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Bharat Handicrafts (Private) Ltd. Vs. Standard Brands Ltd. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKolkata High Court
Decided On
Case NumberAward Case No. 58 of 1963
Judge
Reported inAIR1965Cal489
ActsForward Contracts (Regulation) Act, 1952 - Sections 15 and 27
AppellantBharat Handicrafts (Private) Ltd.
RespondentStandard Brands Ltd.
Appellant AdvocateE. Meyer and ;S.K. Gupta, Advs.
Respondent AdvocateA.C. Bhabra and ;S.N. Saraf, Advs.
DispositionPetition allowed
Cases ReferredBurmah Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer
Excerpt:
- .....india.'in other words the particular contract sued uponmust have been entered into for export of jutegoods from india. if goods are exported by reason of commitments orother contracts between any of the partiesto the contract and another party, thatis not indicative of the fad that the contractbetween the two parties has been entered into forexport of jute goods from india. the exportthere, counsel for the petitioner in my viewrightly contends, is not by the specific contractbut by another contract.13. counsel for the petitioner contended that the words 'contracts entered into for export of jute goods from india' would mean that one of the contracting parties would be a foreigner and that the sale would not be within the internal limits or at home. counsel for the petitioner in this.....
Judgment:
ORDER

A.N. Ray, J.

1. This is an application for settingaside Award No. 526 of 1962 dated October 31,1962 made by the Bengal Chamber of Commercein case No. 295 of 1962 and for an order that theAward be declared null and void. The petitionerentered into a contract with the respondent on orabout January 30, 1962. A true copy of thecontract is annexed to the affidavit affirmed bySaligram Jhajharia on June 10, 1963. There arevarious grounds in the petition for setting asidethe Award. One of the grounds was that thecontract is illegal. The petitioner's contention isthat the alleged contract is a Forward Contractand a transferable specific delivery contract withinthe meaning of Forward Contract Regulation Act1952 and neither the petitioner was a member ofEast India Jute and Hessian and Gunny Brokers norat any material time member of the East IndiaJute and Hessian Exchange Ltd.

2. Counsel appearing on behalf of the respondent conceded that the contract was a transferable Specific Delivery Contract and further conceded that neither the petitioner nor the respondent nor the broker was a member.

3. Counsel appearing for the respondent contended that the contract was saved by reason of a Notification. In order to enable the respondent to rely on the Notification directions were given for further affidavit. That is how respondent Saligram Jhajharia affirmed the affidavit on June 10, 1963.

4. Counsel appearing for the the respondent sought to uphold the contract only on one ground and on no other ground. The ground is that the contract was entered into for export of jute goods from India and therefore the contract is saved from the mischief of Sections 15 and 16 of the Forward Contract Regulation Act, 1952 by reason of the Notification set out in paragraph 6(a) of the affidavit of Saligram Jhajharia.

The Notification is as follows

'In exercise of the powers conferred by sec. 27 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952), the Central Government hereby exempts and shall be deemed always to have exempted, in the City of Calcutta transferable specific delivery contracts entered into for the export of jute goods (Hessian Cloth made of jute or bags made of such hessian cloth and sacking cloth made of jute or bags of such sacking cloth I from India, from the operation of sec. 15 and Section 16 of the said Act.

Explanation:--The expression 'City of Calcutta' means -

1. Calcutta as defined in Clause (11) of Section 5 of the Calcutta Municipal Act, 1951 (West Bengal Act No. 33 of 1951), together with part of the Hastings North or South edge of Clyde Row and Strand Road in the River Bank and the areas which were previously under the new defunct Tollygunge Municipality:

2. The Port of Calcutta; and

3. The districts of 24 Parganas, Nadia, Howrah and Hooghly'

There is no dispute that the contract was entered into at the city of Calcutta.

5. The controversy is whether the contract in the present case is entered into for export of jute goods from India within the meaning of the Notification.

6. Counsel on behalf of the respondent contended first that on the construction of the contract it will appear that the contract is for export of jute goods. It was contended that it would appear from the contract that the goods were to he delivered tree alongside export vessel in the Port of Calcutta and the presence of the words 'free alongside export vessel' indicated that this was a contract for export of goods. It was also contended by relying on the terms and conditions Nos. 2, 8 and 14 in the contract that those terms indicated that the goods were intended for export. To illustrate it was contended that term No. 8 stated that goods ordered for shipment were to be covered under Buyer's Insurance Policies from the time boats enter the limits of the Port of Calcutta and therefore the goods were for shipment or export. Again reference was made to term no. 14 in the contract that in the lighter goods being detained for a period exceeding 12 clear days from registration, a demurrage charge of 26 nP. per bale per day on the detained goods shall be payable by the buyer on and from the 13th day and such demurrage shall continue to be payable until the goods are unloaded from the lighter for shipment Emphasis was placed on the words 'for shipment'' occurring in term No. 14 and it was contended that this clause again shows that the goods were for shipment and the contract was for export:

