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1959 (12) TMI 62

certain jute contracts and the relative Arbiration agreements contained therein are void and unenforceable, that the awards made thereupon are void and unenforceable, that such awards be taken off the file and for perpetual injunction restraining the defendants, their servants and agents from enforcing the award or taking any steps there under. 2. The plaintiff appellant is the seller and the defendant respondent is the buyer of certain jutes. The plaintiff is a partnership and the defendant is a limited company. Under four different contracts, two dated 28-7-1947 and the other two dated 5-9-1947, the plaintiff agreed to sell certain bales of jute to the defendant at rates and prices mentioned in such contracts; the Port of delivery was Genoa, Italy, and the stipulated time for shipment under the first two contracts was from September to November, 1947 and under the last two contracts was from December, 1947 to January, 1948. The contracts were made through the exchange o usual Bought Notes. 3. The plaintiff supplied certain bales but not all under these contracts. In fact, the plaintiff's case is that the plaintiff shipped 842 bales against the said four contracts; 742 bales w .....

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liability was intended or at any rate that the prima facie obligation is not abrogated". "(2) The actual system of controlling the working of the licence or quota system is by no means clear from the award. The appellants may have been obliged to obtain first a quota and then a licence to ship to a particular country or may have had only to obtain a quota for a particular country but whichever of these two courses the system adopted required, they alone had the means of ascertaining what they had obtained or were likely to obtain and knew that the goods could not be shipped under a C. I. F. contract until they had received permission to put them on board. On the other hand, for all the buyers knew, the sellers might have had a quota sufficient to fulfil the whole of their contracts; moreover the sellers knew, as the buyers did not, that the basic year which they had chosen was one in which they had no Italian contracts". "(3) The steps to be taken were for the sellers to determine and it is not clear that steps were taken or indeed how far they took all reasonable measures to fulfil their obligations. There is no finding as to the reason why no application to s .....

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e, added one further ground and made the following observations: "Clause 18 (the so-called 'Paramount' Clause) provides that in certain specified events the contract shall be null and void and the parties shall be excused from further performance. The significance of the clause is, in my view, not that any of the excusing events have in fact occurred, but that the parties were clearly directing their minds to the question what events should excuse them, but did not include among those events inability to obtain an adequate quota or a licence". The reason for setting out these seven conclusions of the House of Lords is to show that they decide some of the very points urged before us in this appeal. 9. At the conclusion of all these proceedings when the respondent made an application in this Court under Section 5 of the Arbitration (Protocol and Convention) Act, 1937 to file the foreign award, the appellant instituted this suit on the Original Side of this Court on 28-11-1952 for the reliefs mentioned above. The plaint covers again many of the grounds decided by the English Courts. 10. Paragraph 4 of the plaint pleads an express oral agreement instead of an implied .....

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een the parties including the question of absence or existence of an implied or oral term that these contracts were subject to and dependent on the appellant obtaining licence or quota from the Governments of India and Pakistan. The other point relates to the plaintiff's right to maintain or institute a suit to set aside a foreign award governed by the Arbitration (Protocol and Convention) Act 1937. 13. I shall first deal with the question of contract because that is a question of merit. The contracts do not expressly appear to be subject to any condition that they are subject to the appellant obtaining licence or quota from the Government. The contracts in this case had an express clause "licence" and it was not stated there that they were subject to any condition of the appellant obtaining licence from the Government. All the other details in these contracts were duly filled up but so important a term which would go to excuse the appellant seller from performing the contract under the clause "licence" was not expressly included and the clause was left blank. This consideration taken along with the paramount clause in Clause 18 of the contract which does no .....

