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Joseph Pyke and Son (Liverpool) Ltd. Vs. Kedarnath Mohanlal and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. No. 64 of 1957 (Special Suit No. 1 of 1955)
Judge
Reported inAIR1959Cal328
ActsCode of Civil Procedure (CPC) , 1908 - Section 100; ;Vegetable Oils and Oil Cakes (Forward Contracts Prohibition) Order, 1944; ;Constitution fo India - Article 245; ;Arbitration Act, 1940 - Section 28; ;Contract Act, 1872 - Sections 2 and 10; ;Stamp Act, 1899 - Section 2(3) and 2(4); ;Negotiable Instruments Act, 1881 - Section 18
AppellantJoseph Pyke and Son (Liverpool) Ltd.
RespondentKedarnath Mohanlal and ors.
DispositionAppeal dismissed
Cases ReferredTrans Trust S.P.R.L. v. Danubian Trading Co. Ld.
Excerpt:
- p. chakravartti, c.j.1. the appellants obtained an arbitration award against the respondents in london and thereafter made an application to this court under section 15(1) of the arbitration (protocol and convention) act, 1937, for an order that the award be filed. on 3-8-1955, sarkar, j., dismissed the application on the ground that the award related to a matter which could not be lawfully referred to arbitration in india and that to give effect to it would be to act against the law and the public policy of this country. the appellants question the correctness of that decision and have appealed.2. the facts are these. by an exchange of bought and sold notes, dated 15-10-1953, the appellants purported to purchase from the respondents and the respondents purported to sell to them 125 tons.....
Judgment:

P. Chakravartti, C.J.

1. The appellants obtained an arbitration award against the respondents in London and thereafter made an application to this Court under Section 15(1) of the Arbitration (Protocol and Convention) Act, 1937, for an order that the award be filed. On 3-8-1955, Sarkar, J., dismissed the application on the ground that the award related to a matter which could not be lawfully referred to arbitration in India and that to give effect to it would be to act against the law and the public policy of this country. The appellants question the correctness of that decision and have appealed.

2. The facts are these. By an exchange of Bought and Sold Notes, dated 15-10-1953, the appellants purported to purchase from the respondents and the respondents purported to sell to them 125 tons of Indian groundnut oil, the term as to delivery being that the goods would be shipped in bulk as per a bill or bills of lading, dated between the 1st of January and the 15th ot February, 1954, from a port or ports in India to Hamburg. The Notes were in the standard printed form of the London Oil and Tallow Trades Association, but several of the printed clauses were scored through while several new clauses were added. According to the printed form, the invoice price was to include costs, freight and insurance, but it appears from the Bought Note that the words 'insurance (including War Risks)' were scored through. On the other hand, one of the added clauses provided that Marine and War Risk Insurance was to be covered by the buyers. The contract contained a guarantee by the sellers that they would obtain the necessary export licence and a similar guarantee by the buyers as regards the import licence was also contained in the contract. As regards the payment of the price, one of the added clauses provided that the buyers were to open a confirmed and irrevocable letter of credit with a first class Bank in Calcutta in favour of the sellers for the full invoice amount and payment was to be made against the presentation ot and in exchange for shipping documents. For the purposes of all proceedings, whether at law or by arbitration, the contract was to be deemed to be in all respects an English contract and all disputes were to be decided in accordance with the law of England. There was, however, an arbitration clause which provided that any dispute arising out of tha contract was to be settled by arbitration in London in accordance with the Rules endorsed on the contract. One of those Rules provided that upon the arising of a dispute, each party would appoint one arbitrator and that if ona of the parties failed to appoint an arbitrator within seven days after receiving notice in writing of an appointment by the other party, the matter would be referred to the Secretary of the London Oil and Tallow Trades Association and thereupon the Council of that body would appoint an arbitrator to fill the vacancy.

3. The respondents did not ship any groundnut oil. The appellants thereupon charged the respondents with breach of the contract and claimed damages by a letter to which they got no response and soon thereafter referred tha dispute to arbitration. They appointed their own arbitrator and notified the respondents of the appointment, but as the respondents failed to appoint an arbitrator on their behalf, the Council of the London Oil and Tallow Trades Association was duly approached and the Council appointed a second arbitrator. The two arbitrators, thus appointed, entered upon the reference and made an award in favour of the appellants. It was that award which the appellants wanted to be filed in this Court.

