BAJRANG JUTE MILLS LTD Vs. FULCHAND KANHAIYALAL CO

JUDGEMENT

(1.) THE facts in this case are shortly as follows : Shree Bajrang Jute Mills Ltd. (hereinafter referred to as the 'buyer') and Messrs. Fulchand Kanhaiyalal (hereinafter referred to as the 'seller') entered into a contract, dated the 5th August 1960 (No. 119) by which the petitioner agreed to buy and the respondent No. 1 agreed to sell to the petitioner, 510 bales of N.C. Cuttings weighing 92534.40 Kilos, at the rate of Rs. 57/32 nP. per hundred Kilos or Rs. 104 per bale, on terms and conditions recorded in a Bought Note passed by the broker, Gopiram Jalan, the respondent No. 2, a copy whereof is annexed to the petition and marked with the letter 'A'. THE contract stipulated that shipment was to be during November 1960 Import Licence and letter of authority in favour of the seller to be furnished by the Buyer. It contained the usual arbitration clause by the Bengal Chamber of Commerce. THE contract further incorporated the terms and conditions for a transferable Specific Delivery. Contract for raw jute, as laid down by the East India Jute and Hessian Exchange Ltd. Calcutta and subject to the Bye-Laws of that Exchange, for trading in such goods. It is alleged in the petition that the petitioner and both the respondents are members of the said Exchange and that the respondent No. 2 is a licensed broker thereof. THE Bye-laws also contain provisions for reference to Arbitration, In terms of the contract, the buyer obtained the necessary import license and forwarded it to the seller and requested them to arrange for import and delivery of the goods. At the request of the seller, the buyer gave several extensions of the due date of delivery, the last of such extension being till February 1961. By letter dated 27th February 1961, the seller again requested the buyer to extend time till 3ist March 1961, which it refused to do. THE seller failed to deliver the goods. THE buyer thereupon made out a Bill of difference amounting to Rs. 99,960/-, being the difference in price between the contract price and the market rate on the 2oth March 1961, and demanded payment of the said sum. THE seller failed to meet the demand. On or about the 8th June 1961, the buyer referred the dispute to the arbitration of the Bengal Chamber of Commerce and Industry, in terms of the arbitration clause in the contract. THE seller contended that the contract, as well as the arbitration clause contained therein where void and illegal and contrary to the Forward Contracts (Regulation] Act, 1952 and the bye-laws of the East India Jute and Hessian Exchange Ltd., Calcutta, and that the arbitrators had no jurisdiction to decide the dispute. THE arbitrators however proposed to proceed with the arbitration and a date was fixed for the hearing.

(2.) ON or about the 24th July, 1961 the seller made an application before this Court, being Matter No. 257 of 1957 (In the Matter of Arbitration Act 1940 between Fulchand Kanhaiyalal Co. and Shree Bajrang Jute Mills Ltd) requesting the Court (under Section 33 of the Indian Arbitration Act 1940) to adjudicate upon the existence or validity of the arbitration agreement dated 5th August 1960 for a declaration that the said agreement was void, illegal and inoperative and of no effect and for setting aside the same. The seller also asked for revocation of the said agreement and that the Bengal Chamber of Commerce be removed from acting as arbitrator, for interim stay aud other reliefs. I have looked at the petition, used in that application, affirmed on the 24th July 1961, and it can be analysed as follows : Firstly the facts are stated. It is then stated that at the time of the performance of the said contract, abnormal circumstances prevailed in the Law Jute trade, inasmuch as Jute was unobtainable from Pakistan. It was stated that the contract had been frustrated and was rendered impossible of performance, and thus the contract itself came to an end together with the arbitration clause. Next, it was contended that the contract was violative of the provisions of the Forward Contracts (Regulation) Act, being Act LXXIV, of 1952 and was therefore illegal and void. Lastly, it was contended that the Bengal Chamber of Commerce and the arbitrators appointed , were biased and / or likely to be biased against the sellers, having already formed and expressed an opinion on the matters in dispute, and as such the authority of the arbitrators should be revoked.

(3.) ON the 14th September, 1961 Mitter J. dismissed the application with cost and refused stay of operation of the order. The buyer thereupon asked the Arbitrators to proceed with the arbitration proceeding. ON or about the 7th October, 1961 the seller instituted a suit in this Court being Suit No. 1777 of 1961 (Fulchand Kanhaiyalal Co. v. Shree Bajrang Jute Milla Ltd). In the plaint of the said suit the plaintiff sets out the facts about the contract dated 5th August 1960 which is described as a "purported contract". This contract is challenged. The first ground is that it is violative of the provisions of the Forward Contracts (Regulation) Act being Act LXXIV of 1952. The next point taken is that under bye-law 1 (a) of Chapter V of the East India Jute and Hessian Exchange Ltd., no trading in transferable specific delivery contracts could be effected otherwise than between the members or through or with any member or where the services of the broker who is not a member are employed by a member otherwise than a licensed broker. It is stated that at all material times neither the plaintiff nor the defendant" nor the broker were members of the said Association and as a result thereof the contract is illegal, invalid and void. It is stated in the plaint that the contract contains an arbitration clause but at the time that the contract was entered into, the plaintiff was not aware that the same was illegal or void. Next it is stated that after the contract was entered into, emergent and abnormal conditions prevailed in the raw jute trade and the plaintiff approached the defendant No. 1 for extension of the delivery tune but the time was not extended, and therefore, the contract stood cancelled and/or terminated. It is alleged in the plaint that notwithstanding the above the defendant No. 1 namely the buyer had wrongfully exercised its option under the purported contract and claimed damages amounting to Rs. 99,960/-. It is then stated that the buyer had referred the dispute to the arbitration of the Bengal Chamber of Commerce and Industry and the arbitrators were threatening to proceed with the arbitration. It is contended that the contract was void illegal and inoperative for the reasons aforesaid and the plaintiff claims for a declaration that the contract and the relevant Bought and Sold Notes in respect of the said contract were void, illegal and inoperative, stay and cancellation of the contract, a declaration that the defendant No. 1 was not entitled to the payment of the said sum of Rs. 99,960/- or any part thereof, injunction restraining the defendant No. 1 from enforcing the contract or claiming any damages or proceeding with the reference of arbitration No. 310 of 1961 pending before the Bengal Chamber of Commerce and Industry and for such reliefs as may seem fit and proper. The broker Gopiram Jalan has been made the defendant No. 2. It is stated that he had been paid Rs. 525/- as brokerage and inasmuch as the contract was void, the plaintiff claims refund of the same.