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PETITIONER: JUTE & GUNNY BROKERS LTD.

       Vs.

RESPONDENT: M/S.  NEW CENTRAL JUTE MILLS CO., LTD.

DATE OF JUDGMENT: 20/01/1959

BENCH: DAS, SUDHI RANJAN (CJ) BENCH: DAS, SUDHI RANJAN (CJ) DAS, S.K. GAJENDRAGADKAR, P.B. WANCHOO, K.N. HIDAYATULLAH, M.

CITATION:  1959 AIR  569            1959 SCR  Supl. (2)  79

ACT:        Contract--Validity--Ordinance making Provision of regulation        of trade--Act replacing Ordinance--Deeming  provisions-Legal        fiction--Effect--Raw   Jute   (Central   Jute   Board    and        Miscellaneous  Provisions) Ordinance, 1950 (W.  Ben.  17  of        1950),  ss.  5,  6 and 7 Raw jute (Central  Jute  Board  and        Miscellaneous  Provisions) Act, 1951 (W.  Ben. 6  of  1951),        ss.5, 6, 7, 16.

HEADNOTE: In  respect of a dispute between the appellant  company  and the respondent company which was referred to the arbitration of   the  Bengal  Chamber  of  Commerce  in  terms  of   the arbitration clause contained in the contract entered into on April  6,  1951,  an award was made on  February  29,  1952, allowing the claim of the appellant.  The respondent made an application in the High Court for having the award set aside on the ground, inter alia, that the contract was void  under the  provisions  of  the Raw jute (Central  jute  Board  and Miscellaneous Provisions) Act, 1951, inasmuch as it had  not been entered into in the manner specified in ss. 5, 6 and  7 of  the Act as required therein.  On December 14, 1950,  the Government  of  West  Bengal had  promulgated  an  Ordinance called  the Raw jute (Central jute Board  and  Miscellaneous Provisions)  Ordinance, 1950, for the better  regulation  of the  trade,  and  on December 29,1950,  a  notification  was issued specifying December 30, 1950, as " the appointed  day for  the purposes of ss. 5, 6 and 7 Of the said  Ordinance." Subsequently the Ordinance was replaced by the Act which  by s.    16,    provided:..............    any     notification issued.........  under the Raw Jute (Central jute Board  and Miscellaneons  Provisions)  Ordinance, 1950, shall,  on  the said  Ordinance ceasing to operate, be deemed to  have  been issued  under this Act as if this Act had commenced  on  the 14th  day  of  December  1950." It  was  contended  for  the appellant  that  the notification dated December  29,  1950, could  not be read as having brought ss. 5, 6 and 7  Of  the Act  into  force,  because, on a plain reading  of  it,  the notification did not purport to bring any of the sections of