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quota either by implication or by an express oral agreement is, in our opinion, impossible in the facts and circumstances of this case. That will make these contracts completely meaningless, hazardous and wholly uncertain for the buyer. It is inconceivable from the point of view of business efficacy how such a problematical contract, whose fulfilment will be left to so uncertain an event, could be entered into by the parties. 16. Apart from the difficulty of construction on the way of the appellants on this point, there are other difficulties on the merits also. The finding of fact by the Courts of England is that the appellants did not even make the best efforts to obtain the quota and licence. In fact, the appellants in their application for quota before the Government chose to give a basic year which was significant in the sense that in that basic year the appellants did not export any jute to Italy at all. It was, therefore, inconceivable how the appellants could expect to get a quota for export to Italy when they deliberately chose a basic year in their application to the Government showing no export to Italy at all. There is also a further finding of fact by the Courts of Eng .....

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ence. That would not be transfer of the licence. There is no legal difficulty in such arrangement although such an arrangement may not always be commercially convenient. The notification of the 30th January 1948 also does not prevent such arrangement. Condition (4) of such notification lays down that all applications for export licence must be accompanied by documentary evidence of bona fide firm contracts having been concluded with the overseas buyer for supply of raw jute and condition (5) lays down that the intending shippers of raw jute should register their requirements with full particulars of (a) date of sale, (b) shipment month and (c) buyer's name. The arrangement that the learned trial Judge speaks of does not violate these conditions. 18. This disposes of the merits of the case. 19. It will be necessary now to deal with the procedural argument pleaded in paragraph 17 of the plaint. The first objection of the appellant is that the award has been made by a tribunal not provided by the agreement for arbitration. The contracts in suit contain the clause: "Arbitration - London or Private''. The document here on record shows first that the appellant plaintiff .....

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Committee of the Privy Council holds that in a suit in India upon an award made upon a submission to arbitration in England, irregularity or misconduct in arriving at the award is not a defence; the award can be Set aside on those grounds only on motion under the (English) Arbitration Act. See the observation of Viscount Cave at pp. 178-179 of that report (Ind App); (at p. 122 of AIR). We therefore also overrule the third objection. 22. The fourth objection of the appellant is that the awards incorporated decisions as to the existence of an implied term and, therefore, deal with matters not referred to the arbitrators and/or not within the scope of the arbitration agreement. The appellant firm invited the arbitrators to decide on the implied term because it was their case at that stage that there was an implied term that the contracts were subject to the condition of quota or licence and they are now contending that because the arbitrators decided against their implied term, therefore they had decided on something which was beyond the agreement. The appellant cannot blow hot and cold at the same time. The appellant's own statement of case before the arbitrators and the respond .....

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rm that these contracts were subject to quota or licence. It cannot be said, therefore, that the awards themselves require the seller to do anything which was against the law of India. If the seller had not protected himself by providing a suitable condition in the contract then the fault is entirely of the seller. They have only to thank themselves for the situation. Therefore, neither the agreement nor the awards as such are against the public policy of India. They would have been so if the contracts did contain a term, express or implied, for which the appellant had contended and lost and if the appellant had successfully proved that they did their best. Even on the facts which we have already analysed, it has been found that in spite of restrictions the appellant could have arranged for shipment and, in fact, they were also guilty in their very application for quota and licence for choosing a basic year for which they had exported no jute to Italy. We hold upon the facts and construction of the contracts in this suit and the awards that neither the contracts nor the awards are against any public policy or law of India. 25. On the merits of this question whether contracts of thi .....

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nt pleaded in paragraph 17 of the plaint are untenable and we overrule them. 28. The major argument on behalf of the respondent before us has been that the entire suit is misconceived. In fact, the learned standing counsel contends that no suit lies on a foreign award governed by the Arbitration (Protocol and Convention) Act. This argument is developed on a number of grounds. 29. It is first said that Section 9 of the Civil Procedure Code does not recognise such a suit. Section. 9 is said to indicate, that the courts shall have jurisdiction to try all suits of a civil nature. The question then is whether this is a suit of a civil nature. It is contended that unless the right of suit is there, Section 9 gives no new right but only indicates that the courts would have jurisdiction to try all suits of a civil nature. That appears to be arguing in a circle. No doubt Section 9 of the Civil Procedure Code says that courts shall have jurisdiction to try suits of a civil nature. But it is nowhere defined what are suits of a civil nature. This is a suit for a declaration of civil rights in respect of certain contracts, arbitration agreements and awards. Therefore, they are questions of a ci .....

