GOKHALE,J. - (1.) THE principal point of controversy which has been agitated at considerble length in these appeals is whether S. 8 of the Bombay Forward Contracts Control Act, 1947 (LXIV of 1947), which will hereafter be referred to as 'the Bombay Act', has been rendered inoperative by virtue of a notification issued by the Textile commissioner on 16 -7 -1953 under the provisions of the central Cotton Order, 1950, which order itself was issued in exercise of the powers conferred on the Central Legislature by the Essential Supplies (Temporay Powers) Act , 1946 (XXIV of 1946), which will hereafter be referred to as 'the Essential Supplies Act'. As we have already indicated. the other law point which was raised on behalf of the plaintiffs in these suits was wherther the Bombay Act was also redered inopertative by virtue of the notification applying s. 15 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952). That notification was issued on 30 -7 -1954, that is to say, long after all the contracts in suit, and it has been fairly conceded on behalf of the plaintiffs in asll these appeals that in view of this position it will not be possible to press the argument urged in the lower Court regarding any repugnancy between the Bombay Act and the provisions of the Forward contracts (Regulation) Act, 1952.
(2.) IN order to appreciate the point as to the alleged repugnancy betweeen the Bombay Act and the notification issued under the Central Cotton Control Order of 1950, it is necessary to note, to some extent, the history of the two legislations. So far as the local legislation is concerned, in 1922 the local Legislature passed the Bombay Cotton Contracts Act (XIV of 1922), but admittedly it had no provision reagarding forward contracts. That was followed by the Bombay Cotto Contracts Act, 1932 (IV of 1932), which made certain provision regarding forwards contracts. It appears, however, that the Government of Bombay, in the year 1947, was of the view that the control exercised by government over the cotton market under the Bombay Cotton Contracts Act of 1932 had proved ineffective in actual practice and though the Act provided that forward contracts other than those made through recognised association were void, in fact forward trading took place outside recogniseed associations and in a manner which was detrimental to genuine trade interests. That is why the Provincial Legislature enacted the Bombay Act and it came into force on 7 -2 -1948. The object of the Act was to provide for the regulation and control of forward contracts, for prohibition of options and certain other purposes, in the Province of Bombay. It has top be mentioned that though S. 1 of this Act was to come into force at once, sub -section (3) of S. 1 provided that the Provincial government may by notification in the Official gazette direct that all the remaining sections other than ss. 4, 5 and 7 shall come into force in the whole of the Province of Bombay or such part thereof and on such date and in their application to such goods as may be specified in the notification. Under sub -section (4), the Provincial Government was also empowered by a notification in the Official Gazette to direct that Ss. 4, 5 and 7 shall come into force in the whole of the Province of Bombay or such part thereof and on such date and in its application to such goods as may be specified in the notification. Four notification appeasr to have been issued by the Provincial Government on 1 -4 -1948. By notification No. 4132/33 D(1), it was directed that Ss. 2, 3, 6 and 8 to 15 of the Bombay Act were to come into force in the whole of the Province of Bombay with effect from 1 -4 -1948 in their applicartion to cotton. By Notification No. 4132/33 -D(2), Ss. 4,5 and 7 were also brought into force in the whole of the Province of Bombay in their application to cotton with effect from the same date. The third notification No. 4132/33 -D(3) issued on the same dat specified in respect of cotton a period of seven days after the date of the contract within which there should be delivery and payment of price. (See Bombay government Gazette, Extraordinary, Part I, dated 1 -4 -1948, pp. 1432 -33). The fourt notification No. 4233/33 -D(1) and No. 4233/33 -D(2) recognized the East India Cotton Association in pursuance of the provisions of sub -section (5) of S. 3, and also sanctioned the bye -laws of the said Association in exercise of the poweres conferred by sub -section (4) of S. 6 of the Bombay Act. (See Bombay Government Gazette, Extraordinary, part IV -B, dated 1 -4 -1948, page 164A -1). These bye -laws have been subsequently amended and added to from time to time.
