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Hiralal Pannalall Vs. Dalhousie Jute Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberAward Case 70 of 1976
Judge
Reported inAIR1978Cal119,81CWN1061
ActsArbitration Act, 1940 - Sections 2 and 30; ;Evidence Act, 1872 - Section 115; ;Forward Contracts (Regulation) Act, 1952
AppellantHiralal Pannalall
RespondentDalhousie Jute Co. Ltd.
DispositionPetition allowed
Cases ReferredWaverly Jute Mills v. Raymon and Co.
Excerpt:
- .....1966 (sic) the central government duly applied section 15 of said act to transferable specific delivery contract relating to raw jute, inter alia, in the state of west bengal, by another notification the central government granted recognition to east india jute and hessian exchange ltd. calcutta in respect of forward contracts for raw jute. no other association was recognised by the central government in respect of raw jute. at all material times both the petitioner and the respondent were members of the said association. it may be mentioned and it has not been disputed, that the contract in this case was a 'forward contract' and was a 'transferable specific delivery contract' and was not a 'ready delivery contract' within the meaning of the said act. under section 11(1) of the said.....
Judgment:
ORDER

Sabyasachi Mukharji, J.

1. Award No. 118 of 1969 made by the Tribunal of Arbitration, Bengal Chamber of Commerce and Industry on 26th of Aug. 1969 is impugned in this application under Sections 30 and 33 of the Arbitration Act, 1940. Hiralal Pannalall is a firm registered under the Indian Partnership Act and is the petitioner in this application. On the 1st of July, 1968 the petitioner agreed to sell and the respondent Dalhousie Jute Company Ltd. agreed to buy 251 bales of 180 Kilograms each, of Dhubri Jute consisting of 76 bales of Mill Firsts quality at the rate of Rs. 441/- per bale and 175 bales of Mill Lights quality at the rate of Rs. 4017-per bale for shipment and/or despatch during July and/or August and/or September 1968. The contract was entered through the broker Messrs. Prakash Trading Company. The said contract was by a letter to the following effect:

'Dear Sirs,

Letter Contract No. L/101 E of 1-7-1968.

We have this day SOLD by your order and on your account to Messrs. Dalhousie Jute Co. Ltd., Calcutta the following :

Crop:1968-69Quantity:251 BalesAgency:Dhubri (ASSAM)Marks:H. P.Assortment and Price:MILL FIRSTS 76 B/s. @ Rs. 441 per bale of 180 Kgs. Mill Lights 175 E/s. @ Rs. 401/- per bale of 180 Kgs.

Shipment:July &/or August &/or September 1968 Ex: DhubriDelivery to:Dalhousie Jute MillPayment:Cash against documentsArbitration:The Bengal Chamber of Commerce & IndustryReweighment:Calcutta Licensed Measurers.Insurance:To be cared for by sellers through Buyer's agency withAll other terms and conditions as per T. S. D. Contract. Brokerage @ 1% Yours faithfully, for PRAKASH TRADING COMPANY Sd. A. C. Bhuna, Partner.'

According to the petitioner the said contract is a purported contract. The respondent extended the due date for delivery under the said contract and the last of such extension was granted by the respondent, by the letter dated 2nd of January, 1969, upto 31st of Jan., 1969. The petitioner contended that the respondent had failed and neglected to perform its part of the contract and had refused to make payment. The respondent on the other hand contended that the petitioner had committed breach of the contract by refusing to deliver the goods and therefore, the respondent cancelled the contract and claimed two several sums of Rs. 8,664 and Rs. 16,065/-by way of difference between the contract rate and the market rate. As the petitioner failed to make payment in respect thereof the respondent referred the claim for a sum of Rs. 24,729/- to the Tribunal of Arbitration, Bengal Chamber of Commerce and Industry. On the 26th of Aug. 1969 the Tribunal of Arbitration of the Bengal Chamber of Commerce and Industry gave an award in favour of the respondent. The petitioner states that the petitioner received the notice of the making of the said award on the 28th of Aug., 1969. On that date before the receipt of the notice of the making of the award the petitioner instituted a suit being Suit No. 2323 of 1969 against the respondent, inter alia, for a declaration that the purported contract between the parties was dishonest, void, illegal invalid and unenforceable. On the 26th of November, 1969 the respondent made an application in the said suit praying, inter alia, that the plaint be rejected and/or for permanent stay of the suit. The suit application came up for hearing before Mr. Justice S.K. Roychoudhury and by an order dated 14th of November, 1975 the learned Judge directed as follows :

