JUDGMENT S.R. Das, J. - This is an application on the part of the Defendants in Suit No. 2184 of 1947 for stay of that suit under sec. 34 of the Indian Arbitration Act. The facts leading up to the present application are identical with those that gave rise to an earlier application by these Defendants for stay of another suit, being Suit No. 2042 of 1947 instituted by these very Plaintiffs against these Defendants. The correspondence in the two cases bear the same dates and are expressed in the same language, except as to the references to the contracts. The several questions raised in the present application are identical with those raised in that earlier application and I would have treated this application as fully covered by my judgment in that case and disposed of the same accordingly. Learned Counsel for the Plaintiffs, who are Respondents before me, has, however, drawn my attention, to two decisions of our Appeal Court which had not been cited before me in the previous application and re-argued the questions and I take this opportunity to re-consider my judgment in the light of those decisions. 2. It will be convenient, for ready reference, to state the material facts: The Plaintiffs are and have been at all material times members of the Gunny Trades Association incorporated under the Indian Companies Act as a company limited by guarantee. The Defendants in their business of Pannalal Sagarmal became members of that Association on or about the 12th November, 1946. On the 21st February, 1946, that is to say, long before the Defendants became members of the Association, the Plaintiffs themselves issued Bought and Sold Notes No. 9429 purporting to record the sale by themselves to the Defendants in their business of Pannalal Sagarmal of 1,80,000 bags of Corn Sacks at Rs. 67-12 per 100 bags, delivery in July, August and September, 1946, at the rate of 60,000 bags monthly upon terms and conditions contained therein. The said Notes which were in the standard form prescribed by the Indian Jute Mills Association contained an arbitration clause in the following terms:-- 13. 67-12 per 100 bags, delivery in July, August and September, 1946, at the rate of 60,000 bags monthly upon terms and conditions contained therein. The said Notes which were in the standard form prescribed by the Indian Jute Mills Association contained an arbitration clause in the following terms:-- 13. All matters, questions, disputes, differences and/or claims arising out of and/or concerning and/or in connection with and/or in consequence of or relating to this contract whether or not the obligations of either or both parties under the contract be subsisting at the time of such dispute and whether or not this contract has been 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. 3. The Defendants allege that they were ready and willing to carry out their obligations under the said contract and to pay for and take delivery of the goods but that the Plaintiffs wrongfully failed and neglected to deliver any portion of the goods or to pay the damage suffered by the Defendants. The correspondence ensued which may now be referred to. 4. On the 27th August, 1947, the Defendants wrote a letter to the Plaintiffs expressing regret that the latter had not sent to the Defendants the delivery order for July and August portions of the goods and requesting the Plaintiffs to send the same without any further delay. On the 3rd September, 1946, the Plaintiffs sent a reply informing the Defendants that the Plaintiffs were short of these goods and were, therefore, unable to tender the same and requesting the Defendants to send their bill for difference between the contract price and the maximum price, meaning, no doubt, the maximum price fixed by the Jute Price Control Order which was then in force. The Defendants on the 6th September, 1946, pointed out that the Plaintiffs had sold the goods after having fully covered themselves by a corresponding purchase and repudiated the plea of short supply of goods. On the 12th September, 1946, the Defendants wrote to the Committee of Outstanding Contracts, Gunny Trades Association complaining that they had not received delivery orders for July and August portions under the contract from the Plaintiffs and asking them to do the needful. On the 12th September, 1946, the Defendants wrote to the Committee of Outstanding Contracts, Gunny Trades Association complaining that they had not received delivery orders for July and August portions under the contract from the Plaintiffs and asking them to do the needful. Nothing was apparently done by that Association. On the 13th September, 1946, the Plaintiffs in reply to the Defendants' letter dated the 6th September, 1946, referred the Defendants to the Plaintiffs' previous letter and denied all liability. On the 26th September. 1946, the Defendants reminded the Plaintiffs that the latter had not delivered the July and August portions of the goods and concluded as follows :-- We hereby confirm that the delivery time for the goods stands extended upto the 31st October, 1946, and we thus require you to deliver the goods within the aforesaid extended time. 5. On the 28th September, 1946, the Plaintiffs replied that they had not made any arrangement for the extension of the due date and that they had nothing further to add to their previous correspondence. 6. As regards the September portion the Defendants on the 30th September, 1946, tendered to the Plaintiffs a cheque for the price of the September portion but the Plaintiffs refused to accept the same. The Defendants on the same day through their pleader sent the cheque again by peon but the Plaintiffs again refused to accept the same. The pleader's letter together with the cheque was thereafter sent by registered post. On the 1st October, 1946, the Defendants, after recording that the Plaintiffs had failed to deliver the September portion and to accept the tender and had committed a breach of the contract, informed the Plaintiffs that the Defendants had bought the goods on account and at the risk of the Plaintiffs at Rs. 88-2 per 100 bags, being the available market rate on that date and that a difference bill would be submitted in due course. A difference bill amounting to Rs. 9,225 was thereafter sent to the Plaintiffs. 7. On the 28th October, 1946, the Defendants reverted to the topic of July and August portions and called upon the Plaintiffs to deliver the same and intimated that in default of their doing so within three days the Defendants would purchase the same on account and at the risk of the Plaintiffs and hold them liable for all losses. 7. On the 28th October, 1946, the Defendants reverted to the topic of July and August portions and called upon the Plaintiffs to deliver the same and intimated that in default of their doing so within three days the Defendants would purchase the same on account and at the risk of the Plaintiffs and hold them liable for all losses. No delivery having been given the Defendants on the 1st November, 1946, sent their difference bill for July and August portions amounting to Rs. 42,000. The Plaintiffs through their attorneys returned the bill and repudiated their liability. 8. On the 28th April, 1947, the Defendants informed the Plaintiffs that the Defendants had no other alternative but to send their claim to the Tribunal of Arbitration, Bengal Chamber of Commerce, for decision as per terms of the contract. On the 16th June, 1947, the Defendants submitted their claim before the Bengal Chamber of Commerce claiming Rs. 42,000 in respect of July and August portions and Rs. 9,225 in respect of the September portion of the goods. In the statement of claim reference was made to the contract and the correspondence which I have summarised above. In course of that statement the Defendants stated, inter alia, as follows:-- In this connection we beg to submit that a new custom has sprung up in the gunny market welt sponsored by the Gunny Trades Association during the period of Jute Price Control in 1946 when the Black market flourished and the goods became scarce. The custom is that unfulfilled contracts specially of this period are automatically extended till goods are delivered or a settlement is reached. According to this custom they are not justified in refusing to accept our extension. Even if they did they ought to have supplied the goods immediately which they had always been promising to do. 9. On the 14th July, 1947, the Registrar of the Tribunal of Arbitration constituted a Court to adjudicate upon the Defendants' claim and notice was given to the Plaintiffs. On or about the 5th August, 1947, the Plaintiffs instituted Suit No. 2184 of 1947 in this Court against the Defendants. It is this suit which is being sought to be stayed by this application. 10. On or about the 5th August, 1947, the Plaintiffs instituted Suit No. 2184 of 1947 in this Court against the Defendants. It is this suit which is being sought to be stayed by this application. 10. In the affidavit in opposition the following grounds have been urged: (i) that there was no contract between the parties because they were not ad idem and, therefore, there is no arbitration agreement between the parties and, therefore, the suit is not in respect of the matters agreed to be referred; (ii) that the contract, if any, became void on the principle of frustration of the-contract by reason of the non-continuance of the Jute Price Control Order and the arbitration clause has become void; (iii) that the contract was void by reason of mutual mistake as to a fact essential thereto, namely, that the Jute Price Control Order would be continued and, therefore, no arbitration agreement came into being; (iv) that both parties being members of the Gunny Trades Association the arbitration clause in the contract has been abrogated and superseded by reason of the rules and bye-laws of the Gunny Trades Association which require the members of that Association to submit their disputes to the Tribunal of Arbitration of that Association. 11. Learned Counsel appearing for the Plaintiffs concedes that in view of the decision of the Appeal Court in Balabux Agarwalla v. Lachminarain Jute Manufacturing Co. Ltd. Unreported which affirmed my judgment in Balabux v. Lachminarain Jute Manufacturing Co., Ltd. 51 C.W.N. (sic) (1945)cannot insist on grounds (ii) and (iii) and accordingly he takes his stand on grounds (1) and (iv). 12. Re. (i) :--This ground is founded on paragraphs 3 to 6 of the plaint which I shall presently analyse and discuss. Learned Counsel for the Plaintiffs contends that the suit proceeds on the allegation that the parties were not ad idem and, therefore, there, was no contract ab initio and there is no arbitration agreement subsisting between the parties. The Defendants deny this and allege that there is a valid contract containing an arbitration agreement. 13. Learned Counsel for the Plaintiffs contends that the suit proceeds on the allegation that the parties were not ad idem and, therefore, there, was no contract ab initio and there is no arbitration agreement subsisting between the parties. The Defendants deny this and allege that there is a valid contract containing an arbitration agreement. 13. This dispute is not one which can be said to be in respect of matters agreed to be referred and, therefore, this dispute as to the formation, existence or validity of the contract is not one for the arbitrator to decide, for he cannot vest himself with arbitral jurisdiction by deciding that issue in his own favour. This issue cannot, therefore, be left to the arbitrator but must be decided by the Court in the suit in which this issue arises. He maintains, on the authority of the decision of the English Court of Appeal in Monroe v. Bognor Urban Council (1915) S.K.B. 157 and of the recent decision of our Appeal Court in Johurmull Pares-ram v. Louis Dreyfus & Co., Ltd. 52 C.W.N. 187 (1947) that the issue as to there being no contract ab initio having been raised in the suit the Plaintiffs are entitled to have that issue, good, bad or indifferent, tried by the Court at the hearing of the suit and, therefore, the application for stay must be refused and the suit must be allowed to proceed in Court. The decision of our appeal Court had not been reported at the time I delivered my judgment in the earlier application between the same parties. I have now had an opportunity to peruse the judgment of my Lord the Chief Justice which contains, if I may say so respectfully, a very full analysis of the facts in Monroe's case (3) and a clear exposition of the principles of law applicable thereto. I unreservedly accept those principles which, being laid down by the Appeal Court, are binding on me and I do so cheerfully because, if I may say so respectfully, they accord with my own notions. I unreservedly accept those principles which, being laid down by the Appeal Court, are binding on me and I do so cheerfully because, if I may say so respectfully, they accord with my own notions. To appreciate the two above-mentioned decisions correctly one has to bear in mind the following points: (a) In those cases no question or issue was raised as to there being no subsisting arbitration agreement on the ground that the contract had been induced by fraud or misrepresentation; (b) Those cases proceeded on the assumption of a subsisting and valid arbitration agreement and the only question was whether the subject-matter of those suits were within the ambit of that arbitration clause. (c) In both cases the entire cause of action, as pleaded, was wholly outside and independent of the contract and, therefore, did not fall within the arbitration agreement and no part of the suit could be said to be in respect of matters agreed to be referred. 