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the Act into force, but expressly brought ss. 5, 6 and 7  of the  Ordinance into force and that the said sections of  the Act  not  having been brought into force,  the  contract  in question was valid and, consequently, the award was  binding and enforceable. Held,  that  in order to give full effect to the  two  legal fictions  created in s. 16 of the Act that the Act shall  be deemed to have commenced on December 14, 195o, and that  the notification  issued under the Ordinance shall be deemed  to have 80 been issued under the Act, the principle of mutatis mutandis has  to be adopted and the word " Act " substituted for  the word  " Ordinance " used in the notification dated  December 29, 1950.  Consequently, the provisions of ss. 5, 6 and 7 Of the Act were applicable to the contract in question.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 92 of 1954. Appeal  from the judgment and order dated January 28,  1953, of the’ Calcutta High Court in Award Case No. 105 of 1952. M.   C. Setalvad, Attorney-General for India, B. Sen, P.   D.   Himatsinghka  and  B.  P.  Maheshwari,   for   the appellant. N.   C.  Chatterjee,  M. 0. Poddar and Ganpat Rai,  for  the respondent. 1959.  January 20.  The Judgment of the Court was  delivered by DAS,  C.  J.-This is an appeal filed upon a  certificate  of fitness granted by the High Court of Calcutta impugning  the judgment  pronounced by the said High Court on  January  23, 1953,  declaring  null and void an award (No. 209  of  1952) made  by the Bengal Chamber of Commerce in case No.  855  of 1951, whereby they ordered the respondent company to pay  to the appellant company a sum of Rs. 1,95,000 besides interest and costs. The  facts giving rise to the present appeal are simple  and may briefly be summarised as follows: On April 6, 1951,  the appellant   company  entered  into  a  contract   with   the respondent company for the supply of 5,000 maunds of  Nikhli and/or Ashuganj Jute on certain prices according to quality, "  shipment during July and/or August, 1951,  guaranteed  ". That  contract,  which was entered into by bought  and  sold notes  exchanged between the parties through  brokers,  con- tained  a  very  wide  arbitration  clause.   When  shipping documents  were presented to the respondent company  by  the bankers of the appellant company, they were not honoured  on the plea that the same were not in order and the  respondent company failed to take delivery of the goods.  The last date on which the 81 documents  were  so presented was September  17,  1951.   On September  26,  1951, the appellant company,  through  their solicitors, wrote to the respondent company intimating  that they  had exercised their option of cancelling the  contract and  demanding  the payment of the sum of  Rs.  1,95,000  as damages on the basis  of the difference between the contract price and the market price of the goods as on September  17, 1951.   The respondent company having by their letter  dated October 25, 1951, denied their liability to pay any  amount, the  appellant  company on November 2,  1951,  referred  the dispute to the arbitration of the Bengal Chamber of Commerce in  terms  of  the  arbitration  clause  contained  in  that

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contract.    The   respondent  company  submitted   to   the jurisdiction of the Tribunal of arbitration by appearing and adducing  evidence  before it.  On February  29,  1952,  the arbitrators made their award by which they allowed the claim of  the appellant company in full with interest  and  costs. The  award having been filed in the Calcutta High  Court  on April 23, 1952, the respondent company on June 9,1952, filed an  application in that Court praying, inter alia, that  the award be declared null and void and be set aside.  The  main ground  urged in that application was that the award  was  a nullity  in  that the contract  containing  the  arbitration clause  was  void  under  the provisions  of  the  Raw  Jute (Central Jute Board and Miscellaneous Provisions) Act, 1951, (W.  Ben.  VI of 1951) which was then in force.  In order to appreciate  the  points  raised before the  High  Court  and before us it is necessary at this stage to refer to some  of the statutory provisions bearing on the question. To regulate the prices of jute and to empower the Government to  fix  its  maximum prices, the  West  Bengal  Legislature passed  an  Act  called the West  Bengal  Jute  (Control  of Prices)  Act, 1950, (W.  Ben.  VI of 1950) which  came  into force on March 15,1950.  On December 14,1950, the Government of West Bengal promulgated an Ordinance called the Raw  Jute (Central Jute Board and Miscellaneous Provisions) 82 Ordinance, 1950 (XVII of 1950) for the better regulation  of the  jute  trade.  The preamble to  that  Ordinance  recited that,  as  the owners of jute mills were not being  able  to secure adequate supplies of jute on the maximum prices fixed under the West Bengal Jute (Control of Prices) Act, 1950, it had become expedient to set up a Central Jute Board in  West Bengal  for ensuring an equitable supply of raw jute to  the owners of the jute mills.  That Ordinance consisted of  only 15  sections.  Section.4 of that Ordinance provided for  the constitution  of  the  Central Jute Board.   Section  5  was expressed in the following terms :- "  5. (1) No person shall sell or agree to sell raw jute  to the  owner of a jute-mill and no owner of a jute mill  shall buy or agree to buy raw jute save and except in pursuance of a  contract for the sale or the supply of raw  jute  entered into in the manner provided in section 6. (2)  Any contract entered into for the sale or the supply of raw  jute with the owner of a jute-mill save and  except  in the manner provided in section 6 shall be void and of no effect. (3)  Any  person contravening the provisions of  sub-section (If  shall be guilty of an offence under this Ordinance  and shall  be punishable with imprisonment which may  extend  to six months or with fine or with both." Section  6 laid down the manner in which all  contracts  for the sale or supply of raw jute with the owners of jute mills were to be entered into.  Section 7 ran as follows:- " 7. (1) No person shall deliver or cause to be delivered to the  owner of a jute-mill and no owner of a jute-mill  shall accept or cause to be accepted any raw jute save and  except in pursuance of a contract for the sale or the supply of raw jute entered into in the manner provided in section 6. (2)  Any  person contravening the provisions of  sub-section (If  shall be guilty of an offence under this Ordinance  and shall  be punishable with imprisonment which may  extend  to six months or with fine or with both. 83 (3)  The  provisions  of  section 5,  section  6,  and  this section shall have effect on and from the appointed day."

