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Arun General Industries Ltd. Vs. Gunny Trading Co. - Court Judgment

LegalCrystal Citation
SubjectArbitration;Contract
CourtKolkata High Court
Decided On
Case NumberAward No. 244 of 1969
Judge
Reported inAIR1972Cal542
ActsForward Contracts (Regulations) Act, 1952 - Section 2; ;Arbitration Act, 1940 - Section 33
AppellantArun General Industries Ltd.
RespondentGunny Trading Co.
DispositionApplication allowed
Cases Referred(See Shayler v. Woolfe
Excerpt:
- .....terms and conditions mentioned in the said contracts.2. the said contracts were non-transferable specific delivery contracts within the meaning of the forward contract (regulations) act, 1952. each of the said contracts contained an arbitration clause to the following effect to wit:'15. all disputes between the parties shall be referred to the arbitration of indian chamber of commerce. calcutta, under the arbitration act, 1940, and courts situated within the area of original side of calcutta high court shall have jurisdiction'.the buyers under the said contracts purported to assign the rights under the said contracts in favour of the respondents. the petitioner failed and neglected to deliver goods under the said contracts notwithstanding application therefor by the buyers and/or the.....
Judgment:
ORDER

S.C. Ghose, J.

1. This is an application fordetermination of the existence or validity of 16 several contracts mentioned in paragraph 1 of the petition whereby and whereunder the petitioner agreed to sell to diverse persons various quantities of jute goods described in the said several contracts on the terms and conditions mentioned in the said contracts.

2. The said contracts were non-transferable specific delivery contracts within the meaning of the Forward Contract (Regulations) Act, 1952. Each of the said contracts contained an arbitration clause to the following effect to wit:

'15. All disputes between the parties shall be referred to the arbitration of Indian Chamber of Commerce. Calcutta, under the Arbitration Act, 1940, and Courts situated within the area of original side of Calcutta High Court shall have jurisdiction'.

The buyers under the said contracts purported to assign the rights under the said contracts in favour of the respondents. The petitioner failed and neglected to deliver goods under the said contracts notwithstanding application therefor by the buyers and/or the respondents. Thus disputes and differences arose under the said contracts between the parties.

3. The respondents in terms of the arbitration clauses contained in the said contracts referred the said disputes to the arbitration of the Indian Chamber of Commerce, the named arbitrator. Hence the application under Section 33 of the Indian Arbitration Act has been made by the petitioner for the reliefs mentioned above.

The petitioner challenges the right of the respondent to refer the disputes between the parties to arbitration on two grounds:--

First, according to the petitioner, the contracts are non-transferable specific delivery contracts within the meaning of Forward Contract (Regulations) Act, 1952. Thus, the rights liabilities under the said contracts, under the express terms of the contracts, could not be transferred to the respondents.

Secondly, the petitioner submits that if the said contracts are held to be transferable specific delivery contracts, then, the same were and are void and illegal inasmuch as the said contracts had not been entered into by or between or through any member of a recognised Association. The said contracts also were not on the forms prescribed by any recognised Association and no permission of the Central Government was obtained to enter into the said contracts. Thus the said contracts were entered into in contravention of the provisions of the Forward Contract (Regulations) Act. 1952 and/or the notifications issued thereunder.

The same, therefore, were and/are illegal and void.

4. The respondent in paragraphs & and 9 of the affidavit of Jupudy Lakshmi Narasimha Rao affirmed on January 20, 1970, and filed in opposition to the petition herein has admitted that all the said contracts were non-transferable specific delivery contracts for jute goods. The respondents, however, has denied in the said affidavit that the said contracts were and are illegal or void.

5. Mr. Vyas appearing on behalf of the petitioner submitted that all the contracts in the instant case are admittedly non-transferable specific delivery contracts. By the very terms of the contracts, they were not transferable as the express terms thereof, prohibited the transfer of the said contracts. Mr. Vyas next submitted that there was no evidence or proof of assignment in the instant case. Lastly, Mr. Vyas contended that in any event the arbitration agreement contained in the said contracts were and are not transferable. Mr. Vyas relied on the case of Khardah Co. Ltd. v. Raymon & Co. (Pvt.) Ltd., AIR 1962 SC 1810. Mr. Vyas submitted that in the case of Lotus Oil Co. v. Calcutta Soap Works. : AIR1962Cal441 , it was held on the facts that the contract in that case was a transferable specific delivery contract.

