# A. M. MAIR & CO v. GORDHANDASS SAGARMULL

- **Citation:** [1950] 1 S.C.R. 792
- **Court:** Supreme Court of India
- **Decided:** 1950
- **Case number:** Civil Appeal No. XLII of 1950
- **Bench:** SAIYID FAZL Au, Patanjali Sastri, Mehr Chand Mahajan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/a-m-mair-co-v-gordhandass-sagarmull-153
- **Pages:** 7

## Headnote

Arbitration-Contract by
bro~er for sale of goods by "sold"
and "bought" notes-Arbitration clause-Seller denying right of
b•roker to enforce arbitral ,;nn
clause-~J urisdiction of arbitratorsValid,ity of award-Construction of contract.
The appellants, a firm of brokers, entered into a' contract for
the sale and purchase of a quantity of jute under a ''sold note"
addressed to the respondents which they signed as " A & Co.,
brokers" and a "bought note" of the same date and for the
same quantity of jute addressed to a third person in which also
they signed as '
1 A & Co., brokers".
The" sold note" contained
the usual arbitration clause under which '' all matters, questions,
disputes, differences and/.or. cla.ims, arising out of and/or concerning, and/or in connection and/or in consequence of, or relating
to, the contract ......... shall be referred to the arbitration of the
Bengal Chamber of Commerce."
A dispute having arisen with
regard to a matter wbich admittedly arose out of the contract
evidenced by the sold note, the appellants referred the dispute
for arbitration.
The respondents raised before the arbitrators
the further contention that as the appellants were only brokers
they were not entitled to refer the matter to arbitration.
The
arbitrators made an award in favour of the appellants.
The
respondents wade an application to the High Court under the
Indian Arbitration Act for setting aside the award:
Held that,. assuming that it was open to the respondents to
raise this objection at that stage, inasmuch as this further dispute
-
-
S.C.R.
SUPREME COURT REPORTS
793
was also one which turned on the true interpretation of the
1950
contraet a.nd the reSpondents must have recourse to the contract
to estJ.blish their claim, this was also a dispute arising out of or .4, M. Mair & Co.
concerning the contract and as such fell within the arbitration
v.
clause, and the award could not be set a.side under the Indian Gordhandass
Arbitration Act, 1.940, on the ground that it was beyond iurisSagarmull.
diction and void.
Heyman v. Darwins Ltd. ([1942] A.O. 356)referred to.
APPELL.ATE JURISDICTION: Civil Appeal No. XLII
of 1950.
Appeal from the judgment of the Calcutta H!gh
Court (Harries C.J. and Chakravarthi J.) in Appeal
from Original Order No. 78 of 1948.
, ·
N. C. Chatterjee (B. Sen, with him),
for the
appellants.
A. N. Grover, for the respondents.
1950. November 30. The judgment of Faz! Ali and
Patanjali Sastri JJ. was delivered by
F .AZ'L ALI J .-This is an appeal from a judgment of a
E'azl Ali J.
Bench of the High Court of Judicature at Calcutta in
West Bengal, reversing the decision of a single Judge of
that Court, who had refused to set aside an award given
by the arbitration tribunal of the Bengal Chamber of
Commerce on a submission made by the respondents.
The facts of the case are as follows.
On the 25th January, 1946, the appellants entered
into a contract with the respondents for the sale of
5,000 maunds of jute, which was evidenced by a "sold
note" (Exhibit A), which is in the form of a letter
addressed to the respondents, commencing with these
words: "We have this day sold by your order and
for your account to the undersigned, etc." The word
"undersigned " admittedly refers to the appellants,
and, at the end of the contract, below their signature,
the word "brokers" is written. On the same day, a
"bought note" (Exhibit B) was addressed by the
appellants to the Bengal Jute Mill Company, with the
following statement: "We have this day bought by
your ortler and for your account from the undersigned,
794
SUPREME COURT REPORTS
[1950]
i9.10
etc." In this note also, the word "undersigned" refers
--:- & 0 to the appellants, and, underneath their signature, the
A. M. ~~·r
0
• word "brokers" appears, as in the "sold note." There
Gordhandass are various provisions in the sold note, relating to
Sagarn1ull.
delivery of jute, non-delivery of documents, non-
. acceptance of documents, claims, etc., but the most
Fa•' Ali J.
material provi

## Text

792
SUPREME COURT REPORTS
[1950]
1950
set aside. As the High Court, however, has dismissed
--
the suit only on the ground of non-attestation of the
Sarju Pmhad mortgage bond and did not consider the other points
;;ja
which were raised before it, the case must go. back to
Jwaleshw>ri that court m order that the other matters, which have
Prntap Narain been left undecided, may be heard and decided by the
Singh & Others. learned Judges and the case disposed of in accordance
with law. The plaintiff appellant is entitled to costs of
~fakherjea J. this hearing as well as the costs of the High Court
1950
Nov. 30.
against defendant No. 1.
