judgement:
Appeal No. 696 of 1976.
(Appeal by Special Leave from the Judgment and Order dated 16 4 1976 of the Madhya Pradesh High Court in M.P. No. 697/72).
A.K. Sen, S.S. Khanduja and S.K. Jain for the Appellant.
D.N. Mukherjee and C.L. Sahu, for Respondent No. 4.
Ram Panjwani, H.S. Parihar and 1.
N. Shroff, for Respondents 1 3.
The Judgment of the Court was delivered by CHANDJACHUD, J.
The management of Primary and Middle Schools was taken over by the Madhya Pradesh Government from the Local Authorities under the Madhya Pradesh Local Author ities School Teachers (Absorption in Government Service) Act, 1963.
In 1968, the State Government decided to take over the management of Higher Secondary Schools also.
One such school was Kanya Naween Vidya Bhawan, Gadarwara, which was run by a Society registered trader the Societies Regis tration Act.
The appellant, Smt.
Juthika Bhattacharya.
who was a B.A.B.T., was the Head Mistress of that school.
Her scale of pay was Rs. 275 700 and at the relevant time she was drawing a monthly salary of Rs. 500.
On February 23, 1970 the Divisional Superintendent of Education, Narmada Division, Hoshangabad, wrote to the Society that the management of the school run by it would be taken over by the Government if there was no improvement in its financial position.
On June 7, 1971 he informed the Society that the Government had issued directions for taking over the management of the school.
In pursuance of this letter, the management of the school, along with its assets, was taken over by the Government on June 18,1971.
The Government assured the Society that the staff of the school will be absorbed in the new set up.
479 The case of the appellant is that she was entitled to be appointed as a Principal since she was holding a corre sponding post in a substantive capacity on the date of her absorption viz., June 18, 1971.
But the Divisional Superin tendent of Education acting under the directions of the State Government, and the Director of Public Instructions directed that the appellant should be absorbed as an Upper Division Teacher in the time scale of Rs. 150 290.
Accord ing to the respondents, the appellant did not hold a post graduate degree and no person could be appointed to the post of a Principal unless he or she held a post graduate degree and possessed the stated length of experience.
Appellant having had the requisite, experience, the only question for decision in this appeal is whether she is entitled to be appointed as a Principal notwithstanding the fact that she.
does not hold a postgraduate degree.
Relying upon a Memorandum dated December 6, 1972 issued by the Government of Madhya Pradesh in its Department of Education, the appellant contended that even assuming that she could not be appointed as a Principal for the alleged reason that she did not hold a post graduate degree, she could obtain that degree any time within 3 years from the date of her absorption and therefore the order passed by the, State Government, before the expiry of that period, appointing her on a lower post is illegal.
There is no substance in this argument because the Memorandum of Decem ber 6, 1972 applies, in terms, only to the staff of the Higher Secondary, Schools run by Janpad Sabhas and Munici palities and not to the staff of schools run by private Societies like the school of, which the appellant, on the date of absorption, was the Head Mistress.
Paragraph 4(b) of the aforesaid Memorandum undoubtedly affords the facili ty that where the qualification for a post is post gradua tion, the post graduate degree may be obtained within 3 years from the date of absorption.
But in view of the express statement in the Memorandum that it will be "ap plicable only to previous teachers of Janpad Sabhas and municipalities", the appellant cannot claim the benefit of the ' particular facility.
Any lurking doubt in this behalf stands resolved by the further statement in the Memorandum that except in regard to schools run by Janpad Sabhas and Municipalities, the Rules dated December 21, 1967 will continue to apply to nonGovernment schools without the amendments introduced by the Memorandum.
The Memorandum dated December 21, 1967, the Rules con tained in which remain unaffected by the amendments intro duced by the Memorandum dated December 6, 1972 provides by paragraph 3(b) that for absorption in the post of the Prin cipal of a Higher Secondary School, the person concerned "should" possess the post graduate degree and should also possess experience of a certain number of years.
The appel lant did have the requisite experience but the question is whether paragraph 3(b) of the Memorandum contains but a directory rule as it uses the word 'should ' and secondly, whether the appellant can be said to possess a 'post gradu ate degree ' since she holds the qualification of B.A.B.T.
It is urged on the first limb of this argument that as contrasted with the Memorandum of December 21, 1967 which uses the word "should", 480 the one dated December 6, 1972 Says that the.
person concerned "must" have obtained a post graduate degree and therefore the former rule is directory in character.
