Decided on January 02,1953

S.M. Abdul Azeez And Sons Appellant
Paruchuri Subrahmanyam And Ors. Respondents


Rajamannar, J. - (1.) THESE three cases have been referred to this Court by the First Additional subordinate Judge of Vijayawada under the proviso to Section 113, Civil P. C. recently inserted by Act 24 of 1951. These references arise out of three suits pending in the Court of the Subordinate Judge in which the validity of the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order, 1944, was questioned.
(2.) THE particular provision whose validity is challenged in these three suits is that contained in clause 4 of the Order. Clause 3 provides that no person shall, after a specified date, enter into any forward contract in certain articles. Clause 4 runs thus: "Notwithstanding any custom, usage or practice the trade, or the terms of any contract or any regulation of an Association relating to any contract: (1) every forward contract in any article to which this order applies out -standing at the close of business on the specified date shall be deemed to be closed out at such rate as the Central Government may by notification in the Official Gazette fix in this behalf, and different rates may be fixed for different classes of contracts ; (2) All differences arising out of any contract so deemed to be closed out shall be payable on the basis of the rate fixed as aforesaid and the seller shall not be bound to give, and the buyer shall not be bound to take, delivery; (3). payment of all difference legally due from a member of an association to another member of such association in respect of any forward contract closed out under this clause shall ho made to the clearing house of the Association and for the purposes of calculating such differences, the rate fixed by the Central Government under Sub -clause (1) shall be deemed to be the settlement rate fixed by the Association under its by -laws or other regulations which shall, for the relevant purpose, continue to have effect subject to the provisions of this order." It is common ground that the order was issued in purported exercise of the powers conferred by Sub -rule (2) of rule 81 of the Defence of India Rules. The following clauses of that sub -rule are material for the consideration of the question which fails now for our decision : " (a) for regulating or prohibiting the production, treatment, keeping, storage, movement, transport, distribution, disposal, acquisition, use or consumption, of articles or thing; of any description whatsoever and in particular for prohibiting the withholding from sale, either generally or to specified persons or classes of persons, of articles or things kept for sale to be sold either generally or to specified persons or classes of persons or in specified circumstances. (b) for controlling the prices or rates at which articles or things of any description whatsoever may be sold or hired and for relaxing any maximum or minimum limits otherwise imposed on such prices or rates.... (f) for any incidental and supplementary matters for which the Central Government or the Provincial Government thinks it expedient for the purposes of the order to provide, including, in particular, the entering, search and inspection of premises to which the order relates with a view to securing compliance with the order, the seizure subject to the provisions of Sub -rule (3 -C) by a person authorised to make such search of any articles in respect of which such person has reason to believe that a contravention of the order has been, is being or is about to be committed, the grant of issue of licences, permits, certificates and other documents, and the charging of fees therefore; and an order under this rule may be made so as to apply either to persons or undertakings generally or to any particular person or undertakings or Class of persons or undertaking, and so as to have effect either generally or in any particular area."
(3.) THE argument of Mr. Narasaraju is that the provision for payment of differences on the footing that forward contracts outstanding on the date specified in accordance with the terms of the order shall be deemed to be closed out at such rates as the Central Government may, by notification fix in this behalf, is not a provision which can be said to fall within the scope of either Clause (a), (b) or (f) of Sub -rule (2). He concedes that the total prohibition of forward contracts in future which is provided in clause (3) of the order as well as the provision in Clause 4 (2) of the Order discharging the seller and the buyer from their respective obligations to give and take delivery, would fall within clause (a) of Sub -rule 2. That would be prohibiting the distribution and disposal of articles. But he contends that the provision for payment of differences on the basis of the rates fixed by the Government cannot be deemed to be a provision for regulating the production, treatment, distribution, disposal, acquisition, or use of the articles. The contention is not without some force. The language is not for regulating contracts of sale. The regulation or prohibition is only in respect of distribution and disposal of articles or things. But, in our opinion, the provision for payment of differences in respect of forward contracts entered into before the corning into force of the Prohibition Order falls within Clause (f) of Sub -rule (2) as either an incidental or supplementary matter for which the Central Government thinks. It expedient for the purpose of the Order to provide. The position in respect of contract? subsisting on the date of the coming into force of the Order is this: They are deemed to be closed out at a particular date. The seller is not bound to give and the buyer is not bound to take delivery. In other words, the contract is being compulsorily closed and the parties are being prevented from performing it. As incidentally to this prohibition or performance of contracts already entered into and subsisting, the Central Government evidently thought it expedient to provide for payment of differences. It was evidently thought that it was equitable that in cases where contracts which were perfectly legal when they were entered were being interfered with and the performance under those contracts was being prohibited, to provide for some compensation. Any adjustment of the rights of the parties on the basis of the compulsory closing out of the contract would certainly be either an incidental or a supplementary matter within the meaning of that expression under Clause (b) of Sub -rule (2). It is not necessary to decide whether it is an incidental or supplementary matter. The two terms taken together practically exhaust all contingencies. We, therefore, hold that the provisions of Clause 4 of the Order in question do not go beyond the power conferred by Clauses (a), (b) and (f) of Sub -rule (2).;

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