4. The respondents did not deny the contract, nor did they contend that they had shipped the goods in compliance with its terms. Their wholecontention was that the contract, being in contravention of the Vegetable Oils and Oil Cakes (Forward Contracts Prohibition) Order, 1944, which applied to groundnut oil and was in force at the time was wholly void and could not lawfully be acted upon. In their affidavit-in-opposition, they also referred to a prohibition said to be contained in the Imports and Exports Control Act 1947, but no re-liance on that statute was placed in the course of the argument except for a minor purpose, to which I shall duly refer. The main defence was that the contract was an illegal contract under the Indian law, the arbitration agreement, being contained in the contract itself, was equally illegal and therefore no award made on the basis of the contract and in pursuance of the agreement could be filed in India under the Arbitration (Protocol and Convention) Act, 1937.

5. It does not appear to have been disputed before Sarkar, J., that the Vegetable Oils and Oil Cakes (Forward Contracts Prohibition) Order, 1944, was in force at the date of the contract and that it applied to groundnut oil. Nor was it disputed that contracts to which the Order applied would be illegal and void. The contention on behalf of the appellants was that the present contract was outside the ambit of the prohibition contained in the Order and secondly that, in any event, it was clearly excepted from the mischief of the Order by the terms of a subsequent notification.

6. The contention advanced on behalf of the appellants before the trial Court would Be appreciated better if I first read the relevant provisions of the Order. Clause 3 of it provides that 'no person shall, after the specified date for any article to which this Order applies, enter into any forward contract in that article.' 'Forward contract' is defined as 'a contract for the delivery on some future date of any article to which the order applies.' The appellants did not deny that the present contract was a forward contract. Nor did they deny that groundnut oil was an article to which the Order had been made applicable. They, however, contended that the present contract was ac.i.f. contract which would be fully performed by the delivery of the shipping documents and, therefore, it was not a contract for 'the delivery x x x of any article' to which only the Order applied.

7. The next contention on behalf of the appellants was based on certain other provisions. Clause 5 of the Order provides that the Central Government may by notification in the Official Gazette exclude any contract or class of contracts from the provisions of the Order. In exercise of the power conferred by the clause, the Central Government did issue a notification by which it excluded from the operation of the Order the following class of contracts :

'Forward contracts 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 contention of the appellants was that the present contract was a contract relating to an article of a specific quality, that it was also a contract for specific delivery at a specified price and that the bill of lading relating to the goods shipped, if any were shipped, would not be transferable to third parties The contract, though a forward contract and though relating to an article to which the Order had been made applicable, was thus excepted from the operation of the Order by reason or the subsequent notification.

8. All these contentions were repelled by Sarkar, J. The contention that the present contract was ac.i.f. contract was disposed of by him briefly with the observation that it was not ac.i.f. contract at all, because it provided for insurance being effected by the buyers themselves. He did not record any finding as to whether the contract was for a specific delivery at a specified price, but he held that it did not relate to an article of a specific quality and that it could not be said that bills of lading relating to ih would not be transferable. The arguments based on the definition of 'forward contract', contained in the Order and on the exception contained in the notification thus both failed with the learned Judge. He, however, did not accept certain further contentions advanced on behalf of the respondents, but held that, nevertheless, his finding as to the illegality of the contract was sufficient for the dismissal of the application.

9. In support of the present appeal, two further grounds were sought to be urged on behalf of the appellants which we did not allow them to take. The respondents on their part repeated the contentions which had not found favour with the learned Judge. I think it will be convenient if I first deal with the contentions which we are either not entertaining or to which we are not giving effect.

