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PETITIONER: MESSRS BASANT LAL BANARSI LAL

       Vs.

RESPONDENT: BANSI LAL DAGDULAL

DATE OF JUDGMENT: 30/11/1960

BENCH: SARKAR, A.K. BENCH: SARKAR, A.K. GAJENDRAGADKAR, P.B. SUBBARAO, K. WANCHOO, K.N. MUDHOLKAR, J.R.

CITATION:  1961 AIR  823            1961 SCR  (2) 780

ACT: Forward   Contracts  in  Oilseeds--If  illegal  in   Greater Bombay--Bombay  Forward  Contracts Control Act,  1947  (Bom. LXIV  of 1947), s. 3--Essential Supplies (Temporary  Powers) Act, 1946 (XXIV of 1946), s. 8.

HEADNOTE: Various  contracts for sale of goods had been  made  between the parties in Bombay each of which contained an arbitration clause.   Disputes having arisen in March, 1952, in  respect of these contracts, they were referred to arbitration and  a composite  award  was made on October 7, 1952,  against  the respondent.   One  of  these disputes had arisen  out  of  a forward  contract in groundnuts.  The respondent applied  to have  the  award set aside on the ground  that  the  forward contract  in groundnuts was illegal as such a  contract  was prohibited  by the Oilseeds (Forward  Contract  Prohibition) Order, 1943, issued under the Essential Supplies  (Temporary Powers)  Act, 1946, passed by the Central Legislature.   The appellant  contended that the Essential Supplies  (Temporary Powers)  Act,  1946,  was repugnant to  the  Bombay  Forward Contracts  Control  Act,  1947,  passed  by  the  Provincial Legislature  of Bombay which had received the assent of  the Governor-General  of India and therefore under s. 107(2)  of the Government of India Act, 1935, which applied, the Bombay Act prevailed in Bombay in preference to the Central Act and under  the  Bombay  Act Forward Contract  in  groundnut  was valid.   The  High  Court accepted  the  contention  of  the respondent and set aside the award. Section  8 of the Bombay Act provided: "Every  forward  con- tract for the sale or purchase of, or relating to, any goods specified  in  the  notification under  sub-section  (3)  of section 1 which is entered into, made or to be performed  in any  notified  area shall be illegal if it  is  not  entered into,  made or to be performed" and thereafter, set out  the manner in which and the persons between whom such  contracts could  be  made and also made punishable a person  making  a contract declared illegal. Section 3 of the Central Act provided, "The Central  Govern-

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ment may by notified order provide for prohibiting trade and commerce"  in any essential commodity.  Under  this  section the Oilseeds (Forward Contract Prohibition) Order was passed prohibiting  forward contracts in groundnuts, which was  one of the essential commodities specified in the Central Act. Held,  The Bombay Act did not make any contract legal.   Its only effect was to render certain forward contracts  illegal if not 781 made in compliance with its terms while the Central Act made the  contracts  to which it applied,  illegal.   There  was, therefore,  no  repugnancy between the Bombay  Act  and  the Central Act and both of them applied to Bombay. Article  372 of the Constitution continued both these  Acts, and so there is no provision in the Constitution under which any one of them may be said to apply to the exclusion of the other. A composite award in respect of more than one dispute  which is not severable, must be set aside as a whole if any of the disputes had been illegally referred.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 264 of 1956. Appeal  by special leave from the Judgment and  Order  dated June  29, 1954, of the Bombay- High Court in Appeal No.  127 of 1953. A. V. Viswanatha Sastri, Hemendra Shah, S. N. Andley,  J. B. Dadachanji,   Rameshwar  Nath  and  P.  L.  Vohra,   for,the Appellant. J.   C.   Bhatt,  C.  J.  Shah  and  Naunit  Lal,  for   the Respondent. 1960.  November 30.  The Judgment of the Court was delivered by SARKAR,  J.-The  appellant is a commission agent  and  pucca aratiya and has been acting as such for the respondent since November  7, 1951, in the course of which various  contracts were  made between them in Greater Bombay.  On February  26, 1952,  two of such contracts were outstanding, one of  which was in respect of groundnuts and was a forward contract. In  March  1952, disputes arose between the  parties  as  to whether these contracts had been closed, each side making  a claim  on  the  other on the basis of  its  own  contention. Eventually,  on March 18, 1952, the appellant  referred  the disputes   to  arbitration  under  the  arbitration   clause contained  in  the  contracts.   On  October  7,  1952,  the arbitrators  made  one composite award for  Rs.  22,529-15-9 against the respondent in respect of the said disputes.   It is not very clear whether this award covered other  disputes also. This award was duly filed in the Bombay City Civil 99 782 Court under the Arbitration Act, 1940, for a judgment  being passed on it.  Thereafter, on July 17, 1953, the  respondent made  an  application  to the Bombay City  Civil  Court  for setting aside the award contending that forward contracts in groundnuts were illegal as the making of such contracts  was prohibited  by the Oilseeds (Forward  Contract  Prohibition) Order, 1943, issued under the Essential Supplies  (Temporary Powers)  Act,  1946, and hence the arbitration  clause  con- tained  in  the forward contract in groundnuts  between  the parties was null and void.  It was said that the award based on  that  arbitration clause was therefore a  nullity.   The