We are unable to agree.
The mere use of the word "should" does not mean necessarily that the compliance with the rule is dis cretionary.
It is well settled that whether a provision is directory or mandatory depends on its object and purpose, not merely on the use of any particular word or phrase.
The object of the Memorandum is to prescribe qualifications for the staff of non Government schools and Local Body schools taken over by the State Government.
In that context, the use of the word "should" cannot justify the construction that for absorption in the post of a Principal of a Higher Secondary School, the incumbent may or may not possess a post graduate degree.
In a memorandum containing a set of rules prescribing qualifications for various posts, it is meaningless to provide that the incumbent of a certain post may or may not possess a certain qualification, if the possession of the particular qualification is considered to be a matter of no importance or consequence.
Paragraph 3(b) consists of a complex provision, one part of which refers to the requirement of a post graduate degree and the other to the need to.
possess a certain amount of experience.
Both the clauses of a single sentence are governed by the verb "should".
If the requirement as to the possession of a post graduate degree is to be directory in character, the same consideration must apply equally to the requirement of experience, with the result that for eligibility for the post of a Principal, it would neither be necessary to possess any particular educational qualification nor any particular experience of teaching.
The appointment then to the highest post in the school would depend upon the sweet will of the appointing authority, unguided alike in the matter of minimum qualification and minimum experience.
The word "should" occurring in paragraph 3(b) of the Memorandum of 1967 must therefor be understood in a mandatory sense, so that no person who does not hold a post graduate degree and possess the requisite experience would be eligible for being appointed as the Principal of a higher secondary school.
As regards the second limb of the argument that since the appellant holds the qualification of B.A.B.T., she ought to be considered as holding a "post graduate degree", regard must again be had to the context in which the particular expression occurs and the purpose of the prescription.
It is not inconceivable that the expression "post graduate degree" may in a broad and general sense mean in a given context any degree obtained after graduation and which a graduate alone can obtain.
But that is not the sense in which the Memorandum uses the particular expression.
By "post graduate degree" is meant a Master 's degree like the M.A. or M.Sc.
and not a Bachelor 's degree like the B.T.
In other words, the expression connotes the successful comple tion of a course of studies at a higher level in any spe ciality, after the acquisition of a basic qualification at the graduate level.
The B.T. course of studies, we are informed, is open only to graduates and in dictionary manner of speaking, the degree of "Bachelor of Teaching" may be said to be a "post" graduate degree in the sense that the degree is obtainable only "after" graduation.
That is the sense in which the word "post" is used in expressions like "post nuptial", "post prandial", 481 "post operative", "post mortem" and so forth.
In these expressions, "post" means simply "after", the emphasis being on the happening of an event after a certain point of time, But the expression "postgraduate degree" has acquired in the educational world a special significance, a technical content.
A Bachelor 's degree like the B.T., or the LL.B is not considered to be a post graduate degree even though those degrees can be taken only after graduation.
In the refined and elegant world of education, it is the holder of a Master 's degree like the M.Ed.
or the LL.M. who earns ,recognition as the holder of a post graduate de gree.
That is the sense in which the expression is used in the Memorandum.
Mr. Sen says that in some foreign universi ties even a Bachelor 's degree, obtainable only after gradua tion, is considered as a post graduate qualification.
We are concerned with the interpretation of an indigenous instrument and must have regard for local parlance and understanding.
Such awareness and understanding compel the construction for which we have indicated our preference.
Indeed, everyone concerned understood the rule in the same sense as is evident from the permission sought by the appel lant herself to appear for the M.A. examination.
She asked for that permission in order to qualify for the Principal 's post.
The appellant ' made a serious grievance that she was discriminated against in comparison with several others who have been appointed as principals in higher secondary schools run by the Government.
On the record is a statement (Annexure P VIII) which does show that in schools which were from their inception run by the Government, several teachers were appointed as Principals though they did not hold the Master 's degree.
Mr. Panjwani appearing on behalf of the state Government has given a valid explanation for this differentiation.
Speaking generally, in schools which were always under Government control, a teacher could aspire to become a Principal only after a long period of service.
Most of the 19 teachers whose names appear in Annexure P VIII had served for about 20 years before being appointed as principals.
On the other hand, private schools like the one in which the appellant was working as a Head Mistress or a principal did not follow any such convention and appoint ments to the post of the head of the school were made there in directly and straightway without insistence on any worth while experience of teaching.
