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HIGH COURT OF CALCUTTA
CHAKRABARTI, DAS GUPTA, SARMA SARKAR
ALBION JUTE MILLS CO. LTD. - Appellant
Versus
JUTE AND GUNNY BROKERS LTD. - Respondent
Arbitration 105 Of 1952
Decided On : JANUARY 28, 1953
RAW JUTE (CENTRAL JUTE BOARD AND MISCELLANEOUS PROVISIONS) ACT, 1951 - SECTIONS 5, 6, 7 - VALIDITY AND ENFORCEABILITY - CONTRACT FOR SALE OF RAW JUTE - REQUIREMENT OF ENTERING INTO CONTRACT THROUGH CENTRAL JUTE BOARD - NON-COMPLIANCE - EFFECT - VOID CONTRACT - ARBITRATION CLAUSE - VALIDITY - REFERENCE TO ARBITRATION - VALIDITY - AWARD - VALIDITY.
Fact of the Case:
The petitioner, Albion Jute Mills Company, Ltd., entered into a contract with the respondent, Jute and Gunny Brokers Ltd., for the purchase of raw jute. The contract was not entered into through the Central Jute Board as required by the Raw Jute (Central Jute Board and Miscellaneous Provisions) Act, 1951. The petitioner refused to take delivery of the goods and the respondent referred the dispute to arbitration. The arbitrators awarded in favor of the respondent. The petitioner challenged the validity of the award on the ground that the contract was void for non-compliance with the Act.
Finding of the Court:
The Court held that the contract was void as it was not entered into through the Central Jute Board as required by the Act. The arbitration clause in the contract was also void as it was part of the void contract. The reference to arbitration was also invalid as there was no valid arbitration agreement. The award was also void as it was made in relation to a void contract.
Issues: 1. Whether the contract for the sale of raw jute was void for non-compliance with the Raw Jute (Central Jute Board and Miscellaneous Provisions) Act, 1951? 2. Whether the arbitration clause in the contract was valid? 3. Whether the reference to arbitration was valid? 4. Whether the award was valid?
Ratio Decidendi: 1. The Court held that the contract was void as it was not entered into through the Central Jute Board as required by Section 6 of the Act. Section 5(2) of the Act declared that any contract entered into for the sale or supply of raw jute with the owner of a jute-mill except in the manner provided in Section 6 would be void and of no effect. 2. The Court held that the arbitration clause in the contract was also void as it was part of the void contract. An arbitration clause is a part of the contract and if the contract is void, the arbitration clause is also void. 3. The Court held that the reference to arbitration was also invalid as there was no valid arbitration agreement. A reference to arbitration is valid only if there is a valid arbitration agreement. In the present case, there was no valid arbitration agreement as the contract was void. 4. The Court held that the award was also void as it was made in relation to a void contract. An award is valid only if it is made in relation to a valid contract. In the present case, the contract was void and therefore the award was also void.
Final Decision: The Court allowed the application and declared the award to be null and void and the arbitration agreement to be invalid. However, the Court directed that each party will bear its own costs, both before the single judge and before the division bench.
( 1 ) THIS is a reference under Chap. 5, Rule 2, Rules of the Original Side, by Bachawat J. of an application made to him, praying that a certain award be declared null and void or, alternatively, that the validity and existence of the contract to which the award related, be adjudged and determined and that the award be set aside. The learned Judge thought that the questions raised before him were such that they might be dealt with more advantageously by a larger Bench, particularly in view of the fact that no appeal would lie from his decision on those questions. He thought further that the whole application might be dealt with by the larger Bench, because on the remaining questions too, the parties had agreed to proceed only on the affidavits.
( 2 ) THE facts are simple, but in order to set out intelligibly the questions of law which have arisen out of them, it is necessary to refer first to the relevant provisions of law and their history.
( 3 ) IN 1950, the West Bengal Legislature passed an Act, called the West Bengal Jute (Control of Prices) Act, which was directed as regulating prices of jute and empowered the Government to fix maximum prices by notification. The Act, which was Act 6 of 1950, came into force on the 15th March of that year and maximum prices were fixed by certain notifications. On 14-12-1950, the Governor of West Bengal promulgated an Ordinance, called the Raw Jute (Central Jute Board and Miscellaneous Provisions) Ordinance (17 of 1950), for the better regulation of the jute trade. It was stated in the preamble 'inter alia' that the owners of the jute mills were not being able to secure adequate supplies of jute at the maximum prices fixed under Act 6 of 1950 and it had become expedient to set up a Central Jute Board in West Bengal for ensuring an equitable supply of raw jute to the owners of the different jute-mills. Accordingly, Section 4 of the Ordinance provided for the constitution of a Central Jute Board "as soon as may be" after its commencement. By Section 6, provision was made for the manner in which contracts for the sale and purchase of raw jute between sellers and owners of jute-mills were to be entered into and it was laid down that such contracts would have to be made through the Central Jute Board according to a certain procedure. Section 5 (1) prohibited the sale and purchase of raw jute to and by owners of jute-mills except in pursuance of a contract entered into in the manner provided for in Section 6 and Section 7 (1) imposed a similar prohibition on giving and accepting delivery. Section 5 (2) declared that any contract entered into for the sale or the supply of raw jute with the owner of a jute-mill except in the manner provided in Section 6 would be void and of no effect. Section 7 (3) provided that Sections 5, 6 and 7 would come into effect on and from "the appointed day" which, under Section 2 (1), meant the day specified by the State Government by notification in the Official Gazette as the appointed day for the purpose of the Ordinance. By a notification dated 29-12-1950 and published in an extraordinary issue of the Calcutta Gazette of the same date, 30-12-1950 was specified as the appointed day for the purposes of Sections 5, 6 and 7.
( 4 ) THE Ordinance which consisted of 15 sections was subsequently replaced by an Act, called the Raw Jute (Central Jute Board and Miscellaneous Provisions) Act (6 of 1951) which added one more section. The Act came into force on 21-3-1951. The first fifteen of its sections were virtually verbatim reproductions of the corresponding sections of the Ordinance, and Section 16 newly added, read as follows:"16. The Central Jute Board constituted, any rule made, any notification or license issued, any direction given, any contract entered into, any minimum price fixed, anything done or any section whatsoever taken under the Raw Jute (Central Jute Board and Miscellaneous Provisions) Ordinance, 1950, shall, on the said Ordinance c
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