The Delhi Cloth and General Mills Co. Ltd. vs Ulfat Rai Kailash Chand and Others

M.S. Joshi, J.

(1) The present petition was made by the Delhi Cloth &General Mills Co. Ltd. against M/s. Ulfat Rai Kailash Chand, a Firm of Cloth Merchants, and its proprietors Kailash Chand and Singari Devi, son and widow of Ulfat Rai, respectively, u/s 20 of the Arbitration Act ,for filing the arbitration agreement between the parties in Court and for reference of the dispute between them to arbitration in accordance with the Rules ramed by the Delhi Hindustani Mercantile Association.

(2) According to the petitioner, it is a Company incorporated under the Indian Companies Act, 1882 and G. S. Gargya is its principal officer and general attorney having authority to sign, verify and institute suits on behalf of the Company. The petitioner had owned at the relevant time a shop known as D, C. M. City Shop at Lal Katra, Nai Sarak, Delhi, and M/s.Ulfat Rai Kailash Chand had been purchasing goods from it. On 26.11.1971they owed a. sum. of Rs. 48,154.72 to the said shop as unpaid price of the goods and Rs. 7,358.52 on account of interest at the rate of 12�/o per annum on the principal amount, i.e. Rs. 55,513.24 in all. They were asked to clear their account through a registered A. D. notice, but they avoided to make the payment .D. C. M. city shop was a member of Delhi Hindustani Mercantile Association (hereinafter referred to as "the Association") and so the Firm, M/s. Ulfat Rai Kailash Chand. According to the Constitution and Rules of the Association, any dispute arising between two members of the same is to be decided by the judges appointed by the Association in accordance with its ^Rules. The membership form signed by the partners of the firm and the Rules of the Association constituted an arbitration agreement between D.G.M. City Shop and the respondents for referring the disputes between them to the arbitration of judges to be appointed by the Association and now that a dispute has arisen between the parties the same has to be decided in accordance with the Rules of the Association. Because the respondents did not pay the petitioner''s dues and they refused to except the notice requiring them to refer the dispute to the Association, the present petition had to be filed.

(3) In their reply to the petition the respondents denied that G.S.Gargya was the principal officer and general attorney of the petitioner, having authority to sign, verify and institute the suit and urged that there was no authority conferred upon him to file the present petition. It was submitted further that respondent No.3, Singari Devi, was never enrolled as a member of the Association inasmuch as she never filled in and signed its membership form and the Rules of the Association could not, Therefore, be binding on and enforceable against her. Kailash Ghand, respondent No. 2, had no express or implied authority, it was contended further on her behalf, to refer any dispute of the firm to any arbitrator appointed by the Association. The claim of the petitioner as to the aforesaid amount being due to it by the respondents was also controverter.

(4) In its replication the petitioner pleaded that it was not open to the respondents to urge that they were not members of the Association.

(5) In view of the conflicting cases set up by the parties the following issues were framed in the case by Chawla, J., on 23.11.1972 : ''

"1. Whether the petition has been signed, verified and instituted by aduly authorised person on behalf of the petitioner ?

Whether the petitioner and its city shop and the respondents are members of the Delhi Hindustani Mercantile Association ? If so, what is the effect ?

Whether the membership form and the rules and regulations of the Delhi Hindustani Mercantile Association constitute an arbitration agreement between the parties ?

Whether the respondent No. 3 signed the application form for membership of the Delhi Hindustani Mercantile Association, and if not, what is the effect ?

Whether the respondents are estopped from pleading that they are not members of the Delhi Hindustani Mercantile Association ?

Relief."

(6) The petitioners have examined Naresh Singh (P.W.1), a clerk of the Association, and J. N. Rastogi (P. W. 2), a clerk employed in their own law department. They have got proved certain documents as well. No witness has been examined by the respondents. Issue No. 1:

(7) EXHIBIT?-11 is a copy of the General Power of Attorney which Shri G. S. Gargya, an officer of the Company, holds from the Cloth &General Mills Company Limited. It authorises him, inter alia, to sign, verify and file before any court in India plaints, written-statements, applications, etc., to appear in or before all courts, to represent the company and act on its behalf. Exhibit P. 10 is an extract from a resolution No. 11 passed bythe Board of Directors of the petitioner on 2.2.1965 and it authorises Shri Gargya to institute and defend civil, criminal and revenue suits, appeals, revisions and other matters and legal proceedings in and before various courts in India and outside. Vide Order 29, Rule I, of the Code of Civil Procedure, in suits by or against a corporation any pleading may be signed or verified on behalf of the Corporation by the Secretary or any director or other principal officer of the Corporation, who is able to depose to the facts of the case. As per Order 3, Rule 2, the recognised agent of a party by whom appearances ,applications and acts may be made include persons holding powers of attorney. According to Rule 14 of Order 6, every pleading shall Be signed by the party and his pleader (if any) : provided that where a party pleading is, by reason of absence or for other good cause, unable to sign the pleading ,it may be signed by any person duly authorised by him to sign the same or to sue or defend on his behalf. All what Shri Gupta, respondents'' learned counsel, had to contend, in the face of the evidence and law referred to above, was that the board of directors of the petitioner should have passed a specific resolution authorising Shri Gargya to institute the instant petition. He has, however, no reason or authority to commend his plea. The petitioner is a big concern and it has to institute and defend numerous legal proceedings. It cannot be expected that the board of its directors should assemble every time, authority is to be conferred on somebody to perform any sort of legal act. The issue is decided against the respondents. Issues 2 to 4:''

