1. Suit for recovery of money — dispute over validity of groundnut transactions under the Saurashtra Groundnut and Groundnut Products (Forward Contract Prohibition) Order, 1949. (Para 1 , 3 )
Back
Next 
1963 Supreme(SC) 94
SUPREME COURT OF INDIA
B.P.Sinha, C.J.I., J.C.Shah, N.Rajagopala Ayyangar, JJ.
Thakkar Hemraj Keshavji
Versus
Shah Haridas Jethabhai
Case No. : 164 of 1961
Date of Decision : 3/29/63
Advocates Appeared: Dadachanji J.B. : Doshi T.L. : Hathi K.L. : Iyengar M.S.B.R.L. : Mathur O.C. : Narain Ravindra : Rehman Atiqur : Trikamdas Purshottam
Advocates:
Atiqur Rehman, J.B.DADACHAN, K.L.Hathi, M.S.B.R.L.IYENGAR, O.C.MATHUR, PURSHOTTAM TRIKAMDAS, Ravindra Narayan, T.L.DOSHI
Atiqur Rehman, J.B.DADACHAN, K.L.Hathi, M.S.B.R.L.IYENGAR, O.C.MATHUR, PURSHOTTAM TRIKAMDAS, Ravindra Narayan, T.L.DOSHI
Silence in a contract regarding transferability does not imply it is transferable. Non-transferability can be inferred from the contract's language and surrounding circumstances, such as association rules imposing personal obligations, meaning such contracts may be exempt from prohibitions on forward contracts.
Headnote:(A) Saurashtra Groundnut and Groundnut Products (Forward Contract Prohibition) Order, 1949 - Definition of forward contract - Exemption for specific delivery contracts that are non-transferable - Whether silence in a contract regarding transferability implies that the contract is transferable - It is not necessary that a contract must expressly recite that it is not to be transferable to fall within the exemption - The question of transferability depends on the language of the contract interpreted in light of surrounding circumstances; silence cannot be regarded as an indication of transferability. (Para 8)
(B) Interpretation of Contracts - Terms can be express or implied - Absence of a specific clause forbidding transfer is not conclusive - If a reasonable interpretation of the contract, aided by surrounding considerations, shows the agreement was not to be transferred, effect can be given to it. (Para 8)
(C) Assignment of Contract - Obligations under a contract cannot be assigned without the consent of the other party - Where rules of an association governing a contract impose specific obligations on the buyer, such as supplying bags or delivery at a specific godown, such obligations imply the contract is non-transferable. (Para 10)
Facts of the case:
A suit was filed for the recovery of money arising from personal accounts and transactions involving the sale of groundnut. The plaintiff contended that certain transactions were forward contracts prohibited by a government order and thus created no liability. The defendant argued that the transactions were ready delivery contracts for specific quality and price, which were exempt from the prohibition.
Findings of Court:
The court found that the contracts were made subject to the rules of a merchants association. These rules, which required the buyer to supply empty bags and the seller to deliver goods to the buyer's specific godown, indicated that the transactions were intended to be performed between the parties and were not transferable to third parties.
Issues: Whether the contracts in question were "forward contracts" prohibited by the 1949 Order, specifically whether the absence of an express non-transferability clause rendered them transferable and thus prohibited.
Ratio Decidendi: The court held that silence in a contract regarding transferability does not imply that the contract is transferable. Non-transferability can be inferred from the terms of the contract and the surrounding circumstances, including the rules of the governing association. Since the rules imposed personal obligations on the parties that could not be assigned without consent, the contracts were non-transferable and therefore fell within the exemption for ready delivery contracts.
Result: Appeal dismissed with costs.
