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Madras High Court
ANANTANARAYANAN,NATESAN
M.A.and Sons - Appellant
Versus
Madras Oil and Seeds Exchange Ltd. - Respondent
Decided On : 08/11/1964
ARBITRATION - RIGHT OF APPEAL - BY-LAW INTRODUCED AFTER CLAIM SUBMITTED TO ARBITRATION - EFFECT - CONTRACT PROVIDING FOR ABIDING BY MODIFICATIONS IN BY-LAWS - RIGHT OF APPEAL ACCRUES - AWARD BY APPELLATE TRIBUNAL IS FINAL AWARD.
Fact of the Case:
A dispute arose between the appellants and the second respondent firm regarding forward contracts for supplies of groundnut oil. The contract was subject to the by-laws of the Madras Oil and Seeds Exchange (Pte) Ltd. (first respondent), which provided for arbitration in case of disputes. After the claim was submitted to arbitration, the first respondent amended its by-laws to introduce a right of appeal from the initial award. The second respondent filed an appeal under the new by-law, which was upheld by the appellate tribunal. The appellants challenged the validity of the appeal and the final award.
Finding of the Court:
The court held that the right of appeal existed under the by-law, as it was necessarily implied from the language used. The court also held that the introduction of the right of appeal after the claim was submitted to arbitration did not take away the remedy from either party, as the contract provided that the parties would abide by any modification or alteration in the by-laws. The court further held that the provision for appeal was not ultra vires the law of Arbitration enacted in Act 10 of 1940.
Issues: 1. Whether the by-law providing for an appellate tribunal was ultra vires, since the award given by the Arbitrators even in the first instance was final and binding under the Indian Arbitration Act 10 of 1940? 2. Whether the right of appeal is available to the second respondent firm, since the proceeding or lis was instituted earlier in point of time to the introduction of this by-law?
Ratio Decidendi: 1. The right of appeal exists under the by-law, as it is necessarily implied from the language used. 2. The introduction of the right of appeal after the claim was submitted to arbitration did not take away the remedy from either party, as the contract provided that the parties would abide by any modification or alteration in the by-laws. 3. The provision for appeal is not ultra vires the law of Arbitration enacted in Act 10 of 1940.
Final Decision: The civil miscellaneous appeal was dismissed with costs.
ANANTANARAYANAN, J. :- This appeal instituted by M. A. and Sons (appellants) from the order and decree of the learned Second Assistant fudge, City Civil Court, Madras, dismissing O. P. No. 478 of 1961, involves certain questions of interest with
regard to a reference to arbitration, as provided for by the by-laws of the Madras Oil and Seeds Exchange (Pte) Ltd (first respondent). The essential facts and dates are as follows :
2. There were certain contracts, which were of the character of forward contracts, as between the appellants and the second respondent firm (Kilachand and Devchand and Co. Pte Ltd.) for supplies of groundnut oil on differing dates. It is not in dispute that, owing to the alleged bursting of the boiler apparatus, the appellants were unable to deliver, and reported the inability; in brief, the contracts were broken. On the principle of S. 60 of the Indian Sale of Goods Act, the second respondent chose to treat the contract as subsisting, and waited till the date of delivery. As there was no delivery, there was a claim in damages arising out of the contracts, Ex. A. 1 to A.4. While upon this topic, it is of importance to note a term of the contract, expressed in the following form :
"The contract entered into subject to the bylaws in force from time to time of the Madras Oil and Seeds Exchange Ltd., of winch the parties admit that they have knowledge and notice. In the event of any dispute of or differences of opinion in respect of any point under this contract, the same shall be settled by arbitration by and under the rules of the Madras Oil and Seeds Exchange Ltd., and the decision of the Madras Oil and Seeds Exchange Ltd., shall be final and binding on both the parties. This clause shall be considered as an arbitration agreement within the meaning of the Indian Arbitration Act 1940 ......"
We may now proceed to scrutinise the further events. On 18-09-1956, there was a claim statement filed by the second respondent before the Madras Oil and Seeds Exchange (Pte) Ltd., first respondent, claiming damages against the appellants to the tune of Rs. 24,200. The appellants filed a written statement on 30-10-1956, the second respondent filed a reply statement on 29-11-1956, and the arbitration proceedings were heard on the 18th and 39th April 1957. Ultimately, on 13-7-1957 the committee or Board of Arbitrators gave an award against the appellants for damages, computed to Rs. 8000.
3. In the meantime, on 15-10-1956, that is, after the claim was filed by the second respondent, there was an amendment of the by-laws of the first respondent firm, and by-law 202 came into existence. Since the interpretation of this by-law is a cardinal ground of controversy, we shall set forth by-law 202, the essential part of it, as follows :
"Wherever an appeal is preferred, the Board shall appoint an appellate Tribunal for deciding such appeal consisting of the president or the Vice President and four other directors none of whom was a member of the Arbitration Tribunal in that particular matter, which had given the award against which such appeal is preferred ..... The minimum number of members of the appellate Tribunal who shall form a quorum and who shall be deemed to be duly appointed appellate Tribunal for the matter and who shall hear and decide the appeal shall be three.
The decision of the appellate Tribunal shall be final and binding on the parties concerned". Two characteristics of this unfortunately framed provision are immediately apparent. The first is that the provision does not, by the ipsissima verba there of, provide that either party to the dispute referred to arbitration, in the first instance, may institute an appeal. In other words, the right of the party to appeal, as distinguished from the Jurisdiction of the Appellate Tribunal, is not expressly stated. The second is an equally obvious defect, that no limitation is provided for. We shall leave that matter there for the present and observe the further events of
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