TaxTMI 
TaxTMI 
TaxTMI 
1961 (2) TMI 75
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....t, are as follows : "We confirm having sold to you African raw cotton on the following terms and conditions subject to the usual Force Majeure Clause : Description : ARBP 52 F.A.Q. Crop/58. Quality : 500 (Five Hundred) bales. Price : at Rs. 1,401 nett per candy CIF Bombay. Payment : Against shipping documents in Bombay. Packing : 420 lbs. approximately per bale. Shipment : February/March 1958. Remarks : The terms and conditions on the reverse form part of the contract. This contract is subject to the Bye-laws of East India Cotton Association, Ltd., Bombay, other than the bye-law 35 of arbitration on Quality in case of East African cotton. * * ....
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....and you will pay as the carry over charges for the same. The interest payable under such carry over charges will be at the rate prevalent in Mombasa. The other terms and conditions remain unaltered..." 4. The contract was not performed. The sellers wrote as many as five letters between March 1, 1958, and May 26, 1958, before they received a reply from the buyers dated June 3, 1958. By that time, the sellers had carried forward the contract, and also invoked their right of re-sale after giving notice, and claimed Rs. 34,103.15 nP. for which a debit note had been issued. This note was returned by the buyers with a letter of June 3, 1958, stating that the contract was "void and/or illegal", that they were not obliged to perform it, that there was no right of any sale on their account and/or on their behalf, and that the alleged sale was not binding upon them. [Ex."D" (Colly) No. 6.] 5. The sellers then invoked the arbitration clause of the agreement and Bye-law 38-A of the Bye-laws of the East India Cotton Association, Ltd., Bombay and moved the Bombay High Court, on the Original Side, under s. 20 of the Indian Arbitration Act, requesting that the agreement be filed in Court and t....
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.... in relation to a contract as contemplated by Bye-law 38-A; that in showing cause against the petition under s. 20, the buyers had averred that the contract was illegal and void; and that such a question could be decided by the Court before making the reference. The learned Judges pointed out that a petition under ss. 32 and 33 of the Indian Arbitration Act questioning the existence or validity of an arbitration agreement was not to be expected from one making a claim under a contract, that the plea was always likely to be raised by one resisting the petition, and that when such a plea was raised, the Court must decide it, even though the proceedings be under s. 20 of the Act for making a reference. The case was, therefore, remanded with the following direction : "As the respondents have challenged the validity of this agreement, the Court will have to decide this question before passing further orders in the matter. Accordingly we set aside the order passed by Mr. Justice K. T. Desai, dismissing the petition filed by the petitioners, and remand the matter to the trial court for deciding the objections, raised by the respondent under sub-section (3) of section 20 of the Act, to t....
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.... of the words "if necessary" in the letter of November 30, 1957. 8. The sellers appealed against the dismissal of the petition, and the buyers cross-objected against the adverse findings and the disallowance of costs. The appeal was heard by Tarkunde and Chitale, JJ., and by separate but concurring judgments, the appeal was allowed and the cross-objection dismissed, and the buyers were ordered to pay costs throughout. The Divisional Bench agreed with K. T. Desai, J. on all the points decided by him against the buyers. They left open the question whether "legal proceedings" in s. 21(3) of the Foreign Exchange Regulation Act were wide enough to include an arbitration for the decision of the arbitrators to be appointed, and addressing themselves to the question raised about s. 20, held that the petition was maintainable. They were of opinion that the Court could order the arbitration agreement to be filed and also to refer the dispute to arbitrators to be chosen in accordance with Bye-law 38-A, though they left that if the latter action could not be taken, at least the first could be, because the procedural part could not destroy the power conferred to file the agreement. 9. In this....
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....ge Regulation Act may be read. It provides :- "21. Contracts in evasion of this Act. - (1) No person shall enter into any contract or agreement which would directly or indirectly evade or avoid in any way the operation of any provision of this Act or of any rule, direction or order made thereunder. (2) Any provision of, or having effect under, this Act that a thing shall not be done without the permission of the Central Government or the Reserve Bank, shall not render invalid any agreement by any person to do that thing, if it is a term of the agreement that that thing shall not be done unless permission is granted by the Central Government or the Reserve Bank, as the case may be; and it shall be an implied term of every contract governed by the law of any part of British India that anything agreed to be done by any term of that contract which is prohibited to be done by or under any of the provisions of this Act except with the permission of the Central Government or the Reserve Bank, shall not be done unless such permission is granted. (3) Neither the provisions of this Act nor any term (whether expressed or implied) contained in any contract that anything for which the per....
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....parties by the second part of sub-s. (2), and by sub-s. (3), the responsibility of obtaining the permission of the Reserve Bank before enforcing judgment, decree or order of Court, is transferred to the decree-holder. The section is perfectly plain, though perhaps it might have been worded better for which a model existed in England. 15. It is contended that s. 21 uses the word "permission", while s. 5 speaks of an exemption, and that ss. 21(2) and 2(3) do not cover the prohibition in s. 5. The Foreign Exchange Regulation Act, no doubt, uses diverse words like, "authorise", "exempt" and "permission" in different parts. The word "exempt" shows that a person is put beyond the application of law, while "permission" shows that he is granted leave to act in a particular way. But the word "permission" is a word of wide import. "Permission" in this section means only leave to do some act which but for the leave would be illegal. In this sense, exemption is just one way of giving leave. If one went only by the word and searched for those sections where the word "permission" is expressly used, ss. 21(2) and (3) are likely to prove a dead letter. This could not have been intended, and the v....
