SUWALAL JAIN Vs. CLIVE MILLS CO LTD

JUDGEMENT

(1.) THIS appeal is from a judgment of P. B. Mukharji, J. dismissing an application to adjudge and declare the contract dated 17-8-1954 to be illegal and invalid and to decide an award of the Bengal Chamber of Commerce. By the contract dated 17-8-1954 the appellant agreed to sell and the respondent agreed to buy raw jute. The contract contains the usual arbitration clause which is as follows:

(2.) THOUGH the liabilities under the contract are not transferable, prima facie the rights under the contract can be transferred. Thus, prima facie, the right of a buyer to obtain delivery of the goods under the contract of sale as also the right of the seller to obtain payment of the price of goods supplied under such a contract, can be transferred. It is said, however, that by reason of the special terms of the contract in this case, the rights of both the buyer and the seller under the contract are not transferable. The goods to be supplied under the contract were to be imported from Pakistan. At the relevant time no jute could be imported from Pakistan except under a licence obtained under the Imports and Exports Control Act, 1947. The contract, therefore, provides that the goods would be imported against the buyer's import quota. The import licence obtained by the uyer is a licence which, by its terms, is made non-transferable except under a letter of authority from the authority who issued the liences or from any Import Trade Controller. The condition of the licence is that the goods will be utilised only for consumption as raw materials or accessories in the licence-holder's factories and that no portion thereof will be sold to any party. The contract in question is obviously linked up with this licence. Having regard to the terms of the licence, it is practical impossibility for the buyer to transfer his rights under the contract, and it was so held in A F.O. O. No. 173 of 1957:. The question still remains whether the rights of the seller under the contract can be transferred. I am satisfied that it can be so transferred. Mr. Sethia argues that having regard to Clause 3 of the contract which provides for reimbursement, it is not possible for the seller to transfer his right to obtain payment of the goods supplied under the contract. I am unable to accept this contention. The special endorsement on the contract shows that the letter of credit is to be opened by the sellers in favour of its nominee, the shippers. The special endorsement read with Clause 3(1) of the contract shows that the sellers should open the letter of credit in favour of the shippers, present the documents to the scheduled Bank in East Pakistan with whom the letter of credit is opened, obtain a certificate from that Bank that the goods had been shipped, present the certificate to the buyer within the time specified, and on presentation of the documents in Calcutta obtain payment in cash by way of reimbursement of the price of the goods. I see no reason why the seller's right to obtain payment on fulfilment of the conditions mentioned, cannot be transferred. We are concerned with possibilities, and not with what actually might or might not have happened. In order to come within the definition of Section 2(f), the contract by its own terms must be such that the rights and liabilities under the contract are not transferable. I am satisfied that at least the rights of the seller under the contract to obtain payment of the price of the goods can be transferred. In this view of the matter, it cannot be said that the contract is a non-transferable specific delivery contract. It must follow, therefore, that the contract which is a forward contract for the purchase and sale of raw jute is prohibited by Section 17 of the Forward Contracts Regulation Act, 1952 and the Notifications issued thereunder.

(3.) IF the arbitration agreement is illegal, and therefore, legally non-existent, the fountain nead of the Arbitrator's jurisdiction disappears. It must follow, therefore, that any award which the Arbitrator may have made purporting to act under the legally non-existent arbitration clause is also invalid. I am, therefore, of the opinion that the award which the Arbitration purported to make under the supposed arbitration clause under this contract is also invalid and must be set aside.