Appeal allowed.
Agent for the appellant: Rajindar Narain.
Agent for the respondents: 5. P. Varma.
A. M. MAIR & CO.
v.
GORDHANDASS SAGARMULL.
[SAIYID FAZL Au, PATANJALI SASTRI and
MEHR CHAND MAHAJAN JJ.]
Arbitration-Contract by
bro~er for sale of goods by "sold"
and "bought" notes-Arbitration clause-Seller denying right of
b•roker to enforce arbitral ,;nn
clause-~J urisdiction of arbitratorsValid,ity of award-Construction of contract.
The appellants, a firm of brokers, entered into a' contract for
the sale and purchase of a quantity of jute under a ''sold note"
addressed to the respondents which they signed as " A & Co.,
brokers" and a "bought note" of the same date and for the
same quantity of jute addressed to a third person in which also
they signed as '
1 A & Co., brokers".
The" sold note" contained
the usual arbitration clause under which '' all matters, questions,
disputes, differences and/.or. cla.ims, arising out of and/or concerning, and/or in connection and/or in consequence of, or relating
to, the contract ......... shall be referred to the arbitration of the
Bengal Chamber of Commerce."
A dispute having arisen with
regard to a matter wbich admittedly arose out of the contract
evidenced by the sold note, the appellants referred the dispute
for arbitration.
The respondents raised before the arbitrators
the further contention that as the appellants were only brokers
they were not entitled to refer the matter to arbitration.
The
arbitrators made an award in favour of the appellants.
The
respondents wade an application to the High Court under the
Indian Arbitration Act for setting aside the award:
Held that,. assuming that it was open to the respondents to
raise this objection at that stage, inasmuch as this further dispute
-
-
S.C.R.
SUPREME COURT REPORTS
793
was also one which turned on the true interpretation of the
1950
contraet a.nd the reSpondents must have recourse to the contract
to estJ.blish their claim, this was also a dispute arising out of or .4, M. Mair & Co.
concerning the contract and as such fell within the arbitration
v.
clause, and the award could not be set a.side under the Indian Gordhandass
Arbitration Act, 1.940, on the ground that it was beyond iurisSagarmull.
diction and void.
Heyman v. Darwins Ltd. ([1942] A.O. 356)referred to.
APPELL.ATE JURISDICTION: Civil Appeal No. XLII
of 1950.
Appeal from the judgment of the Calcutta H!gh
Court (Harries C.J. and Chakravarthi J.) in Appeal
from Original Order No. 78 of 1948.
, ·
N. C. Chatterjee (B. Sen, with him),
for the
appellants.
A. N. Grover, for the respondents.
1950. November 30. The judgment of Faz! Ali and
Patanjali Sastri JJ. was delivered by
F .AZ'L ALI J .-This is an appeal from a judgment of a
E'azl Ali J.
Bench of the High Court of Judicature at Calcutta in
West Bengal, reversing the decision of a single Judge of
that Court, who had refused to set aside an award given
by the arbitration tribunal of the Bengal Chamber of
Commerce on a submission made by the respondents.
The facts of the case are as follows.
On the 25th January, 1946, the appellants entered
into a contract with the respondents for the sale of
5,000 maunds of jute, which was evidenced by a "sold
note" (Exhibit A), which is in the form of a letter
addressed to the respondents, commencing with these
words: "We have this day sold by your order and
for your account to the undersigned, etc." The word
"undersigned " admittedly refers to the appellants,
and, at the end of the contract, below their signature,
the word "brokers" is written. On the same day, a
"bought note" (Exhibit B) was addressed by the
appellants to the Bengal Jute Mill Company, with the
following statement: "We have this day bought by
your ortler and for your account from the undersigned,
794
SUPREME COURT REPORTS
[1950]
i9.10
etc." In this note also, the word "undersigned" refers
--:- & 0 to the appellants, and, underneath their signature, the
A. M. ~~·r
0
• word "brokers" appears, as in the "sold note." There
Gordhandass are various provisions in the sold note, relating to
Sagarn1ull.
