Messrs. Basant Lal Banarsi Lal v. Bansi Lal Dagdulal

Chagla, C. J. said, it takes a legal contra.ct and imposes on it certain conditions and makes it illegal if those conditions are not fulfilled. If a contract is already illegal, there is no scope for applying the Bombay Act. Furthermore, the Bombay Act deals with all kinds of goods. Sub-section (4) of s. 2 of this Act defines goods as any kind of movable property includ-ing securities but not including money or actionable claims. Now the Central Act only applies to essen-tial commodities as defined in it. Therefore, there would be many contracts to which the Central Act would not apply and such contracts may be rendered illegal by the Bombay Act if they come within its scope and are made in disregard of the conditions la.id down in s. 8.

We, therefore, come to the conclusion that there is no repugnancy between the Bombay Act and the Central Act. It follows that there is no scope for applying the provisions of s. 107(2) of the Government of India Act, 1935. That would bA the position in 1948, when the Bombay Act came into force and the Messrs. Basant Central Act was already in existence. Both the Acts Lal Banarsi v. would then be applying to Greater Bombay as there Bansi Lal is no inconsistency between them. Article 372 of the D?gdulal Constitution continued both these Acts after the Con-stitution came into force and there is nothing in the Sarkar Constitution which provides that any one of two existing laws, both of which had applied up to the coming into force of the Constitution, would apply to the exclusion of the other. It follows that in 1951 or 1952, when the contract in groundnuts-which it is not disputed, was a. forward contract within the meaning of both the Acts-was made, both the Acts applied to it. The Constitution had not affected such application. That being the position, the contract in groundnuts must be held to be illegal under the Cen-tral Act which clearly prohibited the making of it.

The Bombay Act could not make it legal for, as we have said, it was not intended to make any contract legal. It would follow that the arbitration. clause contained in that contract was of no effect. It has therefore to be held that the award made under that arbitration clause is a nullity and has been rightly set aside. The award, it will have been noticed, was however in respect of disputes under several con-tracts, one of which we have found to be void. But as the award was one and is not severable in respect of the different disputes covered by it, some of which may have been legally and validly referred, the whole a.ward was rightly set aside.

The appeal, therefore, fails and is dismissed with costs.

.Appeal diBmiBsed.

CIVIL APPELLATE JURISDICTION: Civil Appeal No.

264of1956. ·

Appeal by special leave from the· Judgment and Order dated Jurie 29, 1954; of the Bombay High Court in Appeal No. 127 of 1953.

A. V. ViswanathaBastri, He.mendra Shah, S. N. And-ley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the Appellant. ·

J. O. Bhatt, 0. J. Shah and Naunit Lal, for the Res-pondent.

1960. November 30. The Judgment of the Court was delivered by . ·

SARKAR, J.-The appellant is a commission agent Sarkar f. and pucca aratiya and has been acting as such for the respondent since November 7, 1951, in the course of which yarious contract.s were made between them. in Greater Bombay. On February 26, 1952, two of such contracts were outstanding, one of which was in res-pect of groundnuts and was a forward contract.

In March 1952, disputes. arose between the parties as to whether these contracts had been closed, each side inaking a .·claim . on the other on the basis of its own contention. Eventually, on March 18, 1952, the appellant referred the disputes to arbitration under the arbitration clause contained in the contracts. On October 7, 1952, the arbitrators made one composite award for Rs. 22,529~15-9 against the respondent in respect of the said disputes. It is not very clear whe-ther this award covered other disputes also.

