(1.), J. : On 3/05/1937, M/s. Alopi Parshad and Sons Ltd., who will hereinafter be referred to as the Agents, were, under an agreement in writing, appointed by the Governor-General for India in Council, as from 1/10/1937, agents for purchasing ghee required for the use of the Army personnel. The Government of India, by cl. 12 of the agreement, undertook to pay to the Agents the actual expenses incurred for purchasing ghee, cost of empty tins, expenses incurred on clearance of Government tins from the railway, export land-customs duty levied on ghee purchased and exported from markets situated in Indian States, octroi duty, terminal tax or other local rates on ghee, and certain other charges incurred by the Agents. The Government also agreed to pay to the Agents at rates specified in the agreement:
(1) the financing and overhead (mandi) charges incurred in the buying markets,
(2) the cost of establishments and contingencies provided by the Agents on the Government's account for carrying out the purchase and supply of ghee, and
(3) the buying remuneration.
In consideration of the Government paying to the Agents a sum of rupee one and anna one only per one hundred pounds net weight of finally accepted ghee, as combined financing and overhead (mandi) charges, the Agents by cl. 13 undertook to provide the working capital and also to bear the costs, charges and expenses, including financing and overhead charges incurred by them in buying ghee in the market.
(2.)THE Agents also undertook, by cl. 14, to bear the establishment and contingency charges for the due performance by them of the terms of the agreement, and the Government agreed to pay in consideration thereof annas 14 and pies 6 per every hundred pounds of ghee accepted. THE Government also agreed to pay to the Agents remuneration for services rendered in purchasing ghee, at the rate of one rupee per one hundred pounds net weight of accepted ghee.
Pursuant to the agreement, the Agents supplied from time to time ghee to the Government of India, as required. In September, 1939, the World War II broke out, and there was an enormous increase in the demand by the Government of ghee. On 20/06/1942, the original agreement was, by mutual consent, revised, and in respect of the establishment and contingencies, the uniform rate of annas 14 and 6 pies per hundred pounds of accepted ghee, was substituted by a graded scale: for the first 5 thousand tons, the Agents were to be paid at the rate of Re. 0-14-6 per hundred pounds, for the next five thousand tons, at the rate of annas 8 per hundred pounds, and at the rate of annas 4 per hundred pounds, for supplies exceeding ten thousand tons. Even in respect of remuneration for services, a graded scale was substituted: for the first five thousand tons, remuneration was to be paid at the rate of Re. 1 per hundred pounds, at the rate of annas 8 per hundred pounds, for the next five thousand, and annas 4 per hundred pounds, for supplies exceeding ten thousand tons. This modification in the rates became effective from 11/09/1940.
By their communication dated 6/12/1943, the Agents demanded that the remuneration, establishment and contingencies, and mandi and financing charges, be enhanced. In respect of the buying remuneration, they proposed a 25 per cent, increase; in respect of establishment and contingencies, they proposed an increase of 20 per cent, and in respect of mandi and financing charges, an increase of 112 per cent. This revision of the rates was claimed on the plea that the existing rates, fixed in peace time, were "entirely superseded by the totally altered conditions obtaining in war time." To this letter, no immediate reply was given by the Government of India, and the Agents continued to supply ghee till May, 1945. On 17/05/1945, the Government of India, purporting to exercise their option under cl. 9 of the agreement, served the Agents with a notice of termination of the agreement. On 22/05/1945, the Chief Director of Purchases, on behalf of the Government of India, replied to the letter dated 6/12/1943, and informed the Agents that normally no claim for revision of rates could be entertained during the currency of the agreement and especially with retrospective effect, but a claim for ex-gratia compensation to meet any actual loss suffered by an agent, might be entertained, if the Agents established circumstances justifying such a claim. The Chief Director of Purchases called upon the Agents to submit, the report of their auditors on the agency accounts, for the ghee supplied, as also a statement in detail, showing the actual expenditure incurred.
(3.)THE notice dated 17/05/1945, was waived by mutal consent, and under an arrangement dated 16/05/1946, the Agents agreed to supply five thousand tons of ghee by 31/10/1946, on which date, the agreement dated 3/05/1937, was to come to an end.
By their letter dated 1/07/1946, the Agents claimed that a dispute had arisen under the contract, and appointed one Nigam to be arbitrator on their behalf to adjudicate upon the dispute, pursuant to cl. 20 of the terms of the agreement dated 3/05/1937, and called upon the Government of India to appoint their arbitrator. The Government of India, by their letter dated 10/07/1946, nominated one Rangi Lal to be arbitrator on their behalf. Before the arbitrators, the Agents made their claim under four heads :
1. The Agents claimed that the agreement dated 20/06/1942, was not binding upon them, and they were entitled to Rs. 23,08,372-8-0 being the difference between the buying remuneration, establishment and contingency charges due under the agreement dated 3/05/1937, and the amount actually received. The details of this claim were set out in Sch. A.
2. In the event of the arbitrators' holding the agreement dated 20/06/1942, was binding, a revision of the rates for establishment and contingencies, and an additional amount of Rs. 6,91,600-4-0 at such revised rated as set out in Sch. B.
3. Revision of the rates fixed under the agreement dated 20/06/1942, of the mandi charges, and an additional amount of Rs. 14,47,204-6-3, at the revised rates as set out in Sch. C.
4. Damages for wrongful termination of the agreement in the month of October, 1946, amounting to Rs. 2,41,235, as set out in Sch. D.