. 11,878 odd from the defendants.

(3.) The main defences to the suit are: (1) that the suit as regards the New York and Liverpool contracts is not maintainable, as under the rules and regulations of the New York Cotton Exchange and the Liverpool Cotton Association, to which the contracts were subject, the holding of arbitration and obtaining an award was a condition precedent; (2) that the said two contracts are void in law as contravening the provisions of the Bombay Cotton Contracts Act, 1922, and by-law No. 82 of the East India Cotton Association.