This award was duly filed in the Bombay City Civil

782 SUPREME COURT RE.PORTS (1961)

Court under the Arbitration Act, 1940, for a judgment Messrs. Basant being passed on it. Thereafter, on July 17, 1953, the iaz llanarsi Lal respondent made an application to the Bombay City

v. Civil Court for setting aside the award contending Bansi Lal that forward contracts in groundnuts were illegal as Dagdulal the making of such contracts was prohibited by the

Oilseeds (Forward Contract Prohibition) Order, 1943, Sarkar ]. issued under the Essential Supplies (Temporary Pow-

ers) Act, 1946, and hence the arbitration clause con-tained in the forward contract in groundnuts between the parties was null and void. It was said that the award based on that arbitration clause was therefore a nullity. The appellant's answer to this contention was that the Essential Supplies (Temporary Powers) Act did not apply to Greater Bombay where forward con-tracts were governed by the Bombay Forward Con-tracts Control Act, 1947, hereafter called the Bombay Act, and as the contract in groundnuts had been made in terms of that Act, it was legal, and, therefore, the award in terms of the arbitration clause contained in it was a valid and enforceable award. The learned Principal Judge of the Bombay City Civil Court ac-cepted the respondent's contention and set aside the award. An appeal by the appellant to the High Court at Bombay against the judgment of the City Civil Court failed. The appellant has now come to this Court in further appeal.

The only question in this appeal is whether the Essentia~ Supplies (Temporary Powers) Act, which was passed by the Central Legislature in 1946, applied to Bombay? If it did, then the Oilseeds (Forward Contract Prohibition) Order, 1943, hereafter called the Oilseeds Order, issued under it would make the con-tract in groundnuts illegal and no award could be made under the arbitration clause contained in it. This is not in dispute.

Now, the Oilseeds Order was first passed in 1943 under r. 83 of the Defence of India Rules. The De-fence of India Rules ceased to be in force on Septem-ber 30, 1946. In the meantime however, as the situa-tion had not quite returned to normal in spite of the termination of the war, the British Parliament passed an Act on March 26, 1946, called the India (Central r96o Government and Legislature) Act, 1946 (9 & 10 Geo. M VI, Ch. 39), hereafter called the British Act. Section 2 La;s;;:~ar:t~~l of this Act provided that the Central Legislature of v. India would have power to make laws with respect to Bansi Lal various matters therein mentioned notwithstanding Dagdulal anything in the Government of India Act, 1935, and Sarkar J. that that power could be exercised during the period mentioned in s. 4 and furt)ler that the laws so made to the extent they could not have been otherwise made, would cease to have effect at the expiration of that period. The Governor General under the powers reserved in s. 4 and subsequently, the Constituent Assembly of India, under the powers conferred on it under the Indian Independence Act, 1947, extended the period mentioned in s. 4 of the British Act from time to time and eventually up to March 31, 1951. It would be unprofitable for our purposes to refer to the various statutory provisions and orders under which this was done for, the extension is not in dispute.

Under the powers conferred by the British Act., the Governor-General promulgated the Essential Supplies (Temporary Powers) Ordinance, 1946, which came into force on October 1, 1946. On November 19, 1946, the Central Legislature under the same powers, passed the Essential Supplies (Temporary Powers) Act, 1946, hereafter called the Central Act, repealing the Ordi-nance and substantially incorporating its terms. The Central Act originally provided that it would cease to have effect on the expiration of the period mentioned is s. 4 of the British Act. As the life of the British Act was extended from time to time, suitable amend-ments were made in the Central Act extending its life also. Our Constitution came into force on January 26, 1950 and by virtue of Art. 372 the Central Act was continued as one of the existing laws. On August 16, 1950, under powers conferred by Art. 369 of the Con-stitution, Parliament passed the Essential Supplies (Temporary Powers) Amendment Act, 1950, Act LII of 1950, amending the Central Act in various respects and extending its life up to December 31, 1952. By another amendment made by Act LXV of 1952, the I960 life of the Central Act was extended till January 26,

1955.

