Court upholds High Court judgment and Arbitration Tribunal award, finding appellants liable for breach of contract.

The court dismissed the appeal, upholding the judgment of the High Court of Calcutta and the award passed by the Arbitration Tribunal. The court found that the appellants were liable for breach of contract, the contract was not void under Section 56, the arbitrators had jurisdiction, there was no legal misconduct, and the basis for awarding damages was appropriate. The appeal was dismissed with costs.

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Issues Involved:
1. Breach of contract by appellants.
2. Impossibility of performance under Section 56 of the Contract Act.
3. Jurisdiction of arbitrators under the arbitration clause.
4. Allegations of legal misconduct by arbitrators.
5. Basis for awarding damages.

Issue-wise Detailed Analysis:

1. Breach of Contract by Appellants:
The appellants agreed to purchase and the respondents agreed to sell two thousand bales of Saidpur N.C. Cuttings under a contract dated July 7, 1958. The contract stipulated that the buyers (appellants) were to provide the sellers (respondents) with import licences by November 1958, failing which the shipment period would extend to December 1958 with an increased price. If the licence was not provided by December 1958, the contract would be settled at the market price prevailing on January 2, 1959. The appellants failed to provide the licence, leading the respondents to claim damages, which were awarded by the Arbitration Tribunal.

2. Impossibility of Performance under Section 56 of the Contract Act:
The appellants contended that the contract became impossible to perform due to a change in government policy, which they argued was unforeseen and made the contract void under Section 56 of the Contract Act. Section 56 states that a contract becomes void if an act becomes impossible or unlawful after the contract is made. The appellants argued that they had done all they could to obtain the licence, but the refusal by authorities due to a change in policy constituted an unforeseen event making performance impossible. The court, however, found that the appellants were aware of the difficulties in obtaining the licence and had provided for such contingencies in the contract itself. The refusal was due to a personal disqualification (sufficient stock) rather than a force majeure event. Thus, the contract was not deemed void under Section 56.

3. Jurisdiction of Arbitrators under the Arbitration Clause:
The appellants argued that the arbitration clause perished along with the contract, thus the arbitrators had no jurisdiction. The court held that even if the contract was frustrated, the arbitration clause would survive for resolving disputes arising under or in connection with the contract. The arbitration clause was broad enough to include disputes about whether the contract was frustrated or not. Therefore, the arbitrators had jurisdiction to adjudicate the dispute.

4. Allegations of Legal Misconduct by Arbitrators:
The appellants alleged legal misconduct by the arbitrators. However, both the Single Judge and the Division Bench found no evidence of such misconduct. The appellants failed to prove any legal misconduct, and this contention was ultimately not pressed by their counsel.

5. Basis for Awarding Damages:
The appellants contended that the arbitrators awarded damages based on the market rate of Rs. 51 per maund instead of the export price of Rs. 65 fixed by the Government of Pakistan, arguing that this was against public policy. The court dismissed this argument, stating that the Government of Pakistan's policies do not dictate public or economic policy in India. The arbitrators were justified in using the market rate in Calcutta on January 2, 1959, to determine the damages.

Conclusion:
The court dismissed the appeal, upholding the judgment of the High Court of Calcutta and the award passed by the Arbitration Tribunal. The court found that the appellants were liable for breach of contract, the contract was not void under Section 56, the arbitrators had jurisdiction, there was no legal misconduct, and the basis for awarding damages was appropriate. The appeal was dismissed with costs.

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