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1958 Supreme(SC) 41
SUPREME COURT OF INDIA
31st March 1958.
N.H. BHAGWATI, J.L. KAPUR AND P.B. GAJENDRAGADKAR, JJ.
Gordhandas Purshottamads Sonawala and another, Appellants
Versus
Eastern Cotton Co., Respondent.
Civil Appeal No. 398 of 1956.
Advocates appeared
Mr. M. C. Setalvad, Attorney-General for India, (Mr. N. P. Nathwani, Advocate and M/s. J. B. Dadachanji, S. N. Andley and Rameshwar Nath, Advocates of M/s Rajinder Narain and Co. with him), for Appellants, Mr. Purshottam Tricumdas, Senior Advocate, (M/s. K. K. Deasi and I. N. Shroff, Advocates, with him), for Respondent.
I.M.SHROFF, J.B.DADACHAN, K.K.Desai, M.C.SETALVAD, N.P.NATHVANI, PARSHOTTAM TRIKAMDAS, RAMESHWAR NATH ROY, S.N.ANDLEY
Contracts not in accordance with the By-laws of the Association are void, but substantial compliance with the By-laws is sufficient.
Headnote:
CONTRACT - Validity - Bombay Cotton Contracts Act (Bom. IV of 1932), S. 8 - By-laws of the East India Cotton Association Ltd. - Contracts not in accordance with the By-laws - Void - Substantial compliance with the By-laws - Omission to fill in the blanks in the contract notes - Effect.
Fact of the Case:
The appellants, members of the East India Cotton Association Ltd. (the Association), sold 2,300 bales of cotton to the respondents, also members of the Association. Out of these, 1,100 bales were disposed of by means of "Havalas" and in respect of 500 bales, out of the remaining 1,200 bales, there were cross-contracts. As a result, when the time for "Delivery" arrived, sales in respect of 700 bales remained outstanding and the Member Firm was liable to give delivery of 700 bales to the respondents. However, the Member Firm failed to give delivery of the said 700 bales to the respondents, and under the relevant By-laws of the Association, the respondents "Invoiced Back" these 700 bales to the Member Firm. As a result of this "Invoicing Back", a sum of Rs. 1,07,530-8-0 became due and payable by the Member Firm to the respondents and with regard to the transactions of all the 2,300 bales taken together an aggregate sum of Rs. 1,79,749-8-0 became due and payable by the Member Firm to the respondents. The Member Firm paid the said sum of Rs. 1,79,749-8-0 and a further sum of Rs. 350 being the amount of penalty for the alleged failure to tender the aforesaid 700 bales of the said contracts of Broach/Vijay March/April 1948 Delivery, to the respondents without prejudice to their rights and contentions. The Member Firm, however, as the beneficiary under the said contracts decided to pay the amounts claimed by the respondents without prejudice to the rights and contentions of both the parties. The appellants thereafter called upon the respondents to return the said sum of Rs. 1,80,099/8/- (being the aggregate of the said two sums of Rs. 1,79,749/8/- and Rs. 350) with interest thereon at the rate of 6 per cent. per annum. The respondents failed and neglected to pay to the appellants the said sum or any part thereof with the result that the appellants filed the suit against the respondents for repayment to them of the said sum with interest and costs.
Finding of the Court:
The Court held that the contracts between the parties were not void as alleged. The appellants were therefore not entitled to recover from the respondent the said sum of Rs. 1,80,099-8-0 or any part thereof as alleged or at all. The Court was of the opinion that the appellate Court was right in rejecting the appellants' claim.
Issues: Whether the contracts between the parties were void as alleged.
Ratio Decidendi: 1. The Court held that the omission to fill in those blanks in the contract notes did not spell any departure from an essential or a characteristic part of the contract form nor was the legal effect of the contracts in any manner changed thereby rendering the contracts void within the meaning of S. 8 of the Bombay Cotton Contracts Act, 1932. 2. The Court observed that the whole difficulty has been created by reason of the Association not having made the necessary alterations in the contract form in accordance with the situation as it obtained from time to time.
Final Decision: The appeal was dismissed with costs throughout.
Judgment
N. H. BHAGWATI J. : This appeal with a certificate of fitness is directed against the judgment and decree passed by the High Court of Judicature at Bombay in appeal from its ordinary Original Civil Jurisdiction confirming, though on different grounds, the judgment and decree passed by a Single Judge of that High Court in Suit No. 468 of 1951 instituted by the appellants (Original Plaintiffs) to recover from the respondents (Original Defendants) a sum of Rs. 1,80,099-8-0 with interest and costs.
2. Since the year 1932 the first appellant has been a member of the East India Cotton Association Ltd., (hereinafter referred to as "the Association") as the sole proprietor of the firm of Messrs. Narrondass Monordass (hereinafter referred to as "the member firm"). The first appellant along with other partners carried on business in partnership in Bombay inter alia as Cotton Merchants and Commission Agents in the name and style of Messrs. Narrondass Monordass, the 2nd appellant (hereinafter referred to as "the partnership firm"). The respondents are a partnership firm and also a member of the Association.
3. Between 23rd September, 1947, and 10th December, 1947, the Member Firm sold to the respondents 2,300 bales of Broach Vijay Fine 3/4" Navsari and/or Bardoli 7/8" Cotton for March /April 1948 Delivery. Out of these 2,300 bales, 1,100 bales were disposed of by means of "Havalas" and in respect of 500, out of the remaining 1,200 bales, there were cross-contracts. In the result when the time for "Delivery" arrived, sales in respect of 700 bales remained outstanding and the Member Firm was liable to give delivery of 700 bales to the respondents. As however, the Member Firm failed to give delivery of the said 700 bales to the respondents, under the relevant By-laws of the Association, the respondents "Invoiced Back" these 700 bales to the Member Firm on 3rd May, 1948 and as a result of this "Invoicing Back" a sum of Rs. 1,07,530-8-0 became due and payable by the Member Firm to the respondents and with regard to the transactions of all the 2,300 bales taken together an aggregate sum of Rs. 1,79,749-8-0 became due and payable by the Member Firm to the respondents. In respect of this sum of Rs. 1,79,749-8-0, the respondents sent to the Member Firm eight separate "Debit Notes" in respect of varying amounts and finally a consolidated debit note for Rs. 1,79,749-8-0.
4. It appears that the contract notes in respect of these transactions had been signed by one Ramanlal Nagindas who had been employed as a salesman in the Ready Cotton Department of the partnership firm. The appellants contended that the said Ramanlal Nagindas had no authority to enter into the said transactions or to sign contract notes in respect thereof on behalf of the appellants and also that the said contracts were not in accordance with the Bye-laws of the Association and they therefore denied their liability in respect of the said transactions. The partnership firm, however, as the beneficiary under the said contracts decided to pay the amounts claimed by the respondents without prejudice to the rights and contentions of both the parties. On 7th May, 1948, the said sum of Rs. 1,79,749-8-0 was paid by the partnership firm and was received by the respondents in terms of the letter addressed by the respondents on the said date :-
"The payment is made by you and accepted by us without prejudice to the rights and contentions of both the parties in respect thereof."
A further sum of Rs. 350 being the amount of penalty for the alleged failure to tender the aforesaid 700 bales of the said contracts of Broach/Vijay March/April 1948 Delivery, was also paid by the partnership firm to the respondents on 6th June, 1948, without prejudice to their aforesaid contentions.
5. The said Ramanlal Nagindas had entered into similar transactions with several other merchants and some of them claimed arbitration under By-law 38-A of the Association. Petitions were thereupon filed by the member fir