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appellant’s answer to this contention was that the Essential Supplies  (Temporary  Powers) Act did not apply  to  Greater Bombay  where forward contracts were governed by the  Bombay Forward  Contracts Control Act, 1947, hereafter  called  the Bombay Act, and as the contract in groundnuts had been  made in  terms  of that Act, it was legal,  and,  therefore,  the award in terms of the arbitration clause contained in it was a valid and enforceable award.  The learned Principal  Judge of  the  Bombay City Civil Court accepted  the  respondent’s contention  and  set  aside the award.   An  appeal  by  the appellant  to the High Court at Bombay against the  judgment of the City Civil Court failed.  The appellant has now  come to this Court in further appeal. The  only question in this appeal is whether  the  Essential Supplies  (Temporary  Powers) Act, which was passed  by  the Central Legislature in 1946, applied to Bombay?  If it  did, then  the  Oilseeds (Forward  Contract  Prohibition)  Order, 1943, hereafter called, the Oilseeds Order, issued under  it would  make the contract in groundnuts illegal and no  award could be made under the arbitration clause contained in  it. This is not in dispute. Now, the Oilseeds Order was first passed in 1943 under r. 83 of  the Defence of India Rules.  The Defence of India  Rules ceased  to  be  in  force on September  30,  1946.   In  the meantime however, as the situation had not quite returned to normal  in spite of the termination of the war, the  British Parliament passed 783 an  Act  on  March  26,  1946,  called  the  India  (Central Government and Legislature) Act, 1946 (9 & 10 Geo.  VI,  Ch. 39),  hereafter called the British Act.  Section 2  of  this Act  provided  that the Central Legislature of  India  would have  power  to make laws with respect  to  various  matters therein mentioned notwithstanding anything in the Government of  India Act, 1935, and that that power could be  exercised during  the  period mentioned in s. 4 and further  that  the laws  so  made  to IV-he extent they  could  not  have  been otherwise made, would cease to have effect at the expiration of  that  period.   The Governor General  under  the  powers reserved in s. 4 and subsequently, the Constituent  Assembly of India, under the powers conferred on it under the  Indian Independence Act, 1947, extended the period mentioned in  s. 4 of the British Act from time to time and eventually up  to March  31, 1951.  It would be unprofitable for our  purposes to  refer  to the various statutory  provisions  and  orders under  which  this  was done for, the extension  is  not  in dispute. Under the powers conferred by the British Act, the Governor- General   promulgated  the  Essential  Supplies   (Temporary Powers) Ordinance, 1946, which came into force on October 1, 1946.   On November 19, 1946, the Central Legislature  under the  same  powers, passe the Essential  Supplies  (Temporary Powers)  Act,  1946,  hereafter  called  the  Central   Act, repealing the Ordinance and substantially incorporating  its terms.   The Central Act originally provided that  it  would cease  to  have  effect  on the  expiration  of  the  period mentioned  is s. 4 of the British Act.  As the life  of  the British Act was extended from time to time, suitable  amend- ments were made in the Central Act extending its life  also. Our Constitution came into force on January 26, 1950 and  by virtue  of Art. 372 the Central Act was continued as one  of the  existing  laws.   On  August  16,  1950,  under  powers conferred by Art. 369 of the Constitution, Parliament passed the  Essential  Supplies (Temporary Powers)  Amendment  Act, 1950,  Act LII of 1950, amending the Central Act in  various