10. The two new contentions sought to be urged on behalf of the appellants were that the Vegetable Oils and Oil Cakes (Forward Contracts Prohibition) Order, 1944, was no longer in force at the date of the contract and that, assuming that it was still in Force, it could apply only to contracts to be performed in India, but could not apply to contracts for the export of goods to foreign countries. As I have already stated, it does not appear from the judgment of the learned Judge that the appellants ever contended before him that references to the Order were irrelevant, since it was not in force at the date of the contract at all. Initially, the Order was promulgated in 1944 under the authority of the Defence of India Act and after that Act had ceased to be in force, it appears to have been continued in operation under the provisions of the Essential Supplies (Temporary Powers) Act of 1946. The line of descent from that time up to the date of the contract is a rather sinuous line whose course is to be traced through a bewildering variety of Acts, Resolutions and Orders. The learned Judge appears' to have been taken through that complicated genealogy by the respondents and at the end of his examination of the Order and after be had emerged from the labyrinth, he declared it to be indisputable that when the present contract was made, the Order was still in force. Indeed, he does not say that it was even disputed. No ground was taken against that finding in the memorandum of appeal, nor had any notice been given to the respondents before the argument commenced that the appellants wished to contend that the learned Judge's finding in this regard was erroneous. In those circumstances, we held that it would not be right to allow the appellants to raise for the first time in the course of the argument before the appeal Court a contention that, at the relevant date, the Order was not in force at all. We thought that it would be even less right to allow them to take their second new point. That point was that even if the Order had been continued in force it could not affect a contract which was not to be performed within India, because by reason of the limi-tations on the legislative powers of the Central Government, the Order was to be construed as restricted to the field over which those powers extended and not projecting beyond. I confess that I did not quite follow now it was sought to be made out that the I Central Legislature or the Central Government, acting as a legislature, could legislate only with respect to contracts to be performed wholly within India, even if the contract related to properties in India and a part of it was to be performed here. In any event, there was no trace of even this ground in the memorandum of appeal, nor had any notice of it been given to the respondents. In those circumstances, we declined to allow the appellants to raise, for the first time in appeal, a so-called constitutional point which they had never thought of before and of which they had not given any warning to the respondents at any stage.

11. The three contentions of the respondents which we did not accept were brief. They contended in the first place that the contract, being one for export of goods to which the Imports and Exports Control Act applied, was void under the provisions of that Act, but the contention is without substance, because the Act permitted exports under a licence and the contract expressly provided that an export licence would be procured by the sellers. It was next contended that the award had been made beyond time, because it had not been made within three weeks from the making of the claim, as provided for in Clause 18 of the contract and no order for an extension of time had been obtained, either from the English High Court or a Judge thereof. I think this contention is sufficiently disposed of by what the learned Judge has stated. Clause 18 of the contract, while it prescribes a period of three weeks for the making of an award, does so subject to the qualification that the time may be extended by the buyer's and the seller's arbitrators jointly or by the umpire. Section 13 of the English Arbitration Act which lays down that the time for making an award may from time to time be enlarged by an order of the High Court or a Judge thereof, applies only where a time for making the award is fixed, either under the provisions of the Act or otherwise. The only provision in the Act which fixes a time, namely Section 22, does not apply to the present case and as regards arbitration agreement itself, instead of fixing any time, it left the time to the will and convenience of the arbitrators on the only condition that in extending the time they were to act jointly. It was contended on behalf of the respondents that there was no arbitrator in the present case appointed by them so that there could be no joint action, but the contention, to my mind, is untenable. According to the Rules of arbitration endorsed on the contract, which I have already read, the London Oil and Tallow Trades Association is to appoint an arbitrator when one of the parties has failed to make an appointment and it is clear that an arbitrator, so appointed, will be deemed to be an arbitrator appointed by the defaulting party. The second arbitrator in the present case must, therefore, be treated as an arbitrator appointed by the respondents and since he, acting conjointly with the arbitrator appointed by the appellants, extended the time for making the award, the extension was lawfully made.