The appellant herself was appointed to the post of a Head Mistress directly in the year 1958.
The state Government had therefore a valid reason for prescribing comparatively stringent qualifica tions for the post of Principal in schools taken over by it from private institutions.
It may be added that in its own schools, the Government appointed persons holding merely the qualification of B.A.B.T., to the post of Principal by reason of the long and valuable experience gained by them as teachers and not on the supposition that they held a post graduate degree.
Reliance was placed by the appellant 's counsel on "Regulations of the Board of Secondary Education, Madhya Pradesh", in support of his submission that the qualifica tions of the teaching staff in any institution have to be the same as prescribed for the corresponding staff in Gov ernment institutions.
But these Regulations have no rele vance in the present case.
They were framed under section 28(4) of the 482 Madhya Pradesh Madhyamik Shiksha Adhiniyam, 1965.
Regula tion 61 and the allied regulations on which reliance is placed show that they were framed in order to prescribe conditions with which an educational institution had to comply before seeking recognition of the Board of Second ary Education.
The various conditions prescribed by the Regulations do not constitute conditions of service and can create no rights and obligations, contractual or statutory, as between a school and its employees whether the school is a Government institution non Government institution.
Before concluding we would like to say that the State Government ought to consider the request which was made by the appellant long since for permission to appear for the final M.A. Examination.
She has already passed Part I of that examination with Political Science as her subject but she was refused permission to complete.
the course on the ground that she had not yet completed one year 's service under the State Government.
That objection.
can no longer hold good.
We are confident that the proceedings taken by the appellant for vindicating her rights will not be allowed to stand in her way if and when she is found fit and quali fied for further ' promotion in accordance with the ' rele vant rules.
For these reasons we confirm the judgment of the High Court and dismiss the appeal but there will be no order as to costs.
P.B.R. Appeal dismissed.

summary/full:
Paragraph 3(b) of a memorandum dated December 21, 1967 issued by the State Government provides that for absorption in the post of Principal of a Higher Secondary School, the person concerned "should" possess a post graduate degree and should also possess the prescribed experience.
An amendment introduced by the memorandum dated December 6, 1972 says that wherever the qualification for a post is post graduate, the person concerned will have to obtain this degree within three years of absorption.
But this amendment was made applicable only to persons who had been working in schools run by Janpad Sabhas and Municipal Committees and for all teachers of non Government schools taken over by the Govern ment 1967 orders applied.
The appellant, who was a B.A.B.T., was the Head Mistress of a Private school.
When the administration of the school was taken over by the Government, she was fixed in a lower time scale of pay because, under the rules, no person could be appointed as Principal unless she held a post graduate degree and possessed the requisite experience.
The High Court dismissed her Writ Petition.
In appeal to this Court it was contended that (i) her appointment in a lower post was illegal because she could have obtained the Post graduate degree within the three years ' time from the date of her absorption; (ii) the word 'should ' used in the 1967 memorandum showed that the rule is directory in charac ter; (iii) since.
she held B.A.B.T., she should be consid ered as having a post graduate qualification; (iv) she was discriminated against because in the schools run by Govern ment from their inception, teachers who did not hold a Master 's degree were appointed as Principals and (v) the qualifications of the teaching staff have to be the same as prescribed in the Regulations of the Board of Secondary Education.
Dismissing the appeal, HELD: (1) In view of the express statement in the 1972 Memorandum that it would be applicable only to previous teachers of Janpad Sabhas and Municipalities, the appellant could not claim the benefit of the particular facility.
[479 E F] (2) The word 'should occurring in paragraph 3(b) must be understood in a mandatory sense.
The use of word "should" cannot justify the construction that for absorption in the post of a Principal of a Higher Secondary School the incum bent may or may not possess the Post Graduate Degree.
In a memorandum containing a set of rules prescribing the quali fications for various posts, it is meaningless to provide that the incumbent of a certain post may or may not possess a certain qualification, if the possession of the particular qualification is considered to be a matter of no importance or consequence.
Paragraph 3(b) consists of a complex provi sion one part of which refers to the requirement of a Post Graduate Degree and the other to the need to possess a certain amount of experience.
Both the clauses of a single sentence are governed by the verb "should".
If the require ment as to the possession of a Post graduate Degree is to be directory in character, the same consideration must apply equally to the requirement of experience, with the result that for eligibility for the post of a Principal, it would neither be necessary to possess any particular educational qualification nor any particular experience of teaching.
