LEWIS W FERNANDEZ Vs. JIVATLAL PARTAPSHI

JUDGEMENT

(1.) The defendants have taken out this notice of motion for stay of the suit filed by the plaintiff against them by reason of "arbitration agreement" contained in the contracts which were entered into between the parties subject to the bye-laws of the East India Cotton Association, Ltd. The defendants are members of the East India Cotton Association, Ltd., and the plaintiff employed the defendants as his brokers to effect diverse transactions on his behalf for purchase and sale of cotton for July 1944 a September, 1944 settlements, through a sub-broker by name Hooseinally Currimbhoy Chagla. In accordance with the instructions conveyed by the plaintiff from time to time through the sub-broker, the defendants entered into diverse transactions for the purchase and sale of Jarila cotton on behalf of the plaintiff in accordance with the rules and bye-laws of the East India Cotton Association, Ltd., for July 1944 a September, 1944 settlements. The defendants rendered unto the plaintiff contract notes in respect of such several transactions and in due course sent the same to the plaintiff at the address which was given to them in that behalf. The said several transactions passed through the clearings in accordance with the bye-laws of the East India Cotton Association, Ltd., for July 1944 a September, 1944 settlements, and the statements of the respective clearings were sent by the defendants to the plaintiff at the said address. Disputes, however, arose between the plaintiff and the defendants because towards June 30, 1944, there was a considerable sum owed by the plaintiff to the defendants as a result of the clearings which the transactions had passed through up to that date, and the defendants intimated to the sub- broker that if the plaintiff did not make payment of the moneys due by him to the defendants in respect of the several transactions up to that date, the defendants would not keep the outstanding transactions of the plaintiff outstanding any further and would close the same. By June 30, 1944, all transactions for July 1944 settlement had been squared and the only transaction which was outstanding was the transaction in respect of the sale of 1,000 bales of cotton for September 1944 settlement which had as afore-stated passed through the various clearings up to June 30, 1944. The defendants say that on June 30, 1944, they intimated to the sub-broker that they were not going to allow that outstanding transaction to remain outstanding any further: until and unless the plaintiff made payment of the moneys which he owed to the defendants. The sub-broker, however, pressed the defendants not to immediately close the outstanding transaction of the sale of 1,000 bales of cotton for September 1944 settlement but gave instructions to the defendants to close the same if the rate reached Rs. 431 per candy. The defendants say that the rate was reached that day and accordingly in the exercise of their right of closing the outstanding transaction by reason of the default of the plaintiff in paying off their dues they closed the outstanding transaction on June 30,1944, and sent the relevant contract note in respect of the closing transaction to the plaintiff together with a statement of account which they also rendered unto the plaintiff in due course. As a result of the transactions of July 1944 a September, 1944 settlements, there was a sum of Rs. 11,112-8-0 due by the plaintiff to the defendants which the defendants claimed from the plaintiff, and in the default of payment of that sum by the plaintiff to the defendants the defendants claimed a reference to arbitration by arbitrators appointed under the bye-laws of the East India Cotton Association, Ltd. The said arbitration is yet pending.

(2.) The plaintiff in the meantime, pending the reference to arbitration, filed this suit against the defendants claiming an account in respect of the transactions entered into by the defendants as his brokers for July 1944 settlement and also for September 1944 settlement except in so far as there was a dispute according to the plaintiff in respect of the unauthorised closing of the outstanding transaction of 1,000 bales of September 1944 settlement which according to him had been closed by the defendants contrary to his instructions conveyed to them through the sub-broker. He stated that after June 30, 1944, he had given instructions to the defendants on August 9, 1944, to close the outstanding transaction of a thousand bales of September 1944 settlement which instructions however the defendants declined to carry out, falsely contending that there was no outstanding transaction of the plaintiff remaining outstanding at that date. The plaintiff therefore claimed from the defendants as and by way of damages sustained by him by reason of the defendants not carrying out those instructions of his a sum of Rs. 11,250. The plaintiff also claimed in the alternative a sum of Rs. 8,250. being the damages which he says he sustained at the rates of Jarila cotton prevailing on the due date in respect of September 1944 settlement.

(3.) The defendants have taken out this notice of motion in order that the suit filed by the plaintiff against them for accounts in respect of the transactions of July 1944 and September 1944 settlements and for recovery of damages either in the sum of Rs. 11,250 or in the alternative in the sum of Rs. 8,250 alleged to be the damages sustained by the plaintiff by reason of the defendants not having carried out his instructions given by him to the defendants on August 9, 1944, on the ground that the said transactions up to June 30, 1944, which were entered into by the defendants in accordance with the instructions conveyed by the plaintiff through the sub-broker were subject to the bye-laws of the East India Cotton Association and contained an arbitration agreement within the meaning of the Indian Arbitration Act. The plaintiff opposes this motion of the defendants on the grounds that there is no arbitration agreement within the meaning of the Indian Arbitration Act, that there is a dispute as to the factum of the transaction of purchase of 1,000 bales of September 1944 settlement alleged to have been entered into by the defendants on June 30, 1944, the transaction having been entered into by the defendants either contrary to the instructions conveyed by the plaintiff to the defendants in that behalf or without any authority from the plaintiff and that there are various transactions which were entered into between the plaintiff and the defendants in respect of most of which there are no arbitration agreements within the meaning of the Indian Arbitration Act, 1940. Reliance has been placed on the decision of B.J. Wadia J. in 34 Bom. L.R. 697,1 where the learned Judge held that to give arbitrators jurisdiction to make an award, it is incumbent on the party claiming arbitration to show (a) that there are disputes between him and the opposing party arising out of or in relation to contracts entered into between them, and (b) that there is an agreement between them in writing to submit those disputes or differences to arbitration within the meaning of the term "submission" as defined in Section 4(6) of the Indian Arbitration Act, 1899, in order to give effect to the arbitration clause. It is necessary to observe that the Indian Arbitration Act, x of 1940, which governs the present application, defines "arbitration agreement" as a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not, and is substantially in the same terms as the definition of "submission" contained in Section 4(b) of the Indian Arbitration Act of 1899. Reliance has also been placed on a decision of Kania J. in 41 Bom. L.R. 12932," where the learned Judge held that the fact that a contract or submission in writing exists between the parties should be established by the person who comes to the Court and applies for a stay under Section 19 of the Indian Arbitration Act of 1899 (corresponding to Section 34 of the Indian Arbitration Act of 1940), and that where the fact of the contract itself is in dispute, it is not open to the arbitrators to decide the point and the Court in normal course will refuse a stay. The learned Judge further held in that case that the mere sending of contract notes containing an arbitration clause by one party to another without confirmation signed by the other party does not amount to a submission in writing as required by the Indian Arbitration Act of 1899. It has not been contended before me that in order to constitute an arbitration agreement within the meaning of the definition thereof in the Indian Arbitration Act of 1940, it would be necessary to have a confirmation note signed by the plaintiff in favour of the defendants, it being conceded that if the Court on the materials before it came to the conclusion that the contract notes having been sent by the defendants to the plaintiff were accepted by the plaintiff either by signing the confirmation notes or by his conduct, it would be a sufficient arbitration agreement within the meaning of the definition thereof in the Indian Arbitration Act, 1940.