12. The third argument advanced on behalf of the respondents is even less tenable. It was contended that the award had been made without any proper notice of the reference having been given to the respondents, because while the contract provided that in the case of parties not domiciled in England, all notices were to be served by leaving a ropy at the Office of the London Oil and Tallow Trades Association, the respondents, instead of being served in that manner, had been served directly in Calcutta, The contention is a curious one, because it amounts to saying that even if a citizen of India may be served personally at his Indian Office or home, he is still not properly served, but proper service could be effected only by leaving a copy of the notice at an Office in a foreign country situated six thousand miles away. Quite apart from the patent absurdity of a contention of that kind, it does not seem to me to be warranted by the terms of the contract and the facts of the case. The provisions as to notice are contained in Clause 17 of the contract which is a printed provision and of an extremely complicated character, dealing, as it does, with nationals of several countries. But at least one provision is clear and that is that, even in cases of non-residents, where a copy of the notice is required to be left at the Office of the London Oil and Tallow Trades Association, a duplicate thereof is to be posted at the same time to the particular party's last known address outside England. In the present case, a notice was served on the respondents in India and there is nothing to show that a copy of the notice had not also been left at the Office of the London Oil and Tallow Trades Association. Sarkar J., disposed of the contention on the finding that the provision for leaving a copy of the notice at the Office of the London Oil and Tallow Trades Association was only an enabling one and was not intended to make even personal service, where such service had actually been effected, ineffective. That reasoning also appears to me to be cogent, but I have endeavoured to show that there is another and a clearer reason for which this particular contention of the respondents must fail.

13. I may now proceed to consider the two main contentions in this case. The first of them is that the contract here is not a contract for the delivery of any article, but a c. i. f. contract and, therefore, the Vegetable Oil and Oil Cakes Forward Contracts Prohibition) Order is well out of the appellants' way. It has already been seen that the contract is not in fact a c. i. f. contract proper, as Sarkar J. has also pointed out. It was, however, contended on behalf of the appellants that although it might not be a c. i. f. contract in the strict sense of the term, it was still a contract which would be fully performed by the delivery of the shipping documents and under which delivery of the goods themselves was not required. I shall not pause to examine how far this contention is tenable, but shall proceed on the footing that the contract does not differ from a c. i. f. contract as regards the mode of performance required.

14. It is true that a c. i. f. contract is fully performed by the delivery of the relevant shipping documents but, in my view, it is a complete mistake to suppose that such contracts have no concern with delivery of the goods covered by them. The incidents of c. i. f. contracts have been authoritatively explained in several decisions. Notably Johnson v. Taylor Bros and Co., 1920 AC 144 and Biddell Brothers v. E. Clemens Horst Co., (1911) 1 KB 214.

'A seller under a contract of sale,' observed Hamilton J., as he then was in the latter case, 'containing such terms'--that is, a c. i. f. contract 'has firstly to ship at the port of shipment goods of the description contained in the contract; secondly to procure a contract of affreightment, under which the goods will be delivered at the destination contemplated by the contract; thirdly to arrange for an insurance upon the terms current in the trade which will be available for the benefit of the buyer; fourthly to make out an invoice as described by Blackburn J., in Ireland v. Livingston, (1871-5 HL 395), or in some similar form; and finally to tender these documents to the buyer so that he may know what freight he has to pay and obtain delivery of the goods, if they arrive, or recover for their loss if they are lost on the voyage. Such terms constitute an agreement that the delivery of the goods, provided they are in conformity with the contract, shall be delivery on board ship at the port of shipment. It follows that against tender of these documents, the bill of lading, invoice, and policy of insurance, which completes delivery in accordance with that agreement, the buyer must be ready and willing to pay the price.'

It will thus appear that although the seller is taken to have performed the contract by delivering the shipping documents, it is not delivery of any shipping documents which will suffice. The documents must show that the seller has shipped goods and that the goods he has shipped are of the contract quantity and description. The seller thus does not discharge his obligation by merely presenting to the buyer or making available to him certain pieces of paper with writings as to a contract of affreightment inscribed on them, but must also deliver the goods covered by the contract, although the delivery is to be to the ship. It is true that after the seller has shipped the goods, he is no longer responsible for their safe landing at the port of destination, but he is not responsible, because he has taken out a policy of insurance for the benefit of the buyer and thus made it possible for the buyer to look to the insurer for compensation or reimbursement if the goods failed to be delivered. The fact, however, remains that although a c. i. f., contract is not a contract by the seller that the goods shall arrive at the pott of destination, it is nevertheless a contract to ship goods complying with the contract of safe. Indeed, as observed in Chalmers, such a contract is not a contract for the sale of documents but a contract for the sale of insured goods, to be implemented by the delivery of proper documents: See Chalmers on Sale of Goods, 13th Edition, pp. 112-13. After all, it is but plain common sense that a person who purchases goods under a c. i. f. contract, does not intend to purchase mere paper and does not expect to get merely some documents, but he intends to purchase and get goods which he may either utilise himself or in which he may trade by disposing of them, at a profit. It is thus a total misconception to think that c. i. f. contracts are altogether divorced from delivery of the goods covered by them.

