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T.G. Lakshmi Narayana Chetty and Brothers Merchants Adoni Vs. K.V. Nanjaiah Chetty - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAndhra Pradesh High Court
Decided On
Case NumberSecond Appeal No. 948 of 1960
Judge
Reported inAIR1965AP136
ActsIndian Contract Act, 1872 - Sections 23 and 30; Vegetable Oils and Oil Cakes (Forward Contracts Prohibition) Order, 1944
AppellantT.G. Lakshmi Narayana Chetty and Brothers Merchants Adoni
RespondentK.V. Nanjaiah Chetty
Appellant AdvocateN.M. Sastry and ;B. Rama Rao, Advs.
Respondent AdvocateO. Chinnappa Reddy, Adv.
Excerpt:
- motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers entitlement to defend the action joint appeal by insured and insurer - held, the language employed in enacting sub-section (2) of section 149 appears to be plain and simple and there is no ambiguity in it. it shows that when an insurer is impleaded and has been given notice of the case, it is entitled to defend the action only on grounds enumerated in sub-section (2) of section 149 of the act, and no other grounds are available to it. the insurer is not allowed to contest the claim of the injured or heirs of the deceased on other grounds, which are available to the insured. if insurer is permitted to contest the claim on other grounds it would mean adding more grounds of contest to the insurer.....venkatesam, j.(1) this appeal is by the plaintiff against the decision of the learned additional district judge, kurnool in a. s. no. 25 of 1958. the facts necessary for determination of the question in controversy may be stated thus :the plaintiff, who is a merchant of adoni carrying on business as a commission agent acts as pucca adithya. the 1st defendant is a merchant of hindupur and manager of the joint family consisting of himself, his father the 2nd defendant, and his brothers, defendants 3 to 5. the 1st defendant entered into a contract in may 1954 with the plaintiff for purchase of one wagon of groundnut oil for june delivery and also remitted rs. 500/- as advance. the plaintiff entered into a contract with one omechand kasiram (hereinafter referred to as kasiram) of adoni for.....
Judgment:

Venkatesam, J.

(1) This appeal is by the plaintiff against the decision of the learned Additional District Judge, Kurnool in A. S. No. 25 of 1958. The facts necessary for determination of the question in controversy may be stated thus :

The plaintiff, who is a merchant of Adoni carrying on business as a commission agent acts as pucca adithya. The 1st defendant is a merchant of Hindupur and manager of the joint family consisting of himself, his father the 2nd defendant, and his brothers, defendants 3 to 5. The 1st defendant entered into a contract in May 1954 with the plaintiff for purchase of one wagon of groundnut oil for June delivery and also remitted Rs. 500/- as advance. The plaintiff entered into a contract with one Omechand Kasiram (hereinafter referred to as Kasiram) of Adoni for the purchase of a wagon at Rs. 15-8-3 per maund for delivery in June, 1954 and intimated the 1st defendant of the same. Subsequently there was a gradual fall in the market price. The plaintiff paid Kasiram the difference between the contract rate and the market rate according to the clearance fixed by the Adoni Groundnut Seeds and Oil Merchants' Association, of which both of them were members, and demanded the 1st defendant for payment of the same. Towards the end of June, 1954, the plaintiff called upon the 1st defendant, by a notice, to take delivery of oil or pay the difference in prices and his commission. The 1st defendant then repudiated the contract on the ground that it is a wagering contract and hence the suit.

(2) The 1st defendant resisted the suit contending that the family is not joint, that he never agreed to pay any commission to the plaintiff, that there was no intention to give or take delivery of the goods, that the performance of the contract was not intended, but the intention was to give and take differences between the contract rate and the prevailing market rate in June, and that the suit contract is forbidden by the Oil Seeds and Oil Forward Contract Order.

(3) Defendants 2 to 5 denied the fact of their members of the joint family or the 1st being the manager thereof.

(4) The learned District Munsif on a consideration of the evidence found that defendants 2 to 5 are not member thereof. That finding was not challenged even in the lower appellate Court and has become final. he further found that the dealings between the parties constituted a wagering contract which is not enforceable under s. 23 of the Contract Act and that the transaction is also prohibited by the Vegetable Oils and Oil Cakes (Forward Contracts Prohibition) Order 1944 (hereinafter referred to as the Vegetable Oils Order). He further found that the plaintiff acted as the pucca adithya of the 1st defendant, and in view of the findings he dismissed the suit.

