Commercial contract upheld where force majeure wording, arbitration machinery, and governing law were all held sufficiently certain.

A commercial contract was upheld against challenges of illegality, uncertainty, and arbitration maintainability. The foreign exchange objection failed because the relevant statutory provision did not invalidate an agreement merely because performance might require governmental or Reserve Bank permission, and the resale arrangement was not treated as an unlawful payment mechanism. The uncertainty challenge also failed because "force majeure" and the phrase "if necessary" were capable of being made certain by context and trade usage. A petition under section 20 of the Indian Arbitration Act remained maintainable despite statutory bye-laws, as the Court retained power to decide objections to the arbitration agreement. The contract was also governed by Indian law.

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Issues: (i) Whether the contract was void for illegality under the Foreign Exchange Regulation Act, 1947. (ii) Whether the contract was void for uncertainty because of the reference to the usual force majeure clause and the words if necessary in the amendment letter. (iii) Whether a petition under section 20 of the Indian Arbitration Act was maintainable in view of the statutory bye-laws governing arbitration. (iv) Whether the proper law of the contract was Indian law or the law of British East Africa.

Issue (i): Whether the contract was void for illegality under the Foreign Exchange Regulation Act, 1947.

Analysis: The contract was attacked as offending section 5 of the Foreign Exchange Regulation Act, 1947, because it contemplated payments and possible resale consequences outside India. The statutory answer lay in section 21, which makes agreements not invalid merely because performance requires governmental or Reserve Bank permission, and which further implies a term that the prohibited act shall not be done unless permission is granted. The Court held that the section was intended to prevent a contracting party from using the Act as a shield against performance. The resale mechanism, after notice, was also treated as a resale by the seller for himself under the Sale of Goods Act and not as an agency payment to the buyer.

Conclusion: The contract was not void for illegality.

Issue (ii): Whether the contract was void for uncertainty because of the reference to the usual force majeure clause and the words if necessary in the amendment letter.

Analysis: Section 29 of the Indian Contract Act renders void only agreements whose meaning is not certain or capable of being made certain. The expression force majeure was treated as a commercial term capable of meaning and, when qualified by the word usual, as referable to a definite clause capable of identification by evidence of trade usage or the parties' prior contemplation. The words if necessary in the later letter were read as part of a commercial adjustment under which the sellers yielded part of their discretion to extend the shipment period if circumstances required. The language was not treated as destroying consensus.

Conclusion: The contract was not void for uncertainty.

Issue (iii): Whether a petition under section 20 of the Indian Arbitration Act was maintainable in view of the statutory bye-laws governing arbitration.

Analysis: The Court held that section 20 applied even where the agreement incorporated statutory bye-laws for arbitration. The judicial function under section 20 includes deciding objections to the existence and validity of the arbitration agreement and, once the agreement is filed, the procedural machinery may proceed so far as it is not inconsistent with the bye-laws. The bye-laws did not eliminate the Court's power to file the agreement and make the reference; they only regulated the subsequent arbitral procedure. The dispute was also held to fall within the words arising out of or in relation to contracts.

Conclusion: The petition under section 20 was maintainable.

Issue (iv): Whether the proper law of the contract was Indian law or the law of British East Africa.

Analysis: The parties had chosen the Bombay High Court's jurisdiction and contemplated arbitration in India. Those features were treated as decisive indications of intention, overriding the ordinary presumptions as to the place of performance. The law selected by the contract and its dispute resolution machinery pointed to India as the governing law.

Conclusion: The proper law of the contract was Indian law.

Final Conclusion: The appeal failed because none of the challenges to the contract, the arbitration reference, or the governing law succeeded, and the High Court's order was upheld.

Ratio Decidendi: A commercial contract is not void for uncertainty where the impugned expression is capable of being made certain by trade usage or surrounding context, and statutory arbitration machinery remains workable under section 20 where the Court retains power to decide objections to the arbitration agreement and the contractual bye-laws do not displace that power.

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