'Therefore in the undisputed facts, I am satisfied that the present suit is barred under Section 32 of the Arbitration Act, 1940 and as such is not maintainable. I am making it, clear that this decision of mine will not in any way affect the right, if any, of the respondent to challenge the award according to law if he has got any right to do so. In the result I am making the following order :

There will be an order in terms of prayer(s) directing the plaint in this Suit No. 2323 of 1969 be taken off the file.

No order as to the costs.'

2. At all material times the Forward Contracts (Regulation) Act, 1952 was in force throughout the whole of India. By Notification No. S. O. 375 dated 29th of March, 1968 as amended by Notification No. 331 dated 27th of January, 1966 (sic) the Central Government duly applied Section 15 of said Act to Transferable Specific Delivery Contract relating to raw jute, inter alia, in the State of West Bengal, By another Notification the Central Government granted recognition to East India Jute and Hessian Exchange Ltd. Calcutta in respect of forward contracts for raw jute. No other association was recognised by the Central Government in respect of raw jute. At all material times both the petitioner and the respondent were members of the said association. It may be mentioned and it has not been disputed, that the contract in this case was a 'Forward Contract' and was a 'Transferable Specific Delivery Contract' and was not a 'Ready Delivery Contract' within the meaning of the said Act. Under Section 11(1) of the said Act power has been given to the said association to make bye-laws for the regulation and control of Forward Contracts. Under Section 11(2) of the said Act such Bye-laws might provide for terms, conditions and incidence of contracts including the forms of contracts in writing as also regulating the entering into, making, performance, rescission and determination of contracts etc. Under Section 11(3) of the said Act the said Bye-laws might specify the Bye-laws the contravention of any of which would make Forward Contract entered into otherwise than in accordance with Bye-laws illegal under Sub-section (3A) of Section 15 of the said Act and under Section 15(3A) of the said Act it is provided that any contract for goods which on the date of the contract, is in contravention of any of the Bye-laws specified in this behalf under Clause (aa) of Sub-section (3) of Section 11 shall be illegal. It appears that the said association had duly framed Bye-laws for trading in Transferable Specific Delivery Contracts in jute which are contained in the Working Manual Vol. III duly published by the said association. Some of the said Bye-laws contained in Chap. V of the said Working Manual are as follows :

'1 (b) All transferable specific delivery contracts shall be in writing in the prescribed forms (Annendix II for Jute Goods and Appendix IV for raw jute) serially numbered and supplied by the Association on payment.

(c) No such contract in any delivery or deliveries as aforesaid shall be entered into before such date as may be fixed in that behalf by the Board with the prior concurrence of the forward market commission.

Provided that subject to provisions contained in Bye-laws 2 herein below the prohibition contained in this clause shall not apply to contracts in respect of Jute goods of any description entered into, to cover actual sales effected of such goods for export outside India.

7. The Board may frame rules under the Bye-laws for the conduct of business, that is, for the control and regulation of dealings in T. S. D. contracts (including pucca Delivery Orders) in Jute goods and/or raw jute by its members. Such rules when adopted shall duly be notified with the prior concurrence of the commission.

