The agarpara Co. Limited vs Sumatichand Kochar

Chakravartti, C.J.—On December 14, 1954, the Appellant, the Agarpara Co. Ltd., entered into a contract with the Respondent, Sumatichand Kochar, for the purchase of a certain quantity of jute which was to be delivered during the month of December, 1954 and/or within January 15, 1955. The contract contained an arbitration clause in the usual form prescribed by the Indian Jute Mills Association. In pursuance of the contract, a part of the goods was delivered and the delivery was accepted by the Appellant. Not only did it accept delivery of the goods, but it also paid out the price and the price was accepted by the Respondent. Thereafter, the Appellant began to complain that the quality and the condition of the goods were not as stipulated and apparently on the basis that it was entitled to some relief on that account, it referred its claim to the arbitration of the Bengal Chamber of Commerce and Industry. The arbitration resulted in an award in favour of the Appellant. When the award was filed in Court, the Respondent, who had lost; before the arbitrators, delivered against it a many-sided attack in the form of a very comprehensive application. It said that the contract itself was bad, being in contravention of the Forward Contracts (Regulation) Act, 1952, read with a notification issued thereunder and that consequently the arbitration agreement, being contained in that contract, was also bad. It proceeded to say that the award was also bad, because there could not be a valid award on a void agreement. Certain allegations relating to the manner in which the merits of the case had been adjudged were also made. The application ended up with five prayers, of which three are material. It was prayed, in the first instance, that the validity of the arbitration agreement be determined and the same be adjudged null and void, secondly, that the award be declared null and void and. thirdly, that the award be set aside.

When the application came up for hearing, the Appellant did not appear. On behalf of the Respondent, only one point was actually urged and it was that the contract had been entered into in violation of the provisions of the Forward Contracts (Regulation) Act. The learned Counsel appearing for the Respondent stated to the Court that he had other points to urge in support of his application, but it would not be necessary to urge them, if he succeeded on the principal point he had taken. He would, however, ask for leave to reserve his other points for the purpose of arguing them, if necessary before the Court of Appeal, in case the matter went up to that Court. The learned Judge accepted the contention actually pressed before him and held the contract, the arbitration agreement and the award to be all void. He also made an order setting aside the award. Necessarily, he had no occasion to pronounce on the other grounds taken by the Respondent in his application, but he gave leave to the Respondent to reserve them for the purpose of his argument before the Appeal Court, if necessary.

I may say at once that the right of reservation claimed on behalf of the Respondent and the leave to reserve actually granted by the learned Judge are not very comprehensible to me. How a party could reserve his right to urge before the Appeal Court points he was not urging before the trial Court, some of which at least involved questions of fact, is not altogether clear.

The Appellant has preferred the present appeal against the order of the learned Judge. At the very outset of the hearing, a preliminary objection was taken on behalf of the Respondent by Mr. Bhabra as to a part of the appeal which in reality, affected the whole. He contended that his client had asked for a declaration as to the invalidity of the arbitration agreement, which he had obviously done u/s 33 of the Arbitration Act, and the declaration he had obtained could not be challenged in the appeal, because against a declaration regarding the existence or validity of an agreement made on an application u/s 33, no appeal had been provided for in the Act. Proceeding, Mr. Bhabra contended that if the declaration stood, the award was bound to fall, whether or not the other grounds taken against it could be substantiated. If the Appellant was excluded from questioning the declaration made by the learned Judge regarding the invalidity of the agreement, it could have nothing else which it could usefully urge in support of its appeal. The award, being hit by the invalidity of the agreement, could not possibly be treated as surviving.

In my view, the preliminary objection is not tenable. It rests on the view of Section 33 which was widely held in this Court before the Full Bench decision in the case of Saha and Co. v. Ishar Singh Kripal Singh (1955) 60 C.W.N. 471 and regards applications u/s 33 and those u/s 30 as mutually exclusive. It may be of interest to note that the structure of the Respondent''s application in the present case was exactly the same as the structure of the application which came to be considered by the Full Bench. There too, the applicant had prayed that the validity of the alleged arbitration agreement might be determined by the Court and it might be declared to be void and that the purported award might be set aside. The learned Judge who had dealt with that case as a Court of first instance was the learned Judge who dealt with the present case and he proceeded on the view to which he gave elaborate expression in his minority judgment in the Full Bench case. The Court by a majority, however, held that all applications for setting aside an award had to be made u/s 33 and Section 30 of the Act only stated the grounds on which an award could be set aside. As to the grounds on which an award could be set aside, the majority expressly held that the non-existence or invalidity of an agreement or a reference could be a ground for an application for setting aside an award and that to think that a ground directed against the validity of the agreement or the reference itself was an independent matter, belonging to the special province of Section 33, was not to take a true view of the law. If, therefore, the invalidity of an agreement or- a reference was taken in a particular case as the ground for impugning the award made and the award was set aside on that ground, an appeal would lie under the provisions of Section 39 of the Act and in such appeal the finding as to the invalidity of the agreement or the reference could be assailed.

