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PETITIONER: FIRM GIRDHAR MAL KAPUR CHAND

       Vs.

RESPONDENT: FIRM DEV RAJ MADAN GOPAL

DATE OF JUDGMENT: 11/02/1963

BENCH: GUPTA, K.C. DAS BENCH: GUPTA, K.C. DAS GAJENDRAGADKAR, P.B. WANCHOO, K.N. HIDAYATULLAH, M. SHAH, J.C.

CITATION:  1963 AIR 1587            1964 SCR  (1) 995

ACT: Partnership-Partnership   registered  before  partition   of India-Suit by firm, if barred-Indian Partnership Act, (IX of 1932), s. 69 (2). Forward  Transaction-Such transaction in cotton  and  edible oil   seeds,   if  prohibited  by   law-Essential   Supplies (Temporary  Powers) Act, 1946 (XXIV of 1946), ss. 2,  3,  5- Cotton Options   (Forward Contracts and Prohibition)  Order, 1943-Oil  Seeds (Forward Contracts and  Prohibition)  Order, 1943-Defence of India Rules, r. 81.

HEADNOTE:     The  respondent, a partnership firm, brought a suit  for recovery of the amount with interest due to it on account of the purchases and sales of cotton-seeds and bales of  cotton on behalf of the appellant firm.  In contesting the suit the appellant while admitting trade relations with the plaintiff firm disputed the correctness of the accounts.  It was urged that the transactions were wagering contracts and so void in law, that they being forward transactions were prohibited by law  and  that the plaintiff firm which  was  registered  at Lahore  before  the  partition  of  India  ceased  to  be  a registered  firm  thereafter  for  purposes  of  the  Indian Partnership Act.      The  trial  court  accepted  the  plaintiffs  story  as regards the transactions but held as regards the  accounting that  the plaintiffs were bound to give certain  credits  to the  defendants and the price of 2300 bags of  cotton  seeds and 50 bales of ’cotton on the final sale was directed to be credited  in favour of the defendant at the market  rate  on May  28, 1947.  Other directions as regards calculations  of incidental  charges  and  interest  were  also  given.   The learned  judge  passed  a final decree  in  favour  of  tile plaintiff with appropriate costs.  Against this decree  both the respondent and the appellant appealed to the High Court. The High Court dismissed  the appellants appeal and  allowed the respondent’s appeal increasing the     decretal  amount. Two  points  of laws were raised by the  appellant  in  this Court, namely,

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996 (i)  the requirement of s. 69 (2) of the Indian  Partnership Act  was  not  satisfied and (ii) the  transaction  being  a forward  transaction  in  cotton and edible  oil  seeds  was illegal and thus prohibited by law.     Held, that once there was registration under the  Indian Partnership  Act,  it continues to be  effective  and  valid under  that Act in the area to which it applied  before  the partition  of  India  so long as it  was  not  cancelled  in accordance with law.        Bombay Cotton Export & Import Go. v. Bharat Sarvodaya Mill Co., r. L. R. Bom. (1958) 1351, approved.     Held,  further,  that the forward  contracts  in  cotton seeds were not prohibited by law.  A cotton and cotton seeds are  not included in the definition of essential  commodity, any previous order with respect to them will be inconsistent with  the  new order and cannot continue under s. 5  of  the Essential Supplies Act, 1946.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 240 of 1961.    Appeal  from the judgment and decree dated  November  21, 1958,  of  the Punjab High Court at  Chandigarh  in  Regular First Appeal No. 266 of 1951.    C.     B. Agarwala and A. N. Goyal, for the appellant.    A.V.  Viswanatha Sastri, O. P. Malhotra and Mohan  Behari Lal, for the respondent.    1963.   February  11.  The  judgment  of  the  Court  was delivered by DAS GUPTA, J.-The respondent a partnership firm carrying  on business  as  commission  agents in the town  of  Khanna  in Punjab brought the suit out of which this appeal has  arisen against  the appellant firm for recovery of Rs.  17,615/10/- claimed  to  be due to it on account-of  the  purchases  and sales  made  on  behalf  of  the  appellant  firm.   Between December 1946  997 and  February  3,  1947, 7600 bags  of  cotton  seeds  were, according  to  the  plaint purchased by  the  respondent  on behalf of the appellant firm at various rates, out of  which 5300 bags are said to have been sold by it on behalf of  the appellant  firm  between the dates of January  2,  1947  and February  3, 1947.  Thus, on February 3, 1947, 2300 bags  of cotton-seeds were left on its hands. ID May 1947 the  market for  cotton  seeds was falling and so  the  respondent  firm asked  the  appellant either to remove the goods  within  48 hours on payment of the full price or pay something more  by way  of  margin and informed them that otherwise  the  goods would be sold As no reply was received these 2300 bags  were sold on May 24some at the rate of Rs. 11/11/16 per maund and the rest at the rate of, Rs. 11/12/- per maund.  Apart  from these  transactions  in cotton-seeds  the  respondent  firm, according to the plaint, also purchased 100 bales of  cotton of which 50 bales were also sold on behalf of the’ appellant firm,  so that after February 14, 1947, 50 bales  of  cotton purchased  by  the  appellant  firm  were  lying  with   the respondent.  These 50 bales were also sold by the respondent on May 24, 1947 at the rate of Rs. 27/12/- per maund, as the appellant  took  no action when the  respondent  asked  them either  to take away these bales on payment of the price  or to put in more money by way of margin.  On the accounts,  it was said, Rs. 15,556/10/- remained due to the plaintiff firm from  the  defendant  firm.  The suit was  brought  for  the

