- (1.) In this appeal the main question is whether a certain agreement to refer disputes to arbitration is bad as being opposed to public policy inasmuch as it was intended to stifle a pending criminal prosecution. The legal proposition that an agreement including an agreement to refer disputes to arbitration, is void if it was made to stifle a criminal prosecution is beyond dispute. Other points, however, were raised and these I have to decide in this judgment.
(2.) The first question naturally is was the agreement to refer to arbitration made to stifle the prosecution. It is hardly ever that the parties make it plain on the face of the agreement that they had that object in view. The entire circumstances have to be looked into to find out if the agreement was intended to stifle the prosecution. For that purpose it is necessary to go into the facts in some detail.
(3.) The Appellant before us is one Nandkishore Jhajharia. He and another person of the name of Jagannath Agarwalla carried on a partnership business under the name of Agarwalla Jhajharia and Company in which it is said one Ramkaran Parasrampuria also had a share.' This partnership was interested in and controlled amongst others, a company called International Mercantile Corporation (India) Ltd. Nandkishore and Jagannath had various other business dealings between themselves. On June 21, 1951, Nandkishore delivered to International Mercantile Corporation (India, Ltd.) hereafter referred to as "the Corporation", 42,200 shares of Ryam Sugar Company Ltd. Of these 37,900 shares had already been registered in the name of the Corporation and the remaining 4,300 shares were delivered with the requisite blank transfer deeds duly signed by the registered holder without registration in the name of the Corporation. The case of the Corporation, which is a Respondent in this appeal, is that these shares were delivered in liquidation of the debt due by Nandkishore to the Corporation. It is said that Nandkishore owed the Corporation Rs. 19, 08, 195-0-3 and that it had been agreed that the Corporation would accept these shares in reduction of this debt to the extent of Rs. 11,39,400 being the sum calculated on these shares at Rs. 27 per share. Nandkishore's case, however, is that he bought these shares with his own moneys and had some of them registered in the name of and all of them delivered to the Corporation as his benanndar for reasons of his own. It is not necessary for the purposes of this appeal to decide which of the two cases is true. Nandkishore was a director of the Corporation. It appears that out of the 37,900 shares registered in the name of the Corporation 24,000 shares were hypothecated with the National Bank of India in the name of the Corporation against an overdraft of Rs. 2,00,000. Thereafter, 18,200 further shares were hypothecated with the National City Rank of New York, Calcutta, for an overdraft of Rs. 1,30,000 of which Rs. 50,000 was later repaid leaving a sum of Rs. 80,000 due to the last named Bank. It is the Respondent Corporation's case that Nandkishore wrongfully and surreptitiously got hold of and committed criminal misappropriation in respect of 30,200 of the said shares consisting of 18,200 shares originally hypothecated with the National City Bank of New York and 12,000 shares out of the 24,000 shares originally hypothecated with the National Bank of India and purported to transfer 26,100 shares out of the 30,200 shares to Mahadeolal Jhunjhunwalla and fraudulently got the said transfers registered in the transferee's name in the books of the Ryam Sugar Mills Company Ltd. All this happened between January and October, 1950. It is also the Respondent Corporation's case that on October 6, 1950, it paid a sum of Rs. 1,00,000 to the National Bank of India having borrowed the money from J. Agarwalla and Sons Ltd., a company apparently controlled by Jagannath Agarwalla and procured delivery of 12,000 shares out of those held by the Bank to J. Agarwalla and Sons Ltd., as security of the moneys lent by the latter to pay off the Corporation's debt to the Bank.;