TMI Blog1961 (2) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... s : We confirm having sold to you African raw cotton on the following terms and conditions subject to the usual Force Majeure Clause : Description : ARBP 52 F.A.Q. Crop/58. Quality : 500 (Five Hundred) bales. Price : at ₹ 1,401 nett per candy CIF Bombay. Payment : Against shipping documents in Bombay. Packing : 420 lbs. approximately per bale. Shipment : February/March 1958. Remarks : The terms and conditions on the reverse form part of the contract. This contract is subject to the Bye-laws of East India Cotton Association, Ltd., Bombay, other than the bye-law 35 of arbitration on Quality in case of East African cotton. * * * Terms and Conditions. 1. The shipment is subject to any cause beyond seller's or seller's shipper's control and is also subject to availability of freight. 5. This contract is subject to the jurisdiction of the High Court of Bombay. 6. It will be the duty of the buyers to obtain the import licence and to communicate the number thereof to the sellers immediately on the same being obtained but in any e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r right of re-sale after giving notice, and claimed ₹ 34,103.15 nP. for which a debit note had been issued. This note was returned by the buyers with a letter of June 3, 1958, stating that the contract was void and/or illegal , that they were not obliged to perform it, that there was no right of any sale on their account and/or on their behalf, and that the alleged sale was not binding upon them. [Ex. D (Colly) No. 6.] 5. The sellers then invoked the arbitration clause of the agreement and Bye-law 38-A of the Bye-laws of the East India Cotton Association, Ltd., Bombay and moved the Bombay High Court, on the Original Side, under s. 20 of the Indian Arbitration Act, requesting that the agreement be filed in Court and the dispute referred to arbitration. The buyers appeared, and resisted the petition on grounds which they set forth in affidavits filed from time to time. By their first affidavit dated July 31, 1958, the buyers contended that cls. 6 and 7, quoted above, were unlawful, as the liability created under them amounted to a contravention of the import policy of Government of India and the Foreign Exchange Regulation Act, 1947, and the Rules made thereunder. They c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a claim under a contract, that the plea was always likely to be raised by one resisting the petition, and that when such a plea was raised, the Court must decide it, even though the proceedings be under s. 20 of the Act for making a reference. The case was, therefore, remanded with the following direction : As the respondents have challenged the validity of this agreement, the Court will have to decide this question before passing further orders in the matter. Accordingly we set aside the order passed by Mr. Justice K. T. Desai, dismissing the petition filed by the petitioners, and remand the matter to the trial court for deciding the objections, raised by the respondent under sub-section (3) of section 20 of the Act, to the arbitration agreement being filed in Court, and then disposing of the matter in accordance with law. 7. When the case went back for retrial, the buyers filed their fourth affidavit on November 16, 1959. They stated in that affidavit that Bye-law 38-A was a statutory Bye-law of the East India Cotton Association, Ltd., Bombay, a recognised Institution under the Forward Contracts Regulation Act, No. 74 of 1952, and that s. 46 of the Arbitration Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. T. Desai, J. on all the points decided by him against the buyers. They left open the question whether legal proceedings in s. 21(3) of the Foreign Exchange Regulation Act were wide enough to include an arbitration for the decision of the arbitrators to be appointed, and addressing themselves to the question raised about s. 20, held that the petition was maintainable. They were of opinion that the Court could order the arbitration agreement to be filed and also to refer the dispute to arbitrators to be chosen in accordance with Bye-law 38-A, though they left that if the latter action could not be taken, at least the first could be, because the procedural part could not destroy the power conferred to file the agreement. 9. In this appeal, all the arguments which had failed before the High Court were urged before us. Shortly stated, they are : that the contract was void (a) for illegality and (b) for uncertainty and vagueness on two grounds; that the petition under s. 20 of the Indian Arbitration Act was incompetent, as that section was inapplicable; and that the law governing the parties was not the Indian law but the law of British East Africa. We shall now deal with these c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n implied term of every contract governed by the law of any part of British India that anything agreed to be done by any term of that contract which is prohibited to be done by or under any of the provisions of this Act except with the permission of the Central Government or the Reserve Bank, shall not be done unless such permission is granted. (3) Neither the provisions of this Act nor any term (whether expressed or implied) contained in any contract that anything for which the permission of the Central Government or the Reserve Bank is required by the said provisions shall not be done without that permission, shall prevent legal proceedings being brought in British India to recover any sum which, apart from the said provisions and any such term, would be due, whether as a debt, damages or otherwise, but - (a) the said provisions shall apply to sums required to be paid by any judgment or order of any Court as they apply in relation to other sums; and (b) no steps shall be taken for the purpose of enforcing any judgment or order for the payment of any sum to which the said provisions apply except as respects so much thereof as the Central Government or the Reserve Bank, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, while permission shows that he is granted leave to act in a particular way. But the word permission is a word of wide import. Permission in this section means only leave to do some act which but for the leave would be illegal. In this sense, exemption is just one way of giving leave. If one went only by the word and searched for those sections where the word permission is expressly used, ss. 21(2) and (3) are likely to prove a dead letter. This could not have been intended, and the very elaborate provisions in those sub-sections show that those matters were contemplated which are the subject of prohibition in s. 5. In our opinion, the argument is without foundation. 