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respects and extending its life up to December 31, 1952.  By another amendment made by Act LXV of 1952, the 784 life of the Central Act was extended till January 26, 1955. Section 3(1) of the Central Act is in these terms: "The  Central Government, so far as it appears to it  to  be necessary   or  expedient  for  maintaining  or   increasing supplies  of any essential commodity, or for securing  their equitable distribution and availability at fair prices,  may by notified order provide for regulating or prohibiting  the production,  supply and distribution thereof, and trade  and commerce therein." Section  2 of the Act provides that foodstuffs would  be  an essential commodity within the meaning of the Act and  would include  edible oilseeds.  We have earlier stated  that  the Oilseeds  Order was originally passed under the  Defence  of India  Rules,  which  expired  on  September  30,1946.   The Ordinance  of 1946 continued in force, orders  issued  under the Defence of India Rules in so far as they were consistent with it and provided that such orders would be deemed to  be orders  made  under it.  Section 17(2) of  the  Central  Act provided that an order deemed to be made under the Ordinance and  in  force  immediately before  its  commencement  would continue  in force and be deemed to be an order  made  under it.   As  a  result of the Ordinance  and  the  Central  Act replacing  it  and the extension of the life of  the  latter from  time to time, the Oilseeds Order so far as it  related to edible oilseeds including groundnuts, continued in  force after the expiry of the Defence of India Rules till  January 26,  1955.   That  Order, as so  continued,  prohibited  the making  of  forward  contracts, that is  to  say,  contracts providing  for  delivery  at a future date,  in  respect  of certain specified oilseeds including groundnuts.  It is  the respondent’s  contention that it is because of  this  order, read  with the Central Act, that the contract in  groundnuts between the parties was illegal and therefore the award made under the arbitration clause contained in it was void. Now the British Act under which the Central Act was  passed, provided in sub-sec. (4) of s. 2 that, "Sub-section  (2) of section 107 of the Government of  India Act, 1935, and sub-section (2) of section 126 785 of  that  Act shall apply in relation to a  law  enacted  by virtue  of this section with respect to any matter  being  a matter  with respect to which a Province has power  to  make laws as if that matter were a matter specified in Part 11 of the Concurrent Legislative List." Section  107(2) of the Government of India Act,  1935,  laid down that, "Where  a Provincial law with respect to one of the  matters enumerated  in the Concurrent Legislative List contains  any provision repugnantto the provisions of an earlier  Federal lawthen  if the Provincial law, having been  reserved  for the consideration of the Governor-Generalhas    received the assent of the Governor-Generalthe Provincial law  shall in  that  Province  prevail  It  would  follow  from   these provisions  that if a Provincial Act which had received  the assent of the Governor-General, contained anything repugnant to  a Central Act passed under the powers conferred  by  the British Act, then in the Province concerned, the  Provincial Act would apply and not the Central Act. Now, the Bombay Act which had been passed by the  Provincial Legislature of Bombay in 1947, came into operation in  1948. That  Legislature had power to pass the Act and the Act  had received  the assent of the Governor-General.  At that  time

