NANAK CHAND Vs. FIRM PANNA LAL DURGA PRASAD

JUDGEMENT

(1.) This is a plaintiff's appeal from as order refusing to set aside an award. The agreement of reference between the parties was filed on 2-8-1945, in a suit which had been instituted by the plaintiff on 15-6-1945. One Mr. Manak Lal Parik was appointed sole arbitrator in that suit. Mr. Manak Lal delivered his award decreeing the plaintiff's case to the extent of Rupees 5869-12-0 on 15-7-1945. The circumstances which gave rise to the suit and later to the agreement to arbitration may be narrated shortly:

(2.) On 22-12-1944, the plaintiff asked the defendants to sell on plaintiff's behalf 107 bars of silver deliverable a week later, that is to say, on 29-12-1944. The plaintiff deposited as cover money a sum of Rs. 15,000. Each bar was to weigh 2800 tolas. According to the case set up by the plaintiff, the defendants were to purchase these silver bars a few days later, that is to say, on 29-121944, the contract into which they had entered being of a forward nature. In point of fact they made a purchase of the bars on 26 December. The plaintiff's case is that this was against the agreement into which the defendants had entered. If the purchase had been made on 29-12-1944 he would have made a profit of Rs. 5000 odd on the transactions for the price on 26 December was too high. Before the matter went up to arbitration the defendants were prepared to return a sum of Rs. 1174 9-0 and their case was that a sum of Rs. 3076-8-0 was due from the plaintiff on a previous transaction. They further pleaded that the contract was entered into subject to the terms of the Upper India Sugar Exchange Ltd. In other words, the defence was that the parties were bound by the rules of the Upper India Sugar Exchange Ltd. Under the rules of the said syndicate the defendants were entitled to settle the transaction three days earlier and the loss, therefore, came to Rs. 10,923-8-0 and the balance due after making allowances for the amount alleged to be due from the plaintiff on a previous transaction would be Rs. 1174-9-0. The issues in the case were: Whether the dealing was subject to the rules of the Upper India Sugar Exchange Ltd. Whether the defendants were justified in settling the bargain on 26-12.1944 and whether the plaintiff gave the defendants any instructions regarding settling of bargain and, if so, whether those instructions were in point of fact carried out. By the award the plaintiff's suit was decreed for Rs. 5869-12-0 including costs. It is against an order refusing to set aside this award that the plaintiff has come up in appeal to this Court. The argument that has been advanced on behalf of the plaintiff is that the arbitrator's action in not accepting the plaintiff's case is against law as it is contrary to the findings at which he had arrived in his arbitration award. The findings in his arbitration award are that the deposit by the plaintiff was accepted as security to cover the loss, that "the defendants action of 26-12-1944, settling the plaintiff's bargain was in hurry, unwarranted and not in the best interest of the plaintiff." The arbitrator has further held that the plaintiff's instructions were not carried out and that no sufficient notice was given to the plaintiff before settling the bargain, the plaintiff being an outsider who would take time in making arrangements for further security money. Learned Counsel for the plaintiff-appellant argues that in. effect the arbitrator had accepted the plaintiff's case. That being so, it was the arbitrator's duty to follow the law as laid down in Section 211, Contract Act. Section 211, Contract Act, reads as follows: An agent is bound to conduct the business of his principal according to the directions given by the principal, or in the absence of any such directions according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and if any profit accrues he must account for it.

(3.) It is urged that the defendants were acting as agents for the principal, that they had not literally carried out the plaintiff's directions, that their action in settling the plaintiff's bargain of 26 December was action of a hurried nature and had resulted in loss to the plaintiff, and that they had given no sufficient notice to the plaintiff for the steps that they had taken. It has been strenuously argued that as the defendants had not carried out plaintiff's instructions, the law applicable to the case was that as laid down in Section 211, Contract Act, and that it was the duty of the arbitrator to follow that law having argued to his own findings. It is, therefore, urged that there is an illegality on the face of the award as on the facts found the arbitrator should have given an award in favour of the plaintiff. We have been referred to a number of cases on the point that the Court is bound to set aside an award when the arbitrator makes a clear mistake in applying the law to the facts found by him. The first of these cases is that in Champsey Bhara and Co. V/s. Jivraj Balloo Spinning and weaving Co. Ltd. 10 A.I.R. 1923 P.C. 66 where at p. 586 Lord Dunedin while delivering the judgment of the board made the following observations, which we take the liberty of reproducing below: An error in law on the face of the award means, in their Lordships view, that you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can sic is erroneous. It does not mean that if in a sic a reference is made to a contention of one party that opens the door to seeing first what that contention is, and then going to the contract on which the parties rights depend to see if that contention is sound. Here it is impossible to say, from what is shown on the fact of the award, what mistake the arbitrators made. The only way that the learned Judge have arrived at finding what the mistake was is by saying : sic the arbitrators awarded so and so, and in such as the letter shows that the buyer rejected the cotton, the arbitrators can only have arrived at that result by totally misinterpreting Rule 52. But they were entitled to give their own interpretation to Rule 52 or any other article and the award will stand unless, on the face of it, they have tied themselves down to some special legal proposition which then, when examined, appears to be unsound. In Shri Meenakshi Mills Ltd. V/s. Langle and Co. 21 A.I.R. 1934 Bom. 107 at p. 295 Blackwell J. pointed out that: The arbitrators having set out the reasons for their awarding Rs. 2200 to the plaintiffs, namely, that their right to claim that depends upon by law No. 74 of the East Indian Cotton Association which was incorporated in the contract, it seems to me clear that we are entitled to look at that by law to see whether upon a proper construction of it as a matter of law the arbitrators have come on the face of their award to a right decision in law. By law No. 74 contemplates, in my opinion, a default on the part of the seller in relation to an obligation under the contract, namely to tender a delivery order or to take delivery. That would amount to a breach of contract on the part of the seller, and as far as I can see by law No. 74 can only apply upon the assumption that there has been an initial breach of contract on the part of the seller. Later on the same learned Judge says: In my view the arbitrators have completely misconstrued by law No. 74 as a matter of law. They have upon the face of the award, shown that they based their award upon that clause, and therefore, there is, on the face of the award, an error of law. In that case the award was set aside.