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Rambilas Nandlal Vs. Imperial Oil Mills Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration;Commercial
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. No. 47 of 1959 (Award Case No. 65 of 1958)
Judge
Reported inAIR1960Cal304
ActsArbitration Act, 1940 - Section 35; ;Forward Contracts (Regulation) Act, 1952 - Section 2
AppellantRambilas Nandlal
Respondentimperial Oil Mills Ltd.
Appellant AdvocateR.C. Deb and ;Subrata Roy Chowdhury, Advs.
Respondent AdvocateA.C. Bhabra, Adv.
DispositionAppeal allowed
Cases Referred(Imperial Oil Mills Ltd. v. Ram Bilas Nandlal
Excerpt:
- .....purchase of raw linseed oil. it is also common case before us that the contract in question is a specific delivery contract inasmuch as it provides for actual delivery of specific qualities or types of oil during a specified future period at a price fixed thereby and in which the names of both the buyer and seller are mentioned.5. the dispute between the parties is whether the contract is a non-transferable specific delivery contract within the meaning of section 2(f) of the forward contracts (regulation) act, 1952. if it be held that the contract is a non-transferable specific delivery contract, the making of the contract would not be prohibited in view of section 18 of the forward contracts (regulation) act, 1952. section 19 explicitly provides that nothing in chapter iii of iv of.....
Judgment:

Bachawat, J.

1. By a contract dated the 27th December, 1955, the appellant agreed to buy and the respondent agreed to sell 25 tons of pure raw linseed oil. The contract reads as follows:

'27-12-1955.

Buyers Name Sri Rambilas Nand Lal, Calcutta. Dear Sirs,

We have this day sold by your order and on your account to the above buyers:Sellers Name Sri Imperial Oil Mills Ltd. Calcutta.

Article Pure Raw Linseed Oil.

Quantity 25 (twenty-five) tons only.

Quality I. S. and Guarantee.

Time of delivery April May 1936.

Delivery -- Ex sellers Mills.

At Rs. 47/8 per Maund loose in buyers tank lorry or in drums

Payment Rs. 90/- after delivery balance within 10 days,

Weighment and Sampling to be done in the presence of sellers' and buyers' representatives.

Remarks nil.

Brokerage to be paid by the Sellers As. -/2/-per maund nett.

Any dispute regarding this contract is to be settled by the Bengal Chamber of Commerce and Industry in Calcutta.

Analysis disputes to be settled by the R. V. Briggs and Co. Ltd. in Calcutta.

This contract is not transferable to any third party by the Sellers or Buyers.

Yours faithfully,

for G. C. Sharma and Company Sd/-

Illegible Broker.'

Disputes arose between the parties and those disputes were referred to the arbitration of the Bengal Chamber of Commerce and Industry under the arbitration clause contained in the contract. While the reference was pending, the respondent filed a suit in this Court being Suit No. 1432 of 1957 (Imperial Oil Mills Ltd. v. Ram Bilas Nandlal) praying for a declaration that the contract and the Bought and Sold Notes in respect thereof are void and for delivery up and cancellation of the contract. A notice purporting to be a notice under Section 35 of the Indian Arbitration Act was thereupon served upon the arbitrators by the respondent. The arbitrators in due course made an award. Thereupon the respondent made an application to this Court for a declaration that the Arbitration agree-ment contained in the contract be declared invalid and that the award made by the Bengal Chamber of Commerce and Industry be set aside. The application was heard by Ray, J. He came to the conclusion that the arbitration agreement and the award were invalid and on this finding he set aside the award. This appeal is preferred from this order.

2. On behalf of the respondent it was urged before Ray, J., and is urged before us that the award is rendered invalid by Section 35 of the Indian Arbitration Act in view of the pendency of the legal proceedings commenced by the respondent and the notice served upon the arbitrators. Ray, J. accepted this contention. In my opinion, the respondent's contention is not tenable and ought not to be accepted. The legal proceeding commenced by the respondent was for a declaration that the contract was void and invalid and for cancellation and delivery up of the contract. The validity or the invalidity of the contract was not and could not be referred to arbitration under the arbitration clause contained in the contract. The arbitrators had no power and authority to decide upon the question of their own jurisdiction. The legal proceedings commenced by the respondent were not upon either the whole or part of the subject-matter of the reference. The subject-matter of the reference was a dispute relating to and arising out of the contract. The subject-matter of the legal proceeding was the validity or invalidity of the contract. The legal proceeding was not one which could be stayed under Section 34 of the Indian Arbitration Act. The question of the validity or the invalidity of the contract was not a question which was agreed to be referred to arbitration. Section 35 of the Indian Arbitration Act presupposes a legal proceeding which is capable of being stayed by the Court under Section 34 of the Indian Arbitration, Act. From whatever point of view the matter is looked at, it is impossible to say that the pendency of the legal proceedings commenced by the respondent in any way rendered the award invalid.