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l although they may come within the general expression "written instrument". We consider that the expression 'written instrument' in Section 39 mentions an instrument which has not already been adjudged by any formal court or tribunal. 32. On Section 42 of the Specific Relief Act dealing with declaratory decrees in this country, the argument also deserves consideration. It is said that the right of suit is confined to a person who is entitled to a "legal character" or "any right as to property". When therefore persons claiming title to any "legal character" or "right to property" have already sought the assistance of a court or a tribunal and obtained its judgment, then their legal character or right stands pronounced in such judgment which binds them and they cannot any longer be called thereafter persons, merely entitled or claiming title to any "legal character" or "any right as to property". It is said that when a Tribunal or a court by its award or judgment has already declared the rights of a party there can be no further question of a suit being filed by a person claiming a legal character or title .....

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e dismissed the suit on the ground that it was misconceived and incompetent. 36. The only difficulty in the way of the respondent on this branch of the argument is another decision of the Privy Council, in E. D. Sassoon and Co. v. Ram Dutt Ramkisen Das, 49 Ind App 366: (AIR 1922 PC 374). This was a case of contract for sale of jute and the Privy Council came to the conclusion that a suit could be maintained on the ground that the award was objected to for want of jurisdiction and not for mere misconduct or irregularity. But this was not a case of a foreign award nor an award governed by the Arbitration (Protocol and Convention) Act 1937. Besides, such suit will no longer be maintainable under Section 32 of the new Arbitration Act 1940. The authority of that decision of the Privy Council therefore has disappeared except the observations of Viscount Cave in Sassoon's case, 49 Ind App 366: (AIR 1922 PC 374) that S, 42 of the Specific Relief Act applies. Mr. Roy for the appellant also relied on the Indian decision reported in Firm Jai Narain Babu Lal v. Firm Narain Das Jaini Mal, ILR 3 Lah 296 at pp. 315-6: (AIR 1922 Lah 369 at p. 378) but that was also before the Arbitration Act, .....

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f the Act and to the Convention on the execution of Foreign Arbitral awards set out in the Second Schedule of the Act. From this it follows that under Article 1 of the Convention in the Second Schedule that such a foreign arbitral award in India "shall be recognised as binding and shall be enforced in accordance with the Rules of the procedure of the territory where the award is relied upon". The subsequent provisions in that convention set out more or less the provisions embodied in the Act. The second conclusion is again deducible from the preamble that these arbitrations relate to contracts which are considered as "commercial" under the law in force in India. The third conclusion is Sections 4, 5, 6, 7 and 8 of the Act relates to the effect of a foreign award, the procedure for its filing, enforcement, condition of enforcement of a foreign award and the evidence necessary for the party seeking to enforce the foreign award. 41. These conclusions appear to indicate that the foreign award under the Arbitration Protocol and Convention Act can be used both as a weapon and as a shield. The party in whose favour the foreign award is made can take steps to enforce it .....

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m inclined to think that the word "award" in Section 32 of the Arbitration Act 1940 means an award made under that Act and not under the Arbitration Protocol and Convention Act and therefore I hold Section 32 of the Arbitration Act does not apply to awards made under the Arbitration Protocol and Convention Act 1937. All that Section 9(a) of the Protocol Act says is that that it will not "prejudice" the award-holder's right to enforce the award which under Section 4(1) of the Protocol Act shall be enforceable "as if it were an award made on a matter referred to arbitration in India". Therefore an award under the Protocol Act is not an award under the Arbitration Act 1940 but is for purposes of enforcement only deemed or treated as such award. That in my opinion does not attract Section 32 of the Arbitration Act which in that sense does not relate to "enforcement" of an award. In this view of the construction of Section 9 of the Protocol Act and Section 32 of the Arbitration Act, there is no conflict and I do not consider the expression "notwithstanding any law for the time being in force" in Section 32 of the Arbitration Act help .....