In the present case, although three separate prayers have been made, one for a declaration as to the validity of the agreement, another for a declaration as to the validity of the award and a third for setting the award aside, it is perfectly clear from the application that the Respondent was urging the invalidity of the contract and the consequent invalidity of the agreement as a ground for challenging the validity of the award. That he was doing so, appears clearly from para. 15(a) of his application where he states that the purported award is bad, being illegal, null and void on, amongst others, the ground that the contract in which the arbitration clause was contained was illegal, null and void. The illegality of the award and the illegality of the agreement are thus interlinked as effect and cause. That scheme, it would appear, was followed by the learned Judge himself in the order made by him, because the declaration made in the first paragraph of the order is that the agreement was null and void and of no effect whatsoever and that the award "is also "null and void". The order setting aside the award forms the subject-matter of a second paragraph. In my view, the case falls exactly within the principles laid down in the Full Bench decision and the invalidity of the agreement having been put forward in the Respondent''s application as a ground for assailing the validity of the award, the declaration made by the learned Judge as to the validity of the agreement cannot be regarded as an independent declaration, immune from appeal, but must be treated as a part of the order setting aside the award and consequently appealable. The preliminary objection taken by Mr. Bhabra must accordingly fail.

Proceeding now to the Appellant''s grounds in support of the appeal, Mr. Das formulated three points. He contended that the contract in the present case did not come within the ban imposed by the Forward Contracts (Regulation) Act, 1952, read with the notification issued thereunder and that by the very terms of the act it was excluded; secondly, that assuming that the contract came within the mischief of the Act, the Act itself was bad. inasmuch as it constituted an unreasonable restriction on the fundamental right to carry on trade or business within the meaning of Article 19(1)(g) of the Constitution, read with exception (6); and that even apart from being repugnant to Article 19(1)(g), the Act was bad, being ultra vires the powers of the Central Legislature to enact legislation of this kind under the relevant entries in the Legislative List.

Before taking up the first point urged by Mr. Das, it will be convenient to read the relevant provisions of the Forward Contracts (Regulation) Act, 1952. The Act was passed on December 26, 1952, but except Chapter I, the remainder was to come into force on such date or dates as the Central Government might by notification in the Official Gazette appoint. It appears that a notification was issued on August 24, 1953, whereby the provisions of Chapters II to VI of the Act were brought into force with effect from the same date. Among the provisions so brought into force, the one relevant for our purpose is Section 17 which provides, inter alia, that the Central Government "may, by "notification in the Official Gazette, declare that no person shall, "save with the permission of the Central Government, enter into "any forward contract for the sale or purchase of any goods or ''''class of goods specified in the notification and to which the "provisions of Section 15 have not been made applicable, except to the "extent and in the manner, if any, as may be specified in the "notification". It would appear that even this section, although brought into force by a notification, could be of no practical effect till another notification by which the goods, to contracts relating to which the Act would apply, was issued. Such a notification was issued on a later date, namely, October 29, 1953 and by it, it was declared that no person must enter into any forward contract, other than a non-transferable specific delivery contract, for the sale or purchase of raw jute in any form, except to the extent and in the manner specified in the notification. The notification is very curiously worded, because whereas it says, on the one: hand, that "no person shall enter into any forward contract * * * except "to the extent and in the manner specified below," what is specified below is not the manner of entering into any forward contract at all, but only the manner in which forward contracts; already entered into were to be squared up. Be that as it may, all that we need take from the notification is that on and with effect from October 29, 1953, forward contracts, other than nontransferable specific delivery contracts, for the sale or purchase of Taw jute were forbidden. It is noticeable that the exception contained in Section 17, namely "save with the permission of the "Central Government," is not incorporated in the notification, under which the ban appears to be absolute.

The present contract, as I have already stated, was entered into on December 14, 1954. It was thus entered into after Section 17 of the Act had come into force and after a notification, banning forward contracts for the sale or purchase of raw jute, had been issued. If. therefore, the present contract is a specific delivery contract of a forward nature, but is not a non-transferable specific delivery contract, it will come within the mischief of the Act and the notification and must be condemned as void ab initio. I may point out that non-transferable specific delivery contracts are excepted not only by the notification, which I have just read, but also by the Act itself, as would appear from Section 18.