3. On behalf of the respondent it was further argued that the contract is illegal and prohibited by the provisions of the Forward Contracts (Regulation) Act, 1952 and the notifications issued thereunder. It is common case that by notifications issued under Section 17 of that Act forward contracts for sale or purchase of raw linseed oil were prohibited some time in 1955.

4. It is common case before us that the contract in question is a forward contract for the sale and purchase of raw linseed oil. It is also common case before us that the contract in question is a specific delivery contract inasmuch as it provides for actual delivery of specific qualities or types of oil during a specified future period at a price fixed thereby and in which the names of both the buyer and seller are mentioned.

5. The dispute between the parties is whether the contract is a non-transferable specific delivery contract within the meaning of Section 2(f) of the Forward Contracts (Regulation) Act, 1952. If it be held that the contract is a non-transferable specific delivery contract, the making of the contract would not be prohibited in view of Section 18 of the Forward Contracts (Regulation) Act, 1952. Section 19 explicitly provides that nothing in Chapter III of IV of that Act shall apply to non-transferable specific delivery contracts for the sale or purchase of any goods.

6. Section 2(f) of the Forward Contracts (Regulation) Act, 1952, rends thus:

'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.'

7. Now, the contract explicitly provides that 'this contract is not transferable to any third party by the Sellers or Buyers'. Mr. Bhabhra contends that though this clause forbids the transfer of the contract it does not prohibit the transfer of the rights or liabilities thereunder. I am unable to accept this contention. The contract consists of a bundle of rights and obligations. By prohibiting the transfer of the contract the clause plainly prohibits the transfer of rights and obligations under the contract.

8. Mr. Bhabhra next contends that this clause does not prohibit the transfer of any delivery order, railway receipt, bill of lading, warehouse receipt or any other document of title relating to the contract. I am unable to accept this contention. The clause must be read and construed in the light of the context of the whole of the contract and in the light of the surrounding circumstances. Plainly the object of the clause is to provide that the contract would not be hit by the provisions of the Forward Contracts (Regulation) Act, 1952 and the notifications issued thereunder. On the face of it the contract does not provide for the issue of any document of title. Assuming for a moment that some documents of title such as delivery order or warehouse receipt could be lawfully issued under the contract, the obvious Intention of the parties was that such a document of title would not bo transferable. The contract provides for weighment and sampling in the presence of the sellers' and the buyers' representatives and for delivery of the oil in buyers' tank lorry or in drums. The parties obviously intended that they will reckon and deal with each other only and with nobody else. Assuming that a delivery order or warehouse receipt or some such document of title could be lawfully issued under the contract, delivery thereunder could be given only to the buyers in the buyers' tank lorry or in drums. Agreeably to the intention of the parties the clause should be read and construed as a clause prohibiting the transfer of all the rights and liabilities under the contract and of all the legal instruments thereof including all documents of title relating thereio.

9. It follows, therefore, that the contract is a non-transferable specific delivery contract within the meaning of Section 2(1) of the Forward Contracts (Regulation) Act, 1952.

10. Mr. Deb contends in the alternative that under the contract as it now stands no document of title could lawfully be demanded or issued and that the issue of a delivery order or a like document of title would not be sufficient delivery of the goods under the contract and that as such the question, whether, any document of title relating to the contract is or is not transferable does not arise. We do not express any opinion on this fur-ther contention. Having regard to what I have already said, it is not necessary to deal with this contention. Assuming that a document of title can he lawfully issued under the contract the transfer of such document of title is also prohibited by the contract.

11. We have, therefore, come to the conclusion that the contract is a non-transferable specific delivery contract and as such the making of the contract was not prohibited by the Forward Contracts (Regulation) Act, 1952. It must, therefore, follow that the contract is legal.

12. Ray, J., has held that the contract is not a non-transferable specific delivery contract.

13. For the reasons given above, we are un-able to agree with this conclusion of Ray, J.

14. The arbitration clause contained in the con-tract and the award were impeahced on the two grounds mentioned above and upon no other ground. It must follow, therefore, that the application made by the respondent for a declaration that the arbitration clause is invalid and for setting aside the award, must fail.

15. I, therefore, propose that the fallowing order he passed:

The appeal be allowed, the judgment and order of Ray, J., be set aside and the application made by the respondent pursuant to the Notice of Motion dated 9-7-1958. taken out by Mr. B. M. Bagaria be dismissed.

16. The respondent to pay to the applicant the costs both in the Court below and also in this Court.

Lahiri, C. J.

17. I agree.


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