(5) On appeal the learned Additional District Judge, Kurnool framed two points for determination : (1) whether the suit contract constitutes a wagering contract and hence unenforceable under Section 23 of the Indian Contract Act and (2) Whether the suit contract is prohibited by the Vegetable Oils and Oil , Cakes (Forward Contract Prohibition) Order 1944 He found on the first point that even at the inception the parties had no intention to give or take delivery. But their intention was only to pay the differences between the contract rate and the rate obtaining in June, 1954 and hence the suit contract is a wagering contract prohibited under Section 23 of the Contract Act. The learned District Judge agreed with the trial Court on the other point also and held that the suit contract is prohibited by the Vegetable Oils Order.

(6) Aggrieved by this decision, the plaintiff has preferred this appeal and contended that the findings of the lower appellate Court on both the points are unsustainable. The question arising for consideration are whether the transaction between the plaintiff and the defendant is in the nature of a wagering contract, and whether it is hit by the Vegetable Oils Order, 1944 and for their solution it is necessary to examine the law bearing on the point.

(7) The incidents of the relationship between a pucca adithiya and his constituent, and whether a transaction between them amounts to a wager or not, has been the subject of a number of Judicial decisions, and it will be supererogatory to make a detailed examination of those decisions. The well established principles may however, be stated here.

(8) Omitting unnecessary words, S. 23 of the Contract Act lays down that :

'The consideration or object of an agreement is lawful, unless - it is forbidden by law ; or is of such a nature that , if permitted, it would defeat the provisions of any law ; or is fraudulent ; or ............

In each of these cases, the consideration or object of an agreement of which the object or consideration is unlawful is void.'

Section 30 lays down omitting unnecessary words that :

'Agreements by way of wager are void ; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made ........................'

Examining the scope of these two sections, the Supreme Court in Gherulal Parakh v. Mahadeodas Maiya, : AIR1959SC781 held that Section 30 of the Indian Contract Act is based upon the provisions of S. 18 of the Gaming Act of 1945 in England, and that though a wager is void and unenforceable, it is not forbidden by law, and therefore, the object of a collateral agreement is not unlawful under Section 23 of the Contract Act, and that a partnership being an agreement within the meaning of Section 23 of the Indian Contract Act is not unlawful, though its object is to carry on wagering transaction. The common law of England and that of India have never struck down contracts of wager on grounds of public policy. Indeed, they have always been held to be not illegal, notwithstanding the fact that the statutes have declared them void. Their Lordships held that even after the contracts of wager were declared to be void in England, collateral contracts were in force till the passing of the Gaming Act, 1892, and that in India, except in the State of Bombay, by reason of the Gaming Act, XXI of 1848, passed in that State, the collateral contracts were enforced.

(9) Wagering contracts dependent on future rise and fall in prices of commodities are generally quoted in the form of forward contracts for the sale or purchase of the commodity. In those cases the Court will look into not the mere form but the substance of the transaction, and will take into account not only the terms of the contract but the surrounding circumstances and the conduct of the parties. The test for distinguishing such forward contracts of wager from ordinary, commercial transactions is by ascertaining whether, neither of the parties intended the actual transfer of the goods. Kong Yee Lone and Co. v. Lowjee Nanjee, ILR 29 Cal 461 (PC), Bhagwandas Parasram v. Burjorji Ruttonji Bomanji, ILR 42 Bom 373 : (AIR 1917 PC 101) and Sakhdevdoss Ram Prasad, a Firm v. Govindoss Chaturbhujadoss and Co. , ILR 51 Mad 96 : (AIR 1928 PC 30). When such is the intention it is not a commercial transaction but a wager on the rise or fall of the market which comes within the connotation of 'gambling'. The important point however, to be noted is that the intention not to transfer goods must be not merely of one of the parties but of both the parties to the contract at the time of entering into the contract. Thus the mere fact that one of the parties is a speculator and arranged the transaction so that differences became payable would not make the contract a wagering one or render it void if the other party intended to transfer the goods.

(10) The customary incidents of business between a constituent and a pucca adithiya were laid down in the leading case of Bhagwandas v. Kanji, ILR 30 Bom 205 thus :

'(1) That the pakka adatia has no authority to the pledge the credit of the upcountry constituent, to the Bombay merchant, and that no contractual privity is established between the upcountry constituent and the Bombay merchant.