15. That it is ultimately delivery of the goods as contracted for which is the objective of c. i. f. contracts like any other contract of purchase, appears from & further incident of such contracts. To say that a seller under a c. i. f. contract performs the contract wholly by delivering the shipping documents to the buyer is to state only half the truth. The liabilities of the seller do not altogether end with the shipping of the goods and the despatch or delivery of the shipping documents relating to them. If, after the goods have been landed, the buyer finds them not to conform to the contract, either in regard to quantity or in regard to quality, he is entitled to reject them and repudiate the contract, although he may have previously paid the price. Indeed, as has been well explained in the very instructive judgment of Devlin J., in the case of Kwei Tek Chao v. British Traders and Shippers Ltd., (1954) 2 QB 459, a buyer under a c. i. f. contract has two rights, one to reject the documents and the other to reject the goods. The two rights are distinct and, corresponding to them, there are two distinct obligations of the seller. As the learned Judge also points out::

'In a c. i. f. contract the goods are delivered, so far as they are physically delivered, when they are put on board a ship at the port of shipment. The documents are delivered when they are tendered, A buyer who takes delivery from the ship at the port of destination is not taking delivery of the goods under the contract of sale, but merely taking delivery out of his own warehouse, as it were, by the presentation of the document of title to the goods, the Master of the ship having been his bailee ever since he became entitled to the bill of lading.'

16. It has sometimes undoubtedly been said that a c.i.f. contract is a contract for the sale of documents rather than a sale of goods. That view owes its origin to the observations which Scrutton, J., as he than was, made in the case of Arnhold Karberg and Co. v. Blythe, Green, Jourdain and Co., (1916) 1 K. B. 495, when dealing with it as a Court of first instance. 'The key to many of the difficulties arising in c.i.f. contracts,' said the learned Judge, 'is to keep firmly in mind the cardinal distinction that a c.i.f. sale is not a sale of goods, but a sale of documents relating to goods.' That view was dissented from by the Court of Appeal which clarified what the true position in law was. Bankes, L. J., for example, observed that he could not agree with Scrutton, J., in the view taken by him, but would himself prefer to look upon c.i.f. contracts as contracts for the sale of goods to be performed by the delivery of documents. It may be said that even that observation does not meet the appellants' point before us, because a c.i.f. contract, even assuming it is a contract for the sale of goods, may yet be a contract under which delivery of the actual goods by the seller is not required. But while it is true that delivery of the actual goods by the seller to the buyer is not required under a c.i.f. contract, delivery of the goods to a ship's Master is undoubtedly required and it is also required that the goods must be of the contract description and that the relative bill of lading must not exceed or fall below the stipulated quantity even by an ounce. The true position as to delivery was explained by Devlin, J., in the passage which I have already read. I may supplement it by reading a passage from the judgment of Warrington, L. J., in the case I am dealing with, namely, (1916) 1 KB 495.

'I need not say,' observed the learned Lord Justice, 'that it is with much deference that I express my disagreement with a statement of that sort made by a judge with such extensive knowledge of commercial matters as Scrutton, J., but it seems to me that it is not in accordance with the facts relating to these contracts. The contracts are contracts for the sale and purchase of goods, but they are contracts which may be performed in the particular manner indicated by that passage from the judgment of Hamilton, J., which I have just read; in particular that the delivery of the goods may be effected first by placing them on board ship, and secondly by transferring to the purchaser the shipping documents.'

It will be seen from the passage I have just now read that delivery of the goods is not unnecessary under c.i.f. contracts, but the obligations as to delivery is discharged by the delivery of the goods on board a ship instead of directly and at once to the buyer. It cannot, therefore, be said that a c.i.f. contract is not a contract for the delivery of any article. I have already pointed out that even after the shipping documents have been presented to the buyer and even after he has paid out the invoice price, he still retains the right to examine the goods shipped to him and to reject them, if he finds any deficiency in regard to either quantity or quality. It is thus impossible to see how it can be said that under a c. i. f. contract delivery of the goods to the buyer is not material or is not contemplated.

