The main legal point established in the judgment is the interpretation of the contract terms, the authority of agents, the impact of arbitration clauses on the maintainability of the suit, and the distinction between a set-off and a counter claim.

RAGHAVAN, J. :- The appeal is by the defendants in a suit for return of price of cotton paid under a contract and also for reimbursement of moneys spent by the respondent (a public limited company) as warehouse charges, etc. The respondent entered Into a contract with the appellants to purchase 356 bales of cotton of the Hubli Jayadhar variety to conform to sample T. 3729 at a particular price F.O.R. Cannanore. Eighty per cent of the invoice price was to be paid before taking delivery and the balance subsequently. Of the goods despatched, 106 bales were found to be Hubli Jayadhar of an inferior quality : and the rest (250 bales) were found to be of the Laxmi variety from Annagiri and Adoni. The respondent accepted the 106 bales, the Hubli Jayadhar, submitting the dispute regarding their quality for arbitration by the East India Cotton Association, Ltd., Bombay, since the contract contained an arbitration clause. The Association reduced the price slightly, since the quality of the said 106 bales did not come up to the sample. Regarding the rest, viz., 250 bales, the respondent did not agree for arbitration, though the appellants claimed that that matter also should be submitted for arbitration. The suit giving rise to the appeal was for return of the price paid by the respondent with interest thereon and also for incidental expenses like warehouse charges, etc. The respondent claimed that the company was entitled to repudiate the contract regarding the 250 bales and demand the money back.

2. The appellants contended that the contract was for the supply of Indian cotton; that even if the contract was to supply Hubli Jayadhar cotton, the said name was not a description, but showed only the quality of the cotton; that the dispute relating to the 250 bales should also have been referred to arbitration; and that the suit should be dismissed, since the question was not referred to arbitration at the first instance. The appellants also filed a counter claim for the 20 per cent of the price to be paid on all the 356 bales.

3. The lower court decreed the suit and dismissed the counter claim.

4. The first question to be decided is whether the contract was for the supply of Hubli Jayadhar cotton or merely of Indian cotton. The ultimate agreement that concluded the negotiations between the parties is Ex. A-8 of 4th June 1956 (Contract No. CCT/124). The document in triplicate was sent to the respondent by a Sippy of Coimbatore, and the document mentioned only Indian cotton conforming to sample T. 3729. The respondent added the term 'Hubli Jayadhar' made some other corrections as well and sent back the duplicate and triplicate to Sippy. Ex. A-9 is the photostat copy of the duplicate kept by Sippy and Ex. A-10 is the photostat copy of the triplicate obtained from the appellants. The expression 'Hubli Jayadhar' is seen scored out in Ex. A-10, while the expression is intact in both Exs. A-8 and A-9.

The case of the appellants is that the respondent had no authority to add 'Hubli Jayadhar' and that in the triplicate sent to them the term was scored out, probably by Sippy Their further contention is that thus the contract was only to supply Indian cotton and not Hubli Jayadhar cotton.

5. The invoices relating to the 250 bales are dated 6th July 1956 (Exs. A-18, A-10 and A-20); and Ex. A-8, as already stated, was of 4th June 1956. On receipt of the duplicate and triplicate. Sippy sent Ex. A-13 on 14th June 1956 to the respondent protesting that the respondent should not have added 'Hubli Jayadhar' in Ex. A-8. The respondent immediately replied by Ex. A-14 on 18th June insisting that the contract was only for Hubli Jayadhar cotton and not for mere Indian cotton. In this connection, the previous correspondence like Exs. A-1 to A-3

and A-6 throws considerable light on what the parties were negotiating for. Those documents clearly show that the negotiations related only to Hubli Jayadhar cotton; and it was only in Ex A-8 that the expression was lef