B. Jaikishan Boob vs Dindigal Cotton Mills

M.P. Chinnappa, J.

1.The appellant being aggrieved by the order passed by the Learned Civil Judge, Raichur on I.A-I in O.S.No.99/86 preferred this appeal.

The brief facts which are necessary for the disposal of this appeal are:

The appellant-plaintiff filed O.S.No.99/86 on the file of the Learned Civil Judge, Raichur against the respondent for recovery of a sum of Rs. 86,414-11 with an interest at 18% per annum towards the supply of 50 cotton bales. The respondent appeared in the suit and filed an application u/s 34 of the Arbitration Act contending that the contract between the parties was subject to the bye-laws of the East India Cotton Association and therefore the dispute had to be referred to arbitration. The said application was contested by the appellant. The Trial Court after hearing both the parties allowed the application. This order is questioned in this appeal. Heard the learned Counsel for the appellant and the learned Counsel for the respondent.

The learned Counsel for the appellant at the very outset submitted that there is no dispute between the parties. The parties are not members to refer this case to the arbitration. The Trial Court has not exercised its power in a judicious manner.

Per contra the respondent submitted that notwithstanding the fact that the parties are not members of the Association according to Clause (b) of bye-law No. 38A the matter has to be referred to the arbitration and the appellant cannot wriggle out of the situation. He also submitted that the question as to whether there exists a dispute or not has to be ascertained with the allegations contained in the plaint. The very fact that the suit came to be filed itself prima-facie establishes that there is a dispute. Further he submitted that Section 34 of the Arbitration Act does not refer to dispute. He also submitted that the pleading has not been commenced & it is analogous to the pleadings. Therefore, at this stage it cannot be said that there is no dispute. However, he also submitted that the order passed by the Trial Court is a discretionary order which does not call for interference by the appellate Court.

Plaintiff filed a suit as stated earlier to recover a sum of Rs. 86,414-11 ps. Before filing the suit the plaintiff-appellant sent a letter requesting the defendant to settle the claim of the plaintiff. In response to that letter dated 27.9.1984 the defendant sent a letter dated 26-10-1984 clearly stating that they purchased 50 bales of Raichur H.420 cotton from the appellant and received supply in September 1983 and they have also issued a cheque for entire balance of Rs. 1,06,097-29 on 30th August 1983 itself in full payment. They however stated that because of some problem in the mill they could not settle the entire amount. Therefore subsequently they paid a sum of Rs. 25,000/- as acknowledged on various dates. They specifically admit that there is still a balance of Rs. 56,097-29 as found in the notice. Subsequently also on 7th October 1985 by their letter they have admitted that they are still due in a sum of Rs. 56,09/-29 to the appellant and they have undertaken that they would positively arrange to pay Rs. 15,000/- in December 1985 and Rs. 15,000/- in January 1986 and Rs. 15,000/- in February 1986 and the balance in March 1986 and clear the dues fully. They further requested the appellant to accept their assurance. This letter was September in response to the telegram referred to in the letter. Subsequently on 6-2-1986 they expressed their regrets for non-remittance as assured. However, they undertook to commence remittance to Jaikisan Boob in March. From these letters it is dear that at every stage the respondents have fully accepted their liability and they also agreed to pay the amount on instalments as stated above. But however they failed to comply with their undertaking. On this ground, the learned counsel for the appellant submitted that there is no dispute. On the other hand the learned Trial Court ought to have passed a decree at least for the admitted amount as provided under Order 12 Rule 6 CPC and in support of his argument he placed reliance on a decision in Janardhan Jog Vs. Srikrishna, , wherein it is held as follows:

"An admission contemplated by Order 12, Rule 6 CPC has to be an absolute admission, capable being worked out by itself. The other questions to be determined in the suit, or decree being made under Order 12 Rule 6, should be such independent questions, reliefs granted on which should be capable of being granted without affecting the former decree (i.e. the one passed on the basis of admission). If the admitted fact cannot independently stand, and the ultimate relief or reliefs to be granted in the suit is interlinked with those facts, then, it will not be a proper exercise of the discretion, to make a decree under Order 12 Rule 6 CPC."