[480 C E] 478 (3) By "Post graduate Degree" is meant a Master 's degree like the M.A. or M.Sc.
and not a Bachelor 's degree like B.T.
In expressions like "post nuptial", "post operative" etc., "post" means "after", the emphasis being on the happening of an event after a certain point of time.
In the educational world the expression "post graduate" has acquired a special significance.
It is the holder a Master 's Degree like the M.Ed.
or LL.M., who earns recognition as the holder of a post graduate degree.
That is the sense in which the ex pression is used in the Memorandum.
[480 G, 481 A] (4) The State Government had a valid reason for pre scribing comparatively stringent qualifications for Princi pals in schools taken over from privae institutions.
While a teacher in a Government school was appointed as Principal by reason of long and valuable experience gained as teacher, a Head Mistress or a. Principal of a private school was appointed directly and straightway without insistence on any worthwhile experience of teaching.
[481 G] (5) Regulations of the Board of Secondary Education framed under the Madhya Pradesh Madhyamik Siksha Adhiniyam 1965 have no relevance in the present ease.
They prescribe conditions with which an educational institution had to comply before seeking recognition.
The various conditions prescribed ' by the Regulations do not constitute conditions of service and can create no rights and obligations, con tractual or statutory, as between a school and its employ ees, whether the school is a Government institution or a non Government institution.
[482 A B]


judgement:
Appeal No. 135 of 1972.
Appeal by Special Leave from the Judgment and Order dated 12 8 71 of the Delhi High Court in F.A.O. No. 47 D of 1964.
Gobind Das and Girish Chandra, for the Appellant.
Bakshi Shiv Charan Singh and Harbans Singh, for the Respondents.
The Judgment of the Court was delivered by BHAGWATI, J.
, This appeal, by special leave, is direct ed against a judgment of the High Court of Delhi setting aside an award made by an arbitrator on the ground that he was not a validly appointed arbitrator and hence had no jurisdiction to arbitrate and make an award.
The facts giving rise to the appeal are few and may be briefly stated as follows.
The respondents a partnership firm entered into a contract with the appellant for the supply of 30,000 tons of East German sugar at the rate and as the terms and condi tions set out in a letter dated 3rd July, 1954 addressed by the Secretary to the Government of India, in the Ministry of Food & Agriculture to the respondents.
The Ministry of Food and Agriculture was concerned with the subject matter of this contract and hence clause (9) provided that "superin tendence and inspection of quality, weight and packing of sugar Shall be made by a reputable superintending agency to be approved by the Government of India, in the Ministry of Food & Agriculture" and clause (10) stipulated for delivery to be made to "authorities or parties nominated by the Ministry of Food and Agriculture".
There was provision for arbitration made in clause (17) and that clause also re ferred to the Ministry of Food and Agriculture.
It was in the following terms: "ARBITRATION: All questions, disputes or differences whatsoever which may at any time arise between the parties to the agreement touching the agreement or the subject matter thereof, arising out of or in relation thereto and whether as to construction or otherwise shall be referred to a single arbitrator for decision.
Such a single arbitrator shall be nominated by the Secretary to the Government of India in the Ministry of Food and Agriculture in his absolute discretion and the decision of such arbitrator shall be final and binding upon the parties.
The reference to the arbitrator shall be governed by the provisions of the Indian as amended from time to time and the rules made thereunder.
" It appears that disputes arose between the appellant and.
the respondents in regard to the fulfilment of this con tract.
The appellant made a claim for payment of Rs. 3,29,107 8 0 against the respondents by a letter dated 11th August, 1956 and threatened to recover it from the security furnished by the respondents through their bankers.
The respondents disputed the claim of the appellant and by their letter dated 23rd August, 1956 pointed out that it was not competent to the: appellant to recover the amount of the demand from the bankers of the 485 respondents without first.
establishing its claim by arbi tration or suit.
The respondents intimated to the appellant that they were prepared to go to arbitration and.
suggested that it would be better still, .if a special case for the opinion of the court were stated under section 90 of the Code of Civil Procedure.
The respondents also claimed to recover from the appellant under the contract diverse amounts aggregating to Rs. 6,05,689.
There was no response to this letter from the appellant and no steps were taken by the appellant to have the disputes referred to an arbitrator nominated by the Secretary in the Ministry of Food and Agriculture as provided in clause (17) of the Contract.
