Judgement

SHAH, J. : Messrs. Sunder Lal and Son -hereinafter called the appellants - are members of the East India Jute and Hessian Exchange Ltd., an Association recognised under the provisions of the Forward Contracts (Regulation) Act, 1952. The appellants applied to the High Court of Judicature at Calcutta on its original side under S. 33 of the Indian Arbitration Act 10 of 1940 for an order, inter alia, declaring that "there exists a valid arbitration agreement contained in Contract No. 750 dated September 18, 1960 between the petitioners and the respondents. The appellants claimed that they entered into a contract with the respondents on September 16, 1960, for the purchase of 6,00,000 bags of B Twill at the rate of Rs. 132.50nP. per 100 bags, "on their own account" in Transferable Specific Delivery. Form prescribed under the bye-laws of the Association and on terms and conditions set out therein. The respondents denied the existence of the contract and also, its validity. The High Court dismissed the application holding that the contract was invalid in that it did not comply with the requirements of S. 15, sub-s. (4) of the Forward Contracts (Regulation) Act, 1952. By special leave, the appellants have appealed to this Court.

2. The relevant recitals in the notes which, it was claimed, constituted the contract between the parties may first be set out :

"7A, Clive Row

Calcutta-1

Sunder Lal and Son

Contract No. 750

Messrs. Bharat Handicrafts (Private,) Ltd.

Dear Sirs,

We have, subject to the terms and conditions hereinafter referred to this day sold to Messrs. Sunderlal and Son by your order, and on your account :

* * * *

Your faithfully,

Sunderlal & Son"

"Calcutta,

16th September, l960

Messrs. Sunderlal & Son.

No. 750

Dear Sirs,

We have, subject to the terms and conditions hereinafter referred to "this day bought from Bharat Handicrafts (Private) Ltd., by your order, and on your account:

* * * *

Yours faithfully,

Sd. Sunderlal & Son."

3. Validity of the contract was challenged by the respondents on two grounds- (1) that the appellants were not at the relevant time members of the Association, and (2) that the requirements of S. 15 (4) of the Forward Contracts (Regulation) Act were not complied with and the contract was on that account invalid. The High Court decided both the grounds in favour of the respondents.

4. The appellants averred in their petition that they were at all material times members of the Association. Baburam Saraf -principal officer of the Company - in his affidavit in reply merely stated that he did not admit that averment. The learned Judge observed that he was "unable to hold that the appellants had proved that the appellants were members of the Association at the time of the formation of the contract". It is unfortunate that the attention of the learned Judge was not invited to the admission made by the respondents in paragraph 6 of the plaint filed by them in the City Civil Court, Calcutta, for a declaration that there was in fact no contract between them and the appellants bearing No. 750 dated September 16, 1960, in which the respondents had averred that they had discovered that the appellants "at all material times were the members of the said East India Jute and Hessian Exchange Ltd." In view of this evidence counsel for the respondents did not seek to support the decision of the High Court on the first ground, and nothing more need be said in that behalf.

5. In dealing with the second ground, it is necessary to summarise the relevant provisions of the Forward Contracts (Regulation) Act, 1952. The Act was enacted to provide for the regulation of certain matters relating to forward contracts, the prohibition of options in goods and for matters connected therewith. By Ch. II It the Central Government is given authority to establish and constitute a Forward Markets Commission with certain functions and powers. By Ch. III provision is made for granting recognition to associations, withdrawal of recognition and other inc