14. Keeping these salient features in mind I proceed to enquire whether the present case falls within the principles enunciated in those cases. This leads me to analyse the plaint in the suit which is being sought to be stayed by the present application. This plaint is almost a verbatim reproduction of the plaint in the suit which was sought to be stayed in the previous application between the same parties and to which I have referred. For ready reference, however, I set out the relevant paragraphs in extenso. 15. After referring, in paragraphs 1 and 2 of the plaint, to the Bought and Sold Notes No. 9429 dated the 21st February, 1946, and the due dates of delivery of the goods the plaint proceeds as follows:-- 3. By the said Notes, however, the plaintiff and the defendants never agreed to the same thing in the same sense The plaintiff understood the meaning and implication of the essential terms of the paid Notes in a sense which is fundamentally different from the sense in which the defendants understood the same in the light of an alleged custom in the Calcutta Gunny Trade. 4. 4. The plaintiff understood and believed that by the said Notes the plaintiff was agreeing to a contract under which in case of non-delivery of the goods their would be no automatic extension of the period or due dates of delivery and further that there was no custom in the Calcutta Gunny Trade where by there would be such automatic extension. 5. The defendants are, however, alleging that they understood and believed that by the said Notes they were agreeing to a contract under which the said period of delivery was provisional only and that in case of non delivery of the goods the due dates of delivery would stand automatically extended till actual delivery of the goods or till a settlement is reached between the parties regarding payment of difference for non-delivery and that there was a custom in the Calcutta gunny trade whereby there would be such automatic extension. 6. In the premises the plaintiff submits that the parties were never ad idem as to the subject-matter and terms of the agreement and as to matters of fact essential to the same and that there was in fact and in law no contract between them. 16. On these averments is founded prayer (a) claiming a declaration that by the Bought and Sold Notes No. 9429 dated the 21st February, 1946, no contract was in fact and in law entered into between the Plaintiff and the Defendants and that there was and is in fact and in law no contract between the parties as alleged by the Defendants. An alternative case is then formulated in the plaint in the following terms:-- 7. An alternative case is then formulated in the plaint in the following terms:-- 7. In the alternative if this Hon'ble Court is of the opinion that there was a contract between the parties, this Hon'ble Court should be pleased to construe the same and to determine its terms and incidents The defendants are wrongfully alleging that it was a term of the said contract that in case of non-delivery of the goods the due dates of delivery would stand automatically extended till actual delivery or settlement and that Such term was annexed to the contract by an alleged custom of the Calcutta gunny trade The plaintiff denies that there was or is any custom in the Calcutta gunny trade as alleged or that there was or is any term of the contract as aforesaid or that the said alleged term was or became or could be annexed to the said contract. The plaintiff submits that upon a true construction of the contract and in the events which have happened the doe dates of delivery under the contract never stood extended as alleged by the defendants. The defendants are denying and/or are interested in denying the rights and privileges of the plaintiff under the contract on the basis of the said true construction. 17. On this paragraph are founded prayers (b) to (d), namely, construction of the contract and determination of its terms and incidents, declaration that the due dates never stood extended and that the Plaintiff is entitled to all rights and privileges on the said basis that there was no term or custom whereby due dates would stand automatically extended. Two further alternative cases, namely, that of frustration and mutual mistake by reason of non-continuation of the Jute Price Control Order are pleaded in paragraph 8 of the plaint and prayer (e), namely, a declaration that the contract was or has become void is based thereon. Prayer (f) which claims a decree for cancellation of the Bought and Sold Notes is based on the apprehension, pleaded in paragraph 9 of the plaint, that the same, if left outstanding, will cause serious injury to the Plaintiffs. 18. Prayer (f) which claims a decree for cancellation of the Bought and Sold Notes is based on the apprehension, pleaded in paragraph 9 of the plaint, that the same, if left outstanding, will cause serious injury to the Plaintiffs. 18. On a careful reading of the plaint it becomes apparent that four several cases are put forward in the plaint, namely: (i) that there was no contract ab initio for absence of consensus ad idem; (ii) that the contract has become void by reason of frustration; (iii) that there was no contract ab initio by reason of mutual mistake; (iv) that the Court should construe the contract and determine the terms and incidents of the contract and the rights and privileges of the Plaintiffs. 19. As to case (ii) it is concluded by the appeal Court decision in Balabux Agarwalla's case Unreported that the arbitration agreement is couched in such language that it survives the effect of frustration and covers the disputes as to frustration. Case (iii) was also sought to be raised in Balabux Agarwalla's case 51 C.W.N. 863 (1945) but it was held by me and also by the Appeal Court on a scrutiny of the pleading, that no issue as to any mutual mistake had in fact and in law been raised at all and, therefore, the arbitration agreement remained unaffected. This leaves two cases, namely, (i) that there was no contract because parties were not ad idem and (iv) that if there was a contract the same should be construed and the rights of the Plaintiffs should be declared. 20. There can be no denying the fact that case (iv) which is formulated in paragraph 7 of the plaint and in respect of which reliefs (b) to (d) are claimed is clearly based on the contract, and, therefore, is in respect of matters agreed to be referred if the arbitration agreement contained in the contract is subsisting. Therefore, the cause of action, as pleaded, is partly outside the contract and partly founded upon the contract. This circumstance appears to me to take this case out of Monroe's case (1915) 3 K.B. 157 and Louis Dreyfus Co.'s case 52 C.W.N. 187 (1947), for it cannot be said here, as was said in those cases that no part of the cause of action, as pleaded, is within the arbitration clause. This circumstance appears to me to take this case out of Monroe's case (1915) 3 K.B. 157 and Louis Dreyfus Co.'s case 52 C.W.N. 187 (1947), for it cannot be said here, as was said in those cases that no part of the cause of action, as pleaded, is within the arbitration clause. Under such circumstances when an application is made for stay of such a suit under sec. 34 of the Arbitration Act, what is the duty of the Court? 21. Under sec. 34 of our Arbitration Act, as under sec. 4 of the English Act, the Court has power to exercise its discretion to make an order staying legal proceedings provided that: (1) there has been a valid arbitration agreement, (2) proceedings in the Court have been commenced, (3) the proceedings have been commenced by a party to the arbitration agreement or any person claiming under him, (4) the proceedings have been commenced against any other party to the agreement or any person claiming under him, (5) the proceedings are in respect of matters agreed to be referred, (6) the application to stay is made by a party to such legal proceedings, (7) the application is made before filing a written statement or taking any other steps in the proceedings, (8) the applicant was and is ready and willing to do all things necessary to the proper conduct of the arbitration, and (9) there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement. 22. The onus, I apprehend, is on the Defendant who applies for stay to satisfy the Court that conditions 1 to 8 have been fulfilled. If he succeeds in so satisfying the Court the onus appears to shift to the Plaintiff to show that, notwithstanding the fulfilment of those conditions, there is yet sufficient reason why the matter should not be referred to arbitration. There is no dispute in the case before me as to the fulfilment of conditions 2, 6, 7 and 8. The Defendants have, therefore, to satisfy the Court as to conditions 1, 3, 4 and 5. These conditions involve two things: (a) that there is a valid arbitration agreement between the parties, and (b) that the legal proceeding is in respect of matters agreed to be referred. 23. The Defendants have, therefore, to satisfy the Court as to conditions 1, 3, 4 and 5. These conditions involve two things: (a) that there is a valid arbitration agreement between the parties, and (b) that the legal proceeding is in respect of matters agreed to be referred. 23. If the arbitration agreement is admitted the Court has only to see whether the suit is in respect of matters agreed to be referred. If, however, the existence of the arbitration agreement alleged by the Defendant is disputed by the Plaintiff, what is the Court to do? 24. Said Lord Porter in Heyman v. Darwins L.R. (1942) A.C. 393 : ............................but this does not mean that in every instance in which it is claimed that the arbitrator has no jurisdiction the Court will refuse to stay an action. If this were the case such a claim would always defeat an agreement to submit disputes to arbitration, at any rate until the question of jurisdiction had been decided. The court to which an application to stay is made is put in possession of the facts and arguments and must in such a case make up its mind whether the arbitrator has jurisdiction or not as best as it can on the evidence before it. Indeed the application to stay gives an opportunity for putting these and other considerations before the court that it may determine whether the action shall be stayed or not. 25. This passage indicates, to my mind, that the Court has the power to decide, on the application for stay, whether an arbitration agreement subsists, for it is a subsisting arbitration agreement which alone can give jurisdiction to the arbitrator. The decision in Bhagwandas Atma Sing v. Atna Sing Jessa Sing AIR (1945) from, 494 as I understand it, fully supports the above principle. There the Defendant applied for stay on the basis of two agreements in writing containing an arbitration clause. The Plaintiff resisted that application on the ground that he did not execute the documents propounded by the Defendant. The Plaintiff contended that the question about the existence of the arbitration agreement could not be decided by the arbitrators who were themselves attesting witnesses and, therefore, privy or party to the forgery. The Defendant contended that sec. The Plaintiff resisted that application on the ground that he did not execute the documents propounded by the Defendant. The Plaintiff contended that the question about the existence of the arbitration agreement could not be decided by the arbitrators who were themselves attesting witnesses and, therefore, privy or party to the forgery. The Defendant contended that sec. 32 of the Arbitration Act did not permit a suit to challenge the existence of an arbitration agreement and that a party desiring to challenge the arbitration agreement should apply under sec. 33. The trial Court asked the Plaintiff's Counsel if he wanted time to make such an application. Learned Counsel for the Plaintiff contended that he was not bound to do so and was entitled to raise, as his defence to the application under sec. 34, the fact that there was no arbitration agreement. The trial Court did not accept this contention and held that he had no jurisdiction under sec. 34 to determine whether there was an arbitration agreement and made an order for stay. The Appeal Court reversed this decision. After referring to secs. 32 and 33, Kania, J., (as he then was) proceeded as follows:-- I do not think sec. 33 takes away too right to set up as a defence the non-existence of an agreement when the agreement is propounded under sec. 34, by the other side. The rights of the parties are to be governed by sec 34. The section starts with the fact that an arbitration agreement is alleged. The court is called upon to stay the suit on the ground that there is a subsisting arbitration agreement, which the applicant is willing to follow up but the other side is not ready and willing to set upon. In order to succeed in an application muter sec. 34, therefore, the defendant (who in the applicant) has to establish the necessary things required by sec. 34. One of them is that he is a party to an arbitration agreement. 