Case: Shiv Omkar Maheshwari Vs. Bansidhar Jagannath

author appears to have indicated his preference for the view taken by Lord Herschell. The observations of Lord Herschell in (1897) AC 239 at p. 305 (O), are cited in the book and comment is made that the view thus expressed by Lord Herschell accords with the well-established principle that it is for the company, save in exceptional oases, to sue for a breach of the articles (page 29). Buckley, in his Companies Actand, has observed :"As regards the rights of members inter se, if the articles do constitute a contract between them, the rights arising out of such contract can ordinarily only be enforced through the company; and the correct view is semble, that stated by Lord Herschell in Welton v. Saffery (O), namely, the articles constitute a contract between each member land the company, and there is no contract in terms between the individual members of the company; but the articles do not, any the less, in my opinion, regulate their rights inter se.Such rights can only be enforced by or against a member through the company or through the liquidators representing the company; but I think that no member has, as between himself and another member, any rights beyond that which the contract with the company gives". (page 53)Thus it would be seen that the view which we have taken is inconsistent with the view expressed by eminent text-writers. We would only conclude with the observation that we have reached our decision on this point with some hesitation and not without diffidence.26. That leaves only one point which was raised before us by Mr. K.T. Desai on behalf of the appellant. He argues that the award was invalid because the dispute was heard by a floating body of members and there has been no fair trial at all in the present proceedings. I have already mentioned that, during the pendency of this dispute before the Lavad Committee, three committees were formed and it is true that on several days when the dispute was heard the same set of arbitrators were naturally not present.But Bye-law 88 of the Chamber has specifically provided that objections such as the one raised before us by Mr. K.T. Desai shall not invalidate the award. Under this Bye-law, it would not be open to a party to challenge the validity of the award on the ground that the dispute was not finally decided at one sitting or that the very same members of the Arbitration Committee or of theBoard were not present at all the meetings or that members of the Arbitration Committee or of the Board who had given the final award were not present at all the meetings in which the hearing of the said dispute was taken up or the appeal heard.Mr. K.T. Desai argued that this Bye-law is ultra vires because it is opposed to natural justice, and in support of his argument he invited our attention to two reported decisions of this Court, in - Fazalally v. Khimji, 1934 Bom 476 (AIR V 21) (T), Rangnekar, J., has held that as the composition of the board of directors had changed from time to time since the appeal went on before the board, and when the award was given some of those who were present at the earlier meeting were absent and did not form part of the board which made the award, the award was not legal and could not be accepted and should be set aside.This question arose before Mr. Justice Rangnekar under bye-laws 38 and 39 of the East India Cotton Association, Ltd. But in two places the learned Judge has pointedly referred to the fact that the existence of a fluctuating body of arbitrators was not justified by any provision contained in the bye-laws themselves. In other words, the judgment shows that, if a bye-law or rule made by the Association had specifically authorised a fluctuating body of arbitrators to deal with the dispute, then the learned Judge may have taken a different view.In - Patel Bros. v. Shree Meenakshi Mills Ltd., 1942 Bom 239 (AIR V 29) (U) Beaumont, C.J. who delivered the judgment of the Bench, agreed with Rangnekar, J.s observations in Fazallallys case, (T) and held that the parties would normally be entitled to the united judgment of the board, and if a dispute was entertained by a fluctuating body of the board that introduced a serious infirmity in the decision. But it would be noticed that in stating his conclusion the learned Chief Justice has observed. "In the absence of consent, I think, the rule is that the tribunal, which has commenced the appeal, must continue, and if any member is obliged to withdraw, and the parties are not willing to go on before the remaining members, then a fresh board must be constituted". In other words, if there is a rule or a bye-law of the association specifically providing for the hearing of the dispute by a fluctuating body of arbitrators then the plea that the same arbitrators have not heard the dispute would not invalidate the award.27. We must, therefore, hold that the infirmity in the award on which Mr. K.T. Desai relies cannot invalidate the award because bye-law 88 expressly precludes the appellant from raising such a contention. Nor can the Bye-law be regarded as ultra vires for the reason that it is opposed to natural justice. Indeed, the hearing of a suit by one Judge and its decision by his successor is authorised even under O. 18, R. 15, Civil P.C.However, it is not necessary to pursue this point any further since Mr. K.T. Desai did not seriously contend that this Bye-law was ultra vires. Besides, the decision on this point would be a matter of academic importance in view of our conclusion that the dispute as to the existence of the contract itself is not covered by the arbitration agreement in the present case and the award made by the arbitrators is invalid for that reason.