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ked in vain for any express statutory provision in the Act to provide for the steps or the course which a party against whom the award is made can take to denounce the award. All the relevant sections are concerned with prescribing procedure for enforcing the foreign award but there is no special remedy prescribed by this statute which expressly gives any right to a person aggrieved by such award. Therefore this case comes under the second class of Willes J.'s threefold classification. It certainly may very well be argued that the party aggrieved by the award can contest and defend proceedings which the award holder will have to bring to enforce his award. Freedom or capacity to question the validity of such foreign award only as defence to proceedings brought for its enforcement cannot in my opinion be read as an implied ouster of his right to initiate and maintain an action to set aside such awards on the same grounds open to him in defence to proceedings brought against him. For one thing that will mean that the award will be at large and he will have to wait until the award holder chooses to bring proceedings to enforce it. I see no reason why he should not have a right to .....

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ught Notes which were passed in respect of the contracts contain inter alia the following words: "We have this day Bought from you on the terms and conditions of the London Jute Association contract the following bales of Crop-1947-1948". 50. Then follow several items - Mark, Quantity, Price, Freight, Shipment, Ports, Weight, Insurance Payment, Arbitration, Commission and Brokerage, Duty, Licence, Buyers - and particulars are given against each of these items except as against the item "Licence" which is left blank. It is not necessary to set out the particulars given against the various items except that against the item "Ports" the name "Genoa" is mentioned and against the item "Arbitration" - the words "London or Private" appear. 51. At the time the contracts were entered into a licensing and a quota system introduced by the Government were in force and it was not possible to export anv jute to foreign countries without obtaining a quota and licence for such export, the procedure of which was laid down in Notifications issued by the Government from time to time. The appellant's case as laid in the plaint is that at .....

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me and would be illegal and unenforceable. It is argued that both parties knew at the time when the contracts were entered into that it would be illegal to ship the goods to Italy unless a licence was obtained and so both parties must have intended that the contracts would be carried out in accordance with the laws in force in this country. Accordingly in order to give business efficacy to the transactions a term must be implied in the contracts that they are subject to a licence to export being obtained. As no licence could be procured to ship the balance of the goods the sellers were released from their obligation to perform the contract. In support of this argument reliance is placed on the decision o the Court of Appeal in England in the case of (1917) 2 KB 679. In this case a contract was entered into in London on the 19th August 1915 for sale of 50 tons of aluminium to be shipped by steamer to Vladivostok during December/January next. At the date of the contract there was to the knowledge of both parties, a prohibition against the export of aluminium from the United Kingdom except on licence granted by the British Government. On 7th December 1915 an order was promulgated proh .....

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ontrary to the prohibition would be illegal and an absolute obligation to ship could not be enforced. I cannot agree that in order to give to the contract its business efficacy, it is a necessary implication that the sellers undertook an absolute obligation to ship whether a licence was or was not obtained. A party to a contract may warrant that he will obtain a licence but no such term can be implied in this case. The reasonable view of the contract in my opinion having regard to the statement in 'the Moorcock', (1889) 14 PD 64 at p. 68, is that the sellers sold subject to their being able to ship under a licence and that they impliedly undertook to use their best endeavours to obtain a licence. The Umpire has found that they used their best endeavours, the failure to ship being due to their inability to, obtain a licence and therefore there has been no breach of contract." (page 686). 55. Lord Cozens Hardy M. R, and Scrutton L. J. agreed, with the view expressed by the learned Chief Justice. 56. It is to be noted that in this Anglo Russian Merchant Traders' case there was no question of any quota system being linked up with the licensing system. The obtaining of .....