26. Further down his Lordship stated: Proceeding with, the discussion under sec. 34 the Defendant, who applies for a stay therefore has to say that there is an arbitration agreement. If the Plaintiff says that there is no agreement, that issue arises between the parties. I find nothing in sec. 26. Further down his Lordship stated: Proceeding with, the discussion under sec. 34 the Defendant, who applies for a stay therefore has to say that there is an arbitration agreement. If the Plaintiff says that there is no agreement, that issue arises between the parties. I find nothing in sec. 34 to prevent the court from deciding that issue, to enable it to pass an order under that section. 27. Chagla, J., (as he then was) concurred and bad nothing further to add. I respectfully agree with the principle enunciated above by Kania, J., as he then was. 28. It is, I think, clear, on the authorities and on principle that on an application for stay the Court must be satisfied, amongst other things, that there is a valid arbitration agreement and then that the suit is in respect of matters agreed to be referred. If the arbitration agreement is admitted then the Court has only to see whether the suit is in respect of matters agreed to be referred, or in other words, whether the subject-matter of the suit is covered by the arbitration agreement. If, however, the arbitration agreement is disputed an issue arises between the parties on the application for stay and the Court has the power to decide the issue as to the existence of the arbitration agreement in that application itself. If the decision is in favour of the Defendant who alleges the arbitration agreement, the Court then passes on to the next question, namely, whether the subject-matter of the suit is within the purview of the arbitration agreement so established and proved. Whether the Court will, on an application for stay, take upon itself the burden of deciding the issue as to the existence of the arbitration agreement or will, in exercise of its discretion, refuse the stay and allow the suit to go on, will depend on the facts of each case. In a complicated case (involving serious questions of fraud and the like the Court may in its discretion refuse to go into and decide the issue as to the formation, existence or the validity of the arbitration agreement. If the Court considers that the issue has been raised in good faith and the dispute is genuine the Court may regard that fact by itself as a sufficient reason for not staying the suit. If the Court considers that the issue has been raised in good faith and the dispute is genuine the Court may regard that fact by itself as a sufficient reason for not staying the suit. But if the matter is one of discretion I do not see why, if an apparently illusory and demonstrably frivolous plea is set up disputing the formation, existence or the validity of the arbitration agreement, the Court should not, as a matter of discretion, determine whether any such issue has been legally raised and, if so, decide that issue on the application itself and it necessary, set down the application for trial on evidence, 29. The issue as to the formation, existence or validity of the arbitration agreement may and generally will involve an issue as to the formation, existence or validity of the very principal contract to which it is attached. Such a situation arose in Balabux Agarwalla's case 51 C.W.N. 863 (1945) where a further contention was raised that there was no arbitration agreement because there was no contract ab initio by reason of a mutual mistake as to a material fact essential to the contract but I held, on an analysis of the plaint, that no such mutual mistake as would prevent the formation of a contract had in fact been pleaded. The Appeal Court was also pleased to approve this part of my decision in that case. In view of that finding it was not necessary for me or the Appeal Court to consider in that case whether, had an issue as to there being no arbitration agreement because of there being no contract ab initio been raised, the Court would decide that issue on the application for stay or dismiss the application out of hand and allow the issue to be raised and determined in the suit. On principle I do not see why, when the existence of an arbitration agreement is put in issue in the application for stay the Court which has jurisdiction to decide that issue in that application must always decline to exercise that jurisdiction only because a decision on that issue involves a decision as to the formation, existence or validity of the principal contract. Of course, if in a suit the only claim is for a declaration that the alleged contract including the arbitration clause as a term thereof never came into existence ab initio and for cancellation of the instrument propounded as a contract and there is no other claim and an application is made for stay of such a suit the Court will decline in that application to go into the issue as to the formation, existence or validity of the impugned contract for that is an issue in the suit itself and is wholly outside the arbitration clause in the contract. If the suit is partly within and partly outside the arbitration clause and if the two parts are severable the Court undoubtedly has jurisdiction to stay the suit in respect of that part which is within the arbitration agreement. If the suit, besides impugning the contract containing the arbitration agreement, includes claims which, if the arbitration agreement subsists, will fall within that arbitration agreement and an application is made by the Defendant for stay of such a suit on the plea of a subsisting arbitration agreement which is denied by the Plaintiff why must the Court always refuse to stay the suit even in respect of the claims which fall within the arbitration clause if it is established? If the dispute as to the formation, existence or the validity of the contract appears to the Court to be genuine and put forward in good faith and if the alternative claims based on the contract is not severable or is an insignificant part of the subject-matter of the suit the Court may, in exercise of its discretion, decline to decide, on the application for stay, the issue as to the formation, existence or the validity of the arbitration agreement which involves the issue as to the formation, existence or the validity of the contract itself which is an issue in the suit. On the other hand if the Court considers, having regard to the circumstances of the case, that the dispute as to the formation, existence or the validity of the contract including the arbitration agreement is a sham and palpably frivolous dispute put forward only to avoid arbitration and the alternative claim is within the arbitration agreement if it subsists, I do not see why, in the exercise of its discretion, the Court should not, in the very application for stay, decide the issue as to the formation, existence or the validity of the arbitration agreement even though it may involve a decision on the issue as to the formation, existence or the validity of the contract itself. A decision of this issue in favour of the Defendant in the application for stay may, on principles analogous to res judicata, be a bar to the same issue being raised and reagitated by the Plaintiff in the suit and may defeat the Plaintiff's object but that is the Plaintiffs' misfortune and cannot be helped. This appears to me to be the logical effect of the authorities and the principles I have been endeavouring to explain. It is said that in such a case the Court should stay that part of the suit which conies within the arbitration agreement as alleged without deciding the issue as to the formation, existence or the validity of the contract including the arbitration agreement and let the suit go on in respect of that issue. This contention appears to me to be wholly illogical and untenable. The Court cannot stay any part of the suit on the assumption of the existence of an arbitration agreement which is in fact denied. The Court must decide that issue before it can exercise its power to stay the suit or any part of it. If the Court holds on the evidence before it that the arbitration agreement subsists such finding will mean that the contract which contains the arbitration agreement also subsists. That finding falsifies the plea of there being no contract and on principles analogous to res judicata, may prevent the Plaintiff from reagitating that issue. A dishonest Plaintiff cannot, in such circumstances, be heard to complain that he has not been given an opportunity to have the issue tried in the suit. That finding falsifies the plea of there being no contract and on principles analogous to res judicata, may prevent the Plaintiff from reagitating that issue. A dishonest Plaintiff cannot, in such circumstances, be heard to complain that he has not been given an opportunity to have the issue tried in the suit. If I were satisfied that the issue as to the existence of the arbitration agreement and, therefore, as to the contract itself was raised in good faith I might in all probability have declined to decide this issue on the application for stay and refused the application. But in this case I have no doubt in my mind that advantage is being sought to be taken of the passage in the Defendants' statement of case before the Bengal Chamber of Commerce where reference has been made to a " new custom " and an attempt is being made to spin out a plea of absence of consensus ad idem so as to evade arbitration. Indeed I am convinced that it is not the Plaintiff's own case but is a case which legal ingenuity and nimble-mindedness have invented for the Plaintiffs. This case is but one illustration of a variety of drafting devices which are being resorted to ever since the Appeal Court decided Balabux Agarwalla's case (1). I am convinced that this is a case where a contumacious party is seeking to get out of his bargain to go to arbitration. I, therefore, propose, in exercise of my discretion, to ascertain whether any issue as to there being no contract has been legally raised at all and if so, to decide, on this application, whether there is any contract including an arbitration agreement subsisting between the parties. 30. The Bought and Sold Notes are admitted. They contain the arbitration agreement. Prima facie, therefore, there is a contract and an arbitration agreement. It is, however, said that no contract in fact or in law came into being, because parties were not ad idem. This is said to be the purport of paragraphs 3 to 6 of the plaint. In Balabux Agarwalla's case Unreported the Appeal Court approved of my analysing the pleadings in that case with a view to ascertaining whether any issue as to mutual mistake had been really raised thereon. This is said to be the purport of paragraphs 3 to 6 of the plaint. In Balabux Agarwalla's case Unreported the Appeal Court approved of my analysing the pleadings in that case with a view to ascertaining whether any issue as to mutual mistake had been really raised thereon. I, therefore, propose to scrutinise paragraphs 3 to 6 of the present plaint and ascertain what they really mean. Paragraph 6, it will be noticed, formulates the case of the parties being not ad idem. That paragraph is a submission and not a statement of fact. In other words, that paragraph purports to set out the conclusion which the Plaintiffs seek to draw from the allegations in the foregoing paragraphs. The question is: Can that conclusion be arrived at on the allegations pleaded in paragraphs 3 to 5? 31. I have already set out paragraphs 3 to 6 in extenso. The principal allegations are that the Defendants are wrongfully alleging a custom and that the Plaintiffs deny that any such custom exists. The issue which undoubtedly arises on these averments is, whether there is any such custom. It cannot possibly be said that such an issue, by itself, raises any issue as to the existence or validity of the contract or the arbitration agreement. It is also clear, on the highest authority, that under a clause in a contract referring to arbitration any dispute arising under the contract it is competent to the arbitrator finally to determine the existence of a custom affecting the rights and obligations of the parties under the contract, where such custom is not inconsistent with the terms of the contract [see Produce Brokers Company, Ltd. v. Olympia Oil & Cake Company, Ltd. (1916) s.c. 314]. When an arbitrator is given power to decide all disputes arising out of a contract he must decide what the contract is and he cannot decide that without introducing the custom (per Earl Loreburn at p. 322 and per Lord Atkinson at pp. 323-324). A trade custom or usage, when established, becomes a part of the contract itself, unless it is expressly or by necessary implication excluded by the terms of the contract. 323-324). A trade custom or usage, when established, becomes a part of the contract itself, unless it is expressly or by necessary implication excluded by the terms of the contract. If the contract be in writing the custom so established, provided it is not inconsistent with the written terms, is to be treated exactly as if it had been written out at length and the parties are taken to have made their bargain in reference to that custom. Therefore, the issue as to whether there is a custom does not raise any question as to the existence or validity of the contract itself. Whether such custom exists, whether it is consistent with the other terms of the contract are really questions for the arbitrator appointed to decide disputes under the contract. This, I apprehend, is the real position on ultimate analysis. 