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]Mr. K.T. Desaihad taken us through the details of the several meetings held by the Lavad Committees and has emphasized the fact that the members of the Committee have changed from time totime. But the change of personnel of the Lavad Committees is inevitable and unless theframed by the Association in regard to the constitution of the Lavad Committee are themselves invalid or ultra vires, no serious or valid grievance can be made against the changing constitution of the Lavad Committeesor not theprescribing the constitution of the Lavad Committees and their procedure are ultra vires, the contention that extension of time should not have been allowed by the learned Judge cannot, in our opinion, be made by the appellant because under S. 39, Arbitration Act, an order passed by the trial Judge extending time is not appealable.Legislature has clearly contemplated that the question as to whether time should be extended should be left entirely to the. discretion of the trial Judge and the order that the j trial Judge may pass in the exercise of his discretion should be regarded as final.It is true that the application made by the respondent for extending time was consolidated with the appellants application for setting aside the award. But this consolidation cannot give the appellant a right to challenge an order which, under the law, is not appealable. Therefore, in. our opinion, it is unnecessary for us to consider whether the learned Judge was right or not in extending time for making thethe present case, however, the alleged contract was not reduced to writing and the case for the respondent is that, though the contract is oral, it is nevertheless subject to the Articles of Association because under S. 21, Companies Act, the Articles of Association must be taken to constitute an agreement in writing between the appellant and the respondent inter se as they are both members of the said Association.Since the Articles of Association represent a contract between the appellant and the respondent inter se, any contract, entered into between them subsequent to their joining the said Association must inevitably be subject to the provisions of the said Articles of Association and a dispute like the present arising between them has to be referred to arbitration of the Lavad Committee appointed under theof the Association.This view has been accepted by the learned Judge andMr. K.T. Desaifor the appellant disputes the validity and the correctness of this view. It may be mentioned at this stage that the point thus raised byMr. K.T. Desaiis a vexed point of law on which sharp difference of opinion has been expressed in judicialdecision of this point would depend upon a fair and reasonable construction of the material Articles of Association andmade by the Association. It is necessary to remember that this point has been raised alternatively on the assumption that the Articles of Association can in law constitute a valid arbitration agreement as a result of the provisions of S. 21, Companies Act.Before the learned Judge below, reliance has been placed by the respondent only on Article 20(a), and we think, rightly. An arbitration agreement as required by S. 2, Arbitration Act can be said to reside only in Article 20(a) which deals with. the obligation of members. It cannot be said to reside in either Article 21(a) or in Article 21(b) because the topic which these two Articles are intended to cover is not one of the obligations of members atcannot overlook the fact that an agreement as to compulsory arbitration takes away a partys right to have his dispute with another member decided by a Court of ordinary civil jurisdiction. Even so, if the words used in Article 20(a) are capable of two constructions, we may be justified in adopting the construction that helps reference to arbitration of a domestic tribunal appointed by the Association.But having carefully considered Article 20(a), we are unable to hold that the relevant words used in this Article can reasonably yield the meaning which has been .assigned to it by the learned Judge below,in our opinion, so far as this Article is concerned, a dispute as to the existence of the transaction or dealing itself is not covered by it and no obligation has been imposed upon any member to refer such a dispute to the arbitration of the Lavad Committee provided for by thearbitration Committee is authorised under Article 21(a) to dispose of all disputes and differences arising between members and members or members and their customers with respect to any transaction or rates or dues or anything out of a transaction or in respect to any liability arising from any transaction. Here again, what the Arbitration Committee is authorised to deal with are disputes and differences arising between members in respect of any transaction and that seems to postulate the existence of an admitted transaction between the parties.Besides, even if Article 21(a) was capable of the wider construction for which Mr. M.V. Desai contends, that, in our opinion, cannot be said to constitute an arbitration agreement within the meaning of S. 2, Arbitration Act. Article 21(a) clearly does not purport to impose an obligation on the members. The obligation has already been imposed by Article 20(a) and Article 21(a) proceeds to take the subsequent step of defining and describing the powers of the Arbitration Committee.If in describing the powers of the Arbitration Committee, words of wider denotation are used., they cannot, in our opinion, widen the scope of Article 20(a) itself. An obligation to refer a dispute even in regard to the existence or factum of a contract itself cannot, in our opinion, be legitimately imposed upon a member in this indirect way and by implication.That is why we are not impressed by the argument urged before us by Mr. M.V. Desai that Article 21(a) should be held to constitute an arbitration agreement between the parties and it should be so construed as to include even a dispute as to the existence of the contract itself. What we have said about Article 21(a) applies with