RATILAL TRIBHIWANDAS THAKKAR Vs. MOWJEE WAGHJEE

JUDGEMENT

(1.) In this suit the plaintiff, a certified broker and member of the East India Cotton Association, sues the defendant for loss sustained by the plaintiff owing to the repudiation by the defendant of an order for purchase of 200 fully good machine ginned Broach cotton for the April-May 1927 delivery alleged by the plaintiff to have been placed with him on September 15, 1926. The defendant denies that he gave any instructions for the order. It appears that there were some six or seven previous transactions between the parties which were brought about by the sub-broker Narotamdas. In those cases the contract which was exchanged between the parties was signed by the defendant. Here it may shortly be stated what the procedure is when an order is given. The broker prepares two counterparts of the contract one of which is signed by the broker. The two counterparts are sent to the constituent in order that he may retain the one signed by the broker and sign and return the other to the broker. Usually it is the sub- broker who brings the counterparts to the constituent

(2.) When an order is given for a transaction in a particular market the inference is that the order is to be placed according to the rules and regulations governing that market. These rules may lay down what is to be regarded as a binding contract in the market, The market in cotton here is regulated by the rules laid down by the East India Cotton Association by virtue of the powers under the Act of 1922 which Act was extended by Government Notification dated December 28, 1922, passed under Section 2 of the Act, Rule 81 is the material rule in this case, for it is to be observed that no counterpart has been signed by the defendant in this case. The plaintiff says that the counterparts were sent by him through Narotamdas to the defendant and that the defendant did not return them but promised to do so from time to time and ultimately, on October 5, 1926, repudiated the contract. What then is necessary in order that there may be a valid contract according to the rules and regulations of the East India Cotton Association? Rule 81, as I read it, requires that the contracts which are to be governed by those rules are to be in writing in the form given in the Appendix mentioned in that rule. The rule then goes on to say, in effect, that a member may regard a constituent who has agreed in writing to sign the prescribed form of contract but fails or refuses to do so after the terms have been arranged as liable in all respects as if he has signed the contract Some force must obviously be given to the words "in writing" for if any oral undertaking by the constituent to sign the contract were enough there would be no necessity to insist on a writing. To my mind the effect of Rule 81 is that unless there is this undertaking taken from the client in writing the principal cannot embody the rules of the Association in the contract of agency between him and the constituent: in other words, there is no contract for dealing in cotton under the rules and regulations of the Association unless either the contract is in writing and signed or there is a written undertaking by the constituent to sign. To hold that there may be a contract for sale or purchase of cotton in this market without a writing would be to enable parties to give the go by to the rules regulating such sales and purchases in this market.

(3.) Here it may be material to inquire why the Association insisted on this writing. It may be that one of the reasons, though perhaps not the chief one, why they laid down this obligation, was that disputes were constantly coming up in which the constituent denied that he had given any order to the broker. A writing signed by the constituent would be evidence of such an order. Probably, however, the chief reason was unless the terms of the Rules of the Association were embodied by virtue of a writing into the contract between the parties the arbitration clause, which it is the main endeavour of the Association to impose on parties contracting in cotton, would not be incorporated in the agreement. This seems to me to show that there is a necessity for the writing and as the plaintiff in this case cannot allege that the defendant undertook in writing to sign the necessary contract form, and admits that he did not sign the necessary contract form, it seems to me that this suit must fail on that ground.