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The  expression  "  appointed day " occurring in  s.  7  (3) quoted above was thus defined in s. 2 (1) of that  Ordinance :- "  2  (1) I appointed day’ means the date specified  by  the State Government by notification in the Official Gazette  as the appointed day for the purpose of this Ordinance; " By  a notification dated December 29, 1950, published in  an extraordinary  issue  of the Calcutta Gazette  of  the  same date,  December 30, 1950, was specified as "  the  appointed day  for  the  purposes  of  ss. 5, 6  and  7  of  the  said Ordinance." The  said  Ordinance  was subsequently replaced  by  an  Act called  the Raw Jute (Central Jute Board  and  Miscellaneous Provisions)  Act  (W.  Ben.  Act VI  of  1951),  hereinafter referred  to as " the Act ", which came into force on  March 21.,  1951.   The  first fifteen sections of  the  Act  were almost verbatim reproductions of the fifteen sections of the Ordinance  and  only  one  new  section  was  added  as  the sixteenth section reading as follows:- "  16.  The Central Jute Board constituted, any  rule  made, any notification or licence issued, any direction given, any contract  entered  into, any minimum price  fixed,  anything done  or  any  action whatsoever taken under  the  Raw  Jute (Central Jute Board and Miscellaneous Provisions) Ordinance, 1950,  shall, on the said Ordinance ceasing to  operate,  be deemed  to  have  been  constituted,  made,  issued,  given, entered into, fixed, done or taken under this Act as if this Act had commenced on the 14th day of December, 1950.  "  The Act was in force at all times material to these  proceedings though the same was subsequently repealed on August 5, 1952. It may be mentioned here that both when the Ordinance was in force and after the Act had come into operation, the Central Jute  Board  issued  a,  series of  circulars  by  which  it authorised the owners of jute mills to purchase raw jute  up to the extent of quotas 84 respectively  allotted  to  them  through  "  normal   trade channels  " subject to their furnishing particulars  of  the contracts  and of deliveries under them to the  Board.   The contract in question was entered into through " normal trade channels  " and not in the manner specified in the said  Act or the rules framed thereunder.  Indeed, it is conceded that no application had been made by the appellant company to the Board  under  s. 6(1) of the Act, that the  Board  did  not, under s. 6(2) of the Act select any jute mills as buyers  of these  goods, that the respondent company had not  signified in writing to the Board its intention to buy the raw jute in question, that the Board did not specify a date within which the  contract was to be entered into and that, finally,  the delivery  period fixed in the contract was in  contravention of  the provisions of the Act and the rules and,  therefore, the contract was void under s. 5(2) of the Act, if ss. 5,  6 and 7 were in force at the date of the contract. The  respondent company’s aforesaid application for  setting aside  the  award having come on for  hearing,  the  learned Single  Judge  sitting, on the Original  Side  reported  the matter, under r. 2 of ch.  V of the Original Side Rules,  to the Chief Justice for forming a larger Bench for hearing  of the  said  application.   A Special  Bench  was  accordingly constituted by the Chief Justice and the application came up for  hearing  before that Bench.  Three  points  were  urged before  the High Court, namely, (1) that the Act  was  ultra vires the Bengal Legislature; (2) that even if the Act  were intra  vires  ss. 5, 6 and 7 of the Act were  never  brought into  force and (3) that there was a subsequent  independent