7. Counsel for the respondent next contended that the surrounding circumstances would have to be looked into in order to ascertain the true and real intention of the parties for which this contract was entered into. Under that head it was contended first that the contract between the petitioner and the respondent was entered into on January 30, 1962 and it will appear from allegations contained in paragraph 6(g) of the affidavit of Saligram Jhajharia affirmed on June 10, 1963 that the respondent on the same day entered into a contract with one Buriap Sales Corporation, New York, by which the respondent agreed to sell to the Burlap Sales Corporation 700 bales of Hessian and/or Burlap Cloth, F.O.B. Calcutta, delivery shipment per steamer during February to U.S.A. Reliance was placed by counsel for the respondent on the last sentence in Sub-clause (g) of paragraph 6 of the said affidavit of Saligram Jhajharia where the deponent alleges that in order to fulfil the said contract (meaning thereby the Burlap Sales Corporation contract) the respondent entered into the said contract No. 589 dated January 30, 1962 with the petitioner for the export of the said jute goods from India. Secondly it was contended that the respondent gave shipping instructions and in support of that contention reference was made to annexure 'B' to the affidavit of Saligram Jhajharia affirmed on June 10, 1963. These annexures are standard form of shipping instructions given by the respondent to the petitioner. It is stated in those shipping instructions.

'Please place the undernoted goods alongside SS/MV. Skautroll for shipment to Savannah on due date' and it would further appear there 'Please send us an advance note when the goods have been exported.'

There are similar instructions for shipment to Philadelphia and New Orleans. All these shipping instructions are dated February 19, 1962 and the Savannah shipping instructions are in respect of 100 bales. Philadelphia shipping instructions are in respect of 100 bales and New Orleans shipping instructions are for 50 bales. It was thirdly contended that the respondent exported the goods as will appear from allegations made in Sub-clause (i) of paragraph 6 of the affidavit of Saligram Jhajharia affirmed on Juno 10, 1963. It is alleged there that the petitioner returned the shipping instructions and the respondent thereafter arranged to ship and that the respondent shipped substitute goods in respect of those 250 bales and that the respondent bought 75 bales from Duli Chand Omprakash, 75 bales from Ratiram and sons, 100 bales from Duli Chand and Sons aggregating 250 bales. It is also alleged that the total quantity was shipped by the respondent per Skautroll as will appear from annexure 'C' to the said affidavit. Counsel for the respondent summed up the surrounding circumstances as indicative of the fact that the goods were shipped and that the goods had been purchased for the purpose and that goods were in fact exported and therefore the contract was for export of goods from India.

8. Counsel for the respondent contended that on the construction of the contract it would appear that the contract was for export of goods and the surrounding circumstances would show that the intention of the parties was that the contract was entered into for that purpose and therefore the contract was saved by the notification.

9. As to the notification counsel for the respondent contended that the meaning of the words 'for the export of jute goods from India' is that the contract has been entered into for the purpose of export or that the contract has been entered into as preparatory to export of the goods or that the contract has been entered into with a view to or with the object of or for the purpose of export. Counsel for the respondent relied on the various dictionary meanings of the word 'for' and I have indicated those meanings extracted from the dictionary on which counsel for the respondent relied.

10. Finally, counsel for the respondent relied on the decision in State of Travancore-Cochin v. Shanmughavilas Cashewnut Factory, reported in : [1954]1SCR53 in support of the proposition that one of the meanings discussed in that case was that there could be a purchase for the purpose of export, like production or manufacture for export and it was only an act preparatory to export though it might not be 'in the course of export' as was contemplated by Art. 286 of the Constitution which was for consideration in the Cashewnut case. It was contended that the present contract was entered into as a contract preparatory to export and therefore it is a contract for export.

11. Counsel appearing for the petitionercontends in the first place that the acceptance of the construction put upon the contract on behalf of the respondent if carried to logical conclusion would lead to absurdity, and it would indicate that in all chain contracts or in all contracts for jute goods it could be urged that the contracts were for export and in that case there would be no necessity for Forward Contracts Regulation Act. That certainly is a consideration to be borne into mind in construing the words FAS, it is contended on behalf of the petitioner, shows merely that one of the options given by the contract is that the buyer can insist on delivery tree alongside export vessel and immediately that is done the seller's obligation is at an end and the contract is exhausted by delivery. Similarly, it is contended that the use of the words 'shipment' in the contract or use of the words like 'lighter for shipment' or use of the words 'after the ship has left the Port of Calcutta' high indicate shipment but not that the contract was entered into for the export of jute goods from India.