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tween the parties are controversial in character, the appellant maintaining that the respondent's representative Mulchand knew everything whereas the respondent asserted the contrary. Before the trial court the appellant set up a case of an oral Agreement as pleaded in paragraph 4 of the plaint. The learned Judge has not accepted this case of the appellant and he has given his reasons. I see no ground for not agreeing with the learned Judge on this point. 58. It also appears that it was possible for the appellant to ship goods from Chittagong in fulfilment of the contracts in question as one of the terms of the contract of London Jute Association was, that the shipment could be made either from Calcutta or Chittagong. On the partition of India and Pakistan, Chittagong became part of Pakistan and the Pakistan authorities appear to have put no obstacle or restriction in respect of the free export of jute from Chittagong to foreign countries, for sometime after the 15th August 1947 and until about the beginning of 1948. So here again the appellant was in default. 59. The further fact which distinguishes this case from the Anglo Russian Merchant Traders' case, 1917-2 KB 679, is .....

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o sale, the fact that there is a legislation to that effect is sufficient to make the defence of frustration complete. But where an enactment such as the Madras Tapioca (Movement Control) Order is in force, which prohibits exports of certain article outside the district or province except on permits, the prohibition is not absolute and complete but qualified, the qualification being that a permit will be necessary before such an export could be made. In such a case it has to be examined whether the party on whom the obligation rested to apply for and obtain the permit has discharged his obligation. In my view this main contention of the appellant must fail. 62. It has been further contended on behalf of the respondent that the provisions of the Arbitration (Protocol and Convention) Act, 1937 constitute a bar to the maintainability of the suit. It is argued that the only remedy which the appellant has is to resist the enforcement off the Foreign Award after a notice is served upon the appellant under Section 5(3) of the Act but it is not open to the appellant to attack the validity of the Award by a suit instituted, for the purpose. Section 7(3) of the Act of 1937 makes it clear tha .....

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l cases were decided prior to the enactment of sections 32 and 33 of the Arbitration Act, 1940 and as Section 32 expressly bars a suit for a decision upon the existence effect or validity or an Arbitration agreement or award it may be contended that these earlier decisions can no longer be regarded as good law so far as Awards governed by the Arbitration Act, 1940 are concerned. But it may be pointed out that in the case of State of Bombay v. Adamjee Hajee Dawood and Co., , Harries, C. J., held that sections 32 and 33 of the Arbitration Act on their true construction do not purport to deal with suits for declarations that there never was a contract or that a contract is void. The sections must be confined to attacks on arbitration agreements and Awards and the fact that the arbitration agreement may fall with the contract does not prevent the court declaring in a properly constituted suit that there never was a contract at all or that the contract is void and of no effect. Banerjee, J., held that Section 32 does not have the effect of impliedly repealing Section 39 of the Specific Relief Act and so a suit which challenges the validity of a contract is not hit by Section 32 even tho .....

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made an application for filing the Foreign Award under the provisions of the Arbitration (Protocol and Convention) Act, 1937, and the appellant could have taken all the grounds which have been taken in the suit, in the said application, for resisting the enforcement of the Award but it cannot be laid down as a universal proposition that the general right of action conferred by Section 9 of the Code of Civil Procedure or by Section 39 or section 42 of the Specific Relief Act is barred under all circumstances. The Award holder may not take steps to enforce the Award for quite a considerable time and the party aggrieved by the Award may not like to leave his business affairs or other affairs in a state of uncertainty with a heavy liability hanging on his head and wait till the enforcement of the Award is barred by limitation. Moreover as the court has very wide powers in dealing with a suit, it can, where it thinks fit, adjourn the suit and ask the parties to have the Award annulled by the Competent Tribunal in the manner envisaged in section 7(3)of the Act of 1937. The provisions of the Arbitration (Protocol and Convention) Act, 1937 cannot therefore be said to constitute a bar to th .....

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