32. Let me now examine the rest of the allegations in paragraphs 3 to 5 and ascertain if there is really anything more in them. It is said in paragraph 3 that the parties did not agree to the same thing in the same sense. This is qualified by the concluding words " in the light of an alleged custom in the Calcutta gunny trade." That is to say, the allegation is that the parties did not agree to the same thing in the same sense because of the alleged custom. In paragraph 4 it is alleged that the Plaintiffs believed that they were agreeing to a contract under which there would be no automatic extension of the due date. Why did they so believe? Paragraph 4 itself supplies the answer, namely, because there is no custom permitting such automatic extension. In paragraph 5 the Defendants are stated to be alleging that they believed they were agreeing to a contract under which there would be an automatic extension. Why? Because there was such a custom. This pleading of unilateral beliefs, not alleged to have been induced by coercion, undue influence, fraud or any representation express or implied, does not, in my opinion, go beyond raising the issue as to the existence of the alleged custom. Once that issue as to existence of the custom not inconsistent with the written terms is decided no other issue can possibly arise or paragraphs 3 to 5 of the plaint. Once that issue as to existence of the custom not inconsistent with the written terms is decided no other issue can possibly arise or paragraphs 3 to 5 of the plaint. If it be held that such a custom exists then there is no room or scope for the Plaintiffs to raise any further issue as to whether they believed that there would not be an automatic extension, for the custom, so established, becomes a part or a term of the contract itself and nobody can be heard to say, in the absence of fraud, coercion, undue influence or misrepresentation practiced on him--which is not pleaded in this case--that he believed what is contrary to the terms he agreed to. The alleged belief becomes contrary to and excluded by his own agreement, for the existence of the custom, when established, means that he agreed to the custom as an implied term of his contract. Similarly, if it be held that there is no such custom as alleged the Defendants cannot, for the same reason, raise the further issue as to whether they believed that there would be any automatic extension. The respective unilateral beliefs thus imputed to the Defendants and the Plaintiffs are founded respectively on the existence or non-existence of the alleged custom. On a determination of the issue as to the existence of the custom no other issue as to any alleged belief can be raised, for such belief is negatived and excluded by the non-existence or existence of the custom as the case may be. There can be no doubt that the parties entered into a contract and that the Bought and Sold Notes express " what is peculiar to their bargain, leaving some trade usage to supply the rest" (per Lord Atkinson at p. 326 of the last mentioned case). It is not at all a question of the parties not being ad idem. The only issue is whether there is a further term, supplied by custom, in the contract which subsists and not whether there was a contract at all. Otherwise in every case where a custom is alleged by one party and denied by the other it will be open to the party denying the alleged custom to plead that the parties were not ad idem. Otherwise in every case where a custom is alleged by one party and denied by the other it will be open to the party denying the alleged custom to plead that the parties were not ad idem. Indeed in every case where a party puts forward a contention based on an interpretation of a term of the contract the other party will be free to adopt the handy formula that the first party thought that he was making a contract which meant what he alleges hut the other party thought that he entered into a contract which had not that meaning and, therefore, the parties were not ad idem. Disputes on a contract usually arise out of conflicting views taken by the parties of its terms and effect and those disputes cannot possibly be permitted to be made the foundation of a plea of not ad idem and no issue as to there being no contract can be formulated out of such dispute. In my judgment, notwithstanding the ingenious pleading, after the issue as to the existence of the alleged custom, no further issue as to the parties not being ad idem, can, on a proper analysis of the plaint, be said to arise or be permitted to be raised thereon and, therefore, there being really no issue as to the existence of the contract the Bought and Sold Notes with the arbitration clause must stand and may properly be founded on for an application for stay of the suit. As that issue does not arise on the pleadings the suit is wholly in respect of matters agreed to be referred. 33. If I am wrong in the view that no issue really arises, on a proper reading of the plaint, as to the parties not being ad idem and that such an issue can be said to arise I have to decide that issue on the materials before me, for without doing so I cannot dispose of this application. The Plaintiffs themselves passed the Bought and Sold Notes. When on the 27th August, 1946, the Defendants demanded delivery of both the July and August portions of the goods, the Plaintiffs did not dispute the contract or even allege that the contract in respect of the July portion had come to an end by their own failure to deliver the same in July, 1946. When on the 27th August, 1946, the Defendants demanded delivery of both the July and August portions of the goods, the Plaintiffs did not dispute the contract or even allege that the contract in respect of the July portion had come to an end by their own failure to deliver the same in July, 1946. On the contrary in their letter dated the 3rd September, 1946, the Plaintiffs stated that they were short of the goods and, therefore, could not tender and asked the Defendants to submit their difference bill. They referred to the contract in the beginning of the letter and treated it as a valid subsisting contract. The Plaintiffs' letter of the 13th September, 1946, also treated the contract as a valid contract. The mention of a custom was for the first time made in the Defendants' statement filed on the 16th June, 1947, before the Bengal Chamber of Commerce. According to the Plaintiffs no such custom exists. 'If no such custom exists then at the date of the contract there could be no occasion for the Plaintiffs' forming or entertaining any positive belief based on the non-existence of such custom. It is quite obvious that this alleged belief is a pure afterthought and the assertion of it has been put into the mouths of the Plaintiffs. On the materials before me I do not believe this assertion as true and I decide this issue against the Plaintiffs. My conviction is so strong that I do not consider it necessary to set down this application for trial on evidence. Having regard to the pleadings and the affidavits and the correspondence, I hold that the parties were ad idem and a concluded contract was made and, therefore, there is a valid arbitration agreement subsisting between the parties and ground (i) must be rejected. As no issue as to the formation, existence or validity of the contract has been, on a construction of these paragraphs, raised at all the suit is one wholly in respect of matters agreed to be referred and the whole suit has to be stayed unless there is any substance in ground (iv) urged in opposition to this application which I now proceed to discuss. 34. Re. 34. Re. (iv):--The argument on this head may be summarised as follows: Both the parties are members of the Gunny Trades Association and, therefore, they are bound by its Memorandum and Articles of Association and the rules and bye-laws made under the Articles. At the date when this contract was entered into there was a rule in the terms following:-- The member of the Association must refer any dispute among themselves to the Tribunal of Arbitration, Gunny Trades Association. The Award shall be final and bindiag on the parties concerned who shall in all events abide by and obey the award. 35. It is then pointed out that after the date of the contract and before disputes arose fresh bye-laws were on the 28th June, 1946, adopted by that Association. One of those bye-laws, being bye-law No. 12, provides as follows:-- All matters, questions, disputes, differences, and/or claims arising out of and/or concerning and/or in consequence of or otherwise relating to any transaction in Jute Manufactured goods between members of this Association or between a member and a non-member, whether or not the obligation of either or both parties covering such transaction be subsisting at the time of Such dispute or whether or not such transactions have terminated or purported to be terminated or completed, shall be referred to the arbitration of the Gunny Trades Association under the Rule of its Tribunal of Arbitration for the time being in force and according to such rules the arbitration shall be conducted. 36. It is submitted that by the aforesaid rule and bye-law the contract stood modified and the agreement to refer to the Bengal Chamber of Commerce was automatically superseded. 37. The rule first quoted above does not appear to me to affect the present case for the following reasons:-- (a) The objects for which the Gunny Trades Association has been established are, inter alia, to promote and protect the interest of dealers and brokers in, gunny trade, to adjust controversy between members of the Association, to establish just and equitable principles and to maintain uniformity in rules, regulations and usages in trade. In view of these objects I am not of opinion that the rule, which was in very general terms and purported to cover disputes wholly unconnected with the Association or even with any commercial transaction, was within the competence of the Association to make. In view of these objects I am not of opinion that the rule, which was in very general terms and purported to cover disputes wholly unconnected with the Association or even with any commercial transaction, was within the competence of the Association to make. (b) The contract which was made on the 23rd January, 1946, was not expressed to have been made subject to the rules of the Association and, therefore, the rule in question was not, by reference, incorporated in the contract. (c) The parties having chosen to enter into an arbitration agreement to refer disputes to the Bengal Chamber of Commerce must be taken to have superseded that rule even if it were binding on them. (d) That rule was replaced by the bye-laws adopted by the Association on the 28th June, 1946, that is to say, long before the Defendants became members of the Association and, therefore, the question whether the rule was binding on the members inter sc and constituted a contract between the members biter se does not arise. 38. Learned Counsel for the Plaintiffs then takes his stand on the new bye-law No. 12 which, according to him, modified the original contract and abrogated the arbitration clause in the contract and substituted therefor a new arbitration clause in terms of this bye-law. I am unable to accept this contention. 39. The contract in question was not expressed to have been made subject to the then or future rules or bye-laws of the Association. Therefore, the rules and bye-laws of the Association were not, by the terms of the contract, incorporated in the contract. The contract was made on the 23rd January, 1946, but the bye-law in question came into force on the 28th June, 1946. Therefore, this bye-law did not attach to the contract at the date when the contract was made. The Defendants became members of the Association on the 12th November, 1946, and, not before, but the disputes had arisen between the parties before that date and the arbitration clause in the contract attached to those disputes before that date. By what process has this arbitration agreement been superseded? 40. It is said that on the 12th November, 1946, when the Defendants became members of the Association a fresh contract came into being in terms of the Memorandum and the Articles and superseded the original arbitration agreement contained in the commercial contract. By what process has this arbitration agreement been superseded? 40. It is said that on the 12th November, 1946, when the Defendants became members of the Association a fresh contract came into being in terms of the Memorandum and the Articles and superseded the original arbitration agreement contained in the commercial contract. This fresh contract is sought to be established (i) by sec. 21 (I) of the Indian Companies Act and (ii) by the respective applications for membership. 