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the Central Act deriving its force from the British Act, was in, operation.  If, therefore, the Bombay Act was  repugnant to  the Central Act, in Bombay, the Bombay Act  would  apply and  not  the  Central Act.  This is not  in  dispute.   The appellant  contends that the Bombay Act is so repugnant  and therefore the Central Act cannot render the forward contract in groundnuts made in, Greater Bombay, illegal and void. The question, therefore, is whether the Bombay Act, contains any provision repugnant to the Central Act.  The preamble of the Bombay Act states that it was enacted as it was  thought expedient to regulate and control forward contracts and  for certain  other  matters.  Section 1 of this  Act  came  into force at once and gave power to the Government to bring into force  by notification the remaining sections of the Act  in the 786 whole  of  the Province of Bombay or parts thereof  on  such date  and  in respect of such goods as might  be  specified. The  Government  of Bombay issued notifications  under  this section  on  December  19,  1950,  applying  the   remaining provisions  of the Act to the area called Greater Bombay  in respect of all varieties of oilseeds as from the said  date. Section 8 of the Bombay Act provides as follows: S.  8.-(1) Every forward contract for the sale  or  purchase of, or relating to, any goods specified in the  notification under  sub-section (3) of section I which is  entered  into, made  or  to  be performed in any  notified  area  shall  be illegal if it is not entered into, made or to be performed-- (a)In accordance with such bye-laws, made under section  6 -or  7 relating to the entering into, making or  performance of such contracts, as may be specified in the bye-laws, or (b) (i) between members of a recognised association, (ii) through a member of a recognised association, or (iii)  with a member of a recognised  association,  provided that   such  member  has  previously  secured  the   written authority or consent, which shall be in writing if the  bye- laws  so provide, of the person entering into or making  the contract, and no claim of any description in respect of such contract shall be entertained in any civil court. (2) Any person entering into or making such illegal contract shall, on conviction, be punishable with imprisonment for  a term  which  may extend to six months or with fine  or  with both. "Recognised association" is defined in the Bombay Act as  an association  recognised by the Provincial Government and  on December 19, 1950, the Bombay Oilseeds Exchange Limited  was recognised  as  such  an association by  the  Government  of Bombay.  The appellant is a member of this association.  The contracts  between  the  parties  were  all  expressly  made subject  to the rules and regulations of  this  Association. The  case  before  us has proceeded on the  basis  that  the impugned contract in groundnut had been made in compliance 787 with the requirements of s. 8 and there is no finding to the contrary  by the Courts below.  We have hence to proceed  on the same basis. The appellant contends that s. 8 of the Bombay Act and s.  3 of the Central Act are repugnant to each other.  Now s. 8 of the  Bombay  Act, it will, be noticed, does not  purport  to make  any  contract  legal.  Its only effect  is  to  render forward  contracts in all varieties of oilseeds  illegal  if not made in compliance with its terms.  The learned Advocate for the appellant says that the effect of s. 8 was to render a  forward  contract in all oilseeds made in  terms  of  it, legal  and, therefore, a repugnancy arose between its  terms

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and the terms of the Oilseeds Order issued under the Central Act which made forward contracts in edible oilseeds illegal. The learned Advocate referred to various other provisions of the  Bombay Act and the bye-laws of the Association made  in terms of the Act to show that the Bombay Act was intended to cover the entire field of forward contracts with respect  to all varieties of oilseeds and was therefore intended to oust the  operation  of the Central Act in  Greater  Bombay  with regard  to the forward contracts covered by the former.   It does not seem to us that a reference to the other provisions in  the  Bombay  Act  or to the  bye-laws,  is  relevant  in deciding the question.  If the effect of s. 8 of the  Bombay Act was not to render forward contracts made in terms of  it legal,  then no question of repugnancy with the Central  Act can  arise whatever may be the scope of the Bombay  Act  and the provisions in the bye-laws. Therefore, it seems to us that the question is whether s.  8 of  the Bombay Act by its terms makes any  forward  contract legal.  Section 3 of the Central Act, as already seen, gives power  to  the  Central Government  to  prohibit  trade  and commerce  in  oilseeds.  That Act,  therefore,  enable&  the Central  Government to make forward contracts  in  essential commodities  as  defined in it, illegal.  That is  what  the Central  Government did by the Oilseeds Order in so  far  as edible oilseeds are concerned. We find nothing in s. 8 from which it can be said 788 that  it rendered any contract legal.  Its only  intent  and effect is to declare certain forward contracts illegal.   We think  that the matter was very correctly put by Chagla,  C. J., who delivered the judgment of the High Court.  He  said, "All  that Sec. 8 does is to declare that forward  contracts will  be illegal unless they comply with the procedure  laid down  in  Sec. 8. But it is one thing to declare  a  certain contract  illegal.  It is entirely another thing to  declare an  illegal  contract legal.  Sec. 8 does not even  make  an attempt  to declare that forward contracts declared  illegal by  the  Central legislation shall be legal if  they  comply with the technicalities laid down in Sec. 8. The  assumption underlying Sec. 8, it seems to us, is that forward contracts which  the Legislature is dealing with are legal  contracts, but  even if they are legal they are declared to be  illegal unless  they  are performed or made or entered into  in  the manner  laid  down in Sec. 8".  With these  observations  we fully agree. In  regard  to the contention that s. 8 of  the  Bombay  Act necessarily implies that contracts made in terms of it would be  legal,  it seems to us that there is no  such  necessity indicated  in  the  Act.  The Act clearly  intends  only  to create an illegality, that is to say, as Chagla, C. J. said, it  takes  a  legal  contract  and  imposes  on  it  certain conditions and makes it illegal if those conditions are  not fulfilled.   If a contract is already illegal, there  is  no scope for applying the Bombay Act.  Furthermore, the  Bombay Act deals with all kinds of goods.  Sub-section (4) of s.  2 of  this Act defines goods as any kind of  movable  property including  securities but not including money or  actionable claims.   Now  the  Central Act only  applies  to  essential commodities  as  defined in it.  Therefore, there  would  be many contracts to which the Central Act would not apply  and such contracts may be rendered illegal by the Bombay Act  if they come within its scope and are made in disregard of  the conditions laid down in s. 8. We,  therefore,  come  to the conclusion that  there  is  no repugnancy  between the Bombay Act and the Central Act.   It