In the meantime, as a result of an order made by the President under clause (3) of Article 77 of the Constitution, the Ministry of Food and Agriculture was bifurcated into two separate Ministries, one of Food and the other of Agricul ture, with effect from 19th October, 1956 and sugar, the subject matter of the contract, came to be allotted to the Ministry of Food.
The respondents, by their letter dated 9th November, 1956, pointed out to the Secretary, Ministry of Food that by reason of this bifurcation, the Ministry of Food and Agriculture has ceased to exist and there was no Secretary in the Ministry of Food and Agriculture and the arbitration agreement contained in clause (17) of the con tract had, therefore, become a dead letter and was no longer enforceable and once again called upon the appellant to agree in stating a special case for the opinion of the court failing which the respondents would have to file a suit against the appellant.
This letter also did not evoke any response from the appellant and the disputes remained unre solved.
On 13th/l4th February, 1956 the appellant addressed a letter to the respondents stating that since the Ministry of Food and Agriculture was bifurcated into Ministry of Food and Ministry of Agriculture, it was necessary to amend clause (17) of the Contract so as to provide for arbitration by "the Secretary to the Ministry, Government of India administratively dealing with the subject of contract at the time of reference to arbitration, or if there is no Secre tary, the administrative head of such Ministry at the time of such reference" and proposed an amendment to that effect for the acceptance of the respondents.
The respondents, by their letter in reply dated 26th February, 1957, declined to accept the proposal for amendment of clause (17) of the contract and once again reiterated that the arbitration agreement contained in that clause was "dead and unenforce able".
However, within a short time thereafter, another order was issued by the President under clause (3) of Arti cle 77 of the Constitution integrating the Ministry of Food and the Ministry of Agriculture into one single Ministry of Food and Agriculture with effect from 23rd April, 1957.
This Ministry of Food and Agriculture had two departments, one of Food and the other of Agriculture, and there was a Secretary incharge each department.
It seems that the appellant requested the Secretary, Department of Food in the Ministry of Food and Agriculture to nominate an arbitration for adjudicating upon the disputes which had arisen between the appellant and the respondents in terms of clause (17) the Contract and the Secretary, Department of Food in the Ministry of Food and Agriculture, by a letter dated 27th February, 1958, nominated Shri A.V. Vishwanath Shastri, Advocate, to act as sole arbitrator to 486 adjudicate upon such disputes.
On the same day, the re spondents served a notice on the appellant under section 80 of the Code of Civil Procedure demanding payment of the amounts due to the respondents and stating that in case the appellant failed to meet these demands, the respondents would have to file a suit against the appellant.
Though respondents gave this notice under section 80 of the Code of Civil Procedure, they did not proceed to file a suit, but instead filed their statement of claim before the arbitrator and in the statement they claimed payment of an aggregate sum of Rs. 7,89,858/ from the appellant and also prayed for a declaration that the contract stood "final and properly performed" by the respondents.
The appellant filed its reply disputing the claim of the respondents.
The appellant also field a statement making its own claim for Rs. 3,29,107 8 0 against the respondents.
It was stated in paragraph 18 of the statement of claim of the appellant "that under Clause 17 of the contract the Secretary Food and Agriculture Ministry of the Government in his discretion has the right to nominate a sole Arbitrator and refer the dis pute to the Arbitrator and that has been duly done on 27th February,1958, and the parties have been duly notified under Secretary to the Government letter No. SIMP 3(4C) dated the 27th February, 1958".
The respondents filed their written statement denying the claim of the appellant and in para graph 18 of this written statement they averted "That para 18 of the Statement of Claim of the Government of India is not objected to".
The proceedings in connection with the claim of the respondents and the counter claim of the appel lant were carried on before the arbitrator and the respond ents participated in the arbitration proceedings without objection or protest against the jurisdiction of the arbi trator.
The arbitrator ultimately made an award against the respondents.
The appellant made an application before the Sub Judge, Delhi to pass a decree in terms of the award.
The respond ents resisted the application of the appellant and sought to set aside the award mainly on two grounds.
One ground was that Daljeet Singh, a partner of the respondents, had no power to bind the other partners by an arbitration agreement and hence clause (17) of the contract was not binding on the respondents, and the other was that the arbitrator was not validly appointed and he had, therefore, no jurisdiction to enter upon the reference and adjudicate upon the disputes between the parties.
