Bombay High Court
Varadam Shetty Jambulanna And Anr. vs Narshi Mulji & Co. on 9 January, 1956
Equivalent citations: AIR1956BOM720, AIR 1956 BOMBAY 720
ORDER
1. This is a petition to set aside an award made by arbitrators appointed under the rules framed by the Bombay Oil Seeds Exchange. The opponents are members of that association, but the petitioners are not. There were certain transactions in groundnuts between the parties on several dates. These transactions were in fact made by telegrams and telephone calls. No contracts in connection with these were embodied in any document far less in any contract in accordance with any form prescribed by the Bombay Oil Seeds Exchange.
When the opponents went before the arbitrators a written statement was filed under protest by the petitioners and in that written statement they took up two points, first that there was no reference at all to arbitration and there being no written reference to arbitration the arbitrators had no jurisdiction to enter upon the adjudication; secondly it was argued alternatively that even if there was such an agreement the contracts were void as being contrary to the Forward Contracts Prohibition Order and under the Defence of India Rules namely E. S. P. T. Act XXIV Of 1946.
2. The petition asks that the award be set aside on these two grounds. I have looked at the award and the second part of the award merely says that having heard the plaintiffs and after considering the evidence namely certain telegrams which have been annexed as Ex. E. the arbitrators come to a conclusion that the defendants owe Rs. 36,819-3-6 to the opponents. There is no reference at all to any discussion or any statement why jurisdiction was assumed.
3. It is clear that the petitioners are not members of the association. There are instances where a non-member would be bound by the arbitration rules of the agreement, where for instance the non-member enters into a contract with a member in the prescribed form. Where the con tract is under the prescribed form then the reference to arbitration is implied by the conduct of the party, namely signing that particular form, but until that is done there could be no imposition of the rules as regards arbitration on a third party.
Clearly the opponents have not been able to show that there was any written reference to arbitration between these parties dehors the rules of the association and the rules of the association cannot help the opponents, because there was no contract in any prescribed form. It appears that no forms were prescribed until a judgment of a Division Bench of this High Court was delivered in 1955.
These are transactions prior to that date, so that in any event even if the form has been prescribed now there was no form available at the time when these contracts were entered into. The fact that no prescribed forms were in existence cannot help the opponents.
4. If ab initio the arbitrators had no jurisdiction, appearance before the arbitrators and undertaking in the event of a finding that they had jurisdiction to file a defence on merits cannot confer jurisdiction on arbitrators who had no jurisdiction at all. The other part of the arguments is also sound, namely that even if there was any prescribed form signed by the petitioners then the argument proceeds on the alternative ground namely that under the Forward Contracts Prohibition Order E. S. P. T. Act XXIV of 1946 the contracts are ab initio illegal and therefore void which shows that there is no contract under which there could be any reference to arbitration.
I therefore take the view that there was no reference to arbitration either written or implied by the signing of any particular form and there fore the petition is properly maintainable. The petition is therefore allowed with costs fixed at Rs.
100/-. The award is set aside. Counsel certified.
5. Petition allowed.