delivery of jute, non-delivery of documents, non-
. acceptance of documents, claims, etc., but the most
Fa•' Ali J.
material provisions are to be found in paragraphs
10 and 11. Paragraph 10 provides that the sellers may
in certain cases be granted an .extension of time for
d~ivering the jute for a period not exceeding thirty
days from the due date free of all penalties, and if· the
contract is not implemented within the extended
period, the buyers would be entitled to several options,
one of them being to cancel the contract and charge
the sellers the difference between the contract rate and
the market rate on the day on which the option is
declared. In the same paragraph, there is another
provision to the -following effect : ·-
" Sellers shall notify Buyers that goods will or will
not be shipped within such extended period
r~ferred
to in (a) and in the case of sellers intimating that they
will be unable to ship within the extended time Buyers
shall exercise their option within 5 working days of
receiving notice and notify Sellers. In the absence of
any such notice from Sellers it shall be deemed that
the goods have not been shipped 'and Buyers shall
exercise their option within 5 working days after
expiration of extended date and notify Sellers."
The 11th paragraph provides among other things that
•·all matters, questions, disputes, differences and/or
claims arising out of and/or concerning and/or in
connection and/or in consequence of or relatiμg to
this Contract whether or not obligations of either or
both parties under this contract be subsisting at the
time of such disputes and whether or not this contract
has been terminated or purported to be terminated or
completed shall be referred to the arbitration of the
Bengal Chamber of Commerce under the rules of its
Tribunal of Arbitration for the time being in force
and according to such rules the arbitration shall be
conducted."
•
S.C.R.
SUPREME COURT REPORTS
795
It is common ground that the respondents delivered
1950
2,256 maunds of jute under . the contract, but the
--:-
h l
f 2 744
d
Id
t b d 1.
d
"th"
A. M. Ma>r&Co.
a ance o
,
maun s cou
no
e e ivere w1
m ·
the stipulated period, and, by mutual agreement, time Gord;~ndass
was extended up to the 30th June, 1946. On the 2nd
Sa.garmul!.
July, 1946, the respondents addressed a letter to the
appellants stating that the balance of jute could not be
Fazl Ali J.
despatched owing to lack of wagons, and "extension"
was requested for a period of one month. •Jn reply to
this letter, which was received by the appellants on
or about the 3rd July, 1946, time was extended till the
31st July, 1946. On the same day on which the reply
was received by the respondents, i.e., on the 9th July,
1946, they addressed a letter to the appellants pointing
out that the extension of time had not been intimated
within the 5th working day as provided in the contract
and therefore the contract was automatically cancelled.
After this letter, some further correspondence followed
between the two parties, and finally a bill of difference
amounting to Rs. 4, 116 .was submitted by the appellants to the respondents, who, in their turn, denied
their liability to pay the sum. The appellants thereupon
claimed arbitration under Clause 11 of the sold note
and submitted the dispute between them and the
respondents to the Bengal Chamber of Commerce. On
the 6th February, 1947, the Tribunal of Arbitration
made an award to the effect that the due date of
contract had been extended by mutual agreement up
to the 31st July, 1946, and accordingly the respondents
.should pay to the appellants a sum of Rs. 4,116
together with interest at the rate of 4% per annum from
the 10th August, 1946, until the date of the award.
A sum of Rs. 210 was also held to be payable by the
respondents on account of costs. Nearly a year later,
on the 19th February, 1949, a petition was presented
by the respondents under the Indian Arbitration Act,
1940, to the High Court at Calcutta, in its ordinary
original civil jurisdiction, praying inter alia that the
award may be adjudged to be without jurisdiction and
void and not binding on the respondents, and that it
may be set aside. The main point raised by the
'
f
796
SUPREME COURT REPORTS
[1950]
1950
respondents in the petition was that it was not open to
--
the appellants to invoke the arbitration clause, as the
A.kI.l.!air&Oo.B
lJ t "1·11c
d
th
11
t
v.
enga
u e n L
ompany an no t e appe an s were
Gordha•dass the real party to the contract and the appellants had
sagarmult.
acted as mere brokers. The appellants asserted in reply
that the allegation made by the respondents in regard
Fazl Ali J.
to there being no privity between them and the appellants was wrong. and in paragraph 16 of their affidavit
they stated·as follows :-
;
"With regard to paragraph 7 of the petition I crave
reference to the said contract for its true construction
and effect. I say as I have already stated that according
to the custom or usage or practice of the trade the
respondent is entitled to charge brokerage and also to
enforce the terms of the said contract."