8. The Board shall have the power to alter, amend any of the rules with the prior concurrence of the commission 12 (a). The Board may, by a resolution passed by itself and concurred in by the Forward Markets Commission, impose such conditions as, in the opinion of the Board, may be necessary in the public interest or in the interest of the trade for regulating the entering into, making, performance, rescission and termination of Transferable Specific Delivery Contracts in raw jute and/or jute goods including contracts between members or between a commission agent and his constituent or between a broker and his constituent, or between a member of the Association and a person who is not a member, and the responsibility of commission agents and brokers who are not parties to such contracts.

16. No member shall enter into any transferable specific delivery contract in raw jute and/or jute goods otherwise than on the terms and conditions prescribed under these Bye-laws.

17. Any transferable specific delivery contract entered into in raw jute and/or jute goods which at the date of the contract is in contravention of the provision of any of the Bye-laws 1 (c), 13, 14, 15 and 16 of Chap. V shall be illegal under the provisions of Section 15(3A) of the Forward Contracts (Regulation) Act, 1952'.

3. By the notification dated 31st of Oct., 1960 the Board of Directors of the said asssociation had decided that thenceforward until further notice all Transferable Specific Delivery Contracts in all varieties of raw jute shall be registered with the said association within 3 days of the completion of the business under the said contracts in the manner prescribed in the said notice. By another notice bearing No. TSDC dated 31st of Oct., 1962 the said association had further notified all members of the said association that the Board of Directors of the said association with the consent of the Forward Market Commission, Government of India had decided that all Transferable Specific Delivery Contracts in all varieties of raw jutes were required to be submitted to the association for registration within 3 working days of the completion of the business under any of the said contracts. By another notice dated 26th of December, 1964, the said association had informed all the members that the Board of Directors with the concurence of the Forward Market Commission had introduced the centralised system of supply of Transferable Specific Delivery Contract Forms from the said association with effect from 1st of February, 1965. The prescribed Transferable Specific Delivery Contract Forms with the serial numbers thereon shall be issued by the said association and that such forms shall be compulsorily used by the members, brokers and all other concerned in passing Transferable Specific Delivery Contracts for raw jute with effect from 1st of Feb. 1965. The form prescribed by the association is included in Appendix V of the said Working Manual, Vol. III and the said form contains, inter alia, the following terms :

'The foregoing terms and conditions as well as other terms and conditions applicable to this contract are as per the terms and conditions of the Transferable Specific Delivery Contract for raw jute of the East India Jute and Hessian Exchange Ltd., Calcutta, and are subject to the Bye-laws of that Exchange for trading in Transferable Specific Delivery Contracts for raw jute Brokerage at ... ... ... ... per cent.

Yours faithfully. Member/Licensed Broker. The East India Jute & Hessian Exchange Ltd.'

4. In this application the petitioner contends that the contract in question was not in the form prescribed. It is apparent that it did not contain the term set out in the foregoing paragraph. On behalf of the respondent it was urged that the broker was a licensed broker and/or member of the East India Jute and Hessian Exchange Ltd. There is, however, no evidence or averment to that effect. It must therefore be held that the contract was not in the prescribed form in the instant case. It did not contain any serial member issued by the said association. The contract was, further, not registered with the said association either within 3 working days of the completion of the business under the said contract or not at all. The contract was not entered into by the form issued by the association for the purpose of entering into such contract. In the aforesaid view of the matter the contract in question must be held to be illegal and void under Section 15(3A) of the said Act. In this case the term which was absent from the contract letter between the parties is a material term in my opinion. In view of the decision of the Supreme Court in the case of Meghna Mills Co. Ltd. v. Ashoke Marketing Ltd., : [1971]2SCR751 , and the decision in the case of Jaikishan v. L. Kanoria and Co., : AIR1974SC1579 and in view of the infirmity and the irregularity of the contract as mentioned hereinbefore it must be held that the contract in question was illegal and as such void.

5. It was, then, contended on behalf of the respondent that in view of the order of Mr. Justice Roychowdhury dated 14th of Nov., 1975 the present application was barred by the principles of res judicata. I am unable to accept this contention. The suit in question filed by the petitioner was barred by Section 32 of the Arbitration Act, 1940 because the award in question had already been made. In that background of the facts of the instant case 1 am of the opinion that the present application is not barred by principles of res judicata.

