Arbitration of the suit-petition filed not maintainable.

Ramaprasada Rao, CJ. — This appeal is by the unsuccessful defendant in I.A. No. 874 of 1974 in O.S. No. 426 of 1974, on the file of the Court of the Subordinate Judge of Erode. The respondent-plaintiff filed the suit for recovery of a sum of Rs. 1,63,794 as damages, on the foot that the appellant-defendent had committed breach of contract, dated 15th January, 1974, to supply 500 full-pressed bales of new crop 797 Dholka or Bavla FAQ cotton of 1973-1974 season on the terms and conditions contained in the confirmation slip dated 15th January, 1974. The contract originated in correspondence and the respondent’s case is that it was concluded by a telegram. This is seen from Exhibits B-1 to B-3. The respondent’s specific case is that he sent the sale confirmation letter to the appellant and that that was the process by which the contract was concluded. On the strength of such a concluded contract, the respondent-plaintiff was demanding the performance of the same in accordance with its tenor, which the appellant refused. Obviously the price of cotton which was the subject-matter of the contract, by then rose. The respondent had therefore to file the suit for the recovery of damages for breach of contract. He relied upon the correspondence ending with Exhibit B-3. The respondent, prior to the institution of the action, issued a notice Exhibit B-16, calling upon the appellant to perform the contract or to suffer damages. Exhibit B-18 is the reply by the appellant in which he categorically denied that there was any concluded contract as between himself and the respondent, as according to him, the respondent had not returned the sale confirmation note duly signed by him in confirmation of the contract which originated in correspondence. In fact, the specific case of the appellant was that the contract had been cancelled by his letter, dated 1st February, 1974. It was in those circumstances the respondent had to file the suit for recovery of damages on the strength of the contract and the breach thereof. No sooner did the respondent file the suit, than the appellant took out under section 34 of the Arbitration Act an application for the stay of all proceedings in the suit and for directing the respondent to refer the alleged dispute in the suit to arbitration, in accordance with the rules and regulations of the East India Cotton Association Ltd., Bombay. The provocation for the appellant to file such an application was that under Exhibit B-3, which was the sale confirmation, reference is made to the East India Cotton Association Ltd., in the following terms:

"We have pleasure to confirm having sold to you this day subject to the East India Cotton Association’s Rules and Regulations as under:

* * * * *

Yours faithfully,

for C.A. Galiakotwala and Co. (P.), Ltd.

Sd. (defendant).

2. Taking advantage of the reliance placed by the respondent on Exhibit B-3, the appellant, notwithstanding his specific stand in Exhibit B- 18, raised a plea that the suit was not maintainable and that the dispute should be referred to arbitration in accordance with the contents of Exhibit B-3. This was negatived by the Court below on more than one ground. Firstly the learned Subordinate Judge thought that the respondent-plaintiff was not a member of the East India Cotton Association Ltd., and therefore he could not be compelled to submit himself to arbitration in accordance with the rules and regulations of that Association. Secondly he was of the view that, in case there was a dispute about the existence of an arbitration agreement, then in accordance with the by-laws of the Association there should be a written agreement between the contesting parties agreeing to refer the disputed matters to arbitration, and that in the absence of such a written agreement in the instant case the question of referring the subject-matter of dispute to arbitration did not arise. The third ground on which the learned Subordinate Judge refused to accept the application for reference to a

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