(3.) TURNING to the history of the Central legislation on the subject of cotton, it has to be mentioned that under the Government of India Act 1935, it was the Provincial government only which had power to legislate on the subject of trade and commerce within the province and production, supply and distribution of goods. This was by virtue of items 27 and 29 of List II, viz., the Provincial Legislative List, of the Seventh Schedule to the government of India Act. It is well known that the Central government, however, armed itself with very wide powers under the Defence of India Act, 1939, and the Defence of India Rules. Under Rule 81(2) of the said Rules, in so far as it is material, the Central government, so far as appeared to it to be necessary or expedient for securing the defence of British India or he efficient prosecution of the war, or for maintaining supplies and services essentia to the life of the community, was empowered to provide for regulating or prohibiting the production, distrivution, disposal, acquisition, use or consumption of articles or things of any description whatsoever and for controlling the prices (or rates) at which such articles or things may be sold. the Indian Cotton (Control) Order, 1945, was promulgated in exercise of the powers conferred by sub -rule (2) of rule 81 of the Defence of India rules, and under clause 3 o this Order, no person could enter into any contract or any option in cotton, and by virtue of clause 4 of this Order all contracts and options in cotton entered into or made after the commencement of the Order were declared void. It was further provided under clause 5 that the textile commissioner may, by general order, and subject to such restrictions and conditions as he may prescribe, exclude from the operation of the Order any class or description of contracts. This Order came to be issued on 29 -12 -1945. The Defence of India Act was to expiere on 30 -9 -1946, but the British Parliament passed the India (Central government and Legislature) Act, 1946 (9 and 10 Geo. 6 Ch. 39), which came into force on 26 -3 -1946, to amend the Government of India Act, 1935, and under s. 2(1)(a) of the former Act it was provided that not -withstanding anything in the government of India Act, 1935, the Indian Legislature shall, during the period mentioned in s. 4 of the Act, have power to make laws with respect to trade and commerce (whether or not within a Province) in and the production, supply and distribution of, cotton and woolle tenxtiles and other goods mentioned in that clause. It appears that on 25 -9 -1946, the Central Government issued the Essential supplies (Temporary Powers) Ordinance, 1946, to provide for the continuance, during a limited period, of powers to control the production, supply and distribution of and trade and commerce in, certain commodities, by virtue of the powers given to the Indian Legislature by the British Parliament , and as the Indian Legislature was not in session then, the Governor general issued this Ordiance. Under s. 2(a) of this Ordinance 'essetial commodity' was defined as including a number of classes of commodities and though cotton and woollen textiles were included as an essential commodity, raw cotton itself was not included as an essential commodity. this Ordinance was followed by the Essential Supplies (Temporary Powers) Act, 1946, which came into force on 23 -11 -1946. Section 2(a) (ii) of this Act mentioned cotton and woollen textiles as an essential commodity. It would appear that the Constituent Assembly, which replaced the Indian Legilsature, which was empowered to repeal or amend any Act of Parliament of the United Kingdom in its application to India by virture of the Indian Independence Act, 1947 (10 and 11 Geo. 6), enacted the constituent Assembley Act III of 1949, known as the India (Central government and Legislature) Amendment Act, 1949, which came into force on 10 -6 -1949. section 3 of this Act amended S. 2 of the India (Central Government and Legislature) Act, 1946 (9 and 10 Geo. 6 Ch. 39), by inserting the words 'raw cotton (including ginned cotton and ungineed cotton or kapas) and cotton seed' after the words 'woollen -textiles' in paragraph (a) of sub -section (1) of S. 2 of the said Act of 1946. The rusult of this amendment was that the Central Legislature got the power to enact legislation with respect to raw cotrton, which formerly it did not posses. The Essential Supplies (Temporary Powers) Second Amendment Act, 1949, came to be enacted thereafter, and by S. 2 of this Act, in the preamble to the Essential Supplies (Temporary Powers) Act, 1946, after the words 'woollen textiles', the words 'raw cotton (including ginned cotton and unginned cotton or kapas) and cotton seed' were inserted. By S. 3 there was a further amendment of the original Essential Supplies (Temporary Powers) Act, and by clause (a), '(iia)raw cotton' was defined as including ginned cotton and unginned cotton or kapas. Section 3 of the Essential Supplies Act, so amended, thus gave the Central Goverrnment power to issue an order providing for regulating or prohibiting the production, supply and distributipon of, and trade and commerce in, cotton, which became an essential commodity, with the object of maintaining or increasing its supplies and for securing its equitable distribution and availability a fair prices. Such an order came to be issued by the Central Government on 13 -9 -1950 and that order is known as the Cotton Control Order, 1950. That Order came into force at once. Clause 4 of the Order provided like the earlier Indian C;otton (Control) Order of 1945, that no person could enter into any contract or anyoption in cotton, except in the cases excluded from