6. Mr. Gautam Chakrabarty appearing on behalf of the respondent on the other hand contended that in an application under Section 33 of the Indian Arbitration Act challenging the legality of the contract, all the parties to the contract must be made parties to the proceedings. In the instant case the original parties to the contract i. e. the buyers have not been made parties and the application should be dismissed on the said ground. The petitioner cannot be allowed to claim any relief as prayed for in prayers (a) (b) and (c) to the petition in the absence of original purchasers. Then Mr. Chakrabarty submitted that the right the purchaser under the contract has been stated in paragraph 7 in the affidavit-in-opposition. Monies according to Mr. Chakrabarty were advanced under the contracts, and became refundable to the purchasers oh the petitioner's default in delivering the goods under the contracts. The buyer's right to the said monies under the said contracts could be and have been assigned. The factum of assignment of the contract has not been challenged and so need not be proved.

7. Mr. Chakraborty also relied on the case of AIR 1962 SC 1810and specially on the observations of the Court in paragraph 24 of the said judgment appearing at page 1818 of the report. The Counsel relied on the case of : AIR1962Cal441 and submitted that the buyer's right to the price advanced could be assigned. According to Mr. Chakrabarty this application has no merit and should be dismissed.

8. In the case of : AIR1962Cal441 , the contract, as appears from the Report, had no express term to the effect that the contract was a non-transferable specific delivery contract. On an analysis of thesaid contract it was found that although the buyer could not assign his rights under the contract, there was nothing in the said contract preventing the seller from transferring his right to the price of goods after effecting delivery thereof. Thus the contract involved in the said case was held to be a transferable specific delivery contract.

9. In AIR 1962 SC 1810there wasno express term prohibiting transfer by the parties of rights under the contract. It was held by the Supreme Court that absence of express words forbidding transfer in the contract itself was not conclusive. A contract might be non-transferable by necessary implication in view of the fact that the benefits conferred upon the parties by the contract were burdened with liabilities. On that ground the contract which was subject-matter of the proceedings in was held to be non-transferable even in the absence to that effect.

10. In the instant case the contract is admittedly a non-transferable specific delivery contract. Clause 16 of the said contract as appears from a sample form of the said contracts annexed to the Petition contains a condition to the following effect, to wit:--

'16. This is a non-transferable specific delivery contract, within the meaning of the Forward Contracts (Regulations) Act, 1952, and as such the rights or liabilities under this contract or under any delivery order. Railway Receipt, Bill ofLading, Warehouse Receipt. Lorry Receipt or any other documents of title relating thereto are not transferable'.

Thus the buyers and the seller in the instant case expressly agreed that their rights under the contract were incapable of assignment.

11. Section 2(f) of the Forward Contract (Regulations) Act, 1952, defines a non-transferable Specific Delivery Contract to be absolutely unassignable. In the instant case the parties have agreed that the contracts which are the subject-matter of the instant application would be non-transferable specific delivery contracts as defined by Section 2(f) of the said Act.

The mere fact that a contract contains an arbitration clause does not by itself make the contract unassignable (See Shayler v. Woolfe, 1946 Ch 320. Mr. Vyas contention on this point cannot be accepted.

12. In the instant case it appears, therefore, that the rights of the parties under the contract were incapable of being assigned and the respondents acquired no right either under the contracts or under the arbitration clause contained therein. There was or is therefore, no arbitration agreement between the parties.

13. The assignors of the said contracts are not necessary parties to thisapplication. They have not asserted anyright under the contract.

14. For all the aforesaid reasons this application must succeed. There shall be orders in terms of prayers (d), (e) and (f) of the petition.

15. The respondents shall pay the costs of this application.


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