(2) That up-country constituent has no indefeasible right to the contract (if any) made by the pakka aditia on receipt of the order, but the pakka aditia may enter into cross contract with the Bombay merchant either on his own account or on account of another constituent, and thereby for practical purposes cancel the same.

(3) The pakka adatia is under no obligation to substitute a fresh contract to meet the order of his first constituent.'

The contract between them is one of employment or reward, and the contract of pakka adatia is one whereby he undertakes or guarantees that delivery should, on due date, be given or taken at the price at which the order was accepted or difference paid ; or in other words he undertakes or guarantees to find goods for cash or cash for goods or to pay the differences, ILR 42 Bom 373 : (AIR 1917 PC 101).

(11) In Ram Dev Jai Dev v. Seth Kaku, AIR 1950 EP 92 (FB), S. R. Das, C. J. , (as he then was) laid down :

(1) when a pucca adatia under instructions of the constituent puts through a contract, in such contract the constituent and the pucca adatia are the contracting parties as principals and a new relationship as between principals arises between the constituent and the pucca adatia with respect to the individual contracts so concluded.

(2) A pucca adatia may or may not cover himself by entering into contract with third parties but if he does, he does so entirely on his own account and no privity is established between the constituent and the third parties and the constituent has no concern with such covering contracts with third parties and cannot call upon the pucca adatia to account for those contracts. The profits or losses arising out of these covering contracts with third parties are entirely the concern of the pucca adatias.

(3) The pucca adatia stands in a dual relationship with the constituent, namely, he is an agent for the purpose of quoting market price and putting through contracts under instructions of his constituent although he may allocate the contract to himself and he is also a principal with respect to the contract he as agent actually concludes with himself. The two distinct relationships subsist side by side.

In Kishan Lal v. Bhanwar Lal, : [1955]1SCR439 a firm A carried on the business of commission agents both at Indore and Jodhpur. B from Jodhpur entered into several forward contracts for the purchase and sale of bullion through the firm at Indore and these transactions proved unprofitable to B and the loss and the entire amount was paid to third parties at Indore by A on behalf of B. B pleaded inter alai that the transaction amounted to wagering contracts which were illegal by reason of a notification issued relating to purchase and sale of bullion under the Defence of India Rules and the suit was not maintainable. It was held by the Supreme Court that the suit was really not one to enforce any contract relating to purchase or sale of bullion which came within the prohibition of the notification, and it was a suit by an agent claiming indemnity against the principal for the loss which the agent had suffered in carrying out the directions of the principal and the right to such indemnity was founded on Section 222, Contract Act. It was found in that case that A had paid the losses resulting from the transactions to third parties, on behalf of B in exercise of the authority conferred upon A by the latter, and that they were lawful because all the transactions took place where the notification did not apply. Their Lordships held that the right to indemnity is an incident of contract of agency and is not hit by the notification at all and was a matter which was entirely collateral to a forward contract of purchase and sale of bullion which the notification aimed at prohibiting, and that the suit was maintainable.

(12) These principles were also laid down by a Bench of this Court in Jethmal v. Nevatia and Co. , (1962) 1 Andh WR 331 : (AIR 1962 Andh Pra 350) by Umamaheswaram and Krishna Rao, J J .

(13) Bearing them in mind we shall examine the facts of the instant case. The case in the plaint was that the plaintiff's firm dealt in Oil Seeds, cake and cotton for themselves and on behalf of customers as pucca adithya and commission agents according to the rules and by-laws of the Adoni Groundnut Seeds and Oil Merchants' Association, (hereinafter called the Adoni Association). The defendants agreed to pay the plaintiff commission at Rs. 42/- per wagon (1000 local maunds) of ground-nut oil and incidental expenses.

On 3-5-1954, the defendants sent a telegram (Ex. A.1) to the plaintiff asking him to purchase one wagon for June delivery. To that the plaintiff replied by wire (Ex. A. 2 dated 3-5-1954) that the price of ground-nut oil for June delivery was Rs. 15-7-6 per maund and that advance may be remitted. On receipt of the same, the defendants sent another telegram (Ex. A. 3 dated 4-5-1954) authorising the plaintiff to purchase one wagon for June delivery and that he was remitting advance of Rs. 500/-. Ex. A. 4 is a letter dated 4-5-1954 also addressed by the defendants to the plaintiff confirming Ex. A. 3 and adding 'I hope you might have executed the order and wired the same by this time'.