17. Indeed, if one refers to the contract in the present case, one finds several provisions which indicate unmistakably that delivery of the actual goods to the buyer was contemplated. In their petition to this Court, the appellants themselves described the contract as a contract to sell and export to them 125 tons of groundnut oil to be shipped in bulk. They did not say that the contract was merely for the despatch to them of certain documents. Turning to the contract itself, one finds it provided in Clause 11 that any difference between the contract quantity and the quantity actually delivered will be adjusted in a certain way. The consequences which are to follow, if the condition of the oil on its arrival at the port of destination is not found to be equal to the guarantees contained in the contract in respect of quality or composition, are laid down in Clause 5. Clause 18, again, which is the arbitration clause, speaks, inter alia, of disputes regarding the quality or the weights of the goods. These provisions can leave no doubt in anyone's mind that the buyers under the contract were looking forward to the delivery of the actual goods contracted for, expecting them to conform to the contract quality and the parties provides elaborately in advance for the manner in which adjustments would be made if any deficiency in regard to quality or quantity was disclosed upon the arrival of the goods at the port of destination. I am, therefore, unable to hold that there was no contract in the present case for the delivery of any article.

18. It is also to be borne in mind that the Order which falls for consideration in the present case is one which is directed at the prevention of speculation regarding certain essential commodities by means of forward contracts. A contract providing for delivery, as contemplated by an Order of this land, must be any contract under which the goods covered by it will move. It follows that even if a contract be a c.i.f. contract and even if so far as the seller is directly concerned, the delivery is only up to the ship and no further, there is still delivery within the meaning of the Order, because the goods are actually moved and they are destined for being landed at the port of destination for the benefit of the buyer. The first contention of the appellants most, therefore, fail.

19. The second contention was that, in any event, the present contract came under the excep-tion contained in the subsequent notification of the Central Government and, therefore, it was outside the mischief of the Order. In order to qualify for exemption under the notification the contract must be in regard to articles of a specific quality. It must also be a contract for specific delivery at a specified price and documents of title relating to it must not be transferable to third parties. It is clear that all these features must co-exist and the absence of any one of them will take a contract outside the exception. Sarkar, J., has held that the article covered by the present contract could not be said to be an article of a specific quality. In that view I agree. The article to be supplied is 'Crude Indian Ground Nut Oil of fair average Quality Maximum 3 (Three) per cent F.F.A. 1 (One) per cent Moisture and Impurities at time of Ship-ment.' In my view, it is not possible that crude groundnut oil of fair average quality, in respect of which allowance up to a certain percentage for moisture and impurities is granted, can be said to he oil of a specific quality. Oil of a specific qua-lity would be oil of a particular specification, connected, it might be, with the place of its origin or some grade which had been given to it after analysis and examination. Such, for example, would be the oil in the case of Ganpatrai Gupta v. Moody Brothers, 85 Cal LJ 136, which was groundnut oil of Guntur quality.' I can also imagine Ag. Mark oil, if that mark could at all be placed on groundnut oil, as oil of a specific quality. But to call oil, which is of a 'fair average quality', oil of a specific quality is, to my mind, an obvious contradiction in terras. If the oil concerned in the present case is not oil of the specific quality, the contract must he outside the exemption for that reason alone.

20. This finding is sufficient to dispose of thesecond contention advanced on behalf of the appellants, but in the course of the argument theyconcentrated almost exclusively on another point,It was contended that the bill of lading relatingto this (sic) was not transferable to third par-ties (sic) the seller was to receive paymentun(sic) a confirmed and irrevocable letter of creditwhich was to be opened in his favour with a bankin Calcutta. Assuming the appellants were right,their success with regard to this point can availthem nothing, because the contract must be heldto be outside the exception for the reason I havealready given. But as the point was pressed strenuously and with great elaboration, I may deal withit briefly.

