Firm Gianchand Walaiti Ram and Others vs Kishan Chand

Harnam Singh, J.—On 13-6-1948, Lala Kishan Chand son of Lala Nika Mal instituted the suit Out of which these proceedings have arisen for the recovery of Rs. 10,500 from Gian Chand Walaiti Ram and others on the basis of transactions which according to the terms of the contracts are to be considered as wholly made and completely to be fulfilled at Okara, subject to the customs of the Okara market and the rules and bye-laws of the Krishan Murari Exchange Ltd., Okara.

On 27-7-1918, Walaiti Shah and Gian Chand basing themselves on Clause 12 of the agreement applied u/s 84, Arbitration Act, 1910, hereinafter referred to as the Act, for the stay of the suit. Plaintiffs, however, maintained at the trial that the agreement for reference of the dispute to arbitration had become wholly incapable of performance for the reason that Krishan Murari Exchange Ltd., Okara, has ceased to function at Okara. The trial Court finding that the arbitration Clause has become impossible of performance has dismissed the Defendants application u/s 34 of the Act.

Messrs. Gian Chand Walaiti Ram have now come up in appeal u/s 39 of the Act from the order passed by the trial Court on 24-5-1949.

For a proper decision of the point involved in these proceedings, I think it desirable to set out conditions Nos. 1, 6, 12 and 14 of the agreement on which reliance has been placed. Conditions Nos. 1, 6, 12 and 14 read as under:

(1) All transactions are to be construed and are to take effect as contracts wholly made and completely to be fulfilled at Okara, subject to the customs of the Okara market, the rules and bye-laws of the Krishan Murari Exchange, Ltd., Okara (or its successors if any) in force from time to time, which shall apply to me/us and bind me/us in the same way and manner as they do you in your capacity of members of the said company.

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(6) I/We agree to deposit with you in Okara, a minimum margin of Rs. 200 per each transaction of lowest denomination and to maintain the same with you intact over and above the current market rate until completion of this contract; differences between the contract and market prices due to fluctuations of the market arising against me/us shall be paid by me/us to you in cash in Okara as and when they may arise. You are not bound to demand payment of the said deposit, and/or differences or to give any notice or warning for such payment. Absence or failure on your part to do so will not in any degree or form prejudice the authority expressly vented in you under this agreement. Any indulgence shown by you pertaining to margin money payable by me/us or my/our failure to keep it intact subsequent on fluctuations of the market will not be construed as a waiver or operate us estoppel....

(12) In the event of any disputes arising out of these transactions between you and me/us the matter shall be referred at Okara to the arbitration of two directors of the Krishan Murari Exchange, Limited, Okara (or its successors, if any), one to be appointed by each of the parties. If any party fails to nominate an arbitrator within seven days of the date of request of the other, or his arbitrator neglects or refuses to act within seven days of his appointment, the other party has the right to nominate both. In case of difference of opinion between the arbitrators they will appoint an umpire who shall also be a director of the Krishan Murari Exchange, Limited, Okara (or its successors, if any). The decision of the arbitrators or the umpire as the case may be shall be final and binding on both the parties.

(14) The arbitration proceedings under this Clause shall be governed by the Indian Arbitration Act of 1940 and award shall be filed in Montgomery Court.

From a perusal of conditions Nos. 1, 6, 12 and 14 it appears that the parties agreed between themselves that all transactions entered into between the parties were to be considered and were to take effect as contracts wholly male and completely to be fulfilled at Okara subject to the customs of the Okara market and the Rules and bye-laws of Krishan Murari Exchange, Limited, Okara. Then the agreement was that differences between the contract and market prices due to the fluctuations of the market, were to be paid by the Defendants to the Plaintiffs firm in cash in Okara and finally in the event of any dispute arising out of the transactions between the parties, the matter was to be referred at Okara to the arbitration of two directors of the Krishan Murari Exchange, Limited, Okara, and the arbitrators were to file their award in the Montgomery Court. That being the situation of matters the question that arises for determination in these proceedings is whether the agreement of reference contained in Ex. D-1 can now be enforced.

Clearly the arbitration Clause has become impossible of performance in the sense that no reference can now be made at Okara and the two directors of the Krishan Murari Exchange Limited, if appointed arbitrators in the case would not be in a position to file their award in the Montgomery Court. That being so, I find that the application u/s 34 of the Act has been rightly dismissed.

But the conclusion that I have reached can be sustained on another ground. It is admitted that at the time the agreement was entered into, there were eleven directors of the Krishan Murari Exchange, Limited, Okara. Walaiti Ram Defendant in the evidence given by him at the trial could only give the addresses of three of the eleven directors. Then at one stage of the proceedings the parties referred the dispute to Durga Dass and Radha Kishan, directors of the Krishaa Murari Exchange, Limited. The reference was, however superseded by the trial Court on 23-3-1919, for the reason that the arbitrators could not collaborate with each other. Considering all these facts the Court has refused to direct the Stay of proceedings. Now, Section 34 of the Act reads:

Where any party to an arbitration agreement or any person claiming under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect, of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings; and if satisfied that there is no sufficient reason, why the matter should not be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were commenced, and Still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, such authority may make an order staying the proceedings.

From a perusal of the last chaise of Section 34, it appears that the making of an order staying the proceedings is a matter largely in the discretion of the Court. It is true that the discretion has to be judicially exercised. Indeed, the language of this section contemplated that on an application being made for stay of the suit the Court should look at the plaint and see for itself whether the arbitration Clause applies to the suit and if it does, whether the nature of the dispute in such that ends of justice would be met by a decision by itself than by a private person. In the present case the Court has, however, considering the altered situation that has come into being by reason of the partition of the Country found that the arbitration Clause contained in Ex. D-1, has been frustrated and be came impossible of performance. Nothing that has been brought to my notice shows that the trial Court m acting as it did has acted arbitrarily or capriciously so as to call for an interference with the discretion exercised by that Court in these proceedings.

For the foregoing reasons this appeal fails id is dismissed. Considering, however, that there was an arbitration Clause agreed to between the parties, I leave the parties to bear their own costs in these proceedings.