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recovery of this amount together with interest.     In  contesting  the suit the appellant  while  admitting trade  relations  with  the  plaintiff  firm  disputed   the correctness of the accounts.  The plaintiff’s case about the purchase of cotton-seeds and cotton bales and the fact  that 2300  bags of cotton seeds and 50 bales of cotton  purchased by it remained with the plaintiff firm was also denied. - It Was   also  urged  that  the  transactions   were   wagering contracts, and so Void 998 in law, that they being forward transactions were prohibited by  law  and  further  that the plaintiff  firm  was  not  a registered  firm  under  the  Indian  Partnership  Act,  and therefore the suit did not lie.      The Trial Court rejected all the contentions in law and accepted  the plaintiff’s story as regards the  transactions but  held as regards the accounting, on a  consideration  of the evidence, that the plaintiffs were bound to give  credit to the defendants for the sale of 2300 bags of  cotton-seeds at  the  contract rate of Rs. 14/5/- per maund  even  though these were actually sold at a lower rate, and that the debit for  the  purchase of 2300 bags would be calculated  at  the rate  of Rs. 13/8/- and Rs. 13/10/- per maund, the rates  at which  they  were actually purchased even though  they  were agreed  to be purchased at the rate of Rs. 14/5/- per  maund on February 3, 1947.  The price of 2300 bags of cotton seeds and 50 bales of cotton on the final sale was directed to  be credited  in favour of the defendant at the market  rate  on May  28, 1947.  Other directions as regards calculations  of incidental charges and interest were also given.  The  Court appointed  an  Advocate as Commissioner for-the  purpose  of calculating  the  amount due after ascertaining  the  market price.   After consideration of the report submitted by  the Commissioner,  the  learned judge passed a final  decree  in favour of the plaintiff for s. 9,749/3/9 with  proportionate costs.     Against this decree both the plaintiff and the defendant appealed  to the High Court of Punjab.  In  the  defendant’s appeal  it  was  contended that the suit  was  not  properly entertained  as the plaintiff firm was not registered  under the  Indian Partnership Act, 1932.  It was also  urged  that the transactions were illegal being forward transactions  in cotton  and  edible oil-seeds and thus  prohibited  by  law. Both these contentions were rejected by the High Court.  Two other minor points which were taken before  999 the  High  Court  and  were rejected by  it  have  not  been repeated before us.     In  the plaintiff’s appeal, it was urged that the  Trial Court had erred in its directions as regards the debits  and credits for 2300 bags of cotton seeds for the purchases  and sales  on  February 23, 1947.  The High Court  accepted  the plaintiff’s  contention in part and held that the  plaintiff was entitled to an extra amount of Rs. 3,244,/12/-.  In  the result, the High Court dismissed the defendant’s appeal  but allowed  the  plaintiff’s  appeal to  the  extent  that  the decretal amount was increased by Rs. 3,244/12/- thus  making the decree one for Rs. 12,694/.     On  the strength of the certificate granted by the  High Court   under  Art.  133(1)(a)  of  the  Constitution;   the defendant firm has preferred the present appeal.     The  appellant’s first contention is, as in  the  courts below, that the suit should have been dismissed  altogether. Two grounds of law are urged in support of this.  The  first is  based  on  the requirement of S.  69(2)  of  the  Indian