6. It was, then, contended that as the petitioner had gone before the Tribunal of Arbitration and had taken part in the arbitration proceeding and took a chance of an award being made in its favour, the petitioner should not be allowed to challenge the award and/or is estopped from challenging the award. Reliance in this connection was placed on the decision of the learned single Judge in the ease of Hazi Ebrahim Kassim Cochinwalla v. Pannalal Johurimull, ILR (1949) 1 Cal 245. There Sinha J. held that the petitioner in that case having participated in the arbitration proceedings without raising any objection as to the jurisdiction of the arbitrators and having taken the chance of a decision in their favour could not be allowed later on to turn round and assume an inconsistent position. Reliance was also placed on the decision in the case of Jupiter General Insurance Co. v. Calcutta Corporation, : AIR1956Cal470 . In that case P.B. Mukharji, J. as the learned Judge then was, held that the applicant in that case had participated in arbitration proceedings without protest and/or fully availed of the entire arbitration proceedings. He could not be heard when he saw that the award had gone against him to make an objection that the whole of the arbitration proceeding was without jurisdiction. Reliance was also placed on behalf of the respondent on another decision of a learned single Judge of this Court in the case of N. I. Assurance Co. v. Dalmia Iron and Steel Ltd., : AIR1965Cal42 where S.P. Mitra, J. as the Chief Justice then was held that if a party had allowed an arbitrator to proceed with the reference without objecting to his jurisdiction or competence, it would not be subsequently heard to say that the award should be set aside on the ground that the arbitrator was not competent to decide the dispute in question. If objection had to be taken it should be taken at the earliest possible opportunity or at any rate at an early stage of the proceedings. Failure to object at an early stage would operate as an estoppel.

7. I am, however, unable to sustain thus objection urged on behalf of the respondent. In the case of A. J. Mills Co. Ltd. v. J. and G. Brokers Ltd., : AIR1953Cal458 (SB) a Special Bench of this Court held that there could be no estoppel against a statute. Therefore, a party who had gone to arbitration under a contract which was void under some Act could not plead that his opponent having taken part in arbitration proceedings could not later repudiate the award as void. In the case of Waverly Jute Mills v. Raymon and Co., : [1963]3SCR209 , it was held by the Supreme Court that if a contract was illegal and void an arbitration clause which was one of the terms thereof, must also perish along with it and a dispute relating to the validity of the contract was in such cases for the Court and not for the arbitrators. An agreement for arbitration according to the Supreme Court, is the very foundation on which the jurisdiction of the arbitrators to act rests and where that is not in existence at the time when they entered on their duties the proceedings must be held to be wholly without jurisdiction. This defect is not cured by the appearance of the parties in the proceedings, even if that is without protest because consent cannot confer jurisdiction. There is, however, nothing in such a case to prevent parties from entering into a fresh agreement to refer the dispute to arbitration while it is pending adjudication before the arbitrator and in that event the proceedings thereafter before them might be upheld as referable to that agreement and the award will not be open to attack as without jurisdiction. But it will make all the difference in the result whether the parties have entered into an arbiration agreement as defined under Section 2(a) of the Arbitration Act or have merely taken steps in the conduct of proceedings assumed or believed to be valid. In the former case the award will be valid, in the latter, a nullity. In the instant case there is no evidence that the parties entered into any fresh agreement apart and separate from the agreement, which is void, to refer the disputes to arbitration.

8. In the aforesaid view of the matter it must be held that the award in question is without jurisdiction. It is true that the conduct of the petitioner is utterly unmeritorious on the facts but in view of the position in law the award must be set aside.

9. In the premises there will be an order in terms of prayer (a) of the petition. In the facts and circumstances of this case parties will pay and bear their own costs.


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