(8) It has been proved by the statement of P. W. 1 Naresh Singh, an official of the Association, that Delhi Cloth Mill''s shop in Katra Lal and M/s. Ulfat Rai Kailash Ghand are both members of the Association. He has produced a printed booklet (Exhibit P-6) affirming his testimony. It has been deposed by him further that the Firm Ulfat Rai Kailash Chand was registered as a member of the Association on 18.3.1960. He brought with him the original admission form. It has been further proved by him from his records (Exhibit P. 2) that on the death of Ulfat Rai his wife, Singari Devi, was taken as a partner of the firm Ulfat Rai Kailash Chand in place of the former with effect from 1.9.1970.

(9) It is provided by the Rules of the Association, among other things, that the disputes between its members shall be got settled by reference to arbitrators appointed by it (Exhibit P-7) and because the petitioner and respondent No. 1 are both members of the Association they are bound by the aforesaid Rules operating as an arbitration agreement. It has been urged on behalf of the respondents by Shri Gupta that as provided by Section 19 of the Partnership Act, in the absence of any usage or custom of trade to the contrary the implied authority of a partner does not empower him to submit dispute relating to the business of the firm to arbitration and because Singari Devi did not sign any form to become a member of the Association the arbitration agreement embodied in the Rules of the Association did not become binding on her. The correct state of affairs, however, is that vide Exhibit P-3, the Firm M/s. Ulfat Rai Kailash Chand was constituted by Ulfat Rai and Kailash Chand and this firm became a member of the Association on 18.3.1960 by the signing of the requisite admission form (ExhibitP-2) by both of its partners. If there is a change in the constitution of a member firm it has to be communicated to the Association. When Ulfat Readied his wife Singari Devi took his place (See partnership deed Exhibit P-4)and the Firm, Ulfat Rai Kailash Ghand came to be constituted by KailashChand and herself. This fact was duly communicated to the Association vide Exhibit P-2. Kailash Chand and Singari Devi submitted to the Association, moreover, a stamped declaration to the effect that they were the partners of Ulfat Rai Kailash Chand and that they would inform the Association if any of them left the Firm. By executing this declaration (Exhibit P-5) Singari Devi affirmed the fact that M/s. Ulfat Rai Kailash Ghand, of which she was a partner, continued to be the member of the Association and remained bound by its Rules.

(10) Section 2 of the Arbitration Act goes to say that arbitration agreement means a written agreement to submit present or future differences to arbitration whether an arbitrator is named therein or not. It does not lay down that the arbitration agreement, though required to be in writing, must be signed by the parties thereto. Their Lordships of the Supreme Court observed in Jugal Kishore. Jugal Kishore Rameshwardas Vs. Mrs. Goolbai Hormusji, that to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties and that was stated to bethe settled law. This view was reiterated in later decisions like Union of India (UOI) Vs. A.L. Rallia Ram, . Vide Jubilee Chamber of Commerce Ltd. v. Lola Amrit Shah A. I. R. 1940 Lah 180 a written contract means contract the terms of which are expressed in writing and accepted by the parties either in writing or orally. In the present case M/s. Ulfat Rai Kailash Chand became a member of the Association through a formally executed admission form and Singari Devi stepped into the shoes of Ulfat Rai as a partner of M/s. Ulfat Rai Kailash Ghand through ExhibitP-4 and confirmed the Association''s membership of the Firm after the change of partners not just by her conduct but by a writing too, as evidenced by Exhibit P-5. The arbitration to be found in the Rules of the Association will, Therefore, govern the dispute between the parties to this case and the petitioner has every right to ask for a reference in accordance with the said Rules. These issues are also decided against respondents. Issue No. 5:

(11) The petitioner''s counsel has not pressed the plea of estoppel and the issue is answered in the negative.

(12) For the foregoing reasons the petition is granted, the arbitration agreement in the form of the relevant provisions of the Rules of the Association is ordered to be filed and the Association is directed to refer the dispute between the parties to arbitration as per the provisions of the Rules within one month. The costs of these proceedings shall be borne by the respondents.