Rule 42A of the Bihar Sugar Factories Control Rules, 1938, and the relevant sections of the Bihar Sugar Factories Control Act, 1937, were void as they were repealed by the Essential Commodities Act, 1955.

Headnote:
SUGAR FACTORIES CONTROL ACT - RULE 42A - VOID - BIHAR SUGAR FACTORIES CONTROL ACT, 1937 - SECTIONS 18(1), 18(2), 19(1), 19(2) - VOID - PROMISSORY NOTE - INDEPENDENT OF AGREEMENT - ARBITRATION CLAUSE - VOID - SECTION 34 OF THE ARBITRATION ACT, 1940 - BAR TO RESPONDENT'S PLEA.
Fact of the Case:

A sugar company filed a suit for recovery of a loan on the basis of a promissory note executed by the defendant. The defendant pleaded that the suit was barred by Rule 42A of the Bihar Sugar Factories Control Rules, 1938, and that the loan was not independent of the supply of sugarcane to the plaintiff company.
Finding of the Court:

The court held that Rule 42A of the Bihar Sugar Factories Control Rules, 1938, and the relevant sections of the Bihar Sugar Factories Control Act, 1937, were void as they were repealed by the Essential Commodities Act, 1955. The court also held that the promissory note was independent of the agreement entered into between the parties and that the arbitration clause in the agreement was also void.
Issues: 1. Whether Rule 42A of the Bihar Sugar Factories Control Rules, 1938, and the relevant sections of the Bihar Sugar Factories Control Act, 1937, were void. 2. Whether the promissory note was independent of the agreement entered into between the parties. 3. Whether the arbitration clause in the agreement was void.
Ratio Decidendi: 1. The court held that Rule 42A of the Bihar Sugar Factories Control Rules, 1938, and the relevant sections of the Bihar Sugar Factories Control Act, 1937, were void as they were repealed by the Essential Commodities Act, 1955. The court relied on the decision of the Supreme Court in Tika Ramji V/s. State of Uttar Pradesh, AIR 1956 SC 676, and two decisions of the Patna High Court, Sugauli Sugar Works V/s. Cane Commr., AIR 1959 Pat 398 and Sasamusa Sugar Works V/s. Cane Commr., AIR 1953 Pat 403. 2. The court held that the promissory note was independent of the agreement entered into between the parties. The court noted that there was nothing in the agreements or in the promissory note that one is dependent or connected with the other. 3. The court held that the arbitration clause in the agreement was also void. The court noted that the arbitration clause was incorporated in the agreement because the agreement form itself was prescribed under Subsection (2) of Sec.18. The court also noted that the arbitration clause brought in the Cane Commissioner as arbitrator and that such a clause would not have been incorporated by the parties in the contract independently of the form prescribed by Sec.18(21 of the Act.
Final Decision: The court allowed the appeal, set aside the judgments and decrees of the courts below, and remanded the suit to the trial court for disposal in accordance with law.

Judgment

1. This appeal by the plaintiff arises out of a suit by a Sugar company, having a sugar factory, for recovery of a loan on the basis of a promissory note for Rs. 2000 executed by the defendant respondent in favour of the plaintiff on the 11th February, 1957. The defendant took two main pleas: (1) the suit did not lie on the ground that it was barred by rule 42A of the Bihar Sugar Factories Control Rules, 1938, made in pursuance of certain provisions of the Bihar Sugar Factories Control Act, 1937, and (2) the loan on the basis of the promissory note was not an independent one, inasmuch as this transaction was connected with the supply of sugarcane to the plaintiff company. Both the courts upheld the defence, but they did not record any finding on the other issues arising out of the pleadings.

2. Mr. Lalnarayan Sinha, who appeared for the appellant, has contended that Rule 42A is invalid, because the Bihar Act has been found by this court to be unconstitutional in the unreported decision in Cr. WJC Nos. II and 31 of 1966 (Pat) A. K. Jain V/s. Government of India decided by a Bench of this court on 4-7-1966 and rule 42A has been found to be invalid by another unreported bench decision of this court in Misc. JC No. 1344 of 1964 (Pat) Sugauli Sugar Works Pvt. Ltd. V/s. Co-operative Development and Cane Marketing Union disposed of on 20-7-1966.

3. Rule 42A contains the provision for arbitration by the Cane Commissioner of Bihar in respect of any dispute touching an agreement referred to in Section 18(2) or Sec.19(2) of the Bihar Act, and, it excludes the jurisdiction of the civil and the revenue courts in respect of any such dispute. The relevant portion of Sec.18 reads as follows:-

"18(1) A Cane grower or a cane growers co-operative society in a reserved area may offer, in the form and by the date described, to supply to the occupier of the factory, for which the area is reserved, cane grown by the cane-grower or by the members of such cane-growers Co-operative Society, as the case may be, not exceeding the quantity, if any, prescribed for such grower or Cane growers Co-operative Society.

(2) The occupier or manager of a factory for which an area is reserved shall enter into agreements, in such form, by such date and on such terms and conditions as may be prescribed, to purchase the cane offered in accordance with Sub-section (1)".

Sub-sections (1) and (2) of Sec.19 enact:

"(1) The Cane Commissioner may, after consulting the advisory committee or committees (if any) of the area concerned and the occupier of the factory and after considering any objections that may be raised, issue an order declaring any area to be an assigned area for the purposes of the supply of cane to a particular factory: Provided that in the case of a factory situated outside the State of Bihar such declaration shall only be made on receipt by the Cane Commissioner of an application in the prescribed form from the occupier of such factory requesting that an area shall be declared to be an assigned area for the purposes of the supply of cane to such factory.

(2) Subject to the provisions of sub-section (5), the occupier of a factory for which an area has been assigned, shall enter into agreements for the purchase in the assigned area, of such quantity of cane as may be fixed by the Cane Commissioner."

It is unnecessary to refer to or quote Sub-section (5) of this section, as it is not relevant nor is the proviso to Sub-section (2) relevant. The courts below acted on the assumption that Rule 42A was valid; and in support of their finding Mr. Janardan Sinha relied on the case of Tika Ramji V/s. State of Uttar Pradesh, AIR 1956 SC 676 and two decisions of this court, viz. Sugauli Sugar Works V/s. Cane Commr., AIR 1959 Pat 398 and Sasamusa Sugar Works V/s. Cane Commr., AIR 1953 Pat 403. One of the questions raised before the Supreme Court was whether the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, was intra vires of the State Legislatu

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1968 Supreme(Pat) 24

PATNA HIGH COURTRamratna Singh and Anwar Ahmad JJ.Belsand Sugar Co.Ltd.VersusThakur Girja Nandan SinghAppeal From Appellate Decree No. 114 of 1963 ;Decided On : JANUARY 22, 1968

Rule 42A of the Bihar Sugar Factories Control Rules, 1938, and the relevant sections of the Bihar Sugar Factories Control Act, 1937, were void as they were repealed by the Essential Commodities Act, 1955.

Cases Referred (3)

PATNA HIGH COURT
Ramratna Singh and Anwar Ahmad JJ.
Belsand Sugar Co.Ltd.
Versus
Thakur Girja Nandan Singh
Appeal From Appellate Decree No. 114 of 1963 ;
Decided On : JANUARY 22, 1968