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HIGH COURT OF CALCUTTA
P. B. Mukharji
CLIVE MILLS LTD. - Appellant
Versus
SWALAL JAIN - Respondent
Special Suit 2 Of 1956
Decided On : JULY 03, 1957
ARBITRATION - STATEMENT OF CASE - JURISDICTION OF ARBITRATORS - QUESTIONS OF LAW INVOLVED - FRUSTRATION OF CONTRACT - FORWARD CONTRACTS (REGULATION) ACT, 1952 - VALIDITY AND CONSTITUTIONALITY - TRANSFERABILITY OF CONTRACT - NON-TRANSFERABILITY OF RIGHTS AND LIABILITIES - EFFECT ON VALIDITY OF CONTRACT.
Fact of the Case:
Arbitrators stated a special case for the opinion of the court under Section 13(b) of the Arbitration Act, 1940, raising questions on the validity of the Forward Contracts (Regulation) Act, 1952, the constitutionality of the restrictions imposed by the Act, the transferability of the contract, and whether the contract was frustrated.
Finding of the Court:
1. The court held that the first three questions, relating to the validity and constitutionality of the Forward Contracts (Regulation) Act, 1952, and the transferability of the contract, were not questions of law "involved" in the dispute and could not be asked by the Arbitrators under Section 13(b) of the Arbitration Act, 1940, as their answers might lead to the ouster of the Arbitrators' jurisdiction. 2. The court answered the fourth question, on the frustration of the contract, in the negative, holding that the contract was not frustrated based on the facts found by the Arbitrators.
Issues: 1. Whether the Arbitrators could ask questions of law that might lead to the ouster of their own jurisdiction under Section 13(b) of the Arbitration Act, 1940. 2. Whether the Forward Contracts (Regulation) Act, 1952, was a valid and constitutional law. 3. Whether the contract in question was transferable or non-transferable. 4. Whether the contract was frustrated.
Ratio Decidendi: 1. The court interpreted Section 13(b) of the Arbitration Act, 1940, to mean that the questions of law asked by the Arbitrators must be "involved" in the dispute, in the sense that their decision would help the Arbitrators in making a true and just award and not transcend their jurisdiction. 2. The court held that questions of law which go to the very root of the Arbitrators' jurisdiction to arbitrate cannot be asked by the Arbitrators under Section 13(b) read with Section 14(3) of the Arbitration Act, 1940. 3. The court found that the questions on the validity and constitutionality of the Forward Contracts (Regulation) Act, 1952, and the transferability of the contract were transcendental questions that could oust the Arbitrators' jurisdiction and therefore could not be answered by the court. 4. The court applied the principles of frustration of contract to the facts found by the Arbitrators and concluded that the contract was not frustrated.
Final Decision: The court answered the fourth question on frustration in the negative, holding that the contract was not frustrated, and declined to express any opinion on the first three questions on the ground that they could not be asked by the Arbitrators under Section 13(b) of the Arbitration Act, 1940.
( 1 ) THE Arbitrators of the Bengal Chamber of Commerce have stated a special case for the opinion of this Court under Section 13 (b) of the Arbitration Act, 1940. This was Case No. 859 of 1955, between Clive Mills Co. Ltd. v. Swalal Jain, before the Arbitrators. The dispute between them arose under a jute contract dated the 7th July 1954, whereby the buyer Clive Mills Co. Ltd. , agreed to purchase from sellers Swalal Jain, 20,000 maunds of Mymensingh and/or Couripur and/or Bhairab (Pakistan) bottom jute at the rate of Rs. 24 per maund on the terms and conditions stated in the usual form of bought note in the Indian Jute Mills Association, a copy of which has been annexed with the Arbitrators" statement of the case. The major part of the contract has been performed by delivery of 19,004 maunds of jute. The dispute that went before the Arbitrators relates to the small balance of 596 maunds. The buyers claimed Rs. 11,324 in respect of this balance of jute and submitted their claim before the Arbitrators.
( 2 ) THE Arbitrators say that the seller had requested them to state a special case to the Court on the point whether the said contract had been frustrated. But the Arbitrators in stating the questions of law for the opinion of the Court have not confined themselves to that particular point but have stated four questions on which Court's opinion is sought. (2a) The questions asked by the Arbitrators are:--1. Whether the Forward Contracts (Regulation) Act, 1952, is an Act dealing with 'trade and Commerce' and, if so, had Parliament any power to legislate in respect of the trade and commerce or to pass the said Act? 2. Whether the said Act imposes reasonable restriction on trade and commerce or whether such restriction is unreasonable and as such repugnant to Article 19 (1) (g) of the Constitution?
( 3 ) WHETHER in order that the contract can be described as a non-transferable specific delivery con tract within the meaning of the said Act it is necessary that -- (a) the rights and liabilities under the contract as also the delivery order and documents of title in respect of the goods covered by the contract should all be non-transferable, or (b) whether if either the rights or the liabilities under the said contract or the delivery order or the documents of title under the contract are non-transferable, then the entire contract would be deemed to be non-transferable within the meaning of the said Act
( 4 ) WHETHER or not in the facts and circumstances as found by the Arbitrators as hereinbefore stated, the said contract in respect of the undelivered jute was frustrated? 3. From a perusal and analysis of the special case stated for die opinion of the Court, it appears that the following facts have been found by the Arbitrators:-- (i) The Arbitrators found that the contract was a forward contract for the sale and purchase of raw jute, (ii) That it was a specific delivery contract. (iii) That the goods were to be delivered at the Mill of the buyer. (iv) That the goods had to be cleared through the Indian Customs Authorities against a licence taken out in the name of the buyer. (v) That the liabilities under the said contract were not transferable. (vi) That the jute under the said contract was to be delivered from Pakistan. (vii) That the trade licence of the Pakistan constituent of the seller was cancelled, but such licence was cancelled due to the default of the seller's Pakistan constituent. (viii) That there was no agreement between the parties that the jute was to be delivered only by or through the said Pakistan constituent of the seller. (ix) That there was no general or universal prohibition on the export of jute from Pakistan and that jute was being exported from Pakistan during the period within which jute was to be delivered under the said contract. (x) After the seller by a letter dated 20th November 1954, informed the buyer that the trade licence of his Pakistan constituent had been cancelled, the b
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