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follows that there is no scope for 789 applying  the provisions of s. 107(2) of the  Government  of India  Act, 1935.  That would be the position in 1948,  when the  Bombay  Act  came into force and the  Central  Act  was already in existence.  Both the Acts would then be  applying to Greater Bombay as there is no inconsistency between them. Article  372 of the Constitution continued both  these  Acts after the Constitution came into force and there is  nothing in  the  Constitution  which provides that any  one  of  two existing  laws, both of which had applied up to  the  coming into force of the Constitution, would apply to the exclusion of  the  other.  It follows that in 1951 or 1952,  when  the contract  in  groundnuts-which  it is not  disputed,  was  a forward  contract  within the meaning of both  the  Acts-was made, both the Acts applied to it.  The Constitution had not affected  such  application.  That being the  position,  the contract in groundnuts must be held to be illegal under  the Central Act which clearly prohibited the making of it.   The Bombay Act could not make it legal for, as we have said,  it was  not  intended  to make any contract  legal.   It  would follow  that  the  arbitration  clause  contained  in   that contract was of no effect.  It has therefore to be held that the  award made under that arbitration clause is  a  nullity and  has  been rightly set aside.  The award, it  will  have been  noticed,  was  however in respect  of  disputes  under several  contracts, one of which we have found to  be  void. But as the award was one and is not severable in respect  of the different disputes covered by it, some of which may have been  legally  and  validly referred, the  whole  award  was rightly set aside. The appeal, therefore, fails and is dismissed with costs.                                   Appeal dismissed. 100 619 of  the Act.  These rules are called the Bihar  Preservation and  Improvement of Animals Rules, 1960.  The provisions  of r.  3  have  also been impugned by the.  petitioners  by  an amendment  petition filed by them.  Rule 3 so far as  it  is material. for our purpose is in  these terms: "3(1).   For  the  purpose  of section 3  of  the  Act,  the Veterinary Officer and the Chairman or Chief Officer, as the case may be, shall be the prescribed authority: Provided that where there is no Chairman or Chief Officer in respect  of  any area, the Veterinary Officer shall  be  the sole prescribed authority. (2) Where the authority prescribed under subrule (1) or sub- rule (5) refuses to issue a certificate under the proviso to section  3, it shall record the reasons for the refusal  and no  such refusal shall be made unless the  person  ’applying for the certificate has been given a reasonable  opportunity of being heard. (3)......................................................... (4)A  bull,  bullock or she-buffalo in respect  of  which  a certificate  has  been issued under section 3 shall  not  be slaughtered  at any place other than the place indicated  in the  certificate and it shall be slaughtered within 20  days of the date of the receipt of the certificate by the  person in whose favour it is issued. (5) In case of difference of opinion between the  Veterinary Officer and the Chairman or Chief Officer, the matter  shall be  referred to the Sub-divisional Animal Husbandry  Officer or  the District Animal Husbandry Officer, as the  case  may be, and the certificate shall be issued or refused according to  the  decision  of the  Sub-divisional  Animal  Husbandry

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Officer  or  the District Animal Husbandry Officer,  as  the case may be. (6) (a) Any person aggrieved by an order refusing to grant a certificate  under the proviso to section 3 may,  within  15 days  of  the communication of the order to him,  prefer  an appeal- (i)  where  the  order is passed  by"  the  District  Animal Husbandry Officer under sub-rule (5) to the Deputy  Director of Animal Husbandry; 790