Thereupon the plaintiff entered into a contract Ex. A. 5 with Kasiram of Adoni for one wagon of groundnut oil at Rs. 15-8-3 per Maund to be delivered from 5th to 25th of June, 1954. Place of delivery was mentioned therein as the seller's godown within the municipal limits of Adoni. It was printed in Ex. A. 5, that the contract or any document of title to the goods such as delivery orders, railway receipts, bills of lading against the contract or any of them referred to therein shall not be assignable or transferable by seller or buyer to any third party. Ex. A. 5 was signed on behalf of Oomechand Kasiram and Co. , by one D. Madal and by the 1st defendant on behalf of T. G. Laxminarayana Chetty and Bros. It mentioned that the transaction was brought about by the broker Amritlal Parakh and that one thousand maunds of oil was purchased for June delivery. Execution of Ex. A-5 was also intimated to the defendants by means of a telegram (Ex. A. 5).

The plaintiff states that under the by-laws of the Adoni Association undue fluctuations and speculation was prevented by fixing ordinary and special clearing rates for ground-nut seeds and oil on the last working day of the month and the day for payment being on that basis. There was a fall in the price of ground-nut oil in June and the contract with Kasiram was settled for the differences in the prices. The amount now sued for consists of those differences together with the agreed commission, brokerage and incidental expenses and interest at 1 % and there is no dispute about the correctness of the figures, The plaintiff sent a consolidated bill to the defendants on 26-6-64 for Rs. 2207-13-6 with interest at 1 % demanding its payment. It is clear that the plaintiff had not based his claim as one for indemnity but on the footing that he having paid the differences he became entitled to the amount.

(14) The defendant in his written statement expressly pleaded that he wanted to try his luck in the forward contracts business by investing a small sum and entered into the suit contract. It was not a ready contract at the market rate ruling on that day. There was no intention to give delivery or take delivery. The intention of both parties was to give and take differences between the contract rate and the rate ruling at the end of June. The idea of the plaintiff and the defendant was only to wager on the difference in price which would obtain for oil in June. The defendants also contended that the plaintiff had no business to pay any differences to the so-called seller and the plaintiff himself was the seller and that he was not authorised to buy from any outsider. He further alleged that the plaintiff admittedly did not take delivery from the so-called seller but settled the differences as there was no intention to give or take delivery even as between them.

(15) P. W. 1 deposed that he purchased one wagon of ground-nut oil at Rs. 15-8-3 from that he did pucca adithya business, that Oome Chand and 1st defendant have no connection and that he (the plaintiff ) was responsible for the contract by both Oomechand and 1st defendant. He was now and then informing the 1st defendant about daily market. If there is failure to deliver according to the rules of the association, he was entitled to claim the difference between the contract rate and the market rate as damages and that monthly clearing and special clearing are in force. In case the party fails to pay, he would be treated as a defaulter and removed from the association. He (the plaintiff ) had to deal with the members of the association and not others.

It may be mentioned that the 1st defendant is resident of Hindupur and is not a member of the Adoni Association and was not bound by its rules, relating to 1st defendant and the several accounts debiting the 1st defendant with the several sums referred to above paid by him to Kasiram. He also filed Ex. A. 39, a registered letter from the 1st defendant to him. He added that he was always ready to deliver the stock. He deposed that the goods contracted under Ex. A 5 were of specific quality ground-nut expeller Oil below 2 per cent / 3 per cent F. F. A. content clear filtered. P. W. 1 admitted in cross-examination that he did not take any delivery of the consignment whenever he contracted on behalf of another, and that he did not enquire about the financial status of 1st defendant or what capital the defendants were doing business. In re-examination he deposed that out of 350 wagons he delivered 100 wagons, and the rest were settled by cross-contracts.

(16) In his evidence D. W. 1 deposed that P. W. 1 represented to him that the business transaction was a forward contract and the business was to proceed on the line that if the market rate were to fall the loss was to be paid to P. W. 1 and if there was to be gain P. W. 1 had to pay him (D. w. 1) and there was no condition that the defendants should take actual delivery of the goods. P. W. 1 wanted an advance of eight annas per maund but not as the agent of the 1st defendant. It is no doubt true that Ex. A. 5 mentions the place of delivery as the sellers godown at Adoni. But as already stated it is the substance of the transaction that has to be looked into for determining whether it is a wager or not. The plaintiff admittedly settled the differences with Kasiram. There is no evidence on record to show that both the parties intended that there should be delivery of goods. Plaintiff's own account books Exs. A. 29, A. 32 to A. 37 do not show that delivery of goods was ever made but they only prove that differences were settled with Kasiram.

