Calcutta High Court
Alliance Mills (Lessees) Pvt. Ltd. vs Madan Gopal & Sons on 16 February, 1982
Equivalent citations: AIR1982CAL282, 86CWN623, AIR 1982 CALCUTTA 282
JUDGMENT Banerjee, J.
1. These appeals arise out of an application under Sections 30 and 33 of the Arbitration Act 1940 for setting aside the award made by the Tribunal of Arbitration. The Bengal Chamber of Commerce & Industry, Calcutta. The fact relating to the arbitration proceeding is that there was a contract between the appellant and the respondent coining under the East India Jute & Hessian Exchange Ltd., Calcutta for Trading in Transferable Specific Delivery Contracts in Raw Jute and Jute Goods and Rules (Sic). The transferable specific delivery contracts in raw jute and jute goods are embodied in the Rules framed under the East India Jute & Hessian Exchange Ltd. The contract also is to be found in Appendix X of the East India Jute & Hessian Exchange Ltd., Calcutta (Working Manual Vol. III). There was no dispute that some sort of agreement was entered into by Alliance Mills (Lessees)" Pvt Ltd. and M/s . Madan Gopal & Sons in a form which is akin to Appendix II as hereinbefore stated. But it appears from the original that the rubber stamp which was embossed on the same form could not be deciphered.
2. These matters were being heard by us sometime in Mar. 1978 and we passed an order on the same by consent of parties. It is imperative what is imprinted by the rubber stamp must be deciphered. We, however, made the order on 20th Mar,, 1978 by sending back the matter to the learned Judge, City Civil Court for decision on the following issues framed by us "(1) Whether the Transferable Specific Delivery Contract for Jute Goods being Contract No, JG/C-10053 dated 9th Dec., 1971 is statutory form upon which the contract was entered into ? and (2) What was the prescribed form prevalent on the date of the Contract?" We also directed that the parties should be given liberty to adduce evidence,
3. The learned Judge however sent his decisions on the said two issues to this Court holding inter alia that the contract was not entered into in the statutory form and secondly, that statutory form in Appendix II at the page next to 93 of the Working Manual Vol. III is a form with up-to-date amendments as prevalent on the date of contract as on 9th Dec. 1971.
4. After the records were sent to us with a decision of the learned Judge, the matter could not be heard because a number of adjournments were taken by the parties on different grounds in eluding the one that one of the appeals in which the main judgment was printed, was not ready. Be that as it may. though belated, all the matters could be heard analogously today.
5. Mr. P.N. Chatterjee on behalf of the appellant contended firstly that the doctrine of substantial compliance has no application in the present case, The contract not being in the prescribed form, there is no contract and as such, arbitration clause is not applicaable. Secondly, it is argued by Mr. Chatterjee that so far as the option clause is concerned the Rule in. Chapt. v. Sub-rule (3) time will have to be specified and no time having been specified in the contract itself, the parties are not entitled in law to rely on custom.
6. Mr. K.K. Maitra on behalf of the respondent, however, contended that it is not Chap. V but Chapter VII of the Working Manual, Vol. III applies. It is also contended by Mr. Moitra that the Supreme Court judgment as has no application in the facts of the present case, as there was no scoring or cancellation in the statutory form prescribed under the Manual, It is argued further by Mr. Moitra that no prejudice is caused to the seller, when subsequent to the contract about the option in regard to the time, element for the exercise of option is present as contained in Rule 3 of Chap. V of the Working Manual, Vol. III Mr. Moitra further contended that the matter had gone to the arbitration and the appellant cannot now raise the question having submitted to the jurisdiction of the arbitrator and it cannot also say that the arbitration was without jurisdiction. Mr. Moitra relied upon the decisions reported in AIR 1949 PC 334, , , and on Russell's Arbitration 19th Ed. p. 453.
7. In reply to the above decisions as cited by Mr. Moitra, Mr. Chatterjee contended that as the contract itself is void, this question is not at all relevant. Mr. Chatterjee relied upon a decision reported in AIR 1962 SC 1810 .