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Partnership Act.  It is no longer disputed that the firm was registered by the Registrar of Firms, Punjab, on August  16, 1946, under the Indian Partnership Act, 1932, as it stood on that  date.  That was an order made before the partition  of India  took place.  The entire Province of Punjab  was  then within British India; there was one Registrar for the entire Province  and it is not disputed that registration  made  by the  Registrar whose office was at Lahore was up  to  August 14,  1947 good registration for the whole of what  was  then British  India.  The appellant contends that as soon as  the partition of India took place that registration caused to be effective  for  that  part of the old  British  India  which became  the  Dominion  of alia and it  so  continued  to  be ineffective for this 1000 entire  area also after the Constitution of India came  into force.   It  is  argued that the Registrar  of  the  Punjab, within his office at Lahore, ceased to be a Registrar  under the Indian Act, when on the partition of India    Lahore became part of a foreign country.  So, it    is  said,   the registration became the registration of a  foreign   country and  thus  ceased to be a registration for  India.   In  our opinion,  this argument is wholly unsound.  Once  there  was registration   under   the  Indian  Partnership   Act   that registration  in  our  opinion,  continues  to  operate   as registration under that Act and continues to be effective-in other  words,  valid  registration  in the  eye  of  law  as administered  in  India so long as the registration  is  not cancelled in accordance with law.    In coming to this conclusion, we have not overlooked  the fact that difficulties may in certain circumstances arise as regards the recording of alterations in the firm name or its principal  place of business (s. 60); noting of closing  and opening  of branches (s. 61); noting of changes in the  name and  address  of partners (s. 62); recording of  changes  on dissolution  of a firm and recording withdrawal of  a  minor from  the  firm (s. 63); rectification of  mistakes  in  the register  (s.  64); and amendment of register  by  order  of court  (s. 65), by the fact of the Register, on whom  duties are  laid  by these sections in connection  with  the  above matters,  being now at Lahore, that is, outside  India.   We have not thought it necessary however to, investigate in the present case as to what arrangements have been made to  cope with  these difficulties.  For, it is clear to us  that  the presence  of such difficulties cannot in any way change  the legal position that registration that was good  registration under the Indian Act does not cease to be good  registration under  the  same  Act. so long as it  is  not  cancelled  in accordance  with  law.  This view of law was  taken  by  the Bombay  1001 High  Court in Bombay Cotton Export & Import Co., v.  Bharat Savodaya  Mill  Co., (1), and is, in our opinion,  the  only possible view.    It is unnecessary for us to consider, for the purpose  of the  present  appeal, whether such a registration  would  be effective registration, in an area which was outside British India,  at  the  time of the registration; and  on  that  we express no opinion.    For   his   next  legal  contention,   viz.,   that   the transactions  were prohibited by law, Mr. Aggarwala  argued, first  that  forward contracts in cotton as also  oil  seeds were prohibited by the orders made in 1943 under the Defence of India Rules and these prohibitions remained effective  up to  the date of the contracts in the present case by  virtue