Legal Category Hierarchy
Table of Contents
2. Whether contracts for future delivery are prohibited forward contracts in the absence of an express stipulation prohibiting transfer to third parties. (Para 3 , 7 )
3. Non-transferability can be implied from the contract's language and surrounding circumstances; silence does not justify an inference of transferability. (Para 8 , 9 , 10 , 11 )
4. A contract for specific quality, price, and delivery is not a prohibited forward contract if it is non-transferable, whether expressly or impliedly. (Para 8 , 12 )
5. Appeal dismissed and the decree of the High Court maintained. (Para 13 )
6. Does a contract for future delivery always constitute a prohibited forward contract?
No. Contracts for specific qualities or types for specific delivery at a specific price are excluded from the definition of forward contracts, provided they are not transferable to third parties. (Para 5 , 12 )
7. Is an express clause prohibiting transfer mandatory to exempt a contract from being classified as a forward contract?
No. The absence of a specific clause forbidding transfer is not conclusive. Non-transferability can be deduced from a reasonable interpretation of the contract and surrounding circumstances. (Para 8 )
8. What factors indicate that a contract is non-transferable?
Non-transferability may be implied if the contract imposes obligations on the buyer that cannot be assigned without consent or if delivery is tied to a specific warehouse. (Para 10 )
J.C.SHAH, J.
(1) THE appellant instituted Suit No. 250 of 1950 in the court of the Civil judge (Senior Division), Junagadh for a decree for Rs. 72693/11/alleging that the appellant had a personal account with the respondent in respect of drafts, cheques, hundis and cash, and at the foot of that account Rs. 58,000.00 as principal amount and Rs. 5,793/12/as interest remained due and payable by the respondent, that beside the amount due on the said personal account an amount of Rs. 8,899/15/3 was dueto him in respect of a transaction of sale of 1300 bags of groundnut sent by him between January 16 to January 28, 1950, and the price of gunny bags and groundnut oil cakes delivered to the respondent. The appellant further alleged that forward contracts were prohibited with effect from 19/11/1949 by the Saurashtra Groundnut and Groundnut Products (forward Contracts Prohibition) order, and that the said contracts being illegal the appellant was not subject to any liability arising from adjustments of credits and debits or differences in rates relating to forward contracts and the respondent was not entitled nor authorised to make credit and debit entries in the appellants account and that nothing was due by him in respect thereof. The respondent by his written statement contendedthat in the appellants personal account an amountof Rs. 1,58,000.00 stood initially credited but at the foot of that account only a sum of Rs. 18,000.00 was due and this sum was credited in the current account of the appellant in the name of Hemraj Keshavji Oil Mills and Ginning Factory and therefore nothing was due in the personal account, that the transaction effected by the appellant through the commission agency of the respondent in groundnut seed for December-January (Samvat 2006) Settlement did not contravene the order dated 19/11/1949, of the United States of Saurashtra and that the respondent has not committed any breach of the order, that all the transactions for the December-January Settlement were in ready goods of specific quality and that there was a condition relating to giving and taking of delivery on fixed dates and the same were all effected at the direction of the appellant and that the appellant was legally responsible for all payments made in respect of those transactions by the respondents as the appellants pucca adatia. He then contended that in Samvat year 2006 the appellant had sold 9000 bags of groundnut through the agency of the respondent and had purchased 2300 bags through him, that the appellant thereafter gave delivery of only 2000 bags of groundnut and did not deliver the balance and on that account there resulted a loss of Rs. 9,221/7/9 which the appellant was bound to reimburse. The respondent admitted that the appellanthad sent 1300 bags of groundnut but these bags were delivered towards the sale of 2000 bags of December-.January settlement and the price thereof and of the balance of 700 bags was credited in the account of the appellant, and that the appellant was not entitled to a decree for any amount except the amount found due at the foot of the account.
(2) THE trial court decreed the claim by awarding Rs. 30,589/3.00 and interest. Against the decree of the Trial court the respondent as well as the appellant appealed to the High court of the Saurashtra. The appeals were transferred for trail under the States Reorganization Act to the High court of judicature of Bombay at Rajkot. The High court allowed the appeal of the respondent and dismissed the appeal of the appellant. The appellant has with certificate issued by the High court, appealed to this court against the decree passed by the High court.
(3) THE appeal raises a dispute about the liability of the appellant for transactions in groundnut seed effected through the agency of the respondent after 19/11/1949, for December 1949, and January 1950, settlement. The appellant says that these were forward transactions in groundnut and were prohibited under the S