Viewed as a contract between the plaintiff and the 1st defendant, the circumstances do not warrant the inference that the plaintiff intended to deliver or the 1st defendant intended to take delivery of the wagon of ground-nut oil. In fact the 1st defendant has no shop or godown at Adoni and is not even a resident of that place. Moreover there is clear admission of P. W. 1 that he did not take any delivery of the consignments whenever he contracted on behalf of another, which clearly establishes that in the instant case also he did not intend to take delivery of thousand maunds and Rs. 500/- was sent. There was no contract form sent and P. W. 1 merely sent a telegram accepting the contract. At the time when he commenced the business the market rate was falling. The witness had only one house and ancestral house worth Rs. 2000/- in which he and his brothers were all residing . He never intended to do business in ground-nut oil. He had no capital. He is a clerk in a private shop. He gave reply to Exs. A. 38 and A. 39 that the contract is a wagering contract. In cross-examination he stated that he traded in borrowed Rs. 40,000/- on security of others, that he had not paid any income-tax and that the turnover was two or three lakhs and that he sustained loss of Rs. 2000/- or Rs. 3000/-.

(17) It may be noted at the outset that the terms of the contract between the plaintiff and the defendants have to be gathered from the correspondence between them. It is the plaintiff's case that he acted as pucca adithya in respect of the suit transaction. According to the authorities the relation between the appellant and the 1st defendant is that of a principal and another principal but not of a principal and agent. The first telegram Ex. A. 1 dated 3-5-1954 does not even specify that the commodity required by the defendants is ground-nut oil. Likewise the telegram Ex. A. 3 under which remittance of Rs. 500/- was intimated does not specify the goods to be purchased. It is only for the first time in Ex. A. 4 that reference to the purchase of one wagon of ground-nut oil for June delivery was made. In his telegram Ex. A. 4 the plaintiff no doubt stated that one wagon of oil was purchased for June delivery. But it does not state that he purchased it on the plaintiff with Kasiram (Ex. A. 5) has already been referred to. The account books of Omechand Kasiram have not been produced to show the entries on the relevant dates, or that the plaintiff purchased goods from him on behalf of the 1st defendant. It is very significant to note that Ex. A. 5 does not mention that the buyer was the 1st defendant. Nanjiah Chetty on that the plaintiff firm entered into the contract on behalf of the 1st defendant. This coupled with the evidence of p. W. 1 fortifies the conclusion that he entered into the contract with Kasiram as principal of the goods, as usual with him. Relying on all these circumstances, the Courts below held that there was no intention on the part of the parties to give or take actual delivery, and their intention was only to pay the differences between the contract rate and the rates obtaining in June, 1954, and the suit contract is a wagering contract.

(18) It is laid down in Halsbury's Laws of England, Volume 18, page 171, Para 344 (Simond Edition) thus :

'As in the case of any other contract, so in the case of a wager, the intention of the parties is a question of fact, and the Court will look beyond the form in which the parties have couched the transaction as to ascertain it'.

(19) For this statement reliance was placed on Carlill v. Carbolic Smoke Ball Co. , (1892) 2 Q. B. 484.

(20) The position under the Indian Law is the same. In Chimanlal Purshottamdas v. Nyamatrai Madhavlal, AIR 1938 Bom 44, it was held that in a wagering contract the common intention of both the parties at the time of entering into the contract must be not to call or give delivery from or to each other and that such intention is a question of fact. There can be hardly be any direct evidence of it, and, though an agreement in writing may ostensibly be for purchase and sale of goods deliverable on a certain day, oral evidence is admissible to prove that the intention of the parties was only to pay the difference. It was therefore held that in order to ascertain the real intention of parties, the court must look to all the surrounding circumstances, and can go even behind the written contract.