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of  s. 5 of the Essential Supplies (Temporary  Powers)  Act, 1946 (Act XXIV or 1946).  That these were forward  contracts is  not disputed.  It does appear that forward contracts  in cotton   and  in  oil-seeds  including  cotton  seeds   were prohibited  by  the Cotton Options  (Forward  contracts  and prohibition)  Order,  1943  of  May  1,  1943  and  oilseeds (Forward  Contracts and Prohibition) Order, 1943 of May  29, 1943 respectively.  Tile Defence of India Rules under  which these  orders  were made had however ceased to be  in  force long  before the date of the contracts in the present  case. Unless  therefore the prohibition orders were kept alive  by some  other provision of law the present transactions  would not be hit by the prohibitory orders.  To show that they had been  kept  alive,  Mr.  Aggarwala relied on  s.  5  of  the Essential  Supplies (Temporary Powers) Ordinance,  1946  and the  same  section  of  the  Essential  Supplies  (Temporary Powers) Act, 1946 by which it was replaced.  The section  is in these words               "5.  Continuance  in force of  existing  Until               other provisions are made under this               (1)   I.L.R. Bom. (1952) 1351.               1002               Ordinance any order, whether notified or  not,               made by whatever authority under rule 80-B, or               sub-rule (2) or sub-rule (3) of rule 81 of the               Defence  or  India Rules, in  respect  of  any               matter  specified in s. 3, which was in  force               immediately  before  the commencement  of  the                             Ordinance shall, notwithstanding the e xpiration               of the said rules, continue in force as far as               Consistent  with this Ordinance and be  deemed               to  be  an  order made under  s.  3;  and  all               appointments made, licences or permits granted               and directions issued under any such order and               in force immediately before such  commencement               shall likewise continue in force and be deemed               to be made, granted or issued in pursuance  of               this Ordinance."     The   Act   continued  the  same   phraseology.    These provisions of the Ordinance or the’ Act, are however clearly of no assistance to Mr. Aggarwala’s arguments.  It is  clear that  before the order made under rule 81 of the Defence  of India   Rules   continues  in  force   notwithstanding   the expiration  of the Defence of India Rules, it  is  necessary that the order must be in respect of any matter specified in s.  3.  Section 3 empowers the Central  Government  to  make various  orders  but  only  in  connection  with   essential commodities.   No  order can therefore be considered  to  be "’in  respect of any matter specified in s. 3" unless it  is in respect of an essential commodity.    "Essential  Commodity" is defined in s. 2 to mean any  of the following classess of commodities: (i) foodstuffs,  (ii) cotton and woollen textiles, (iii) paper, (iv) petroleum and petroleum   products,  (V)  spare  parts   of   mechanically propelled  vehicles,  (vi) coal, (vii) iron  and  steel  and (viii)   mica,   "Foodstuffs"  was  also  defined   thus   : "’Foodstuffs"  shall  include  edible  oilseeds  and  oils." Cotton  seed is an oilseed but it cannot be for a moment  be suggested that itis  1003 fit  for  human  consumption.  So, ’Clearly, it  is  not  an oilseed  which  is edible.  Mr. Aggarwala as a  last  resort argued  that  what "’edible oil seed" means is a  seed  from which edible oil can be prepared.  Such an argument has only