41. As to (i) : Sec. 21 (I) of our Companies Act, which corresponds to sec. 20 of the English Companies Act of 1929, sec. 14 of the English Act of 1908 and sec. 16 of the English Act of 1862, is in the terms following :-- The memorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by each member and contained a covenant on the part of each member, his heirs and legal representatives to observe all the provisions of the memorandum and of the articles, subject to the provisions of this Act. 42. In my judgment in the previous application for stay I stated that the passage from the speech of Lord Herschell in Welton v. Saffery 1897 A.C. 299 at p. 816 and the passage from Halsbury's Laws of England (Hailsham Edition), Vol. 5, Art. 256 at p. 142 and certain passages from the judgment of Scott, L. J., in London Sack and Bag Co. v. Dixon and Lugton, Ltd. (1943) 2 A.E.R. 768 which I then quoted appeared to suggest (a) that the memorandum and the articles did not by reason of sec. 21 (I) constitute a contract between the members inter se although they regulated their rights which could, be enforced only through the company and (b) that they only regulated the rights of the members qua members for the purposes of the company law. I have now been referred to the decision of our Appeal Court in Ramkissendas Dhanuka v. Satya Charan Law 50 C.W.N. 310 (1945) which was not cited before me on that occasion and which, it is contended, militates against the authorities quoted and relied on by me in my previous judgment. I have now been referred to the decision of our Appeal Court in Ramkissendas Dhanuka v. Satya Charan Law 50 C.W.N. 310 (1945) which was not cited before me on that occasion and which, it is contended, militates against the authorities quoted and relied on by me in my previous judgment. In Radha Krishna Beniprosad v. Surajmull Hanumandas Unreported, Clough, J., in his judgment delivered on the 28th January, 1948, held, following this decision of the Appeal Court, that by sec. 21 (I) the memorandum and articles constituted a contract between the members and that an award made by the arbitrators on a reference pursuant to an article was a good and valid award. A decision of our Appeal Court is certainly and at all times binding on me sitting singly on the Original Side and it is necessary, therefore, for me to reconsider the matter in the light of that decision and the English decisions I have since consulted. 43. In Pritchard's case (1878) 3 Ch. App 956 one of the articles of the Tavarone Mining Company provided that the company should, immediately after incorporation, enter into an agreement with the vendor De Thierry for the purchase of a mine for a consideration to be paid partly in cash and partly by fully paid-up shares. After incorporation of the company the directors allotted the shares to the vendor or his nominees and for a while worked the mines but no further agreement was made. On the company going into liquidation, Mr. Pritchard, one of the allottees of these shares, was put upon the list of contributories in respect of the shares allotted to him. Mr. Pritchard contended that the article in question constituted a contract between the company and the vendor and his nominees and, therefore, the shaves were fully paid up and that such contract was also a contract within the meaning of the 25th section of the English Companies Act of 1867. Vice-Chancellor Wickens refused to remove Mr. Pritchard's name from the list of contributories and his decision was upheld by the Court of Appeal. Mellish, L. J., said at page 960, But I am of opinion that the articles of association cannot be considered as a contract in writing between De Thierry and the Company for the sale of the mine to them. Pritchard's name from the list of contributories and his decision was upheld by the Court of Appeal. Mellish, L. J., said at page 960, But I am of opinion that the articles of association cannot be considered as a contract in writing between De Thierry and the Company for the sale of the mine to them. It may, no doubt, be the case, if no other contract was entered into, and if De Theirry signed these articles and they were acted upon, that a court of Equity would hold that as between him and the company--from their acting upon it--there was a binding contract; but in themselves the articles of association are simply a contract as between the share-holder, inter se in respect of their rights as share-holders. 44. Macdougall v. Gardiner (12) was a case of a bill filed by one of the share-holders on behalf of himself and all other shareholders except the directors and of the company complaining of certain irregularities, in contravention of the articles, in the proceedings of a general meeting and praying for a declaration that the conduct of the Chairman was illegal and improper and for an injunction to restrain the directors from carrying out certain proposed arrangements. The Court of Appeal held, on demurrer, that the bill could not be sustained inasmuch as it violated the rule laid down in Foss v. Harbottle (1843) 2 Hare 461 and Mosley v. Alston (1847) 1 Ph. 790 and asked the interference of the Court in the internal management of the company. 45. In Eley v. Positive Assurance Company (1875) 1 Ex. D. 20 the Plaintiff brought an action against (12) (1876) 1 Ch. D. 13 the company for breach of contract in not employing him as solicitor on the terms of the articles containing a clause in which it was stated that the Plaintiff should be solicitor to the company, The Plaintiff was not appointed as solicitor by any resolution of the directors nor by any instrument bearing the corporate seal but he acted as such for some time. Amphlett, B. said at page 26: The articles, taken by themselves, are simply a contract between the share-holders inter se, and cannot in my opinion, give a right of action to a person like the Plaintiff, not a party to the articles although named therein. 46. Amphlett, B. said at page 26: The articles, taken by themselves, are simply a contract between the share-holders inter se, and cannot in my opinion, give a right of action to a person like the Plaintiff, not a party to the articles although named therein. 46. Cleasly, B., agreed that the article could not by itself be taken to operate as a contract between the solicitor and the company. Kelly, C. B. did not pronounce any opinion on this point. All the learned Judges agreed that the contract, if any, did not satisfy the requirements of the statute of fraud so as to hind the company. 47. Imperial Hydropathic Hotel Conipuny. Blackpool v. Hampson 1883 23 Ch. D. 1 was a case where certain share-holders who were appointed directors by a general meeting in the place of existing directors brought an action in the name of the company against the existing directors to restrain them from acting. The articles contained no-power to remove the directors but authorised the share-holders by special resolution to alter any of the articles. The share-holders in a general meeting passed resolution removing some directors and appointing some directors in their place but did not alter the articles. It was held that there should have been a separate special resolution altering the article so as to give power to remove directors before a resolution could be passed to remove any particular individual director. Colton, L. J., at page 10 said: In the present case there is not only the charter of incorporation, and the memorandum, but there are the articles of association, which under the Act are a contract between all the share-holders to comply with the regulation in them,............. 48. In Browne v. La Trinidad (1887) 87 Ch. D. 1 the articles gave power to remove directors by special resolution. The sixth clause of the articles provided that the directors should adopt and carry into effect an agreement made on the 24th November, 1884, between the Plaintiff and a person as trustee for the intended company whereby the Plaintiff was to be a director not removable till after 1888. The agreement was acted upon but no contract adopting it was entered into between the Plaintiff and the company. The agreement was acted upon but no contract adopting it was entered into between the Plaintiff and the company. At a meeting of directors a resolution was passed to summon an extraordinary general meeting at which were to be proposed special resolutions for removing the Plaintiff from the office of director and for increasing the capital. The notice of the board meeting was given to the Plaintiff less than ten minutes before the time of holding it. The Plaintiff did not attend the meeting. Notices for the general meeting were then issued and four days before the general meeting the Plaintiff who upto that time had made no complaint as to the shortness of the notice for the board meeting brought his action against the company and the other directors for an injunction restraining the Defendants from holding the general meeting. The general meeting, however, was held and the resolutions were passed. The Plaintiff then moved fur an injunction restraining the Defendants from holding a general meeting to confirm the resolutions. The Vacation Judge granted the injunction. The Court of Appeal held that treating the agreement as embodied in the articles, still there was no contract between the Plaintiff and the company that he should not be removed from the office of a director, the articles being only a contract between the members inter se and not between the company and the Plaintiff and discharged the order for injunction. Cotton, L. J., observed at page 13:-- The memorandum of agreement of the 24th of November, 1884, is in no way a contract between the Plaintiff and the company. It is said, that it was adopted and incorporated into the articles, but I cannot accede to that. The Company by its directors acted upon the agreement, but that does not make it binding on the company. Then is it incorporated into the articles in such a way as to entitle the Plaintiff to say 'I have such a contract between me and the company as can be enforced by a court of Law, and as 1 might enforce in equity by way of spcific performance?' That point is clearly settled, I think, by Kley v. Positive Life Assurance Company (1875) 1 Ex. D. 20. 49. D. 20. 49. Referring to the contention that Article 6 constituted a contract between the Plaintiff and the company Lindley, L. J., at p. 14 said: Having regard to the construction put upon sec. 16 of the Companies Act of 1862 in the case of Eley v. Positive Life Assurance. Company (15) and subsequent cases, it must be taken as settled that the contract upon which he relies is not a contract upon which he can maintain any action, either on the common law side or the equity side. There might have been some difficulty in arriving at that conclusion if it had not been for the authorities because it happens that this gentleman has had shares allotted to him, and is therefore a member of the company. Having regard to the terms of sec. 16, there would be some force, or at all events some plausibility in the argument that, being a member, the contract which is referred to in the articles has become binding between the company and him. Of course that argument is open to this difficulty that there could be no contract between him and the company until the shares were allotted to him, and it would be remarkable that, upon the shares being allotted to him, a contract between him and the company, as to a matter not connected with the holding of shares, should arise. There are difficulties in the construction of sec. 16 of the Act of 1862 but those difficulties have been removed by the authorities which shows that Browne has no contract with the company which he can enforce either at law or in equity. 50. In Wood v. Odessa Waterworks Com-pony (1889) 42 Ch. D. 636 the Plaintiff, on behalf of himself and all other share-holders, brought; the action against the company for an injunction restraining the company from acting on a certain resolution proposing to give to the share-holders debenture bonds bearing interest and redeemable at par by annual drawing instead of paying dividends in cash. His contention was that the resolution contravened the articles of the company. Sterling, J., in granting an interlocutory injunction observed at p. 642: The articles of association constitute a contract not merely between the share-holders and the company, but between each individual share-holder and every other; 51. His contention was that the resolution contravened the articles of the company. Sterling, J., in granting an interlocutory injunction observed at p. 642: The articles of association constitute a contract not merely between the share-holders and the company, but between each individual share-holder and every other; 51. Welton v. Saffery (1897) A.C. 299 was concerned with the question whether articles authorising the issue of shares at a discount were ultra vires the company and whether the holders of such shares were liable, on a winding-up, to be put upon the list of contributories for the adjustment of the rights of the contributories inter se as well as for the payment of the company's debts and the costs of the winding-up. The House of Lords held (Lord Herschell dissenting) that such articles were ultra vires and the holders of such shares had been properly placed on the list of contributories. In course of his speech Lord Herschell observed at p. 315: It is quite true that the articles constitute a contract between each member and the company and that there is no contract in terms between the individual members of the company; but the articles do not any the less, in my opinion, regulate their rights inter se. Such rights can only be enforced by or against a member through the company but I think that no member has, as between himself and another member, any right beyond that which the contract with the company gives. 52. The Plaintiff in Borland's Trustee v. Steel Brothers & Co., Ltd. (1901) 1 Ch. 279 was the trustee in bankruptcy of a share-holder of the Defendant company. The articles of that company contained provisions compelling a share-holder to transfer his shares to particular persons at a particular price. It was held that such articles were not void. Farwell, J., at p. 288 said: A share is the interest of a share-holder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the share holders inter se in accordance with sec. 16 of the Companies Act, 1862. The contract contained in the articles of association is one at the original incidents of the share. 