(21) It was laid down by the Privy Council in Bala Subrahmanya v. Subbayya AIR 1938 PC 34 that whether a particular intention can be referred from a particular set of circumstances is rather a question of fact than of law. It is well, settled that finding of the lower Court with regard to the nature of the transaction are conclusive in second appeal. The jurisdiction of the High Court to interfere in Second appeal has been subject of several decisions of the Supreme Court and it is laid down that the High Court will interfere with the conclusions of the lower appellate court, only if it is satisfied that the decision is contrary, to law or to some usage having the force of law, that the decision has failed to determine some material issue of law or usage having the force of law; and that there is a substantial error or defect in the procedure provided by the Code of Civil Procedure, which may possibly have produced error or defect in the decision of the case upon the merits. The error referred to is one connected with or related to procedure and not an error or defect in appreciation of evidence. If a finding of fact has been recorded by the first appellate court without any evidence that finding can be successfully challenged in second appeal because finding of fact not supported by evidence by a question under section 100, C. P. C.

(22) It cannot be said that in the instant case there is no evidence at all warranting the conclusion of the lower appellate Court regarding the intention of the parties or that there is any error or defect in procedure. We therefore cannot interfere with this conclusion of the lower appellate Court.

(23) Sri N. M. Sastry, learned counsel for the appellant placed considerable reliance on a decision of a Bench of this Court in (1962) 1 An W. R. 331 : (AIR 1962 Andh Pra 350) (supra) and contended that in this case also it should be held that the suit contract is not a wagering contract. We are unable to accede to that contention for these reasons. The learned Judge in that case relied on the circumstances that the defendant placed cross-orders for purchases and sales of equal quantities in respect of each month's delivery, which showed that there could not have been an initial agreement to settled by differences. There was also the circumstance that the defendants at the trial raised no dispute as to the fact of the plaintiff having put through the defendants' orders by entering into corresponding contracts with third parties. Their Lordships observed at page 336 (of Andh W R) : (at p. 354 of AIR ) :

'The plaintiff's claim in the present suit has to be regarded as being based on their right to recover the difference between the purchase and sale prices. which was due to them as principles under the contracts with the defendants in terms of the orders which the plaintiffs put through.'

After discussing the evidence , the learned judges concluded that none of the circumstances pressed into service by the defendant advanced his case that there was an agreement by which delivery of goods was dispensed with and differences only were paid. They followed the decision of the Privy Council in ILR 42 Bom 373 : (AIR 1917 PC Privy Council in ILR 42 Bom 373 : (AIR 1917 PC 101) (supra) and : [1955]1SCR439 (supra) that even a pucca adithya in so far as he is an agent of his employer may successfully maintain a suit to recover the loss sustained by him virtue of his right to indemnity under S. 222 of the Contract Act and such a suit is not hit by Section 30.

We have already held that conclusion of the lower Court that the contract between the plaintiff and the 1st defendant is a wagering contract has to be accepted, and this decision is therefore of no assistance to the appellant.

(24) The next point for consideration is whether the suit contract is prohibited by the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order, 1944. The said Order was promulgated on the 8th January, 1944. The expression, 'forward contract' was defined in clause 2 (iii) as a contract for delivery at some future date of any article to which the order applied. Under the provisions of clause (iii) no person shall after the 8th January, 1944 enter into any forward contract in ground-nut and clause 5 authorises the Central Government by notification to exclude any contract or any class of contracts from the provisions of the Order. Pursuant to clause 5, the Government of India issued the following notification on 8th January, 1944.

'In exercise of the power conferred by clause 5 of the Vegetable Oils and Oilcakes (Forwarded Contracts Prohibition) Order, 1944, the Central Government is pleased to exclude the following class of contracts from the provisions of the said Order, namely :

Forward contract for specific qualities or types of any article to which the said Order applies and for specific delivery at a specified price, delivery orders, railway receipts or bills of lading against which contracts are not transferable to third parties.'

The scope and effect of this notification was considered in a number of cases of this Court as well as by other High Courts. The effect of this notification has been stated in Firm Hansaraj Keshavji and Co. v. Vasanji, (1949) 4 D. L. R. (Bom) 7 :

'The only classes of cases of forward contracts which were exempted were those which contained in them the guarantee against speculation by reason of a provision that the Deliver, Orders, Railway Receipts or Bills Lading (which were contemplated by the contracts and would be issued), should not be transferable to third parties. In other words the persons in whose favour the delivery orders, railway receipts or bills of lading were issued were to be the very persons who should get those goods and that would check speculation. The property in such cases would not pass by the negotiations of the document nor delivery by made possible to any person who becomes the holder of he document. In my opinion, if delivery orders were contemplated under these contracts, they were illegal as the delivery orders were not made non-transferable. If delivery orders, railway receipts or bills lading were not contemplated under the contracts then the exemption (which deals with cases where delivery orders, railway, receipts or bills of lading are issued), has no application'.

