Case: Jugal Kishore Rameshwardas Vs. Mrs. Goolbai Hormusji

The appellant is a share broker carrying on business in the City of Bombay, and a member of the Native Share and Stock Brokers Association, Bombay. The respondent, Mrs. Goolbai Hormusji, employed him for effecting sales and purchases of shares on her behalf, and on 6-8-1947 there was due from her to the appellant on account of these dealings a sum of Rs. 6,321-12-0. On that date, the respondent had outstanding for the next clearance, sales of 25 shares of Tata Deferred and 350 shares of Swadeshi Mills.On 11-8-1947, the appellant effected purchases of 25 shares of Tata Deferred and 350 shares of Swadeshi Mills to square the outstanding sales of the respondent, and sent the relative contract notes therefor Nos. 2438 and 2439 (Exhibit A) to her. She sent a reply repudiating the contracts on the ground that the appellant had not been authorised to close the transactions on 11-8-1947, and instructed him to square them on 14-8-1947. The appellant, however, declined to do so, maintaining that the transactions had been closed on 11-8-1947 under the instructions of the respondent.2. After some correspondence which it is needless to refer to, the appellant applied on 21-8-1947 to the Native share and Stock Brokers Association, Bombay for arbitration in pursuance of a clause in contract notes, which runs asevent of any dispute arising between you and me/us of this transaction the matter shall be referred to arbitration as provided by the Rules and Regulations of the Native share and stock BrokersAssociation gave notice of arbitration to the respondent, and called upon her to nominate her arbitrator, to which she replied that the contract notes were void, and that in consequence, no arbitration proceedings could be taken thereunder. The arbitrators, however, fixed a day for the hearing of the dispute, and gave notice thereof to her, but she declined to take any part in the proceedings. On 10-10-1947 they made an award in which, on the basis of the purchases made by the appellant on 11-8-1947 which were accepted by them, they gave credit to the respondent for Rs. 1,847, and directed her to pay him the balance of Rs. 4,474-12-0.3. The respondent then filed the application out of which the present appeal arises, for setting aside the award on the ground, inter alia, that the contracts in question were forward contracts which were void under S. 6 of the Bombay Securities Contracts Control Act 8 of 1925, that consequently the arbitration clause was also void and inoperative, and that the proceedings before the arbitrators were accordingly without jurisdiction and the award a nullity.The learned City Civil Judge, who heard the application agreed with this contention, and holding that the contracts were not void under S. 6 of Act 8 of 1925, dismissed the application. The respondent took the matter in appeal to the High Court of Bombay, and that was heard by Chagla C. J. and Tendolkar J. They were of the opinion that the contracts in question were not ready delivery contracts as defined in S. 3 (4) of the Act, because though no time for performance was specified therein, they had to be performed within the period specified in the Rules and Regulations of the Association, which were incorporated therein by reference, and not "immediately or within a reasonable time" as provided in S. 3 (4), that they were accordingly void under S. 6, and that consequently, the arbitration clause and the proceedings taken thereunder culminating in the award were also void.

Court's reasoning:
we are of opinion that the point is open to the appellant, and having heard counsel on both sides, we think that the appeal should succeed on thatquestion of sale or purchase would arise between the respondent and the seller or purchaser, as the case may be, with reference to the contract brought about by the appellant. But the relationship between the respondent and the appellant was one of principal and agent and not that of seller and purchaser.The contract of employment is no doubt connected, and intimately, with sales and purchases of securities; but it is not itself a contract of sale or purchase. It is collateral to it, and does not become ipso facto void, even if the contract of purchase and sale with which it is connected is void.It may be argued that if the contract note is only, intimation of a sale or purchase on behalf of the constituent, then it is not a contract of employment, and that in consequence, there is no agreement in writing for arbitration as required by the Arbitration Act.But it is settled law that to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties, and that it is sufficient if the terms are reduced to writing and the agreement of the parties thereto is established.Though the respondent alleged in her petition that she had not accepted the contract notes, Ex. A, she raised no contention based thereon either before the City Civil Judge or before the High Court, and even in this Court the position taken up by her counsel was that Ex. A constituted the sole repository of the contracts, and as they were void, there was no arbitration clause in force between the parties.We accordingly hold that the contract notes contained an agreement in writing to refer disputes arising out of the employment of the appellant as broker to arbitration, and that they fell outside the scope of S. 6 of Act 8 of 1925 that the arbitration proceedings are accordingly competent, and that the award made there, in is not open to objection on the ground that Ex. A iserror in the argument of the respondent is in mixing up two different provisions enacted by two different authorities and reading the one into the other. The Rules framed by the Association form a code complete in itself, and any question arising with reference to those Rules must be determined on their construction, and it would be a mistake to read into them the statutory provisions enacted in Act 8 of 1925.In this view, the contract notes, Ex. A, cannot be held to be void under R. 167.In the result, we must held, differing from the learned Judges of the Court below, that the arbitration proceedings are not incompetent and that the award made therein is not void on the ground that the contracts containing the agreement are void.10. The respondent contested the validity of the award on several other grounds.They were rejected by the City Civil Judge and in the view taken by the learned Judges of the High Court that the contract notes were void under S. 6 of Act 8 of 1925, they did not deal with them. Now that we have held that the contracts are not void, it is necessary that the appeal should be heard on those points.