The Articles of Association of a company do not constitute an arbitration agreement within the meaning of Section 2, Arbitration Act, unless they impose an obligation on the members to refer their disputes to arbitration.

Headnote:
Arbitration - Extension of time - Jurisdiction of Lavad Committee - Articles of Association - Arbitration agreement - Construction - Bye-laws - Validity - Ultra vires - Natural justice - Award - Validity.
Fact of the Case:

The appellant had applied to the City Civil Court for setting aside an award made against him. Pending the said application, the respondent had applied for extension of time to make the award. The two proceedings were consolidated and the learned trial Judge allowed the respondents application for extension of time and dismissed the petitioners application for setting aside the award.
Finding of the Court:

The Court held that the learned Judge was in error in holding that the Articles of Association could, in law, constitute an agreement in writing to refer the dispute to arbitration within the meaning of Section 2, Arbitration Act. The Court also held that the Lavad Committee had no jurisdiction to deal with the preliminary dispute as to whether the contract had been entered into between the appellant and the respondent or not.
Issues: 1. Whether the Articles of Association could, in law, constitute an agreement in writing to refer the dispute to arbitration within the meaning of Section 2, Arbitration Act? 2. Whether the Lavad Committee had jurisdiction to deal with the preliminary dispute as to whether the contract had been entered into between the appellant and the respondent or not?
Ratio Decidendi: 1. The Court held that the Articles of Association did not constitute an arbitration agreement within the meaning of Section 2, Arbitration Act, as they did not impose an obligation on the members to refer their disputes as to the existence of the alleged contract itself to arbitration. 2. The Court held that the Lavad Committee had no jurisdiction to deal with the preliminary dispute as to whether the contract had been entered into between the appellant and the respondent or not, as the Articles of Association did not confer jurisdiction on the Lavad Committee to deal with such disputes.
Final Decision: The appeal was allowed, the order passed by the City Civil Court Judge reversed, and the award made against the appellant set aside with costs throughout.

Judgment

1. On 26-4-1951 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 on 10-9-1951 for extension of time to make the award. The two proceedings were consolidated and on 20-6-1955 the 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.

2. 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, Bye-laws 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 1945 a Syndicate of live persons was formed for dealing in silver pieces. On or about 5-2-1948, according 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; 1,208 pieces to Messrs Jotram Kedar-nath; 1,817 pieces to Messrs M. Gulamali Abdullhusein; and 500 pieces to the appellant. The rate at which these 600 pieces were allotted to the appellant was Rs. 160/14/6 per 100 tolas.

It would appear that on 7-3-1948 an emergency was declared by the authorities of the Association and on 10-2-1948 the 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. 24, 226-9-0 and on 15-4-1948 the respondent applied for reference of this dispute to arbitration under the relevant Articles of Association and Bye-laws.

The Lavad Committee to whom this dispute was referred by the Association held several meetings and in the end on 20-9-1950 the 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 on 24-10-1947, the second on 27-10-1948 and the third on 2440-1949.

It was the third Lavad Committee that made the award in the present dispute. The award was filed on 27-2-1951 and the appellant was given notice of the filing of the award on 3-4-1951. Thereafter the appellant filed his petition to set asidte the award and his petition was followed by the respondents petition for extension of time to make the award. Ultimately the appellants petition was dismissed and the respondents petition was allowed.

3. 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 Associations Bye-laws constitute art agreement in writing to refer the dispute to arbitration and that the said Articles and Bye-laws conferred 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 learn

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