21. The argument was that an irrevocable letter of credit or, for the matter of that, any commercial letter of credit was not negotiable and, therefore, the seller in the present case could not negotiate the credit opened in his favour. It is true that what we have to consider is not whether a letter of credit is negotiable, but whether a bill of lading is transferable. It is well settled that a bill of lading is negotiable, although it is not a negotiable instrument in the strict sense of the term. What, however, the appellants contended was that since the seller could get his price only on presentation of the bill of lading and the other documents and since he could get the price only by a draft drawn against the credit which was nor negotiable, he himself would have to present the bill of lading to the bank, if the price for the goods was to be had at all and, therefore, in effect, the bill of lading was non -transferable.

22. Although in their above contention the appellants are right to a certain extent, it appears to me that to look at the transferability of the bill of lading from the seller's point of view is to adopt a completely mistaken approach. Normally, the only use which a seller under a c.i.f. contract has of the bill of lading after he has shipped the goods is to collect the price upon its presentation or if the buyer or his agent is not readily available, to obtain finance on it by negotiating a bill of exchange drawn by him with its support as security. The advantage which a c.i.f. contract gives him is that he need not always wait for the collection of the price till the goods reach their destination, nor till he has been able to present the shipping documents to the buyer himself, but he may negotiate his right to realise the price by pledging the shipping dcuments with third parties. As a general rule, what he does is that he draws a bill of exchange and then goes with that bill a? also the bill of lading, the policy of insurance and the invoice to a buyer of exchange and the buyer of exchange, who pays him the money, then sends the documents to the buyer of the goods or his agents and collects the invoiced price. In such a case, the use which the seller may make of the bill of lading is only to utilise it for recovering the price due to him on account of the goods. He cannot, in any event, get anything higher than the price and cannot certainly deal with the goods by negotiating the bill of lading without committing a breach of the contract. Transfer of a bill of lading by a seller in a normal case has, therefore, hardly any meaning if by such transfer is meant also the transfer of the right to take delivery of the goods themselves against the bill. It may, however, be that in a certain case the buyer will take the bill of lading to his own order and part with it to a third person who is not the buyer and such third person may, by presenting the bill of lading, get the goods. Such dealing with the bill of lading will obviously be in breach of the contract and is not, I imagine, the kind of dealing that is contemplated by the Government notification with which we are concerned in the present case. Apart from the abnormal case of the seller retaining the bill of lading and negotiating with its help the right to take delivery of the goods, in normal cases, the seller deals with the bill of lading by way of passing it on to a third party only to secure the contract price and not to withdraw the goods from the contract. In the present case even such dealing with the bill of lading was not necessary, because a letter of credit in favour of the sellers had been opened with a Calcutta bank, from whom the sellers could get the contract paid directly and at once on presentation of the documents. I, therefore, do not see any point in approaching the transferability of a bill of lading from the setter's point of view.

23. Since, however, the appellants also addressed to us an elaborate argument on letters of credit, I may make a brief reference to that con- tention as well. It is true that a commercial letter of credit, not to speak of a confirmed and irrevocable letter of credit, is not negotiable but the benefit of the credit is negotiable and the credit itself, as distinguished from the benefit of it, is assignable or transferable with the buyer's consent, although it may not be negotiable. A benefit under a letter of credit has been held to be a chose in action: see Trans Trust S.P.R.L. v. Danubian Trading Co. Ld., (1952) 2 Q.B. 297, per Denning LJ., at page 305. Even when the credit itself has not been made transferable by the buyer, the seller, it would appear, can negotiate the benefit accruing to him under it without the authority of either the buyer or the corresponding bank, provided he complies with the requirements laid down for the assignment of choses in action. As to the credit itself, the position appears to be, at least with bankers in England, that it is not negotiable in any circumstances and is assignable or transferable only with the consent of the buyer: See Halsbury's Laws of England, 3rd Edn. Vo. II, pp. 213-214. In the present case, a letter of credit was opened with the Calcutta branch of the Anglo-Portugese Colonial and Overseas Bank Ltd., but it is not known whether it was made in a transferable form. Since, however, the relevant clause in the contract speaks only of a confirmed and irrevocable letter of credit and does not say that it would be a credit in favour of the seller or his order, I shall assume that it was a non-transferable credit. Even so, however, the benefit under it could be negotiated or assigned, but I shall concede that such right of assignment of the benefit under the credit will not meet the appellants' point. Even when a seller negotiates the benefit reserved to him under a letter of credit or when he negotiates a bill of exchange drawn against it, he undoubtedly has to place the person in whose favour he negotiates it in possession of the bill of lading and other documents, but those documents, when presented to the banker by such person, can be presented by him only in the capacity of an agent of the seller. A letter of credit means an undertaking given by a bank to meet drafts drawn against the credit by the beneficiary under it in accordance with the conditions laid down therein but when the credit is non-transfer-able--which means that the buyer has authorised the banker to pay the seller alone the bank cannot accept the shipping documents from anyone else, presenting the same in his own right, for, to do so would be to aqt in violation of the instructions of the buyer. That is why it has been said that, in such a case, the transferee of the benefit under the credit or the holder of the bill of exchange drawn against it presents the shipping documents to the bank concerned as an agent of the seller and not in his own right. If that be so, it follows that the bill of lading qua bill of lading is not transferable, when the payment is to be received under a Letter of credit, for the purpose of collecting the price. For a very instructive discussion on the negotiability of letters of credit, reference may be made to 'Export of Trade' by Schmitthoff, 3rd ed., pp. 196 to 198; and Halsbury, 2nd ed. Vol. 29, pp. 212-213, 222-223.

