- (1.) This appeal arises out of an application made by the respondent under the Indian Arbitration Act, 1940, praying inter alia that the arbitration agreement contained in certain contract notes including contract Note No. 17996 sent by the appellants to the respondent be declared to be invalid, void and unenforceable and be set aside and that a purported award made by the arbitrators appointed in terms of the said contract notes be set aside. That application came to be made in the following circumstances :
(2.) The appellants were and are members of the East India Cotton Association Ltd. The respondent, however, was not and is not a member of that Association. In April 1945 the respondent employed the appellants as his agents to effect forward contracts for the sale and/or purchase of cotton according to the rules, regulations and bye-laws of that Association, Between 9th April 1945, and 10th August 1945, the appellants as such agents put through various contracts for sale and/or purchase of cotton for July 1945, and September 1945, deliveries and sent to the respondent contract notes in respect of each of such contracts. All the said contract notes were in printed forms, a specimen copy whereof is set out at pp. 12 to 15 of the Paper Book. On 10th August 1945, the purchase of 900 bales of cotton at Rs. 432 per candy for september 1945 delivery remained outstanding. According to the respondent, on 11th August 1945, the respondent instructed the appellants to close the said outstanding purchase by selling 900 bales for September 1945 delivery at a rate not less than Rs. 426 per candy, which is said to be the prevailing market rate on that date. As the respondent did not receive any contract note from the appellants in respect of the closing transaction of 900 bales, the respondent on 18th August 1945, put on record his aforesaid instructions and asked the appellants to send the contract note. The appellants, however, deny that any instruction was given by the respondent on 11th August 1945, for closing the outstanding contract. They deny the receipt of the respondent's letter of that date. According to the appellants, 21st August 1945 was a clearing date and on that clearing a sum of Rs. 18,900 became due and payable by the respondent to the appellants and that instead of paying up his dues the respondent concocted the false story of having given instructions to the appellants to close the outstanding purchase. The appellants by their letter of 22nd August 1945, repudiated the allegations in the respondent's last mentioned letter and called upon the respondent to pay up Rs. 18,900 and gave notice to him that if he failed to pay up the amount by noon of 23rd August 1945, the appellants would be compelled to square up the outstanding contract at their discretion on account and at the risk of the respondent. The respondent on 24th August 1945, denied having fabricated any false story and repudiated liability for Rs. 18,900 and returned the appellants' bill. On 27th August 1945, the appellants closed the outstanding contract for purchase of 900 bales by selling the same at Rs. 956 per candy for September 1945 delivery and along with their letter dated 27th August 1945, sent contract note No. 17996. The respondent by his letter dated 28th August 1945, reiterated the story of previous instruction for closing the contract, denied having given any instruction to the appellants to close the contract on 27th August 1945, and returned the contract note No. 17996. On 28th August 1945, the appellants wrote to the respondent claiming Rs. 34,313 and expressing the desire to refer the disputes to arbitration in terms of the arbitration agreement contained in the contract notes. Both parties appointed their respective arbitrators. The arbitrators entered upon the reference and eventually fixed 24th October1945, for a meeting of the arbitrators. The respondent alleges that he received the notice of meeting only on 22nd October 1945, and could not attend the meeting on 24th October 1945, as he had to appear before the Income-tax Officer on the same day. Accordingly, the respondent sent his agent to attend the arbitration meeting and to obtain an adjournment. The arbitrators, however, rejected the application for adjournment and made an ex parte award on the same day for Rs. 34,313 and interest and costs. Being aggrieved by the award, the respondent on 10th November 1945, filed an appeal to the Board of the Association. The respondent's allegation is that pending the said appeal he discovered that the contract notes rendered by the appellants from time to time including the contract note No. 17996 were not in accordance with the prescribed official form of contract notes of the Association and he was advised that in the premises the contracts were void under the provisions of the Bombay Cotton Contracts Act (IV [4] of 1932) and that, that being so, there was no arbitration agreement between the parties under which there could be any reference to arbitration on which any award could be made. The respondent thereupon amended his memorandum of appeal to the Board pointing out the invalidity of the contracts and at the same time made a substantive application to the High Court under the Arbitration Act for the reliefs already summarised above.
(3.) In order to appreciate the rival contentions of the parties it is necessary to refer to the relevant provisions of the Bombay Cotton Contracts Act, 1932, and the bye-laws of the said Association.;