TMI Blog1962 (5) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... les of Jute cutting 'raw) of Pakistan at ₹ 80 per bale of 400 lbs. to be delivered in October, November and December at the rate of 250 belles every month. Clause 14 of the agreement provides that all disputes arising out of or concerning the contract should be referred to the arbitration of the Bengal Chamber of Commerce. The respondents failed to deliver the goods as agreed whereupon the appellants applied to the Bengal Chamber of Commerce for arbitration in accordance with el. 14 of the agreement. The respondents appeared before the arbitrators, and contested the claim on the merits. The arbitrators made an award in favour of the appellants for ₹ 41,250 with interest, and that was filed under s. 14(2) of the Indian Arbitration Act in the High Court of Calcutta in its original side and notice was issued to the respondents. Thereupon the respondents filed an application in the High Court, presumably under s. 33 of the arbitration Act, wherein they prayed for a declaration that the contract dated September 7, 1955, was illegal, as it was in contravention of the notification of the Central Government dated October 29, 1953, and that in consequence proceedings taken t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all be final, binding and conclusive on the parties. Now the contention of the appellants is that the clause is general in its terms and is wide enough to include dispute as to the validity of the contract that in consequence the only right of the respondents is to agitate this question before the arbitrators and if the award goes against them to move the Court either to modify it under s. 15 of the Arbitration Act or to remit it under s. 16 or to set it aside under s. 30 on the grounds mentioned therein and that the present application for a declaration that the contract is illegal, and that the arbitration proceedings are without jurisdiction is therefore incompetent and misconceived. it cannot be disputed that the expression arising out of or concerning or in connection with or in consequence of or relating to this contract occurring in el. 14 are of sufficient amplitude to take in a dispute as to the validity of the agreement dated September 7, 1955 Vide Ruby General Insurance Co. Ltd. v. Pearey Lal ,Kumar (1) But the question is not whether el. 14 is all comprehensive but whether it could be enforced when the agreement of which it forms an integral part is held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement to arbitrate. The greater includes the less. Further, a claim to set aside a contract on such grounds as fraud, duress or essential error cannot be the subject matter of a reference under an arbitration clause in the contract sought to be set aside. in the speech of Lord Wright there are the following observations on which the appellants rely: Hence, if the question is whether the alleged contract was void for illegality or being voidable was avoided because induced by fraud or misrepresentation, or on the ground of mistake, it depends on the terms of the submission whether the dispute falls within the arbitrator's jurisdiction. The argument is that if the arbitration clause is general and unqualified it will include a question as to the legality of a contract also. The above observation does lend support to the view that if it was a term of the contract that a dispute as to its legality could be referred to arbitration, then it is valid. If that is what was meant by Lord Wright it maybe difficult to reconcile it with the view expressed in the passages already cited. But it is to be noted that the noble Lord wound up with the following observation Finally, I agree w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining the clause was ever entered into at all, or was void ab initio, illegal, or obtained (for example) by fraud duress or undue influence, the clause does not apply and a stay will be refused. This question arose incidentally for discussion in the Union of India v. Kishorilal Gupta and Brothers(1) where on an examination of the authorities, including Heyman v. Darwins Ltd. (2) this Court held that an arbitration clause embodied in an agreement is an integral part thereof and that it that agreement is non est either because. it was never legally in existence or because it was void ab initio., then the arbitration clause would also perish with it. Similar decisions had been given in Tolaram Nathmull v. Birla Jute Mfg. Company Ltd.(3) and Hussain Kasam Dada v. Vijayanagaram Commercial Association(4). Reference might in this connection be made to s. 33 of the Arbitration Act which enacts that a party to an arbitration agreement who desires to challenge the existence or validity of an arbitration agreement should apply to the Court for determination of the question. This section represents the law on the subject as understood in England at the time of that legislation and as decla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leave because that was a matter between him and the Court. But here if the agreement dated September 7, 1955, is void then there was no submission which was alive on which the arbitrators could act and the proceedings before them would be wholly without jurisdiction. If there had been another arbitration agreement apart from and independent of cl. 14 of the contract dated September 7, 1955, it might have been possible to sustain the proceedings before the arbitrators as referable to that agreement. But none such has been set up or proved in the present case. All that is alleged is that the respondents acquiesced in the proceedings. But what confers jurisdiction on the arbitrators to hear and decide a dispute is an arbitration agreement as defined in s. 2(a) of the Arbitration Act, and where there is no such agreement, there is an initial want of jurisdiction which cannot be cured by acquiescence. It may also be mentioned that the decision in Ex. p. Wyld (1) has been understood as an authority for the position that when one of the parties to the submission is under a disability that will not be a ground on which the other party can dispute the award if he was aware of it. Vide Russe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the notification which is entered into in the area specified therein otherwise than between members of a recognised association or through or with any such member shall be illegal. Where a notification has been issued under 15(1) it is provided in s. 16 that all forward contracts falling within the notification shall be deemed to be closed out and that the seller shall not be bound to give and the buyer shall not be bound to take delivery of the goods . Then comes s. 17 which is as follows:- 1711). The Central Government may, by notification in the Official Gazette, declare that no person