8. The question for our consideration is therefore whether the contract is in Appendix II of the Working Manual Vol. III at page 93. Admittedly it is not so. It appears that in the original there is some rubber stamp which cannot be deciphered. On evidence also nothing came out that the amended form has been used at the time of contract on 9th Dec. 1971. In our opinion, the case applied here on all fours as the Supreme Court has held in the said case that it is not correct to say that the prescribed form may be followed only in so far as circumstances may admit. The prescribed form is imperative and a contract in order to be valid must contain all the terms and conditions set out in the prescribed form. Either the contract must incorporate all those terms and conditions or no contract can be made at all. No term or condition in the prescribed form can be dispensed with on the plea that it is inapplicable. The Supreme Court has clearly stated in para 10 relying upon the case that "In our opinion, the High Court was right in holding that the contracts in question were not in the prescribed form and thus they did not comply with the requirement of Bye-law 1 (b) of Chap. V. There can be no manner of doubt that that bye-law is mandatory when read with By-laws 15 and 17. It must be remembered that under Bye-law 15 no member shall enter into any transferable specific delivery contract otherwise than on terms and conditions prescribed under the bye-laws and under Bye-law 17 if there is a contravention inter alia of Bye-law 15 the contract shall be rendered illegal by virtue of the provisions contained in Section 15(3A) of the Act, that is, Forward Contracts (Regulation) Act, 1952. It is clear from this judgment that any member of the East India Jute & Hessian Exchange Ltd. cannot contract out of Appendix II in respect of transferable specific delivery contracts in jute goods. Chap. V of the said Manual deal with the trading provisions in general. Chap. V sub-para (g) provides that all Transferable Specific Delivery Contracts shall be subject to the provisions of the Bye-laws. Bye-law 3 of Chap. V runs as follows:--
"T. S. D. Contracts in jute goods shall ordinarily provide for delivery of a specified quality of these goods but provisions can be made in the contract for specified options which may be with or without penalty and/or premium or which may contain terms for delivery at specified rates arranged mutually between the sellers and the buyers. Such options shall be exercised by the buyer within the time specified in the contract."
9. It appears from the contract form that there was no option given in the column left for option to be exercised by the buyer within the time specified in the contract. If no such option is given, the contract becomes illegal in view Bye-laws 15 and 17 of the Manual read with Section 15(3) of the Forward Contracts (Regulation) Act, 1952.
That there was no incorporation in the form is clear from the application the buyer made in his arbitration petition which contained an objection thereto, to the appellant's objection. It is clear from their objection that they pleaded that even if the option clause was not there, still this can be incorporated in the contract itself by consent of the parties and according to the customs prevailing. In our opinion, in view of the fact of the statutory prohibition and in view of the fact that the contract must be entered into in Appendix II and not otherwise, this purchase or no purchase is of no concern for the consideration whether the contract was validly made or not in accordance with the statutory regulation framed under the Forward Contracts (Regulation) Act, 1952. Mr. Moitra further contended that, when the matter was referred to the arbitration, the petitioner or appellant or any of the party was barred in raising the question of arbitration being invalid because the contract was invalid. In our opinion this cannot be correct. The privy Council in AIR 1949 PC 334 has already decided that the award cannot be set aside even if there is error of law unless it comes within the mischief of provision of Section 20 (or 30) of the Arbitration Act of 1940. This question was also considered in a similar matter by the Supreme Court in a case and where the question was raised similarly under the Forward Contracts (Regulation) Act that this cannot be raised by the parties to the Contract. The Supreme Court categorically stated that if the contract itself is void the question of submitted jurisdiction of arbitrator is of no avail It has been held by the Supreme Court that it cannot be disputed that the expression "arising out of" or "concerning" or "in connection with" or "in consequence of" or "relating to this contract" occurring in an arbitration clause in an agreement to purchase goods are of sufficient amplitude to take in a dispute as to the validity of the agreement. But the arbitration clause cannot be enforced when the agreement of which it forms an integral part is held to be illegal. On principle it must be held that when an agreement is invalid every part of it including the clause as to arbitration contained therein must also be invalid. The point which Mr. Moitra argued was specifically taken by the parties. It has been held by the Supreme Court that the party applying under Section 33 is not estopped by its conduct in appearing before the arbitrators and in taking part in the proceedings before them from questioning the validity of the award. What confers jurisdiction on the arbitrators to hear and decide a dispute is an arbitration agreement as denned in Section 2(a), and where there is no such agreement, there is an initial want of jurisdiction which cannot be cured by acquiescence. We are therefore of opinion that this argument of Mr. Moitra that the appellant having acquiescence and taking part in the arbitration proceeding cannot now challenge the arbitration proceeding, cannot be sustained and must fail. In view of the finding on the first question we must hold that the contract not being in form as in Appendix II and in violation of Chap. V Bye-laws 15 and 17 read with Section 15(3A) of the Forward Contracts (Regulation) Act cannot be upheld and must be said to be void.
10. The appeals ate therefore allowed. The judgment and order passed by the court below are set aside and the Award of the Tribunal is set aside. But there will be no order as to costs.
B.N. Maitra, J.
11. I agree.