12. In my view counsel for the petitioner isright in his aforesaid intentions because theentire emphasis is on the words 'contracts enteredinto for the export of jute goods from India.'In other words the particular contract sued uponmust have been entered into for export of jutegoods from India. If goods are exported by reason of commitments orother contracts between any of the partiesto the contract and another party, thatis not indicative of the fad that the contractbetween the two parties has been entered into forexport of jute goods from India. The exportthere, counsel for the petitioner in my viewrightly contends, is not by the specific contractbut by another contract.

13. Counsel for the petitioner contended that the words 'contracts entered into for export of jute goods from India' would mean that one of the contracting parties would be a foreigner and that the sale would not be within the internal limits or at home. Counsel for the petitioner in this context relied on the decision of the Supreme Court in Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer reported in : [1961]1SCR902 . The contention in that case was that the appellant company which carried on business in petroleum and petroleum products maintained supply depots at Dum Dum Airport from which motor spirit for the purpose of aviation was sold and delivered to aircraft which proceeded to foreign countries directly from the airport and as such the aviation spirit was not liable to taxation. The question was considered under Article 236 of the Constitution as to whether the aviation spirit was sold in the course of export out of the territory of India. The case was originally decided in our Court, The decision is reported in Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer, : AIR1957Cal395 . That decision was upheld. It will appear at p. 911 of the Supreme Court Report that there was a finding of the trial court the sale was physically within the State because both the buyer and the seller were at the time of sale within the State of West Bengal, even though delivery of aviationspirit was beyond customs barrier. The question was also considered in the light of Article 286 of the Constitution and it was held by the trial court that it was not an interstate transaction. Counsel for the petitioner relied on this decision first to show that the finding of the trial court was upheld and secondly that in an export contract or a export of goods from India there has to be a foreigner as one of the parties to the contract. In my view counsel for the petitioner is correct in his contentions.

14. Counsel for the petitioner contended that under a free alongside contract the seller undertook to deliver the goods alongside the ship at his own expense and it is stated in Halsbury's Laws of England 3rd Edition Vol. 34, p. 178, paragraph 307 that F.A.S. and F.O.R. contracts differ from the ordinary inland contract of sale only in respect of the place at which delivery is lo be made which puts on the seller an item of cost over and above the goods themselves and prima facie fixes the point at which the property passes and the risk falls upon the buyer and the price becomes payable. In short the contention on behalf of the petitioner is that the statement of law in Halsbury's Laws of England shows that a free alongside contract is ordinarily an inland contract and in the present case the F.A.S. delivery aspect is merely a place for delivery and the contractual obligation of the seller is at an end there and the contract is performed, and therefore the contract is not for export of jute goods from India. In my opinion, all the contentions on behalf of the petitioner are sound and correct.

15. The most important consideration is that the contract meaning the particular contract sued upon has to be entered into for export of goods from India. If the argument of the respondent is accepted that the goods eventually will be shipped or that the goods are intended for export the emphasis on the contract as counsel for the petitioner rightly stressed is lost sight of and the fallacy is committed by shifting the emphasis on goods or the purpose for which the goods arc bought or the purpose for which the contract is entered into. These considerations, as counsel for the petitioner in my view rightly contended, are entirely irrelevant and should not enter into the arena of construction of the contract, because it would have the effect of introducing new words or phrases which do not occur in the notification.

16. Finally counsel for the petitioner relied on the statement of law in Schmitthoff's Export Trade. The passage which has been referred to in the Supreme Court decision in Cashewnut case is as follows:

'From the legal point of view it is essential to distinguish the contract of sale which has as its object the exportation of goods from this country from other contracts of sale relating to the same goods, but being the direct and immediate cause for the shipment of the goods .. . .. ..

When a me reliant shipper in the United Kingdom buys for the purpose of export goods from a manufacturer in the same country the contract of sale is a home transaction; but when he resells those goods to a buyer abroad that contract of sale has to be classified as an export transaction'

(Export Trade Schmitthoff's 2nd Edn. p. 3).

17. Counsel for the respondent relied on the passage at p. 12 in the 4th Edition of the same book-Export Trade. There it is staled the clause free alongside ship embothes certain elements which are not lo be found in a sale of the home market. The seller's responsibility and risk in respect of the goods is discharged when they are carried alongside the ship so that they can be placed on board either in ship's tackle or by a short crane or some other means. The actual loading of the goods over the ship's rail is buyer's and not the sellers responsibility. To my mind this passage does not in any way indicate that the presence of the word 'FAS' is indicative of a contract being entered into for export of jute goods for the reasons which I have already indicated.

18. I am, therefore, of opinion that the petitioner is entitled to succeed and I hold that the contract is not saved by the notification from the, mischief of Section 15. I therefore declare the award null and void and I also set aside the award. The petitioner is entitled to costs. Costs of the previous day which, have been reserved are also to be paid by the respondent to the petitioner.

19. It may be stated that only for the purposeof the present application and for no other purposepetitioner assumed without admitting that thecontract was entered into between the parties.


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