53. The same idea was repeated by the learned Judge at p. 290. 54. 16 of the Companies Act, 1862. The contract contained in the articles of association is one at the original incidents of the share. 53. The same idea was repeated by the learned Judge at p. 290. 54. Burland v. Earle (1902) A.C. 83 is a decision of the Judicial Committee on an appeal from Canada. It arose out of a suit by some share-holders against the company and the directors to compel them to distribute in dividends a rest or reserve fund which, during a long course of years, had been accumulated. On the authority of Foss v. Harbottle (1843) 2 Hore 461 and Mazley v. Alston (1847) 1 Ph. 790 the Judicial Committee held that it was an elementary principle that a Court had no jurisdiction to interfere with the internal management of the companies acting within their powers. It was also held that the company must sue to redress a wrong done to it, but if a majority of its shares are controlled by those against whom relief is sought, the complaining share-holders may sue in their own names, but must shew that the acts complained of are either fraudulent or ultra vires. The relevant passage is at p. 93 where it is pointed out that this privilege is given, to the minority in order to give a remedy for a wrong which would otherwise escape redress and that in such an action the Plaintiffs cannot have a larger right to relief than the company itself would have if it were a Plaintiff. 55. In Automatic Self-Cleansing Filter Syndicate Company, Ltd. v. Cuninghame (1906) 2 Ch. 34 the company had power under its memorandum to sell its undertaking to another company having similar objects. By its articles the general management and control of the company were vested in the directors subject to such regulations as might from time to time be made by extraordinary resolution and in particular the directors were empowered to sell or deal with any part of the company's assets on such terms as they might think fit. At a general meeting of the company a resolution was passed by a simple majority fur the sale of the company's assets on certain terms to a new company and directing the directors to carry the sale into effect. At a general meeting of the company a resolution was passed by a simple majority fur the sale of the company's assets on certain terms to a new company and directing the directors to carry the sale into effect. The directors, being of opinion that a sale on those terms was not for the benefit of the company, declined to carry the sale into effect. An action was thereupon filed in the names of the company and one shareholder suing for himself and other shareholders against the directors asking that the directors be ordered forthwith to affix the seal of the company to the contract and carry it into effect and that the directors be restrained until the hearing of the suit from dealing with or disposing of the assets in a manner inconsistent with the terms of that contract. The Plaintiffs then moved for an interlocutory injunction which was refused by Warrington, J. On appeal by the Plaintiffs the Court of Appeal upheld this decision on the ground that upon the construction of the articles the directors could not be compelled to comply with the resolution which was passed by a simple majority and which was not special resolution. Cozens-Hardy, L. J., at p. 44 said: It has been decided that the articles of association are a contract between the members of the company inter so. This was settled finally by the ease of Browne v. La Trinidad (1887) 37 Ch. D. 1, if it was not settled before. 56. In Salmon v. Quin & Axtens, Ltd. (1909) 1 Ch. 311the articles vested the general management of the business of the company in the directors subject to such regulations (being not inconsistent with the articles) as might be prescribed by the company in general meeting. It was also provided that no resolution of the directors having for its object the acquisition or letting of any premises should be valid unless 24 hours' notice of the meeting should have been given to each of the managing directors, Axtens and Salmon, and neither of them should have dissented therefrom in writing before or at the meeting. Axtens and Salmon held the bulk of the ordinary shares and were the managing directors. Axtens and Salmon held the bulk of the ordinary shares and were the managing directors. Resolutions were passed by the directors for acquisition of certain premises and for letting out certain other premises but Salmon dissented from each of the resolutions in accordance with the articles. At an extraordinary general meeting of the company, resolutions to the same effect were passed by a simple majority of the share-holders. Thereupon Salmon suing on behalf of himself and all other share-holders except the Defendants commenced this action against the company and Axtens and Boys-Tombs (another director) for an injunction restraining the Defendants from acting upon any of the resolutions and moved for an interlocutory injunction. Warrington, J., refused the motion. The Court of Appeal reversed this decision. After referring to the articles Farwell, L. J., at p. 318 said; Pausing there for a moment, it appears to me to be plain that this is a contract by which the business of the company shall be managed by the board. The articles, by sec. 16 of the Act of 1862, are made equivalent to a deed of covenant signed by all the share-holders. The Act does not say with whom the covenant is entered into, and there have no doubt been varying statements by learned judges, some of them saying it is with the company, some of them saying it is both with the company and with the share-holders. Stirling, J., in Wood v. Odessa Waterworks Co., (1839) 42 Ch. D. 686 says The Articles of association constitute a contract not merely between the share-holders and the company, but between each individual share-holder and every other.' I think that that is accurate subject to this observation, that it may well be that the court would not enforce the covenant as between individual share-holders in most cases. 57. There was an appeal to the House of Lords in Quin & Axtens, Ltd. v. Salmon (1909) A.C. 442 but the decision of the Court of Appeal was affirmed. Lord Loreburn, L. C., did not "see any solid ground for complaint against the judgment of the Court of Appeal." Lord Macnaghten thought the judgment of the Court of Appeal was perfectly right. The other Law Lords concurred. 58. Lord Loreburn, L. C., did not "see any solid ground for complaint against the judgment of the Court of Appeal." Lord Macnaghten thought the judgment of the Court of Appeal was perfectly right. The other Law Lords concurred. 58. I now proceed to consider three decisions which dealt with the question with which I am directly concerned in this case, namely, how far an article providing for arbitration can be said to constitute a contract binding on the members. The first of these decisions is to be found in Hickman v. Kent or Romney Marsh Sheep Breeders' Association (1915) 1 Ch. 881. The company was registered as an association not for profit. Its object, inter alia, was the encouragement of the breeding of sheep at home and abroad and the purity of the breed. The articles proided for admission of members, their subscriptions, regulation of their conduct, constitution of the Council and officers. Very wide powers were given to the Council including imposition of fines. Article 49 which is reproduced at p. 884 provided for reference of disputes between the association and any of the members, touching the various matters therein mentioned to arbitration. The Plaintiff in 1905 applied for membership in writing whereby he engaged to pay fees and subscriptions, etc., and to conform to the rules and regulations of the Association. He was duly elected. In 1914, the Plaintiff issued a writ against the Association and one Chapman for an injunction to restrain the Association from employing Chapman as secretary and to restrain Chapman from acting as secretary and other reliefs mentioned at p. 885. The Defendants applied for stay of the action under sec. 4 of the Arbitration Act, 1889. The arbitration agreement was sought to be established in two ways, namely, by sec. 14 (I) of the Companies (Consolidation) Act, 1903, and by the written application of the Plaintiff. Astbury, J., at p. 890, referred to the conflicting views taken in text books of the highest repute and reviewed all the earlier cases. After considering the four cases said to be the principal authorities in support of the view that the articles did not constitute a contract between the company and its members the learned Judge summarised the true effect of those decisions at pp. 896-897. After considering the four cases said to be the principal authorities in support of the view that the articles did not constitute a contract between the company and its members the learned Judge summarised the true effect of those decisions at pp. 896-897. Then after referring to other cases the learned Judge formulated his views at p. 990 as follows:-- It is difficult to reconcile these two classes of decisions and the judicial opinions therein ex-pressed but I think this much is clear; first, that no article can constitute a contract between the company and a third person; secondly, that no right merely purporting to be given by an article to a person, whether a member or not, in a capacity other than that of a member, as, for instance, as solicitor, promoter, director, can be enforced against the company; and, thirdly, that articles regulating the rights and obligations of the members generally as such do create lights and obligations between them and the company respectively. 59. It will be noticed that the disputes in that case related to the relationship between the company and the Plaintiff as a member in which all other members were interested and the conclusion of the learned Judge on this point, to be found at p. 903, was that Article 49 did constitute a submission of such dispute to arbitration. He did not, however, base his decision on this point alone and passed on to the second point and held that the contract contained in the Plaintiff's application for membership and the Association's acceptance of it amounted to a submission within the Arbitration Act. It is important to note the language in which the learned Judge expressed his views at p. 903: In consideration of being elected a member and of his offer to join the association being accepted, the plaintiff contracted in writing with the association to conform to its rules and regulations One of these regulations was a general submission to arbitration of all differences between the association and any of its members as such, amply wide enough to cover the matters in dispute in this action. 60. In Beattie v. E. & F. Beatti, Ltd. (26), the company was a private limited company. 3228 shares were issued and fully paid up and were held by Frank Beatti and Ernest Beatti in equal shares. 60. In Beattie v. E. & F. Beatti, Ltd. (26), the company was a private limited company. 3228 shares were issued and fully paid up and were held by Frank Beatti and Ernest Beatti in equal shares. On the death of Frank Beatti his 1614 shares were registered in the name of his widow, the Plaintiff in the action. The remaining 1614 shares were registered, as to 1514, in the name of Ernest Beatti and as to 100, in the name of his son, Edward Beatti. The only directors were the Plaintiff and Ernest Beatti who was the Chairman and Managing Director. Article 133 of the company's articles provided that whenever any dispute should arise between any members of the company or between the company and any member or members, touching (26) (1938) 1 Ch. 708 the construction of the articles or the conduct, affairs, business or interest thereof or any act or default of the directors, the members should not take proceedings at law but the same should be referred to arbitration in the manner therein specified. The Plaintiff commenced action against the company and Ernest Beatti claiming a declaration that she was entitled to inspect all books and records of the company and for injunction restraining the Defendants from excluding her from such inspection and that a resolution to increase the capital was invalid and an injunction accordingly. After pleadings were delivered the Plaintiff applied for amendment of the writ and her statement of claim by claiming an injunction restraining the company from paying to the Defendant Ernest Beatti and the Defendant Ernest Beatti from drawing from the funds of the company any sum by way of remuneration and for an order directing the Defendant Ernest Beatti to repay all sums improperly paid to himself and his son. The Defendant Ernest Beatti moved for stay of further proceedings upon the summons for amendment. The lower Court having refused the application for stay the Defendant Earnest Beatti appealed. The argument proceeded on the footing as if the suit was only in respect of the new claim and it was not disputed that although the suit was, in form, one by a share-holder, it was really a suit by the company against Ernest Beatti for refund of the company's money. The question was whether there was an arbitration agreement between the company and the Defendant Ernest Beatti. The question was whether there was an arbitration agreement between the company and the Defendant Ernest Beatti. Sir Wilfrid Greene, M.R., did not find it necessary to express any definite opinion as to whether the words " any member or members" in Article 133 was to be read qualified by words "in his or their capacity as member or members" for there was another clear answer to the argument. His Lordship at p. 720 said: To bring himself within s 4 of the Arbitration Act the appellant must point to a written agreement for submission. For that reason it will not be sufficient for him to rely on an agreement appointing him director which is merely to be Inferred from conduct, even if in such an agreement a term corresponding to art. 133 ought to be imported. An agreement so extracted from the general relationship of the parties would not be a sufficient submission within S. 4. The appellant, accordingly, seeks to find in the articles themselves a contract to which he is a party giving him the right to demand an arbitration in the present circumstances. I cannot find that contract. 