HUSSAIN KASAM DADA Vs. VIJAYANAGARAM COMMERCIAL ASSOCIATION REGD
LAWS(MAD)-1953-8-22
HIGH COURT OF MADRAS
Decided on August 05,1953

HUSSAIN KASAM DADA, REPRESENTED BY SAKOOR DAWOOD, AGENT Appellant
VERSUS
VIJAYANAGARAM COMMERCIAL ASSOCIATION (REGD.) Respondents

JUDGEMENT

Govinda Menon, J. - (1.) THESE two appeals arise under the provisions of the Indian Arbitration Act from the orders of the Subordinate Judge of Vizagapatam, allowing O.P. No. 36 of 1946 and dismissing O. P. No. 24 of 1936 on his file.
(2.) THE appellant had entered into three contracts with the contesting respondent for the sale of groundnut and though the contracts themselves have not been exhibited in the court below, the specimens have been admitted by consent of parties in order to know the nature of the agreements. THE first contract related to the sale of 500 bags of groundnut and is dated 23-8-1945 at the rate of Rs. 2012- 0 per bag with the stipulation that the delivery would take place in December 1945. Towards the price, a sum of Rs. 2500 was paid as advance. THE second contract dated 26-8-1945 related to the sale of another 500 bags of groundnut at the rate of Rs. 21 a bag with the stipulation for delivery in December 1045 itself. As advance towards this transaction a sum of Rs. 2500 was also paid. THE third contract dated 13-11-1045 related to the sale of 1000 bags of groundnut at the rate of Rs. 24-12-0 a bag for which the advance paid was Ps. 5000 with a similar stipulation that delivery should take place in December 1945. In all, therefore, a sum of Rs. 10,000 was paid as advance for all the three contracts for the delivery of 2000 bags of groundnuts. THE appellant also supplied 917 gunnies for collecting the groundnuts. In the contracts there was an agreement that in ease of dispute arising between the parties regarding the performance and fulfilment of the terms of the contracts, they would be subject to the decision of the Vizianagaram Commercial Association (Regd.) and such a decision would be binding on all the parties. Presumably, on account of the fact that the price of groundnut rose abnormally, during the intervening period i.e., between the dates of the signing of the contracts and the date of their fulfilment, the contesting respondent did not act according to the terms and no delivery of groundnut bags was ever made. The appellant therefore referred the matter to the Vizianagaram Commercial Association (Regd.) which appointed the arbitrators who enquired into the matter and passed an award which was to the effect that the contesting respondent had to pay a sum of Rs. 27672-6-4 to the appellant made up of a sum of Rs. 16375 being the damages due on account of the non-delivery of the groundnut bags, Rs. 10,000 being the advance received by the contesting respondent under the three contracts, Rs. 600 being the cost of 977 empty gunnies which were not returned and Rs. 697-6-4 being the interest on the advance amount and the price of gunnies at 1per cent, per mensem from 31-12-1945 till the date of the award, viz., 18-7-1946. O. P. No. 24 of 1946 was by the Vizianagaram Commercial Association (Regd.) who appointed the arbitrators, under Section 14 of the Act for filing the award and passing a decree thereof. O. P. No. 36 of 1946 was by the contesting respondent for setting aside the award; and these two were tried together by the learned Subordinate Judge who, as stated above, allowed O.P. No. 36 of 1946 and dismissed O.P. No. 24 of 1946. Hence the two appeals by the aggrieved party.
(3.) VARIOUS points were raised before the learned Judge of which the most important ones were whether the contracts in question were prohibited by the Oil Seeds Forward Contracts Prohibition Order, 1943 and if so whether the award is null and void. The lower court's finding on this point was against the appellant. In this court the only serious contest between the parties related to the decision on this controversy. Though the respondent feebly attempted to question the correctness of the decision of the learned Judge regarding the validity of an award made by three members of the Vizianagaram Commercial Association (Regd.) as being one made by the association itself, to whom alone the reference was made, and on which point the learned Judge had found against the respondent's contention, we do not think that there is any substantial point arising in that dispute. What is urged on behalf of the contesting respondent is that at the time the contracts were entered into, the rules of the association, to which the reference to arbitration has to be made, were to the effect that five members of the association should be appointed as arbitrators. This rule was later on altered on 24-6-1946 by reducing the number to three. It is therefore urged that the rule which obtained at the time of the contracts should be the guiding principle and not the amended procedure. No authority has been cited before us to justify this contention. If, as laid down in 'Ramnarain v. Liladhur', 33 Cal 1237 (A), the rules of a body to which the agreement of arbitration is referred to by the parties should be seemed to have been incorporated in the contract by virtue, of the agreement of parties, then it has necessarily to be held that on a matter of procedure the relevant factors should be the rules as existing at the time of the reference and not at the genesis of the contract. The substantial argument is based upon the prohibition contained in the Oil Seeds (Forward Contract Prohibition) Order, 1943, which was first promulgated on the 29th May 1943. Subsequently, there was a notification exempting certain kinds of contracts from the ambit of the prohibition. A forward contract is defined in Section 2 Sub-clause (2) of the Order as a contract for the delivery of oil seeds at some future date. In the contracts in question there is no doubt that the delivery is not 'eo instanti' the contract itself but is intended to take place some days or months later. There can be no difficulty therefore in acceding to the respondent's contention that the contracts in question are forward contracts. But the notification dated 3lst May 1943 by which certain kinds of forward contracts are excepted has also to be noticed in this connection. That notification lays down as follows: "Forward contracts for groundnuts, linseed, mustard seed, rapeseed or to raised of specified qualities or types and for specific delivery at specified price-- 'not transferable to third parties are excluded from the provisions of this order'." What has therefore to be considered is whether the contracts in question within the exemption namely that if they are not transferable to third parties then such contracts are not vitiated by the terms of the Oil Seeds (Forward Contracts Prohibition) Order.;


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