The case was heard by Sinha]., who dismissed the
petition on the ground that the contract was directly
between the respondents and the appellants. The
learned Judge also observed that if the right of the
appellants to enforce the contract depended upon the
existence of custom it would have been necessary to
take evidence and the arbitrators would have had
jurisdiction to decide the question of the existence of
custom.
The respondents being dissatisfied with the judgment
of Sinha ]., preferred an appeal, which was heard and
disposed of by a Division Bench of the High Court consisting of the learned Chief Justice and Chakravarthi].
The learned Judges held that having regard to the fact
that the appellants' own contention was that they had
entered into the contract as brokers and were entitled
to enforce its terms by reason of the usage or custom
of the trade, it was not open to Sinha J. to treat them
as principals, and the award was liable to be set aside
on the ground that the arbitration tribunal had no
jurisdiction to make an award at the instance of a per.
son who was not a principal party to the contract. The
appellants thereafter having obtained a certificate from
the High Court under section 109 (c) of the Code of
Civil Procedure, preferred this appeal.
..
S.C.R.
SUPREME COURT REPORTS
797
It seems to us that this appeal can be disposed of on
1950
a short ground.
vVe have carefully read the affidavit
--
filed on behalf of the appellants in the trial cuurt, and A. M. Mair & Co.
we are unable to hold that their case was that they
Gord;~ndass
were not parties to the contract or that they had asked
Sagarmull.
the court to proceed on the sole ground that they were
entitled to enforce the contract by virtue of the custom
Fa•Z Ali J.
or usage of the trade. In our opinion, the position
which was taken up by them may be summed up as
follows:-
(1) They did not accept the allegations made by the
respondents that they were not parties to any arbitration agreement with the respondents.
(2) They asked the Court to construe the contract
and its effect and asserted that they were entitled to
enforce it.
(3) They also stated that they were entitled to
enforce the contract according to the custom or usage
of the trade,
The principal dispute raised in this case was whether
the extension of time for delivery was granted within
the time limited in the contract. That dispute is cer.
tainly covered by the arbitration clause. The further
dispute that,he brokers (appellants) were not parties
to the contract in their own right as principals but
entered into the contract only on behalf of the Bengal
Jute Mill Company does not appear to have been raised
until the matter wenL to the arbitrators. Assuming
that at that stage it was open to the respondents to
raise such an objection, after the other dispute which
clearly fell within the arbitration clause was referred to
the arbitrators, this further dispute is also one which
turns upon the true interpretation of the contract, so
that the respondents must have recourse to the contract
to establish their claim that the appellants were not
bound as principals while the latter say that they were.
If that is the position, such a dispute, the determina.
tion of which turns on the true construction of
the contract, would also seem to be a dispute, under
pr arising out of or concerning the contract. In a,
lOi
798
SUPREME COURT REPORTS
[ 1950]
~
50
passage quoted in Heyman v. Darwins Ltd.('), Lord
A. M. Mair &Co. Dunedin
propounds the test thus: - "If a party
v.
has to have recourse to the contract, that dispute is
Gordhondass a dispute under the contract". Here, the respondents
Sagarmul!.
must have recourse to the contract to establish their
Fa.Z Ali J.
case and therefore it is a dispute falling within the
arbitration clause. The error into which the learned
Judges of the appellate Bench of the High Court
appear to have fallen was their regarding the dispute
raised by the respondent in respect of the position of
the appellants under the contract as having the same
consequence as a dispute as to the contract ever having
been entered into.
Mahajan J.
If, therefore, we come to the conclusion that both
the disputes raised by the respondents fall within the
scope of the arbitration clause, then there is an end of
the matter, for the arbitrators would have jurisdiction
to adjudicate on the disputes, and we are not conc<"rned
with any error of law or f_act committed by them or
any omission on their part to consider any of the
matters. In this view, it would not be for us to determine the true construction of the contract and find out
whether the respondents' contention is correct or not.
Once the dispute is found to be within the.scope of the
arbitration clause, it is no part of the province of the
court to enter into the merits of the dispute.
In the result, we allow this appeal, set aside the
judgment of the appellate Bench of the High Court and
restore the order of Sinha J. The appellants will be
entitled to their costs throughout.
MAHAJAN J.-I agree with my brother Fazl Ali that
this appeal be allowed with costs.
Appeal allowed.
Agent for the appellants: P. K. Chatterjee.
Agent for the respondents : J1.f. G. Poddar.
(I I
[1942] A.C. 356,