Bachawat, J. - (1.) BY a contract dated the 27th December, 1955, the appellant agreed to buy and the respondent agreed to sell 25 tons of pure raw linseed oil. The contract reads as follows: "27-12-1955. Buyers Name Sri Rambilas Nand Lal, Calcutta. Dear Sirs, We have this day sold by your order and on your account to the above buyers: Sellers Name Sri Imperial Oil Mills Ltd. Calcutta. Article Pure Raw Linseed Oil. Quantity 25 (twenty-five) tons only. Quality I. S. and Guarantee. Time of delivery April May 1936. Delivery -- Ex sellers Mills. At Rs. 47/8 per Maund loose in buyers tank lorry or in drums Payment Rs. 90/- after delivery balance within 10 days, Weighment and Sampling to be done in the presence of sellers' and buyers' representatives. Remarks nil. Brokerage to be paid by the Sellers As. -/2/-per maund nett. Any dispute regarding this contract is to be settled by the Bengal Chamber of Commerce and Industry in Calcutta. Analysis disputes to be settled by the R. V. Briggs and Co. Ltd. in Calcutta. This contract is not transferable to any third party by the Sellers or Buyers. Yours faithfully, for G. C. Sharma and Company Sd/- Illegible Broker." Disputes arose between the parties and those disputes were referred to the arbitration of the Bengal Chamber of Commerce and Industry under the arbitration clause contained in the contract. While the reference was pending, the respondent filed a suit in this Court being Suit No. 1432 of 1957 (Imperial Oil Mills Ltd. v. Ram Bilas Nandlal) praying for a declaration that the contract and the Bought and Sold Notes in respect thereof are void and for delivery up and cancellation of the contract. A notice purporting to be a notice under Section 35 of the Indian Arbitration Act was thereupon served upon the arbitrators by the respondent. The arbitrators in due course made an award. Thereupon the respondent made an application to this Court for a declaration that the Arbitration agree-ment contained in the contract be declared invalid and that the award made by the Bengal Chamber of Commerce and Industry be set aside. The application was heard by Ray, J. He came to the conclusion that the arbitration agreement and the award were invalid and on this finding he set aside the award. This appeal is preferred from this order.
(2.) ON behalf of the respondent it was urged before Ray, J., and is urged before us that the award is rendered invalid by Section 35 of the Indian Arbitration Act in view of the pendency of the legal proceedings commenced by the respondent and the notice served upon the arbitrators. Ray, J. accepted this contention. In my opinion, the respondent's contention is not tenable and ought not to be accepted. The legal proceeding commenced by the respondent was for a declaration that the contract was void and invalid and for cancellation and delivery up of the contract. The validity or the invalidity of the contract was not and could not be referred to arbitration under the arbitration clause contained in the contract. The arbitrators had no power and authority to decide upon the question of their own jurisdiction. The legal proceedings commenced by the respondent were not upon either the whole or part of the subject-matter of the reference. The subject-matter of the reference was a dispute relating to and arising out of the contract. The subject-matter of the legal proceeding was the validity or invalidity of the contract. The legal proceeding was not one which could be stayed under Section 34 of the Indian Arbitration Act. The question of the validity or the invalidity of the contract was not a question which was agreed to be referred to arbitration. Section 35 of the Indian Arbitration Act presupposes a legal proceeding which is capable of being stayed by the Court under Section 34 of the Indian Arbitration, Act. From whatever point of view the matter is looked at, it is impossible to say that the pendency of the legal proceedings commenced by the respondent in any way rendered the award invalid. On behalf of the respondent it was further argued that the contract is illegal and prohibited by the provisions of the Forward Contracts (Regulation) Act, 1952 and the notifications issued thereunder. It is common case that by notifications issued under Section 17 of that Act forward contracts for sale or purchase of raw linseed oil were prohibited some time in 1955.
(3.) IT is common case before us that the contract in question is a forward contract for the sale and purchase of raw linseed oil. IT is also common case before us that the contract in question is a specific delivery contract inasmuch as it provides for actual delivery of specific qualities or types of oil during a specified future period at a price fixed thereby and in which the names of both the buyer and seller are mentioned.;