Case: Shiv Omkar Maheshwari Vs. Bansidhar Jagannath

51 the appellant had applied to the City Civil Court for setting aside an award No. 19 of 1951 made against him. Pending the said application, the respondent had applied onfor extension of time to make the award. The two proceedings were consolidated and onthe learned trial Judge allowed the respondents application for extension of time and dismissed the petitioners application for setting aside the award. It is against this order that the present appeal has been preferred.Both the appellant and the respondent were and are members of the East India Chamber of Commerce, it appears that this association had established a market or Exchange for effecting forward transactions inter alia in silver pieces. Consistently with the Articles of Association,were framed to regulate the transactions effected by members of the association in the said Exchange in respect of several commodities including silver pieces.In about January 1943 a Syndicate of five persons was formed for dealing in silver pieces. On or aboutaccording to the respondent one Lawjibhai as representing the said Syndicate had instructed the respondent to purchase 6,615 tukdas of silver from the market and accordingly the respondent did make the said purchase for and on behalf and as an agent of the said Syndicate.Thereafter one Chandulal Ravjibhai and one Kishan Gopal Bagdi instructed the respondent to allot and assign the said 6,615 pieces of silver to four parties in the proportion mentioned by them. 3,000 pieces were allotted to Messrs Radhakishan Shivkisan; 1,298 pieces to Messrs Jotram Kedarnath; 1,817 pieces to Messrs M. Gulamali Abdulhusein; and 500 pieces to the appellant. The rate at which these 500 pieces were allotted to the appellant was Rs. 160/14/6 per 100 tolas.It would appear that onan emergency was declared by the authorities of the Association and onthe Board of Directors issued instructions for squaring up all transactions at Rs. 154 per 100 tolas. In respect of this transaction the respondent claimed from the appellant Rs.948 the respondent applied for reference of this dispute to arbitration under the relevant Articles of Association andLavad Committee to whom this dispute was referred by the Association held several meetings and in the end onthe Committee made an award. It may be mentioned at this stage that in the meanwhile three Lavad Committees came to be appointed, as under the Articles of Association the life of a Lavad Committee appointed by the Association is only a year. The first Lavad Committee was appointed onthe second onand the third onwas the third Lavad Committee that made the award in the present dispute. The award was filed onand the appellant was given notice of the filing of the award onThereafter the appellant filed his petition to set aside the award and his petition was followed by the respondents petition for extension of time to Mack the award. Ultimately the appellants petition was dismissed and the respondents petition was allowed.The learned Judge before whom the consolidated applications were heard has held that on the facts of this case it was necessary in the interests of justice that time for making the award should be extended. He has also held that the relevant Articles of Association read in the light of the Associationsconstitute an agreement in writing to refer the dispute to arbitration and that the said Articles andconferred jurisdiction on the Lavad Committee to deal with the present dispute. He was disposed to take the view that, though the appellant disputed the existence of the contract itself, that did not oust the jurisdiction of the Lavad Committee.According to him, it was within the competence of the Lavad Committee to adjudicate even upon this dispute. It was urged before the learned Judge by the appellant that the proceedings before the Lavad Committee were affected by many irregularities; but the learned Judge was not impressed by this argument. He relied upon the conduct of the appellant in that lie appeared before the Lavad Committees for more than two years, took a chance of the decision of the Lavad Committee going in his favour, and when he found that the award was passed against him, he chose to raise these technical objections.In the opinion of the learned Judge, this conduct showed acquiescence on the part of the appellant and it was not, therefore, open to him to raise these technicalities against the validity of the award at that stage. That is why the learned Judge rejected the appellants prayer for setting aside the award.

Court's reasoning:
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.