61. Then after quoting sec. 20 (I) of the English Companies Act, 1929, and setting out the argument of learned Counsel, namely, that the article provided for arbitration regarding a dispute between the company and a member, that the dispute related to an act or default of a director, that the Defendant as a member was seeking to enforce his right under this article and not any right as a director, that the case must be treated as though that the circumstance that the Appellant happened to be director was immaterial, the learned Master of the Rolls at p. 721 said: In my judgment, that argument is based on an incorrect view both as to the effect of the article and as to the effect of s. 20 of the Companies Act. The question as to the precise effect of s. 20 has been the subject of considerable difficulty in the past, and it may well be that there will be considerable controversy about it in future. The question as to the precise effect of s. 20 has been the subject of considerable difficulty in the past, and it may well be that there will be considerable controversy about it in future. But it appears to me that this much, at any rate, is good law: that the contractual force given to the articles of association by the section is limited to such provisions of the articles as apply to the relationship of the members in their capacity as members. 62. Again at p. 722: It is to be observed that the real matter which is here being litigated is a dispute between the company and the appellant in his capacity as a director, and when the appellant, relying on this clause, seeks to have that dispute referred to arbitration, it is that dispute and none other which he is seeking to have referred and by seeking to have it referred he is not, in my judgment, seeking to enforce a right which is common to himself and all other members. He is seeking to enforce quite a different right. 63. Further down the learned Judge observed : But quite apart from that consideration, the two rights are, in my judgment, perfectly distinct and quite different, the general right of a member as a member and the right which the appellant as a party to the dispute is seeking to enforce. 64. The other learned Judges concurred. 65. The next case is London Sack & Bag Co., Ltd. v. Lugton, Ltd. (1943) 2 A.E.R. 763. Each of the two parties was a member of the United Kingdom Jute Goods Association, Ltd. According to the articles of that Association a director of each of these companies had a share in the Association and the companies were members of the Association through their respective directors There was a contract for sale of 5000 cotton flour bags by the Defendant to the Plaintiff. There was no arbitration clause in the contract. The Plaintiff (purchaser) complaining that the goods delivered were not in terms of the contract, filed the suit for refund of the price. There was no arbitration clause in the contract. The Plaintiff (purchaser) complaining that the goods delivered were not in terms of the contract, filed the suit for refund of the price. The Defendant (seller) applied for stay upon the contention that there was a written submission because (1) both parties were members of the Association; (2) that they were bound by the rules of the Association one of which was that " all disputes arising out of transactions connected with the trade shall be referred to arbitration"; (3) that the transaction in question was concerned with the trade; (4) that sec. 20 of the Companies Act, 1929, made a binding agreement between the members in terms of the articles and the rules. The Appeal Court, affirming the decision of the lower Court, held that the seller had failed to prove that there was a binding submission to arbitration between the parties. After referring to the contention that sec. 20 of the English Act (which corresponds to our sec. 21) creates a contract between the parties and the several cases cited by learned Counsel Scott, L. J., expressed himself thus at P. 765: I am not satisfied that he has Interpreted those decisions correctly. It may well be, even as between ordinary members of a company who are also in the nominal way shareholders, that sec. 20 adjusts their legal relations inter se in the same way as a contract in a single document would, if signed by all; and yet the statutory result may not be to constitute a contract between them about rights of action created entirely out-side the company relationship, each as trading transactions between members. 66. Further down the learned Lord Justice said: Even If the cases which counsel for the appellants cited amounted to the enunciation of a clear rule that, as between shareholding members i.e. ordinary members of a company having a capital interest in the company by reason of their shares-there is a written contract for what may be called the purposes of company law, it does not in the least follow that the rule applies to extrinsic purposes such as individual trading. 67. It is evident that Scott, L. J., based his decision on the ground that sec. 67. It is evident that Scott, L. J., based his decision on the ground that sec. 20 (I) of the English Act did not give contractual force to the article in relation to disputes as to rights which were entirely outside the company relationship and arose out of a commercial contract between two members in which the other members had no interest. Mackinon, L. J., based his decision first on the ground that the two parties were not members although each had a director who was a member of the Association and secondly on the ground that the contract, being for cotton bags, was not connected with jute trade. D. Parcq. L. J., only agreed that the appeal should be dismissed. 68. The case of Ramkissendas Dhanuka v. Satya Charan Law 50 C.W.N. 310 (1945) is a decision of our Appeal Court. There the facts were as follows: one of the articles of the company prescribed a maximum and a minimum number of directors. Another article authorised the company in general meeting to increase or reduce the number of directors. At an extraordinary general meeting of the company the share-holders by a simple majority passed two resolutions. By the first it was resolved that the number of directors be increased to 11 and that certain persons named therein be appointed directors in addition to the present directors. By the second resolution the appointment of the Managing Agents was terminated. Thereupon a suit was filed in the names of the company and of a share-holder on behalf of himself and other share-holders against the persons appointed as directors by the first resolution. It was held by McNair, J., that the company could not by an ordinary resolution increase the number of directors beyond the maximum number prescribed by the existing article and that that maximum number could be increased only by altering that article under sec. 20, i.e., by a special resolution. As regards the right of action McNair, J., held that as the matters complained of were ultra vires a share-holder could maintain the action in the name of the company as laid down in Foss v. Harbottle (1843) 2 Hore. 461. The appeal Court upheld the decision of McNair, J. Derbyshire, C. J., based his decision on the same grounds. So did Gentle, J., on the main questions. 461. The appeal Court upheld the decision of McNair, J. Derbyshire, C. J., based his decision on the same grounds. So did Gentle, J., on the main questions. As regards the right of action Gentle, J., advanced a further ground, namely, that the articles constituted a contract between the members inter sc and if there was a breach any member had the right to come to Court. 69. From the authorities cited above it is quite clear that eminent English Judges have from time to time expressed different views as to the meaning and effect of the section of the Companies Act to which I have referred. It is difficult to reconcile them. The theory as to the articles constituting a contract between members inter se seems logically to lead to the conclusion that any member complaining of breach of an article may come to Court in his own right. How is this logical result to be reconciled with the rule in Poss v. Harbottle (13), the Privy Council decision and the other cases where a share-holder's right of action is said to be limited to cases of fraud or acts ultra vires the company? Why is it said that even in case of fraud or ultra vires the complaining share-holder has no higher rights than the company has? Why is it said that such a right of the share-holder will not be enforced by the Court in most cases? Assuming that the Court as a Court of equity has a discretion to decline to give specific performance or to interfere by injunction with the domestic management of the company, how will the Court refuse to entertain an action, say, for damages for the breach of the contract, if the articles are regarded as such. In all the cases the company was a party and the right of action could be amply supported on the doctrine laid down in Boss v. Harbottle (1813) 2 Hare 461 and the other cases. However, Gentle, J., sitting in appeal has held that by sec. 21 of our Companies Act the articles are to be regarded as a contract not only between the company and the members but also between the members. However, Gentle, J., sitting in appeal has held that by sec. 21 of our Companies Act the articles are to be regarded as a contract not only between the company and the members but also between the members. It is not for me to say whether it was necessary for his Lordship to go to that length for the purpose of his decision, I am bound to accept the position that the articles, by virtue of sec. 21, constitute a contract. But the question still remains: for what purpose and to what extent do they constitute such a contract. I find myself in respectful agreement with Sir Wilfred Greene, M.R. and Scott, L. J., whose observations I have quoted at some length. The dispute here is between two parties to a contract as to their respective rights thereunder. It is not a dispute arising out of their company relationship. No other member is interested in this dispute. The party insisting on the article is not seeking to enforce a right he has in common with other members but is only seeking to enforce his private rights under a contract. The contractual force given to the articles by sec, 21 (I) is, by judicial decisions, limited to matters arising out of the company relationship of the members as members. The statutory result does not extend beyond that and does not convert the articles into a contract or covenant, in reference to rights entirely outside the company relationship and does not affect or regulate the rights arising out of a commercial contract with which other members have no concern. The decision of Gentle, J., does not appear to me to militate against this view at all. That case was concerned with disputes which arose out of the company relationship. I say with utmost respect that Clough, J., did not advert to this aspect of the matter in his judgment to which I have referred. 1 am unable to agree with him that the section gave any contractual force to the arbitration article in respect of the private disputes arising between two members out of a private commercial transaction with which other members were in no way concerned. In my opinion, sec. 1 am unable to agree with him that the section gave any contractual force to the arbitration article in respect of the private disputes arising between two members out of a private commercial transaction with which other members were in no way concerned. In my opinion, sec. 21 does not assist the Plaintiffs in establishing a new contract in terms of bye-law No. 12 which will cover disputes arising out of a contract so as to supersede the arbitration clause contained in the contract. 70. Learned Counsel for the Plaintiffs then falls back on the written applications for membership submitted by the parties as constituting a contract between them whereby the articles and rules and bye-laws framed in exercise of the powers conferred by the articles were incorporated in the contract. As in the previous application between the same parties, a supplementary affidavit was filed setting out a copy of the application made by the Defendants. I admitted that affidavit upon the term that the Plaintiffs would not insist on an affidavit in reply and would admit that the Defendants became members only on the 12th November, 1946. The material part of that application was in the following terms:--. Gunny Trades Association, Calcutta. Form of application for membership. To The Honorary Joint Secretary, Gunny Trades Association, Dear Sir, I/We being desirous to become a member of the Association beg to be admitted at a member : on being elected, I/we promise to conform to and be bound by the Memorandum and Articles of Association, Bye-laws, Rules for the conduct of business amongst members, Rules of Arbitration and any other Rules and Regulations of the Association and also by any change or amendment thereof that may be made from time to time. ............................... 