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agreement  to refer the disputes to the arbitration  of  the Bengal  Chamber of Commerce.  The High Court  negatived  all the  contentions raised by the appellant company and by  its judgment dated January 23, 1953, allowed the application and declared  the  award to be null and void, but  directed  the parties  to bear their own costs.  This appeal,  as  already stated,  has  been filed against the judgment  of  the  High Court  upon  a certificate of fitness granted  by  the  High Court. 85 The  learned Attorney-General appearing in support  of  this appeal  has  urged  before us only the  second  point  urged before  the  High Court, namely, that even if the  Act  were intra vires ss. 5, 6 and 7 had never been brought into force and,  therefore,  the contract in  question  containing  the arbitration clause was valid and consequently the award  was binding  and  enforceable.   He does not  dispute  that,  by virtue  of  s.  16 of the Act, the  notification  issued  on December 19, 1950, under s. 2(1) of the Ordinance has to  be deemed  to have been issued under the Act, but  he  contends that  even  so  the notification dated  December  29,  1950, cannot  be read as having brought ss. 5, 6 and 7 of the  Act into  force, for it, in terms, specified December 30,  1950, as the appointed day " for the purposes of ss. 5, 6 and 7 of the  Ordinance ". He urges that this Court has to  take  the notification  made  under the Ordinance as it finds  it  and then,  under s. 16 of the Act, to deem it to have been  made under  the Act.  According to him the fiction created by  s. 16  ends as soon as the notification is deemed to have  been made  under the Act and goes no further.  He  concludes,  on the authority of the decisions in Hamilton and Co. v. Mackie and  Sons  (1)  and T. W. Thomas & Co.  Limited  v.  Portsea Steamship  Company Limited (2), that, on a plain reading  of it,  the notification, when it is deemed to have  been  made under  the Act, makes no sense, for it does not  purport  to bring  any  of  the  sections of  the  Act  into  force  but expressly brings ss. 5, 6 and 7 of the Ordinance into force. He  submits that it is not for the court to alter the  terms of the notification so as to make it possible to read it  as a notification made under the Act.  We are unable to  accept this  line  of  argument.  The decisions relied  on  by  the learned Attorney General can have no application to the pre- sent case.  In those cases there was no statutory  provision for deeming the provision of the charter party referring all disputes  under  the  charter party  to  arbitration  as  an integral  part of the provisions of the bill of lading  and, therefore,  the only thing to be done in those cases was  to lift bodily the relevant provision (1) [1889] 5 T. L. R. 677. (2) L.R. [1912] A.C. 1. 86 of the charter party and to insert it in and to read it as a part  of  the bill of lading.  It was held that so  read  it became  insensible, for an arbitration clause referring  all disputes arising out of the charter party was wholly out  of place  and meaningless as a term of  the bill of lading.   A cursory perusal of s. 16 will, however, show that there  are two  fictions created by that section: One is that  the  Act shall be deemed to have commenced on December 14, 1950,  and the  other  is  that  the  notification  issued  under   the Ordinance shall be deemed to have been issued under the Act. If the Act fictionally commenced on December 14, 1950,  then the Ordinance would have to be treated as not promulgated at all,  for the two could not have coexisted and when the  Act provided  that the notification, which, for  identification,

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is  described  as having been issued  under  the  Ordinance, should  be  deemed  to have been made under  the  Act  then, unless  we read the word " Ordinance " 7 as " Act ",  we  do not  give  full effect to the twin fictions created  by  the Act.  In other words the creation of the statutory  fictions compels us to adopt the principle of mutatis mutandis and to substitute the word " Act " for the word " Ordinance "  used in  the  notification,  so as to give  full  effect  to  the fictions  created  by  the statute.  We  see  no  reason  in support of the contentions of the Attorney General that  the fiction  raised by s. 16 stops short at mere issuing of  the notification.   The  ambit of the fiction appears to  us  to cover  not  only  the issuance of the  notification  but  to extend to our reading it as having been one issued under the Act.  We cannot read it as having been issued under the  Act unless  we  read  the  word  "  Ordinance  "  used  in   the notification as " Act ". No  other  point has been urged before us  and  for  reasons stated above this appeal must be dismissed.  In view of  the circumstances referred to in the judgment of the High  Court and  appearing in the record we make no order for  costs  of this appeal.                                Appeal dismissed. 87