shall, save with the permission of the Central Government, enter into any forward contract for the sale or purchase of any goods or class of goods specified in the notification and to which the provisions of section 15 have not been made applicable, except to the extent and in the manner, if any, as may be specified in the notification. (2)All forward contracts in contravention of the provisions of subsection (1) entered into after the date of publication of the notification thereunder shall be illegal. (3)Where a notification has been issued under subsection (1), the provisions of sec- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound to give and the buyer shall not be bound to take delivery of raw jute. The contract with which we are concerned in these appeals was entered into on September 7, 1955, when the notification aforesaid was in force, and so it would be hit by it, unless it is a non-transferable specific delivery contract and the point for decision is whether it is that. There is no dispute between the parties that it is a specific delivery contract. It is between named buyers and sellers the goods are specified, as also the period during which they have to be actually delivered and their price is fixed. What is in controversy is whether it is transferable or non- transferable. There was considerable argument before us on the question as to assignability of a contract. The law of the subject is well settled and might be stated in simple terms. An assignment of a contract might result by transfer either of the rights or of the obligations thereunder. But there is a well-recognised distinction between these two classes of assignments. As a rule obligations under a contract cannot be assigned except with the consent of the promisee, and when such consent is given, it is really a novation resultin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferable except under a letter of authority from the authority who issued the licences or from any Import Trade Controller). Messrs. Khardah Co. Ltd. of 7. Wel- lesley Place, Calcutta are hereby authorised to import the goods of which particulars are given below :- 1. Country from which consigned .... Pakistan 2. Country of origin .... 3. Description of goodsRaw Jute .... Raw Jute 4. Serial No. and part of the I.T.C. Schedule 174-IV 5 Quantity 50,000 Mds. (Fifty thousand ma- unds only). This licence is issued subject to the condition that the goods will be utilised only for consumption as raw material or accessories in the licence bolder's factory and that no portion thereof will be hold to any party. It will be noticed that the licence is non-transferable and that further the goods to be imported are not to be sold to any party but to be utilised for manufacture in the factory of the licencee. In view of the terms of the licence there can be no question of assignment of the contract by the buyers. That is not disputed. Turning next to the sellers, can they assign their right to the price on delivery of the goods ? The learned Judges in the Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, such as the rights to resell and so forth, when the latter refuse to accept the documents. What is said is that these rights cannot be assigned in law as they are really claims founded on breach of contract by the buyers. That undoubtedly is so, but that does not conclude the question. There is in law a clear distinction between assignment of rights under a contract by a party who has performed his obligations thereunder, and assignment of a claim for compensation which one party has against the other for breach of contract. The letter is a mere claim for damages which cannot be assigned in law, the former is a benefit under an agreement, which is capable of assignment. The fact therefore that the rights under el. 8 are incapable of assignment does not stand in the way of the respondents assigning their rights to receive the ice after they had performed their obligations. Pr That brings us on to cl. 3 on which the appellants mainly. Under that clause the sellers are entitled to receive the price only on their delivering to the buyers the full set of shipping documents. Now the argument is that as the delivery of documents and payment of cash are to be simul- taneous, it is a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parkgate Waggon Company could get it done by any person, and that would be sufficient performance. This decision would be in point if the respondents had arranged to deliver the jute to the appellants through another person, and then claimed the price, and that claim was disputed. But it is not an authority on the question which we have to decide, whether the assignment of the benefit under the contract burdened as it is with an obligation would itself be valid. It is true that the Court observed in passing That a debt accruing due under a contract can, since the passing of the Judicature Acts, be assigned at law as well as equity, cannot since the decision in Brice v. Bannister(1) be disputed . But it should be noted that both the companies figured is plaintiffs, and therefore it is not possible to read chose observation as a decision that an assignment of a benefit burdened with an obligation is valid. It was argued for the respondents that it would have been open to them to first obtain the requisite certificate from the Dank in East Pakistan (1) (1878) 3 Q.B.D. 560. then deliver it to the appellants, and then assign their right to the price. But the question is not what co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is dated September 7, 1955, the licence is dated September 22, 1955, and the letter of authority to the respondents is even later, and it might strike one as an anachronism to read the licence and the letter of authority into the contract. But it should be remembered that the licences are in standard form and are renewed from time to time except as to details concerning the imports, and the course of business followed in the jute market was throughout in conformity with the conditions laid down. in the licence and was of the same pattern. Now the agreement provides that the shipping documents in Pakistan are to be taken in the name of the buyers that the sellers are to open letter of credit and that the goods are to be delivered ,at the buyer's Mill siding . We have no doubt that these terms have been inserted with a view to give effect to the conditions on which licences are granted and that it was the understanding of both the sellers and buyers that the rights under the contract were not to be transferred. But it is argued for the respondents that unless there is in the contract itself a specific clause prohibiting transfer, the plea that it is not transferable is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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