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to  ’be mentioned to deserve rejection.  The phrase  "edible oil-seed"  can never mean what the learned Counsel  suggests and can and does mean only an oil seed which is edible as an oil. seed.  Cotton-seed, not being edible, falls outside the class  of "edible oil-seed" and so is not  foodstuff  within the  meaning  of s. 2 of the Ordinance or the Act  of  1946. The  Cotton  Seeds Order of 1943 which  has  been  mentioned above  is therefore not in respect of a matter specified  in s. 3 of the Ordinance or the Act and so was- not kept  alive by s. 5. The Cotton Order has also not been kept alive,  for raw  cotton  is  not one of the  articles  included  in  the definition  of  "essential commodity" in s. 2.  It  may  -be added  that s. 5 continues only such previous Orders as  are consistent  with  the  new law and clearly,  as  cotton  and cotton-seeds are not included in the definition of Essential Commodity,  any previous Order with respect to them will  be inconsistent with the new Order and cannot continue under s. 5.       Mr. Aggarwala drew our attention to a Notification  by the  Central Government dated on November 4, 1949  by  which cotton seed was excluded from the operation of the  Oilseeds Forward  Contracts Prohibition Order, 1943, by  omitting  it from  the  schedule  to the  order,  Mr.  Aggarwala  rightly contends that such exclusion would be unnecessary unless  as a  result  of  s. 5 of  the  Essential  Supplies  (Temporary Powers) Act, 1946, the Oilseeds Order had remained alive tin to  November,  1949.  We do not know what  led  the  Central Government to make this Notification.  It is not  improbable that a question having arisen before the Government  whether or  not forward -contracts in cotton seeds continued  to  be prohibited, in view of the provisions 1004 of s. 5 of the Ordinance or the Act as mentioned above,  the Government thought it proper to put the matter beyond  doubt by making the notification excluding cotton seeds altogether from   the  Schedule  to  the  Prohibition  Order.   It   is unnecessary  for us to investigate the  circumstances  under which  the  order was made.  For, the fact  that  Government thought  that  the  effect of s. 5 was  to  keep  alive  the Oilseeds  Forward Contracts Prohibition Order, 1943  is  not relevant at all.  For the reasons mentioned earlier, we  are clearly  of opinion that s. 5 cannot have that effect.   Mr. Aggarwala’s contention that the Forward contracts in cotton- seeds which are the subject matter of the present litigation were prohibited by law has therefore no substance.    This  brings  us to the question whether the  High  Court erred in allowing the plaintiff ’s appeal ’in increasing the amount  decreed by Rs. 3,244/12/-.  It appears  that  before the High Court it was urged on behalf of the plaintiff  that there had been a clerical error in preparing the  statement. Ex.  P-8, an extract from the Saudabahi-in that the purchase price  and  sale price for the transactions of  February  3, 1947  was  shown as Rs. 14/5/-and Rs. 14/8/-instead  of  the correct  figures  which  were, according  to  Saudabahi  Rs. 13/5/-and Rs. 13/8-.  It is obvious that this mistake  would not  affect the result as the difference between the  credit entry  and  the  debit entry for  these  transactions  would remain the same.  What the Trial Court did was that it  took the sale price for February 3, transaction to be Rs.  14/5/- as  shown in Ex.  P-8; but for the purchase price which  had to  be debited against the defendant it rejected the  figure of  Rs. 14/8/- shown in Ex.  P-8 but took the figure of  Rs. 19/8/-and  Rs. 13/10/- as shown in the  plaintiff’s  account book.   It seems to us likely that the  arrangement  between the  parties was that the debits and credits in the  running

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account  should  be on the basis of the rate  at  which  the purchases and sales were  1005 actually  made  and  not  at  the  rate  mentioned  in   the Saudabahi.   This is clear from the fact that for  both  the sale  and  the purchase the account book  shows  the  actual rates  at  which  the purchases and  sales  were  made  (the purchase  price  being  at the rate of Rs.  13/8/-  and  Rs. 13/10/- per maund and sales being at the rate of Rs.  13/5/- and  Rs. 13/7/- per maund).  It is difficult  to  understand why  the Trial Judge, though making the debits  against  the defendant  at the lower rate of actual purchase  thought  it fit  to  accept the Saudabahi rate   for the sale.   If  for both  debits and credits the actual rates at which the  pur- chases  and  sales were effected are accepted, it  is  clear that  the  Tria Court’s direction had resulted in  crediting the  defendant  with Rs. 3,244/12/-more than  what  was  the correct  figure.   The  High Court was  therefore  right  in increasing   the  decretal  amount  by  this  sum   of   Rs. 3,244/12/-.      It  may  be  pointed out that if the  actual  rates  of purchases  and  sales in respect of these  ’transactions  of February 3, 1947 for 2300 bags of cotton-seeds are  rejected and the Saudabahi rates (according to Ex. P-8) of Rs. 14/5/- for the sale and Rs. 14/8/- for the purchase are accepted as the  basis  for  making  the  credits  and  debits,  as  Mr. Aggarwala asks us to do, the defendant would gain nothing at all.     We  have therefore come to the conclusion that the  High Court  was right in allowing the plaintiff’s appeal in  part and increasing the decretal amount by  Rs. 3,244/12/-.     The appeal is accordingly dismissed with costs.                             Appeal dismissed. 1