A! essYs. Bas ant Section 3(1) of the Central Act is in these terms: Lal Banarsi Lal

v. "The Central Government, so far as it appears to Bansi Lal it to be necessary or expedient for maintaining or in-Dagdulal creasing supplies of any essential COI!lmodity, or for

securing their equitable distribution and availability Sarkar ]. at fair prices, may by notified order provide for

regulating or prohibiting the production, supply and distribution thereof, and trade and commerce therein." Section 2 of the Act provides that foodstuffs would be an essential commodity within the meaning of the Act and would include edible oilseeds. We have earlier stated that the Oilseeds Order was originally passed under the Defence of India Rules, which ex-pired on September 30, 1946. The Ordinance of 1946 continued in force, orders issued under the Defence of India Rules in so far as they were consistent with it and provided that such orders would be deemed to be orders made under it. Section 17(2) of the Central Act provided that an order deemed to be made under the Ordinance and in force immediately before its com-mencement would continue in force and be deemed to be an order made under it. As a result of the Ordi-nance and the Central Act replacing it and the exten-sion of the life of the latter from time to time, the Oilseeds Order so far as it related to edible oilseeds including groundnuts, continued in force after the expiry of the Defence of India Rules till January 26, 1955. That Order, as so continued, prohibited the making of forward contracts, that is to say, contracts providing for delivery at a future date, in respect of certain specified oilseeds including groundnuts. It is the respondent's contention that it is because of this order, read with the Central Act, that the contract in groundnuts between the parties was illegal and there-fore the award made under the arbitration clause contained in it was void.

Now the British Act under which the Central Act was passed, provided in sub-sec. (4) of s. 2 that, "Sub-section (2) of section 107 of the Government of India Act, 1935, and sub-section (2) of section 126 of that Act shall apply in relation to a law enacted by virtue of this section with respect to any matter being a matter with respect to which a Province has power Messrs .. Basant to make laws as if that matter were a matter specified Lal BanaJSi Lal v. in Part II of the Concurrent Legislative List .. " Bansi Lal Section 107(2) of the Government of India Act, 1935, Dagdulal laid down that,

"Where a Provincial law with respect to one of Sarkar the matters enumerated in the Concurrent Legislative List contains any provision repugnant to the provi-sions of an earlier Federal law ....... ; .... then if the Provincial law, having been reserved for the con-sideration of the Governor-General. ........... has receiv-ed the assent of the Governor-General.. ................ the Provincial law shall in that Province prevail.. ....... ".

It would follow from these provisions that if a Pro-vincial Act which had received the assent of the Governor-General, contained anything repugnant to a Central Act passed under the powers conferred by the British Act, then in the Province concerned, the Pro-vincial Act would apply and not the Central Act.

Now, the Bombay Act which had been passed by the Provincial Legislature of Bombay in 1947, came into operation in 1948. That Legislature had power to pass the Act and the Act had received the assent of the Governor-General. At that time the Central Act deriving its force from the British Act, was in operation. If, therefore, the Bombay Act was repug-nant to the Central Act, in Bombay, the Bombay Act would apply and not the Centni,l Act. This is not in dispute. The appellant contends that the Bombay Act is so repugnant and therefore the Central Act cannot render the forward contract in groundnuts made in Greater Bombay, illegal and void.

The question, therefore, is whether the Bombay Act contains any provision repugnant to the Central Act.

The preamble of the Bombay Act stittes that it was enacted as it was thought expedient to regulate and control forward contracts and for certain other mat-ters. Section 1 of this Act came into force at once and gave power to the Government to bring into force by notification the remaining sectii:>ns of the Act in the .1960 whole of the Province of Bombay or parts thereof on MessYs, Basant such. ·date and in respect of such goods as might be Lal Banarsi Lal spemfied. The Government of Bombay issued notifica-

v. ~ions under th!-8 .section o~ _December 19, 1950, apply-Bansi Lal mg the remamrng prov1s1ons of the Act to the area Dngdulal called Greater Bombay in respect of all varieties of

oilseeds as from the said date. Section 8 of the Bom-Sarkar ]. bay Act provides as follows:

S.· 8.-(1) Every forward contract for the sale or purchase of, or relating to, any goods specified in the notification under sub-section (3) of section 1 which is entered into, made or to be performed in any notifi-ed area shall be illegal if it is not entered into, made or to be performed- (a) In accordance with such bye-laws, made under section 6 or 7 relating to the entering into, making or performance of such contracts, as may be specified in the bye-laws, or (b) (i) between members of a recognised associa-tion, (ii) through a member of a recognised associa-tion, or (iii) with a member of a recognised association, provided that such member has previously secured the written authority or consent, which shall be in writing if the bye-laws so provide, of the person enter-ing into or making the contract, and no claim of any description in respect of such contract shall be enter-tained in any civil court.

