Contract held valid by Supreme Court for arbitration clause. Appeal dismissed.

The Supreme Court upheld the decision of the Calcutta High Court, determining that the contract in question was a non-transferable specific delivery contract, not prohibited by the government notification. Therefore, the arbitration clause within the contract was deemed valid, allowing the arbitration proceedings to proceed. As a result, the appeal was dismissed with costs.

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Issues Involved:
1. Validity of the contract under the Forward Contracts (Regulation) Act, 1952.
2. Nature of the contract: whether it is a transferable or non-transferable specific delivery contract.
3. Legality of the arbitration clause in the contract.

Detailed Analysis:

1. Validity of the contract under the Forward Contracts (Regulation) Act, 1952:
The appellant argued that the contract was in violation of the Forward Contracts (Regulation) Act, 1952, specifically under a government notification issued on March 29, 1958, which declared certain forward contracts illegal. The appellant contended that the contract was a forward contract and thus prohibited by the notification, rendering it illegal and void. The court examined the definitions provided in the Act, including "ready delivery contract," "forward contract," "specific delivery contract," "non-transferable specific delivery contract," and "transferable specific delivery contract." The court concluded that the contract in question was not prohibited by the notification as it fell under the category of a non-transferable specific delivery contract, which is exempt from the operation of the Act under Section 18(1).

2. Nature of the contract: whether it is a transferable or non-transferable specific delivery contract:
The core issue was whether the contract was a transferable or non-transferable specific delivery contract. The court emphasized that the determination of this nature depends on a reasonable construction of the contract. The absence of a specific clause prohibiting transfer was not deemed conclusive. The court noted that the contract contained provisions that implied non-transferability, such as the prohibition of subletting or assigning the contract without written permission from the purchaser (Condition 10 read with para 3(b) of the "Conditions of Contract contained in Form D.G.S. & D. 68"). Additionally, the contract's terms indicated that the jute bags were intended for packing foodgrains arriving in bulk, and specific instructions were given regarding inspection and shipment. Considering these factors, the court concluded that the contract was a non-transferable specific delivery contract.

3. Legality of the arbitration clause in the contract:
The appellant contended that since the contract was illegal, the arbitration clause contained therein was also void. However, since the court determined that the contract was a non-transferable specific delivery contract and not prohibited by the notification, the arbitration clause remained valid. The court held that the arbitration proceedings could continue as the contract itself was not illegal.

Conclusion:
The Supreme Court upheld the decision of the Calcutta High Court, concluding that the contract was a non-transferable specific delivery contract and was not rendered illegal by the government notification. Consequently, the arbitration clause was valid, and the appeal was dismissed with costs.

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