KARUMUTHU THIAGARAJAN CHETTIAR Vs. THOSSMITH AND CO

JUDGEMENT

(1.) This is an appeal against an order made by the Judge in chambers staying the suit and referring the matters in dispute to arbitration. The suit is a suit by the plaintiff against the defendants, who are brokers in Bombay. The plaintiff asks for accounts of the dealings between him and the defendants and for payment of the amount found due and various consequential reliefs. Various contracts were made between the plaintiff and the defendants, and there is a clause in them providing for matters in dispute to be referred to arbitration. The contracts being contracts relating to cotton are governed by the bye-laws of the East India Cotton Association, Ltd. The issues in the suit show that there are various questions of fact and of law to be decided, some of the questions of law possibly involving some difficulty. Although the Court will generally stay a suit and refer the matters in dispute to arbitration when the parties themselves have agreed that matters should be so decided still the fact that there are difficult points of law involved is one reason which always weighs with the Court in deciding whether to stay the suit or not, because experience shows that awards involving points of law almost invariably come before the Court, and the only result of the arbitration in such a case is to add to the expense and delay. But apart from that general consideration, there are two reasons which induce us to think that this suit ought not to be stayed.

(2.) The first is that the defendants have entered into an agreement with five persons under which the defendants have agreed to assign by way of mortgage their claims against the plaintiff. Now that assignment or agreement to assign is apparently challenged in a suit (No. 1905 of 1933) filed for the specific performance of the said agreement. In that suit a receiver has been appointed, and the receiver was authorised to continue or adopt proceedings in arbitration under the bye-laws of the East India Cotton Association, Ltd., in the name of the defendants. But at the moment undoubtedly that agreement by the defendants charging all their claims against the plaintiff must be treated as subsisting, and it seems to me to present considerable difficulty in relation to any arbitration. The agreement to refer to arbitration is between the plaintiff and the defendants, and not between the plaintiff and the assignees of the defendants or the receiver appointed by the Court. If the arbitration proceeds as between the plaintiff and the defendants and the arbitrators find that something is due to the defendants, they cannot give effect to that finding and no order can be made for payment to the defendants because on this mortgage it appears that the defendants are not the persons entitled to receive the moneys. Therefore, it seems to me that in the event of the defendants succeeding in the arbitration, the award would be in effect a nullity. That view of the matter follows the decision of Mr. Justice Wright (as he then was) in Cotton Club Estate V/s. Woodside Estate Co. [1928] 2 K.B. 463 and the fact that that difficulty may arise in relation to the arbitration is one good reason for not staying the action and referring the disputes to arbitration.

(3.) Then there is another difficulty. One of the arbitrators appointed by the East India Cotton Association is a gentleman named Mowji Bhimji. Now Mr. Mowji Bhimji is a director and a shareholder in a private company which is an assignee of the interest of one of the five persons to whom the defendants have mortgaged their claims against the plaintiff. So that it seems to me to be clear that Mr. Mowji Bhimji is an interested person since he is interested in the award being made in favour of the defendants. Of course it may be that he would not allow his own interest to affect his judgment, but that is not the point, because bye-law No. 40 of the bye-laws of the East India Cotton Association provides that no member of the Association having an interest in the particular matter in dispute shall be competent to sit on any arbitration. The learned Judge in his judgment thinks that the plaintiffs cannot rely on the disqualification of Mr. Mowji Bhimji because he has not pursued his remedy available to him under the bye-laws of the East India Cotton Association. I do not know exactly what remedy the learned Judge refers to as there does not seem to be any rule or bye-law on that point,-but in any case that hardly meets the point. The fact that one of the arbitrators is disqualified from acting affords another good reason for not staying the suit and referring the matter to the arbitrament of that arbitrator.