(2) Any person entering into or making such illegal contract shall, on conviction, be punishable with imprisonment for a term which may extend to six months or with fine or with both.

"Recognised association" is defined in the Bombay Act as an association recognised by the Provincial Government and on December 19, 1950, the Bombay Oilseeds ExchB>nge Limited was recognised as such an association by the Government of Bombay. The appel-lant is a member of this association. The contracts between the parties were all expressly made subject to the rules and regulations of thi_s Association. The case before us has proceeded on the basis that the impugn-ed contract in groundnut had been made in compliance with the requirements of s. 8 and there is no finding to the contrary by the Courts below. We have henc~ Messrs. Basant to proceed on the same basis. Lal Banarsi Lal

The appellant contends that s. 8 of the Bombay v. Act and s. 3 of the Central Act are repugnant to each Bansi Lal other. Nows. 8 of the Bombay Act, it will be noticed, Dagdulal does not purport to make any contract legal. Its only Sarkar effect is to render forward contracts in all varieties of oilseeds illegal if not made in compliance with its terms. The learned Advocate for the appellant says that the effect of s. 8 was to render a forward contract in all oilseeds made in terms of it, legal and, therefore, a repugnancy arose between its terms and the terms of the Oilseeds Order issued under the Central Act which made forward contracts in edible oilseeds illegal.

The learned Advocate referred to various other pro-visions of the Bombay Act and the bye-laws of the Association made in terms of the Act to show that the Bombay Act was intended to cover the entire field of forward contracts with respect to all varieties of oilseeds and was therefore intended to oust the opera-tion of the Central Act in Greater Bombay with regard to the forward contracts covered by the former. It does not seem to us that a reference to the other pro-visions in the Bombay Act or to the bye-laws, is relevant in deciding the question. If the effect of s. 8 of the Bombay Act was not to render forward con-tracts made in terms of it legal, then no question of repugnancy with the Central Act can arise whatever may be the scope of the Bombay Act and the provi-sions in the bye-laws. ·

Therefore, it seems to us that the question is whe-ther s. 8 of the Bombay Act by its terms makes any forward contract legal. Section 3 of the Central Act, as already seen, gives power to the Central Government to prohibit trade and commerce in oilseeds. That Act, therefore, enables the Central Government to make forward contracts in essential commodities as defined in it, illegal. That is what the Central Government did by the Oilseeds Order in so far as edible oilseeds are concerned.

We find nothing in s. 8 from which it can be said

that it rendered any contract legal. Its only intent &nd effect is to declare certain forward contracts illegal. Messrs. Basant We think that the matter was very correctly put by Lal Banarsi Lal

v. Chagla, C. J., who delivered the judgment of the High Bansi Lal Court. He said, "All that Sec. 8 does is to declare Dagdulal that forward contracts will be illegal unless they com-

ply with the procedure laid down in Sec. 8. But it is Sarkar ] . one thing to declare a certain contract illegal. It is

entirely another thing to declare an illegal contract legal. Sec. 8 does not even make an attempt to declare that forward contracts declared illegal by the Central legislation shall be legal if they comply with the technicalities laid down in Sec. 8. The assumption underlying Sec. 8, it seems to us, is that forward con-tracts which the Legislature is dealing with are legal contracts, but even if they are legal they are declared to be illegal unless they are performed or made or entered into in the manner laid down-in Sec. 8". With these observations we fully agree.

In regard to the contention that s. 8 of the Bombay Act necessarily implies that contracts made in terms of it would be legal, it seems to us that there is no such necessity indicated in the Act. The Act clearly intends only to create an illegality, that is to say, as