RADHAKISSON GOPIKISSON Vs. BALMUKUND RAMCHANDRA

JUDGEMENT

(1.) The suit in which the present appeal arises was instituted by the appellants on 21 November 1928, in the High Court of Judicature (original jurisdiction) at Bombay against the respondents for recovery of the balance due in respect of a series of transactions in cotton carried out by the appellants as commission agents on behalf of the respondents. Various grounds of defence were put forward by the respondents, but only two of these are involved in the present appeal, viz. : (1) that the suit was not maintainable under the provisions of the Bombay Cotton Contracts Act No. 14 of 1922 and Art. 96, Articles of Association of the East India Cotton Association, Ltd., which were applicable to these transactions and under which arbitration was a condition precedent to any suit in Court ; and (2) that the transactions did not comply with the statutory by- laws of the Association and were therefore rendered void by the provisions of the Act. The trial Judge (Kemp, J.) on 5 November 1929, dismissed the suit, holding that, while there was sufficient compliance with the by- laws, a submission to arbitration was a condition precedent and the suit was not maintainable. On appeal the learned Judges of the Court of appeal on 12 August 1930 held that arbitration was not a condition precedent, but that the by-laws had not been complied with; they therefore confirmed the decree of the lower Court though on a different ground. The present appeal is taken from that judgment. The appellants carry on business as commission agents at Cawnpore and Bombay ; the respondents are merchants at Cawnpore. The balance sued for arises on eight transactions which began in each case with an order by the respondents on a printed form supplied by the appellants for purchase or sale in Bombay of a number of bales of cotton for forward delivery. On receipt of the order the appellants instructed their brokers in Bombay, Messrs. Chimanram Motilal who executed the order and reported it to the appellants. Subsequently each transaction was closed by a sale or purchase with a profit or loss arising to the respondents, as the case might be. The initial order in each ease stated that the order was to be "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."

(2.) Then follow various stipulations. It may be taken that the ungrammatical words "is applicable"mean "so far as applicable."In fact the appellants, who are now Associate Members of the Association, were not so at the time of the initial orders in the case of the three earliest transactions; but their Lordships are not in a position to separate the stages of these transactions and they will deal with the important questions which arise on the footing that the appellants were at all material times members of the Association. It may be noted that Associate Members must employ a broker to carry out dealings on the Bombay Cotton Exchange and that such broker must be a member of the Association. The Bombay Cotton Contracts Act of 1922 recites that it is expedient to provide for the regulation and control of transactions in cotton in Bombay and provides, so far as is material, as follows : "2. In this Act, unless there is anything repugnant in the subject or context: (a) "Contract"means a transaction in cotton to be carried out in whole or in part in Bombay; ,.. (c) the 'Association' means the East India Cotton Association Limited ; and (d) the 'Board' means the Board of Directors of the Association acting through at least a quorum of their number at a meeting of that Board duly called and constituted. 3. The Board may, subject to the sanction of the Governor-in-Council make by-laws for the regulation and control of transactions in cotton: (f) prescribing the terms, conditions and incidents of contracts and the forms of such contracts as are in writing ; (g) regulating the making, performance and cancellation of contracts including contracts between a commission agent and his constituent or between a broker and his constituent, or between a jethawala or muccadum and his constituen, or between a member and a non-member of the Association and providing for the consequences of insolvency on the part of a seller or buyer or intermediary, the consequences of a breach or omission by a seller or buyer, and the responsibility of commission agents, muccadums and brokers not parties to such contracts ; ... (m) regulating the course of business between parties to contracts in any capacity whether they be members of the Association or not." "4. The constitution and administrative machinery set out in the Articles of Association of the Association are declared to be lawful. The said articles shall not, except with the sanction Of the Governor in Council, be altered in respect of the number or constitution of Panels, or the Representation upon (a) Panels, (b) the Panels Representative Committees, (c) the Representative Committee of the Association or (d) the Board." "5. Any contract (whether either party thereto is % member of the Association or not) which is entered into after the date on which bylaws 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."

(3.) The first question at issue depends on S. 4 of the Act, and on Art. 96 of the Articles of Association which provides as follows : " Art. 96. 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 connexion 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 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 of any such arbitration."