"Forward contract" is defined in the Act as "a contract for the "delivery of goods at a future date and which is not a ready "delivery contract". The contract in the present case was entered into in December, 1954 and provided for the delivery of the goods in the course of that month and/or within January 15, 195,5. It was thus a contract for the delivery of goods at a future date and, therefore, the first part of the definition of "forward contract" is satisfied. The next question is whether it is a "ready delivery "contract". "Ready delivery contract" is defined, to quote only the material part, as "a contract which provides for the "delivery of goods and the payment of a price therefor, either ''''immediately or within such period not exceeding eleven days "after the date of the contract * * *, the period under such "contract not being capable of extension by the mutual consent of "the parties thereto or otherwise". There was no provision in the present contract for the delivery of the goods or the payment of the price within the period mentioned in the definition. The contract, therefore, was not a ''ready delivery contract'' and, consequently, the second part of the definition of "forward "contract" is also satisfied.

But was this "forward contract" a "specific delivery contract"? "Specific delivery contract" is defined in the Act as "a forward "contract which provides for the actual delivery of specific "qualities or types of goods during a specified future period at a "price fixed thereby or to be fixed in the manner thereby agreed "and in which the names of both the buyer and the seller are "mentioned". The contract in the present case provided for the actual delivery of one thousand maunds of jute cuttings at Rs. 110 per screwed bale of 400 lbs. net weight and it mentioned the names of the Appellant as the buyer and the Respondent as the seller. It was thus a "specific delivery contract". If it was a "specific delivery contract", the next question is whether it was transferable or non-transferable. "Transferable specific delivery "contract" is very curiously defined in Section 2(n) of the Act as "a "specific delivery contract which is not a non-transferable specific "delivery contract". What purpose is served by a definition of that kind is not clear, because it throws one back on the definition of "non-transferable specific delivery contract". That definition is to be found in Section 2(f) of the Act and under it "non-transferable ''''-specific delivery contract" means "a specific delivery contract. ''''the rights or liabilities under which or under any delivery order, ''''railway receipt, bill of lading, warehouse receipt or any other "document of title relating thereto are not transferable". The question before us is whether the contract in the present case satisfies this definition.

Mr. Das contended that it did and he tried to support his submission by his own construction of the definition clause. From the terms of the definition, which I have just read, it will appear that it consists of several words joined with or separated from one another by the word "or". Mr. Das''s contention was that the various alternatives set out in the definition were to be read disjunctively and that if the definition was enlarged from its condensed form and worked out to the full, it would read as follows:

Non-transferable specific delivery contract means-

(a) the rights under which are not transferable ; or

(b) the liability under which are not transferable ; or

(c) the rights under any document of title relating to which are not transferable ; or

(d) the liability under any document of title relating to which are not transferable.

Having thus amplified the definition into what he considered to be its true form, Mr. Das contended that the various alternatives were mutually exclusive and that if any one of them was satisfied, the contract would be a non-transferable contract. If, for example, the rights under a contract were not transferable, it would be a non-transferable contract, even if the liability under it was transferable or the rights under any of the documents of title relating to it were transferable. In Mr. Das''s view, any one of the many non-transferabilities would suffice. He then proceeded to submit that under the general law of contract, the benefit under a contract could always be transferred, but not the burden under it, except in the case of a novation and since, as a consequence, the liability under the present contract could not be transferred, it had to be treated as a non-transferable contract within the meaning of the definition given in the Act.

I find myself entirely unable to accede to Mr. Das''s contention. I may point out at once that if the contention was to be accepted, there could not possibly be any contract which would be a transferable contract, because every contract carries with it certain liabilities of one party or the other and if such liabilities could not be transferred under the law and the impossibility of such transfer made the contract itself non-transferable, every contract would have to be treated as of that character. The definition given in the Act would thus be completely robbed of its content and there would be no contract left on which the Act or any notification issued under it could operate. One should always hesitate to accept a construction of a definition clause in an Act which would render the whole Act nugatory, but I think there is enough indication in the language used by the Legislature in the present case that the definition does not mean what Mr. Das contended it did.

In aid of his main contention, Mr. Das invoked the well-known observation of Jessel, M.R., that in reality "or" could never mean "and" and that whenever it had to be held that although the word actually used was "or" what was meant was "and", one would have to find either that the word "or" had been used by mistake or that the context made it impossible to accept its disjunctive implication. To the text quoted from the great Master of the Rolls, Mr. Das added his own commentary that the provision in which the word "or" appeared in the present case being a definition clause, there could not possibly be any context to point to any particular meaning and certainly there was no reason to think that the Legislature had made a mistake in the use of words.