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....s, the meaning of which is not certain, or capable of being made certain, are void," and emphasise the words "capable of being made certain", and contend that the clause was capable of being made certain, and ex facie, the agreement was not void. 19. McCardie J. in Lebeaupin v. Crispin ([1920] 2 K.B. 714), has given an account of what is meant by "force majeure" with reference to its history. The expression "force majeure" is not a mere French version of the Latin expression "vis major". It is undoubtedly a term of wider import. Difficulties have arisen in the past as to what could legitimately be included in "force majeure". Judges have agreed that strikes, breakdown of machinery, which, though normally not included in "vis major" are included in "force majeure". An analysis of rulings on the subject into which it is not necessary in this case to go, shows that where reference is made to "force majeure", the intention is to save the performing party from the consequences of anything over which he has no control. This is the widest meaning that can be given to "force majeure", and even if this be the meaning, it is obvious that the condition about "force majeure" in the agreemen....
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....arter-party in order to define loading obligation." 22. The addition of the word "usual" refers to something which is invariably to be found in contracts of a particular type. Commercial documents are sometimes expressed in language which does not, on its face, fear a clear meaning. The effort of Courts is to give a meaning, if possible. This was laid down by the House of Lords in Hillas & Co. v. Arcos Ltd. [[1932] All E.R. 494], and the observations of Lord Wright have become classic, and have been quoted with approval both by the Judicial Committee and the House of Lords ever since. The latest case of the House of Lords is Adamastos Shipping Co. Ltd. v. Anglo-Saxon Petroleum Co. Ltd. [[1959] A.C. 133, 153]. There, the clause was "This bill of lading", whereas the document to which it referred was a charter-party. Viscount Simonds summarised all the rules applicable to construction of commercial documents, and laid down that effort should always be made to construe commercial agreements broadly and one must not be astute to find defects in them, or reject them as meaningless. 23. Applying these tests to the present case and in the light of the provisions of s. 29 of the Indian C....
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....nd the buyers confirmed it, it cannot be said that there was no consensus ad idem, or that the whole agreement is void for uncertainty. 26. We shall not consider the next argument, which was very earnestly urged before us. It is that s. 20 of the Arbitration Act cannot be made applicable to this case at all. We have already quoted extracts from the agreement which include the clause by which the Bye-laws of the East India Cotton Association Ltd., Bombay, were applied to this contract, except Bye-law 35, which deals with arbitration on quality in case of East African cotton. Bye-law 1(B) relates to East African cotton, and it says that Bye-laws 1 to 46 inclusive (with certain exceptions) shall apply to contracts in respect of East African cotton. It was conceded before the High Court and also before us that the Bye-laws are statutory. The buyers were members of the Association but not the sellers; but the Bye-laws on arbitration, with which we are concerned, include arbitrations between a member and a non-member. We are concerned directly with Bye-law 38-A. Bye-law 38-A in its opening portion, reads : "All unpaid claims, whether admitted or not, and all disputes (other than those....
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....pplicants, requiring them to show cause within the time specified in the notice why the agreement should not be filed. (4) Where no sufficient cause is shown, the Court shall order the agreement to be filed and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court. (5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by, the other provisions of this Act so far as they can be made applicable." 29. The sellers rely upon clause (5), which enjoins the application of the provisions of the Arbitration Act, so far as they can be made applicable. Reference is then made to provisions of Chap. II and the Schedule of the Act laying down the powers of the Court, and they are contrasted with the provisions of the Bye-laws to show that if the latter prevail, no residuum of power is left to the Court, and that after filing the agreement, the Court must abdicate in favour of the Chairman and the Act, in terms, ceases to apply. Reference is also made to s. 47 of the Arbitration Act, which provides : "Subj....
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....20 is not applicable. This argument overlooks the fact that this is a statutory arbitration governed by its own rules, and that the powers and duties of the Court in sub-s. (4) of s. 20 are of two distinct kinds. The first is the judicial function to consider whether the arbitration agreement should be filed in Court or not. That may involve dealing with objections to the existence and validity of the agreement itself. Once that is done, and the Court has decided that the agreement must be filed, the first part of its powers and duties is over. It is significant that an appeal under s. 39 lies only against the decision on this part of sub-s. (4). Then follows a ministerial act of reference to arbitrator or arbitrators appointed by the parties. That also was perfectly possible in this case, if the parties appointed the arbitrator or arbitrators. If the parties do not agree, the Court may be required to make a decision as to who should be selected as an arbitrator, and that may be a function either judicial, or procedural, or even ministerial; but it is unnecessary to decide which it is. In the present case, the parties by their agreement have placed the power of selecting an arbitra....