24. But, as I have said, the real question is not whether the seller can transfer the bill of lading to third parties, but whether the buyer can do so. The notification under which exemption is claimed speaks of contracts, documents of title relating to which 'are not transferable to third parties.' That must mean transferable by either party to the contract. Indeed, as I have endeavour-ed to show, if the intention be to deal with the goods by transferring or negotiating the bill of lading, such dealing is possible normally only by the buyer, because the seller's right under the bill of lading is in a normal case, limited to the right to realise the contract price with its aid and he can use it for the purpose of trafficking in the goods only by committing a breach of the contract. If it is transferability of the buyer which is more appropriately to be regarded, there is nothing at all in the present contract which would preclude the buyer from negotiating or otherwise transferring the bill of lading. The relevant provisions differ in no way from those of a typical c.i.f. contract. One of the main advantages of a c.i.f. contract to the buyer is that before the goods are actually landed which in the old days of sailing vessels, when the doctrine was first formulated, took a considerable time--he can negotiate the shipping documents and take advantage of the rising or the falling market. That right of the buyer under c.i.f. contracts is in no way excluded by any provision under the present contract. If it is not, the contract is not one, the bill of lading relating to which is not transferable and, therefore, on this ground also it is not within the exemption.

25. It might be said that the goods were to be shipped to England and that once they were shipped to that country, further speculation with regard to them would in no way affect the position of the particular commodity in India and that, therefore, if the object of the Order was to prevent essential commodities being made the subject-matter of speculation, there could be no room or necessity for its application in the present case. Such an assumption, in my view, would be mistaken. If one looks at the contract itself, one finds a very significant provision contained in Clause 14, against which appears the marginal note 'Circle'. The 13th clause of the contract deals with default in the performance of the contract. The 14th clause contemplates a repurchase by the seller from the buyer or from any subsequent buyer & a series of such sales and purchases before the actual landing of the goods. It is even provided that with regard to the performance of such subsequent transactions, the default clause shall not apply & that if in a certain case the documents are not delivered, the invoices based on the contract quantity shall be settled between each buyer and each seller in the Circle by payment by each buyer to each seller of the excess of the seller's invoice amount over the lowest invoice amount in the Circle. I have omitted to mention that the clause describes .the parties in such subsequent purchases or repurchases as constituting a Circle. The contract, therefore, itself contemplates that before the goods are delivered and they find a buyer who will keep them, there may be innumerable further sales and purchases and even a repurchase by the seller from the buyer. If so, it is perfectly clear that the documents of title were transferable under the very terms of the contract and that the contract left room for subsequent speculation in the goods in India by various parties, including the sellers themselves.

26. Since, in any event, the buyer would be free under the contract to transfer the bill of lading, and since the contract was not for the sale of goods of any specific quality, the appellants could not claim that it came under the exemption and was not hit by the main provisions of the Order. The second branch of the appellants' contention thus also fails.

27. The above were all the contentions advanced in the case. I find myself unable to accept any one of them.

28. The appeal is, accordingly, dismissed with costs. Certified for two Counsel.

S.C. Lahiri, J.

29. I agree.


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