In this case, as noted above the defendant has admitted the averments of the plaint in the written statement. In this case, the written statement has not been filed by the defendant. Before filing the written statement as contemplated u/s 34 of the Arbitration Act the defendant has filed this application for referring to the arbitration. Section 34 of the Act does not refer td the word ''dispute''

In this case, the plaintiff has claimed in all a sum of Rs. 86,414,11 which is inclusive of the principal and also the interest. The defendants have admitted that they are liable to pay a sum of Rs. 56,097.29 being the principal amount. However, they have specifically stated in their replies that they are not liable to pay any interest much less the amount claimed by the plaintiff, towards interest. This has to be decided by the Court or the Arbitrator. This claim also is arising out of the claim of the plaintiff. Therefore, there is a dispute to be decided by the Arbitrator. Under the circumstances, the contention of the learned counsel for the appellant that there is no dispute to refer it to the arbitrator in view of the admission of the defendants in their replies cannot be accepted.

The learned counsel for the appellant has vehemently argued that both the plaintiff and the defendants were not members of the South India Cotton Association. Therefore, they cannot be subjected to the bye-laws of the Association. The Division Bench of the Andhra Pradesh High Court in The Vijayalakshmi Mills Ltd. Vs. Shah Naval Mal Gulabchand and Sons., considered this question and left it at that without giving any definite opinion on the ground that even otherwise the impugned order therein cannot be interfered with as it does not suffer from any infirmity.

But from a perusal of the Bombay High Court Judgment reported in Arthur and Co. Vs. Shamji Kalidas and Co., wherein it is held that ordinarily speaking, the bye-laws of an Association apply to, & govern only the members thereof. Bye-laws do not have statutory force and, therefore, cannot affect the rights of, or bind third parties. A reading of bye-law 38-A shows that it provides for arbitration of disputes arising amongst members, as also between members and non-members. The bye-law does not specifically provide for disputes arising between non-members. Clause (e) says "cotton contracts covered by any such arbitration agreement". The word ''such'' indicates that the contracts and arbitration agreements contemplated by the said clause are of the nature referred to in clauses (a) to (d). The word ''such'' is merely descriptive and the inquiry therefore would be whether any provision of the nature of an arbitration agreement finds a place in any of the earlier Sub-clauses (a) to (d). The word ''any'' is used before the word ''such'' it was intended to give a wider application to the clause and therefore, it takes in cotton contracts between strangers as well. Clause (e) does not use words like ''between members'', or ''between a member and a non-member'', or any other similar descriptive words of limitation. Assuming that the interpretation placed upon Clause (e) by the Bombay High Court is correct, and in view of the fact that there is a dispute between the parties as stated above, the plaintiff''s sale contract clearly stipulates, which reads:

"We have this day sold to you, subject to the Bye-laws of the East/South India Cotton Association Ltd., Bombay Coimbatore as under. Through M/s. Sunil Cotton Company, Bangalore."

This has been signed by the plaintiff. Therefore, the plaintiff has made representation to the defendant that the sale was subject to the bye-laws of the South India Cotton Association which was accepted by the defendant and now it is not open to the plaintiff to say that as both of them are not members of the Cotton Association, it is not subject to the bye-laws of the East/South India Cotton Association. I therefore, hold that the plaintiff is estopped from pleading that. Therefore, even though both the parties are not members of the Association, still they are subject to the arbitration clause contained in the bye-law of the Association.

The learned counsel for the respondent submitted that even if the order of the Trial Court is otherwise insufferable by this Court, still the order cannot be set aside unless the appellant establishes that the order is arbitrary, injudicious or capricious calling for interference by this Court & in support of it, he placed reliance on a decision rendered by the Andhra Pradesh High Court referred to supra, wherein it is held that staying a suit u/s 34 is a matter within the discretion of the Trail Court. It is well settled that unless the discretion is exercised in a perverse manner or is vitiated by misdirection in law, the Appellate Court would not interfere. Left to itself, the Appellate Court may come to a different conclusion but that is not a ground for interfering with the exercise of discretion by the Trial Court. The Printers (Mysore) Private Ltd. Vs. Pothan Joseph, and Uttar Pradesh Co-operative Federation Ltd. Vs. Sunder Brothers of Delhi, , have been followed. Therefore, it is clear that viewed from any angle, the order passed by the Trial Court does not call for interference.

For the foregoing reasons, the appeal has no merit and the same is liable to be dismissed. Accordingly, dismissed.