71. The Plaintiffs also made a similar application long before this when they had become members. The argument is that the two applications signed by the respective parties constitute an agreement between the parties and by their terms, incorporate all present and future articles, bye-laws and rules including the above-quoted bye-law No. 12 for referring disputes to arbitration. The argument appears to me to be contrary to the basic principles of the law of contract. The application for membership is certainly an offer made by the intending member to the company. The argument appears to me to be contrary to the basic principles of the law of contract. The application for membership is certainly an offer made by the intending member to the company. The company may, by allotment of shares to the applicant, where the company has a share capital or by electing and putting the applicant on the register of member where there is no share capital, accept the offer and in such a case the offer and the acceptance ripen into a binding agreement or contract between the company and the applicant who becomes a member. The offer is made to the company which is a legal entity apart from the corporators and it is wholly incorrect to say that the offer is made to all other members present or future or that all other members can or do accept the offer. The offer can be accepted only by the person to whom it is made. The contract is between the person who makes the offer and the company which accepts that offer. This contract, by its terms to be gathered from the offer, attracts the articles, bye-laws and rules and incorporates them as terms of the contract. It is by this process alone that the bye-law in question can be regarded as a term of the contract between the company and the applicant. The observance or, in case of its breach, the enforcement of the bye-law may ultimately enure for the benefit of the other members but there is no privity of contract between the members inter se. The other members are strangers to the contract. No consideration flows direct from one member to another. Therefore, no member can insist on the observance or, in case of its breach, enforce the bye-law against any other member direct. The other members can only look to the company to enforce the bye-law-on the strength of its contract with the defaulting member. It is an elementary principle of the law of contract that a stranger to the contract cannot, unless" he can establish a direct trust in his favour, enforce the contract. This I apprehend is the correct principle and the result of the decision in Hickman v. Kent or Romney Marsh Sheep Breeders' Association (1915) 1 Ch. 881 as the last passage I have quoted from the judgment of Astbury, J., clearly shows. This I apprehend is the correct principle and the result of the decision in Hickman v. Kent or Romney Marsh Sheep Breeders' Association (1915) 1 Ch. 881 as the last passage I have quoted from the judgment of Astbury, J., clearly shows. If it were otherwise, the observations of Scott, L. J., in London Sack & Bag Co.'s case (1948) 2 A.E.R. 763 would not have been made and the case would have been otherwise decided by him for, as the arguments of learned Counsel in that case show, both parties in that case had submitted written applications for membership. Sec. 21 of the Companies Act has nothing to do with the point I am now discussing. 72. Learned Counsel for the Plaintiffs has referred me to three Indian decisions, namely, Kotumal Pokardas v. Adam Haji Pir Mahomed AIR (1939) Sind 357 and Mohanlal Chhaganlal Shah Vs. Bissesarlal Chirawalla and Others, AIR 1947 Bom 268 and Chimanram Motilal v. Vandravandas AIR (1948) Bom. 55 in support of his contentions. With utmost humility and with great respect I am unable to assent to the principles laid down therein and for the following reasons: (a) The learned Judge in the Sind case purported to follow the case of Hickman v. Kent or Romney Marsh Sheep Breeders' Association (25) but failed to appreciate the fundamental distinction between the situation in that case and that in the case before him. In Hickman's case (25) the disputes were between a member and the company and the disputes directly touched the affairs of the Association and concerned the rights of the member qua member. The application for membership when accepted by the company became a contract between the company and the applicant. That contract incorporated the articles which provided for arbitration and the company was held entitled to enforce the contract. On the other hand no contract between members inter se arises out of the separate applications and, therefore, the principle of Hickman's case (1915) 1 Ch. 881 had no application to the Sind case. (b) In the Sind case the learned Judge expressed himself as follows:-- In Hickman's case (1915) 1 Ch. 881 the agreement created by the application for membership was between the applicant and the association, that is to say, between the applicant and all members collectively. In the present case, the agreement is between the applicant for membership and each individual member. 881 the agreement created by the application for membership was between the applicant and the association, that is to say, between the applicant and all members collectively. In the present case, the agreement is between the applicant for membership and each individual member. I see no difference of substance between these two positions. The above observations appear to me to proceed on two misconceptions. A contract between a member and the company is not the same thing as a contract between a member and " all members collectively," for a company is a legal entity apart from the members. In the next place, the two separate applications for membership made by two intending members do not give rise to a contract between them but result, on the acceptance of those applications by the company, in two distinct contracts between the company and each of the applicants. (c) The Bombay cases appear to me to militate against the elementary principles of the law of contract. As I have tried to explain, the application for membership and the acceptance thereof gives rise to a contract between the applicant and the company. There is no contract between the members inter se by such application. (d) With great respect, Bhagwati, J., appears to have mixed up the two things, the contract created by sec. 21 and the contract created by the application for membership and the acceptance thereof. The observations of Sir John Beaumount, C. J., in Radhakison Gopikison v. Balmukund Ramchandra ILR 55 Bom, 382 (1980) were made in connection with the effect of sec. 21 of the Companies Act and have no bearing on the question whether any contract arises between the members out of the application for membership and acceptance thereof by the company. The reasoning adopted by Bhagwati, J., appears to be as follows: The Plaintiff has, by his application, agreed to abide by the articles. The Defendant has done the same. Sec. 21 operates to create a contract between the members inter se in terms of the article. The fallacy in this reasoning, if I may say so respectfully, is that if I take recourse to sec. 21 I need not depend on the application for membership at all to constitute a contract. I repeat with utmost respect that Bhagwati, J., has mixed up the two principles. The fallacy in this reasoning, if I may say so respectfully, is that if I take recourse to sec. 21 I need not depend on the application for membership at all to constitute a contract. I repeat with utmost respect that Bhagwati, J., has mixed up the two principles. (e) The decisions in Beatti v. E. & F. Beatti, Ltd. (1938) 1 Ch. 708 and London Sack & Bag Co., Ltd. v. Dixon & Lugton, Ltd. (1943) 2 A.E.R. 763 were not considered by Bhagwati, J. and he did not advert to the principle that sec. 21 only gives contractual force to the articles in respect of the company relationship of the members and not in respect of rights created entirely outside that relationship, e.g., by a commercial transaction between two members in which other members have no interest. On a consideration of the authorities and on general principles I am unable to assent to the proposition that by virtue of sec. 21 the articles or bye-laws constitute a contract between the members inter se in respect of rights outside their company relationship or affect or regulate their rights arising out of a commercial transaction with which the other members have no concern or that any contract comes into being between the members inter se by reason of their respective applications for membership. 73. Assuming that I am wrong in the views expressed above and that the articles and bye-laws constitute a contract between two members even as regards their private rights arising out of a commercial contract entered into by them, what is the position of the parties before me as regards the question of arbitration? Learned Counsel for the Plaintiffs contends that as soon as the Defendants became members of the Gunny Trades Association the bye-law quoted above superseded the arbitration agreement contained in the contract and that as the Defendants insisted on going to the arbitration of the Bengal Chamber of Commerce and did not agree to go to the arbitration of the Gunny Trades Association they were not ready and willing to do all things necessary to refer the disputes to arbitration in terms of the contract as modified as aforesaid and, therefore, they have not complied with one of the principal requirements of sec. 34 of the Arbitration Act and consequently, they are not entitled to have the suit stayed. 34 of the Arbitration Act and consequently, they are not entitled to have the suit stayed. On the assumption aforesaid, and if the bye-law quoted above stood by itself the position might have been as contended. But at the same extraordinary general meeting held on the 28th June, 1946, in which the new bye-laws including bye-law No. 12 quoted above were adopted the Gunny Trades Association adopted what have been called the Rules of Arbitration. The Rules of Arbitration, like the bye-laws have been made under the articles and if the bye-laws are to be regarded as a contract between the members inter se, the Rules of Arbitration must also, on a parity of reasoning, be so regarded. The Rules of Arbitration and the bye-laws must, therefore, be read together. Rule 6 of the Rules of Arbitration is in the following terms:-- 6. In the event of a dispute between two or among more than two parties, whether members of the Association or not, regarding non-fulfilment or breach of any contract or practice, custom or convention of trade, the parties to the dispute may be an agreement written and signed by them refer the point or points at dispute to the Tribunal of arbitration of the Association and address the reference to the Registrar. 74. Bye-law No. 12 provides that disputes, etc., shall be referred to the arbitration of the Gunny Trades Association " under the Rules of its Tribunal of Arbitration for the time being in force and according to such rules the arbitration shall be conducted." It is not an agreement to go to arbitration simpliciter but is a qualified agreement, namely, to go to arbitration "under the Rules of its Tribunal of Arbitration." Rule 6 provides that parties may "by an application written and signed by them refer the point or points at dispute to the Tribunal of Arbitration." Reading bye-law No. 12 and Rule 6 together, the position appears to be that until "an agreement written and signed" is brought into being there is no completed arbitration agreement between the parties and until that is done the original arbitration agreement cannot be regarded as superseded. The words "such application" in Rule 7 clearly refers to the agreement referred to in Rule 6. I do not think Rule 5 which is under the heading "Registrar" has any bearing on the question. The words "such application" in Rule 7 clearly refers to the agreement referred to in Rule 6. I do not think Rule 5 which is under the heading "Registrar" has any bearing on the question. It only defines the powers and duties of the Registrar. Rules 6 and 7 and the following rules are under the heading, " Constitution of Court," and go together. It is nobody's case that any "agreement was written or signed" by the parties as contemplated by Rule 6 and, therefore, bye-law No. 12 cannot be invoked. [See Kcdarnath v. Sukhamal I.L.B. 44 All, 481 (1922))]. For all the reasons stated above, ground (iv) must be rejected. No other point has been urged in opposition to this application. No reason has been shown why the matters agreed to be referred should not be referred in terms of the arbitration clause contained in the contract. As the issue as to there being no contract is out of the way either because it has not been really raised, or the whole suit is in respect of matters agreed to be referred as I have explained above I make an order for stay of the whole suit. If that issue could be legally raised, I would still have stayed the rest of the suit. The applicants will get the costs of this application.