the operation of this clause under clause 6. Under clause 5, all contracts and options entered into or made after the commencement of the Order in contravention of clause 4 were to be void. Under clause 6, the Textile Commissioner was empowered, by general order and subject to such restrictions and conditions as he may prescribe to exclude from the operation of clause 4 any class or description of contracts. The effect of this Order admittedly was that no contract in cotton could be entered into and, if entered into, was to be void. But the Textile Commissioner could by general order and subject to such restrictions and conditions as bhe may prescribe relax from the operation of clause 4 any classs or description of contracts relating to cotton. Now, the original essential Supplies Act would have expoired on 1 -4 -1951, but the life of the Act came to be extended by the Essential Supplies (Temporary Powers) Amendment Act (LII of 1950) from 1 -4 -1951 to 31 -12 -1952. There was a further extension of the life of this Act under the Essential Supplies (Temporary Powers) Amendment Act (LXV of 1952), which extended the life of the original Act from 31 -12 -1952 to 261 -1955. That is how, and there is no dispute about this, that when the suit contracts were entered into, both the Essential supplies Act as well as the Cotton Control Order, 1950, issued under its provision, continued to have operation. On 16 -7 -1953, the Textile Commissioner, in exefcise of the powers conferred upon him by clause 6 of the Cotton Control Order, 1950, issued a notification relaxing the prohibition placed on contracts in cotton. as the question in these papeals in concerned with the alleged repugnancy between S . 8 of the Bombay Act and this notification, it would be convenient to reproduce the entire notification, which runs as follows: - MINISTRY OF COMMERCE AND INDUSTRY Notification. Bombay, 16th July 1953. S. R. O. 1425. - 'In exercise of the powers conferred upon me by clause 6 of the Cotton Control Order. 1950, I hereby exclude, subject to the restrictions and conditions specified in paragraph 2 below, the following classes or descriptions of contracts relating to Indian cotton produced during the cotton season 1953 -54, from the operation of clause 4 of the said Order, namely: - (I) Ready Contracts; (ii) Delivery Contracts; that is to say, Forward Contracts for cotton (full -pressed, half -pressed or loose) of specific description and for specific delivery at specified price, delivery orders, railway receipts or bills of lading against which contracts are not transferable to third parties; (iii) Hedge Contracts for February 1954; that is to say, Forward Contracts entered into by members of the East India Cotton Association Limited, entitled to the use of the Clearing House of the Association where such contracts are made in accordance with the rules and bye -laws of the association in the official markets of the Associastion and are for February 1954 delivery. 2. (1) Nothing in this permission shall apply in relation to - (a) any contract for the sale or purchase of any cotton wherein the price stipulated is less than the minimum price or more than the maximum price fixed by the textile commissioner under clause 3 of the said Order for Indian cotton produced during the cotton season 1953 -54 in respect of the subject -matter of the contract having regard to the place of delivery; (b) any contracts of sale by a manufacturer except under and in accordan ce with the terms of a Special permission granted by the Textile Commissioner of the Director (Cotton); (c) a contract of sale with an overseas buyer for the purposes of export. (2) Every contract in which the final price is not named shall be construed as if the following clause was inserted therein: - 'The price payable shall be within the rang of the minimum and the maximum prices fixed by the Textile Commissioner under clause 3 of the Cotton Control Order, 1950, for Indian cotton produced during the cotton season 1953 -54'. Now, it is urged on behalf of the p,laintiffs in these appeals that the provisions of S. 8 of the Bombay Act are repugnant to the provisions of this notification, and this notification having been issued by the Gtextile Commissioner under the powers conferred on him under clause 6 of the Cotton Control Order, 1950, which Order itself was issued by virtue of S. 3 of the Essential Supplies Act, so far as the suit contracts are concerned, S. 8 must be treated as void and of no effect, and, therefore, the suit contracts would be legal and enforceable contracts. Section 8 of the Bombay Act runs as follows: - '8. (1) Every forward contract for the sale or purchase of, or relating to, any goods specified in the notification under sub -section (3) of section I which is entered into, made or to be performed in any notified area shall be illegal if it is not entered into, made or to be performed - (a) in accordance with such bye -laws, made under S. 6 or 7 relaing to the entering into, making or performance of such contracts, as may be specified in the bey -laws, or (b) (I) between members of a recognised association, (ii) through amembers of a recognised association, or (iii) with a member of a recognised association, provided that such member has previously secured the written authority or consent, which shall be in writing if the bye -laws so provide, of the persons entering into or makeing the contract, and to claim of any description in respect of such contract shall be entertained in any Civil Court. (2) Any person entering into or making such illegal contract shall, on conviction, be punishable with imprisonment for a term which may extend to six months or with fine or with both'. ;