This view was followed in Seetharamaswami v. Bhagavathi Oil Co., (1951) 1 Mad L. J . 147. In the later case it was held that there must be an express prohibition on the contract itself preventing the parties from transferring delivery orders railway receipts and bills of lading. The same construction was adopted in an unreported decision of this Court in Appeal No. 867 of 1953 decided on 17th April, 1958 (AP), and in Venkateswami v. Hanura Noor Md. Begum, 1955 Andh W. R. 91 : (AIR 1956 Andhra 9) and in V. Krishna Rao Batchu Guravayya and Co. Amravathi v. Ghouse Ahmed Khan 1956 Andh W. R. 941 : (AIR 1957 Andh Pra 37).

(25) In Khardah Co. Ltd. v. Raymon and Co. (India) Private Ltd. AIR 1962 S. C. 1810 the Supreme Court/ had to adjudicate upon the validity of a forward contract relating to jute. By section 17 clause (2) of he Forward Contracts Regulation Act 74 of 1952 forward contracts in contravention of the provisions of Sub-section (1) of S. 17 were declared illegal, but the notification did not apply to non-transferable specific delivery contracts for the sale or purchase of any goods. In a dispute relating to non-delivery of jute, which was one of the commodities to which the Act was made applicable, it was urged that in the absence of a specific clause prohibiting transfer in the contract itself, the plea that the contract is not transferable is not open to the party supporting the contract and that evidence aliunde is not admissible to establish the condition. In support of that argument reliance was placed on (1951) 1 mad L. J. 147 and Hanumanthiah v. U. Thimmaiah, : AIR1954Mad87 and Hussain Kasam Dada v. Vijay Nagaram Commercial Association, : AIR1954Mad528 , Venkatarama Aiyar J., speaking on behalf of the court observed thus :-

'The terms of a contract can be express or implied from what has been expressed. on the question whether there was an agreement between the parties that the contract was to be non-transferable, the absence of a specific clause forbidding transfer is not conclusion. What has to be seen is whether it could be held on a reasonable interpretation of the contract, aided by such consideration as can legitimately be taken into account that the agreement of the parties was that it was not to be transferred. When once a conclusion is reached that such was the understanding of the parties, there is nothing in law which prevents effect from being given to it.'

(26) This was followed by the Supreme Court in a later case in Thakkar Hemraj Keshavji v. Shah Haridas Jethabhai, C. A. No. 164 of 1961 of the Supreme Court D/- 29-3-1963 : [1964]2SCR686 which involved the interpretation of the Saurashtra Groundnut and Groundnut Products (Forward Contracts Prohibition) Order, 1949 the provisions of which are in pari materia with the Vegetable Oils Order in question. Shah Justice, speaking on behalf of the Court held that

'From the absence of a clause expressly prohibiting transfer of the contract against delivery orders, railway receipts or bills of lading it cannot be inferred that the contract is transferable. The question whether an impugned contract is transferable must depend upon the language of the contract interpreted in the light of surrounding circumstances, and silence of the contract cannot be regarded as an indication of transferability much less would it justify an inference that it is transferable'.

In the light of these two Supreme Court decisions, the view expressed by the Bombay, Madras and Andhra Pradesh High Courts in the cases cited above can no longer be held to be valid.

(27) The question whether the contract between the plaintiff and the 1st defendant falls within the exemption provided for by the Vegetable Oils Order, 1944, even in the case of Ex. A. 5 the contract between plaintiff and Kasiram, has therefore to be decided not merely by the language of the contract, but also upon the surrounding circumstances. We have already held that none of the transaction in which the plaintiff acted on behalf of third parties had taken delivery of the goods. From this it follows that even the contract between the plaintiff and Kasiram is one of a speculative nature, falling within the main provisions of the Vegetable Oils Order and not governed by the exemption. We have further found that the dealing between the plaintiff and defendants are in the nature of wagering contract and speculative. The finding of the courts below that the transaction offends the Vegetable Oils order is correct, and the appellant's contention on this point also must fail.

(28) In the result both the contentions fail, and the appeal is dismissed with costs.

(29) Appeal dismissed.


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