greater force to Article 21(b). This Article mentions that all disputes shall be settled by arbitration as provided in the Articles andand it enjoins upon members not to institute legal proceedings for settlement of such, disputes.This Article must clearly apply to disputes in respect of which an obligation has been imposed under Article 20(a). It merely says that disputes which are required to be referred to arbitration should be dealt with by the Arbitration Committee and should not be dragged to a Civil Court. There is nothing in Article 21(b) which can legitimately help the construction of the material clause in Article 20(a).The whole of Mr. M.V. Desals argument has centred on92(b). It may be assumed in favour of Mr. M.V. Desai that82(b) seems to imply that, if a dispute with regard to the existence of a Souda arises between members within two months after the date of the Souda it may be tried by the Lavad Committee. This, at the highest, can be said to be implicit in the provisions of thelaw prohibits the hearing of a dispute as to the existence of a Souda if it is raised more than two months after the date of the Souda. But can the implication arising out of the words used in thisbe said to govern the construction of Article 20(a)  In our opinion, the answer to this question must be in the negative. It is possible that thismay have in view cases where a difference arises between members as to the existence of a contract and the members agree that even this dispute should be referred to the Arbitration Committee.The position, therefore, is that, in our opinion, the material Article which has to be construed is Article 20(a). The words used in this Article are not ambiguous or doubtful and so it is unnecessary to take the assistance of any other Article orin construing the said words. It is by this Article alone that an obligation has been imposed upon members to refer specific disputes to arbitration and a dispute as to the existence of a contract is not one of the disputes specified in this Article.That is why we must hold that the learned Judge below was in error in taking the view that Article 20(a) conferred jurisdiction on the Lavad Committee to deal with the preliminary dispute as to whether the contract had been entered into between the appellant and the respondent or not.In this connection, we would like to add that, though84(a) and 92(b) were cited before the learned Judge, his ultimate conclusion was based upon a construction of Article 20(a). He thought that "the wording of Article 20(a) is wide enough to cover all disputes arising out of the transactions and contracts between the members of the Chamber of Commerce."With this view we are unable to concur. If the relevant Articles of Association did not constitute an arbitration agreement in respect of a dispute as to the existence of the contract itself, then the award made by the arbitrators has to be set aside. The jurisdiction of the arbitrators is and can be derived only from an arbitration agreement. Without an arbitration agreement there would be no jurisdiction in the Lavad Committee to deal with the dispute as to the existence of the contract.A plea of acquiescence cannot be raised in respect of such jurisdictional points. The jurisdiction of the Lavad Committee being conditioned upon the existence of a prior arbitration agreement, all proceedings before the Lavad Committee must be held to be invalid notwithstanding the fact that the appellant appeared before the Lavad Committee.It is well settled that parties cannot confer jurisdiction on a tribunal by consent. Jurisdiction is conferred on arbitrators by the provisions of the Indian Arbitration Act on condition that there is a written arbitration agreement between the parties in respect of the dispute referred to the arbitrators. If the condition precedent is found to be absent there is no scope for holding that the proceedings before the Arbitration Committee are with jurisdiction.16. If that be the true position, the order passed by the learned Judge below must be set aside on this ground alone. An award has been made by a Committee which had no jurisdiction to deal with an essential part of the dispute between the parties, and so the whole of the award must be set aside.Ihave already mentioned that, during the pendency of this dispute before the Lavad Committee, three committees were formed and it is true that on several days when the dispute was heard the same set of arbitrators were naturally not present.But88 of the Chamber has specifically provided that objections such as the one raised before us byMr. K.T. Desaishall not invalidate the award. Under thisit would not be open to a party to challenge the validity of the award on the ground that the dispute was not finally decided at one sitting or that the very same members of the Arbitration Committee or of theBoard were not present at all the meetings or that members of the Arbitration Committee or of the Board who had given the final award were not present at all the meetings in which the hearing of the said dispute was taken up or the appeal heard.We must, therefore, hold that the infirmity in the award on whichMr. K.T. Desairelies cannot invalidate the award because88 expressly precludes the appellant from raising such a contention. Nor can thebe regarded as ultra vires for the reason that it is opposed to natural justice. Indeed, the hearing of a suit by one Judge and its decision by his successor is authorised even under O. 18, R. 15, Civil P.C.However, it is not necessary to pursue this point any further sinceMr. K.T. Desaidid not seriously contend that thiswas ultra vires. Besides, the decision on this point would be a matter of academic importance in view of our conclusion that the dispute as to the existence of the contract itself is not covered by the arbitration agreement in the present case and the award made by the arbitrators is invalid for that reason.