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High Court Of Calcutta
SABYASACHI MUKHERJI
HIRALAL PANNALALL - Appellant
Versus
DALHOUSIE JUTE CO.LTD. - Respondent
Award 70 Of 1976
Decided On : 04/19/1977
ARBITRATION - AWARD - CHALLENGE - CONTRACT - ILLEGALITY - FORWARD CONTRACTS (REGULATION) ACT, 1952 - SECTION 15 (3A) - ARBITRATION ACT, 1940 - SECTION 30, 33 - RES JUDICATA - ESTOPPEL - JURISDICTION OF ARBITRATORS.
Fact of the Case:
A contract for the sale and purchase of jute was entered into between the petitioner and the respondent. The contract was not in the prescribed form and was not registered with the East India Jute and Hessian Exchange Ltd., as required by the Forward Contracts (Regulation) Act, 1952 and the Bye-laws of the Exchange. The petitioner instituted a suit for a declaration that the contract was void and illegal. The respondent filed an application for rejection of the plaint and/or permanent stay of the suit. The suit was dismissed by the trial court on the ground that it was barred under Section 32 of the Arbitration Act, 1940. The petitioner then filed an application under Sections 30 and 33 of the Arbitration Act, 1940 to set aside the award passed by the Tribunal of Arbitration.
Finding of the Court:
The court held that the contract in question was illegal and void under Section 15 (3a) of the Forward Contracts (Regulation) Act, 1952, as it was not in the prescribed form and was not registered with the East India Jute and Hessian Exchange Ltd. The court further held that the award passed by the Tribunal of Arbitration was without jurisdiction, as the contract on which it was based was void. The court also held that the petitioner was not estopped from challenging the award, as there was no evidence that the parties had entered into a fresh agreement to refer the disputes to arbitration.
Issues: 1. Whether the contract in question was illegal and void under Section 15 (3a) of the Forward Contracts (Regulation) Act, 1952? 2. Whether the award passed by the Tribunal of Arbitration was without jurisdiction? 3. Whether the petitioner was estopped from challenging the award?
Ratio Decidendi: 1. The court held that the contract in question was illegal and void under Section 15 (3a) of the Forward Contracts (Regulation) Act, 1952, as it was not in the prescribed form and was not registered with the East India Jute and Hessian Exchange Ltd. The court relied on the provisions of the Act and the Bye-laws of the Exchange, which made it mandatory for all transferable specific delivery contracts in raw jute to be in the prescribed form and to be registered with the Exchange. 2. The court held that the award passed by the Tribunal of Arbitration was without jurisdiction, as the contract on which it was based was void. The court relied on the decision of the Supreme Court in Waverly Jute Mills v. Raymon and Co., which held that if a contract is illegal and void, an arbitration clause which is one of the terms thereof, must also perish along with it and a dispute relating to the validity of the contract is in such cases for the Court and not for the arbitrators. 3. The court held that the petitioner was not estopped from challenging the award, as there was no evidence that the parties had entered into a fresh agreement to refer the disputes to arbitration. The court relied on the decision of the Special Bench of this Court in A. J. Mills Co. Ltd. v. J. and G. Brokers Ltd., which held that there could be no estoppel against a statute.
Final Decision: The court set aside the award passed by the Tribunal of Arbitration.
( 1 ) AWARD No. 118 of 1969 made by the Tribunal of Arbitration, Bengal Chamber of Commerce and Industry on 26th of Aug. 1969 is impugned in this application under Sections 30 and 33 of the Arbitration Act, 1940. Hiralal Pannalall is a firm registered under the Indian Partnership Act and is the petitioner in this application. On the 1st of July, 1968 the petitioner agreed to sell and the respondent Dalhousie Jute Company Ltd. agreed to buy 251 bales of 180 Kilograms each, of Dhubri Jute consisting of 76 bales of Mill Firsts quality at the rate of Rs. 441/- per bale and 175 bales of Mill Lights quality at the rate of Rs. 4017-per bale for shipment and/or despatch during July and/or August and/or September 1968. The contract was entered through the broker Messrs. Prakash Trading Company. The said contract was by a letter to the following effect:
Dear Sirs,
Letter contract No. L/101 E of 1-7-1968.
We have this day SOLD by your order and on your account to Messrs. Dalhousie Jute Co. Ltd. , Calcutta the following :
Crop : 1968-69
Quantity : 251 Bales
Agency : Dhubri ( ASSAM )
Marks : H. P.
Assortment and Price : MILL firsts 76 B/s. @ Rs. 441 per bale of 180 Kgs. Mill Lights 175 E/s. @ Rs. 401/- per bale of 180 Kgs. Shipment : July &/or August &/or september 1968 Ex: Dhubri
Delivery to : Dalhousie Jute Mill
Payment : Cash against documents
Arbitration : The Bengal Chamber of Commerce & Industry
Reweighment : Calcutta Licensed Measurers.
Insurance : To be cared for by sellers through Buyer's agency with
All other terms and conditions as per T. S. D. Contract. Brokerage @ 1%
Yours faithfully,
for PRAKASH TRADING COMPANY
Sd . A. C. Bhuna , partner.
According to the petitioner the said contract is a purported contract. The respondent extended the due date for delivery under the said contract and the last of such extension was granted by the respondent, by the letter dated 2nd of January, 1969, upto 31st of Jan. , 1969. The petitioner contended that the respondent had failed and neglected to perform its part of the contract and had refused to make payment. The respondent on the other hand contended that the petitioner had committed breach of the contract by refusing to deliver the goods and therefore, the respondent cancelled the contract and claimed two several sums of Rs. 8,664 and Rs. 16,065/-by way of difference between the contract rate and the market rate. As the petitioner failed to make payment in respect thereof the respondent referred the claim for a sum of Rs. 24,729/- to the Tribunal of Arbitration, Bengal Chamber of Commerce and Industry. On the 26th of Aug. 1969 the Tribunal of Arbitration of the Bengal Chamber of Commerce and Industry gave an award in favour of the respondent. The petitioner states that the petitioner received the notice of the making of the said award on the 28th of Aug. , 1969. On that date before the receipt of the notice of the making of the award the petitioner instituted a suit being Suit No. 2323 of 1969 against the respondent, inter alia, for a declaration that the purported contract between the parties was dishonest, void, illegal invalid and unenforceable. On the 26th of November, 1969 the respondent made an application in the said suit praying, inter alia, that the plaint be rejected and/or for permanent stay of the suit. The suit application came up for hearing before Mr. Justice S. K. Roychoudhury and by an order dated 14th of November, 1975 the learned Judge directed as follows :"therefore in the undisputed facts, I am satisfied that the present suit is barred under Section 32 of the Arbitration Act, 1940 and as such is not maintainable. I am making it, clear that this decision of mine will not in any way affect the right, if any, of the respondent to challenge the award according to law if he has got any right to do so. In the result I am making the following order : There will be an order in terms of prayer (s) directing the plaint in thi
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