I am of opinion that in contending that there was no context in the present case, Mr. Das was not right. He was thinking of the opening words of the definition which like all definition clauses, say that certain words next set out will mean certain things "unless the context Otherwise "requires". That only means that if the words defined are found to occur in any provision in the body of the Act, it has to be seen whether the meaning given in the definition is excluded by the context in which the word appears in the relevant provision. The context contemplated is, therefore, the context of the words defined. If, for example the expression, "non-transferable specific delivery "contract" occurs anywhere in the body of the present Act, as it does at many places, one will have to see whether the definition given of the term in Section 2(f) can possibly be applied or whether there is something in the context, in which the expression appears, which excludes the application of the definition. In the present case, however, we are concerned not with the context of the expression "non-transferable specific delivery contract," but of the word "or" and as to that word, in my opinion, there is a compelling context which indicates that it must be read in the sense of "and". The manner of expression used in the definition is a familiar one and what is contemplated obviously is a total exclusion of transferability as respects any right or libility under either the contract itself or any of the relative documents. The contract, delivery order, railway receipt, bill of lading, warehouse receiptor any other document of title, constitute merely an enumeration of the subject-matters with respect to which neither rights, nor liabilities must be transferable and it is clearly not the intention of the definition that if the rights under any one of them or the liabilities under any one of them are not transferable, the definition will be satisfied. In my view, it is perfectly clear that all the non-transferabilities, if 1 may use that expression, must co-exist in order that "a specific delivery "contract" may be a non-transferable contract. The object of the Act is clearly to limit dealings in "specific delivery contracts" to the immediately contracting parties and consistently with that object of the Act, the definition excludes transferability in any shape or form and says that only when such complete exclusion can be posited, will a contract be treated as non-transferable.

For all the foregoing reasons, I am of opinion that the contention of Mr. Das that the contract in the present case is outside the mischief of the definition of "non-transferable specific "delivery contract" cannot possibly be accepted.

The remaining two points of Mr. Das can be disposed of briefly. As I have already stated, his client was not present before the learned trial Judge. The only foundation which exists for the constitutional grounds sought to be raised by Mr. Das is contained in para. 17 of the affidavit-in-opposition of his client. All that is stated there was that the contract in question "being typical in "the jute trade," the notification of October 29, 1953 constituted an unreasonable restriction on trade and was ultra vires the Article 19(1)(g) of the Constitution of India. In the objection so stated, it is impossible to read any meaning other than that the sole ground upon which the Appellant was impugning the Act and the notification was that they were violative of Article 19(1)(g). No other ground of attack on the constitutionality of the Act was even hinted at. It is, therefore quite impossible to allow Mr. Das to travel beyond the ground taken by his client before the learned Judge and to permit him to embark upon a general and more comprehensive attack against the Act. It must be borne in mind that not only did the Appellant not take any constitutional objection other than the objection to which I have just referred, but it was not even present before the learned Judge. To allow an Appellant to urge a point which he had not actually urged before the trial Court, having failed to appear there, is indulgence enough, but to allow him to urge in appeal a point which lie had not even taken in his petition of objection is plainly impossible. In the end, Mr. Das did not press his third point.

In fairness to him I must add that even with regard to the second point, Mr. Das ultimately told us that he thought he would not be right in asking us to trouble ourselves with it. The question raised by the second point is whether the undoubted interference with the right of entering into forward contracts regarding raw jute, which had been caused by the Act and the notification, amounted to an unreasonable restriction on the fundamental right to carry on trade or business. There is no absolute yard-stick of reasonableness. In order that a Court may judge whether a particular provision of law constitutes an unreasonable restriction on a particular fundamental right or does not, it must be put in possession of the circumstances of the case so that it may try to effect, so far as it lies in its power, a just and true balance between the rights of the individual and the claims of the society. It was, therefore, essential for the Appellant to place before the Court materials which would show what benefits were likely to accrue to traders from an unfettered exercise of the right of entering into forward contracts regarding raw jute how such contracts were innocuous and what would be the prejudice caused to traders by the restriction resulting from the Act and the notification. Except the averment in the affidavit-in-opposition which I have just read, there is nothing before us at all, that averment makes out nothing, because wide vogue of a particular mercantile practice cannot by itself, show that it is unexceptionable and ought to be protected. In my opinion, questions as to the reasonableness or unreasonableness of a restrictive provision of law cannot be considered or adjudged in vacuo and we could not possibly hold in Mr. Das''s favour merely on the statement of his client that the Act and the notification constituted an unreasonable restriction on its right to carry on trade or business and the same right of other persons, similarly placed. I need not, however, pursue this point further, as ultimately Mr. Das abandoned this contention as well.

For the reasons given above, all the contentions of Mr. Das fail. The appeal is, accordingly, dismissed with costs.

Lahiri, J.

I agree.