16. The contention, that on resale the price would have accrued to the buyers in the first instance, as the sellers would be acting as the agents of the buyers, is also incorrect. It has been rightly pointed out by K. T. Desai, J. that the right of resale given by ss. 54(2) and (4) of the Indian Sale of Goods Act is exercised by the seller for himself and not as an agent of the buyer, when the latter is given a notice of sale. This is indeed clear from the fact that the buyer is not entitled to the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, which, though normally not included in vis major are included in force majeure . An analysis of rulings on the subject into which it is not necessary in this case to go, shows that where reference is made to force majeure , the intention is to save the performing party from the consequences of anything over which he has no control. This is the widest meaning that can be given to force majeure , and even if this be the meaning, it is obvious that the condition about force majeure in the agreement was not vague. The use of the word usual makes all the difference, and the meaning of the condition may be made certain by evidence about a force majeure clause, which was in contemplation of parties. 20. Learned counsel for the appellants relies strongly on a decision of McNair, J. in British Industries v. Patley Pressings [[1953] 1 All E.R. 94]. There, the expression used was subject to force majeure conditions . The learned Judge held that by conditions was meant clauses and not contingencies or circumstances, and that there being a variety of force majeure clauses in the trade, there was no concluded agreement. The case is distinguishable, because the reference to forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um Co. Ltd. [[1959] A.C. 133, 153]. There, the clause was This bill of lading , whereas the document to which it referred was a charter-party. Viscount Simonds summarised all the rules applicable to construction of commercial documents, and laid down that effort should always be made to construe commercial agreements broadly and one must not be astute to find defects in them, or reject them as meaningless. 23. Applying these tests to the present case and in the light of the provisions of s. 29 of the Indian Contract Act, it is clear that the clause impugned is capable of being made certain and definite by proof that between the parties or in the trade or in dealings with parties in British East Africa, there was invariably included a force majeure clause of a particular kind. 24. In our opinion, the contract was not void for vagueness or uncertainty by reason of the reference in the terms stated, to the force majeure clause. Mr. Daphtary posed the question as to on whom was the burden of proving the usual force majeure clause. In our opinion, if the agreement is not void for uncertainty, that question would be a matter for the decision of the arbitrators. It is too early to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain exceptions) shall apply to contracts in respect of East African cotton. It was conceded before the High Court and also before us that the Bye-laws are statutory. The buyers were members of the Association but not the sellers; but the Bye-laws on arbitration, with which we are concerned, include arbitrations between a member and a non-member. We are concerned directly with Bye-law 38-A. Bye-law 38-A in its opening portion, reads : All unpaid claims, whether admitted or not, and all disputes (other than those relating to quality) arising out of or in relation to...contracts (whether forward or ready and whether between members or between a member and a non-member) made subject to these Bye-laws...shall be referred to the arbitration of two disinterested persons one to be chosen by each party. The arbitrators shall have power to appoint an umpire and shall do so if and when they differ as to their award. 27. Then follow certain provisions, which were stressed but which need not be quoted in extenso. Shortly stated, they are that the arbitrators must make their award in 15 days, unless time be extended by the Chairman. The umpire is to be appointed within 15 days or su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of the Arbitration Act, so far as they can be made applicable. Reference is then made to provisions of Chap. II and the Schedule of the Act laying down the powers of the Court, and they are contrasted with the provisions of the Bye-laws to show that if the latter prevail, no residuum of power is left to the Court, and that after filing the agreement, the Court must abdicate in favour of the Chairman and the Act, in terms, ceases to apply. Reference is also made to s. 47 of the Arbitration Act, which provides : Subject to the provisions of section 46, and save in so far as is otherwise provided by any law for the time being in force, the provisions of this Act shall apply to all arbitrations and to all proceedings thereunder : (Proviso omitted) 30. The opening words of s. 47 takes us to s. 46, which may be read at this stage. It provides : The provisions of this Act, except sub-section (1) of section 6 and sections 7, 12, 36 and 37, shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Then follows a ministerial act of reference to arbitrator or arbitrators appointed by the parties. That also was perfectly possible in this case, if the parties appointed the arbitrator or arbitrators. If the parties do not agree, the Court may be required to make a decision as to who should be selected as an arbitrator, and that may be a function either judicial, or procedural, or even ministerial; but it is unnecessary to decide which it is. In the present case, the parties by their agreement have placed the power of selecting an arbitrator or arbitrators (in which we include also the umpire) in the hands of the Chairman of the Board of Directors of the East India Cotton Association, Ltd., and the Court can certainly perform the ministerial act of sending the agreement to him to be dealt with by him. Once the agreement filed in Court is sent to the Chairman, the Bye-laws lay down the procedure for the Chairman and the appointed arbitrator or arbitrators to follow, and that procedure, if inconsistent with the Arbitration Act, prevails. In our opinion, there is no impediment to action being taken under s. 20(4) of the Arbitration Act. 34. We may dispose of here a supplementary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case. In the present case, two such circumstances are decisive. The first is that the parties have agreed that in case of dispute the Bombay High Court would have jurisdiction, and an old legal proverb says, Qui eligit judicem eligit jus. If Courts of a particular country are chosen, it is expected, unless there be either expressed intention or evidence, that they would apply their own law to the case. See N. V. Kwick Who Tang v. James Finlay Co. [[1927] A.C. 604]. The second circumstance is that the arbitration clause indicated an arbitration in India. Of such arbitration clauses in agreements, it has been said on more than one occasion that they lead to an inference that the parties have adopted the law of the country in which arbitration is to be made. See Hamlyn Co. v. Tallisker Distillery [[1894] A.C. 202], and Spurrier v. La Cloche [[1902] A.C. 446 (P.C.)]. This inference, it was said in the last case, can be drawn even in a case where the arbitration clause is void according to the law of the country where the contract is made and to be performed. In our opinion, in this case, the circumstances clearly establish that the proper law to be applied is the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