Both these grounds were rejected by the learned Sub Judge and the award was made a rule of the court.
The respondents thereupon preferred an appeal to the High Court.
The same two grounds were also urged in the appeal.
Out of them, the first ground relating to lack of authority in Daljeet Singh to bind the respondents by clause (17) of the contract Was negatived by the High Court and it was held that clause being an integral part of the contract, the authority of Daljeet Singh to enter into the contract on behalf of the respondents extended also to clause (17) of the contract and in any event, the conduct of all the partners showed that Daljeet Singh had authority on behalf of the other partners to enter into the arbitration agreement contained in clause (17) of the contract.
The second ground, however, found favour with the High Court which held that in view of the bifurcation of the Ministry of Food and Agriculture into two separate Ministries, 487 one of Food and the other of Agriculture, by the Presiden tial Order, which came into effect from 19th October, 1956, the arbitration agreement in clause(17) of the contract became dead and unenforceable and nothing that happened thereafter could revive it and in any event, even after reintegration of the Ministry of Food and Agriculture into one single Ministry of Food and Agriculture, the arbitra tion agreement could not be given effect to since there were then two Secretaries in the Ministry of Food and Agriculture and clause (17) of the contract did not indicate as to which Secretary was to exercise the power of nomi nating the arbitrator, with the result that the arbitration agreement suffered from the fault of vagueness and uncer tainty.
The High Court accordingly allowed the appeal and set aside the award made by the Arbitrator.
Hence the present appeal by the appellant with special leave obtained from this Court.
The only question debated before us in this appeal was as to whether the appointment of the arbitrator by the Secretary, Department of Food in the Ministry of Food & Agriculture was a valid appointment.
Obviously, if the appointment was invalid, the arbitrator would have no juris diction to arbitrate upon the disputes between the parties and the award would be invalid.
But, an alternative argument was also advanced on behalf of the appellant to sustain the award and it was that the respondents not having raised any objection to the appointment of the arbitrator and participated in the arbitration proceedings without any demur or protest, it was not open to them, after the award was made, to challenge it on the ground of invalidity of appointment of the arbitrator.
The respondents, having taken the chance of obtaining the award in their favour, could not denounce the award when it went against them.
We will first examine whether the appointment of the arbitrator was valid, for, if it was, the second question, which raises the issue of waiver, would not arise.
Now, clause (17) of the contract provided that all disputes arising out of the contract shall be resolved by arbitration.
It embodied an arbitration agreement between the parties.
It also laid down the machinery for appoint ment of the arbitrator.
It provided that the arbitrator shall be nominated by the Secretary in the Ministry of Food & Agriculture in his absolute discretion.
There was un doubtedly a Ministry of Food & Agriculture at the time when the contract was made and there was one and only one Secre tary in that Ministry, so that at the date of the contract there could be no question as to who was the person autho rised to nominate the arbitrator, The same position contin ued to obtain also at the time when disputes arose between the parties.
But before an arbitrator could be nominated by the Secretary in the Ministry of Food & Agriculture to adjudicate upon these disputes, the Ministry of Food & Agriculture was bifurcated into two separate Ministries and it ceased to exist as Ministry of Food & Agriculture.
Then obviously there was no individual who fiIIed the description of "Secretary in the Ministry of Food & Agriculture" and, consequently the machinery for appointment of the arbitrator became unworkable.
If the matter had rested there, a ques tion could well have arisen whether, despite the break down of the machinery for nomination of an arbitrator, the arbi tration agreement in clause (17) 15 1104SCI/76 488 could still be enforced by the Court by appointing an arbi trator in a proceeding under section 20 of the .
But the position again changed and the Ministry of Food & Agriculture came into being as a result of integra tion of the Ministry of Food and the Ministry of Agricul ture, with this change, namely, that the new Ministry of Food & Agriculture had two departments, one of Food and the other of Agriculture and there was a Secretary incharge of each department.
There were thus, after integration, two Secretaries in the Ministry of Food & Agriculture and the argument of the respondents was and that argument found favour with the High Court that this event rendered the arbitration agreement vague and uncertain, inasmuch as it did not specify which of the two Secretaries was to nominate the arbitrator "in his absolute discretion".
Though this argument appears attractive at first sight, a little scruti ny will reveal that it is unsound.
It is based on a highly technical and doctrinaire approach and is opposed to plain commonsense.
it must be remembered that a contract is a commercial document between the parties and it must be interpreted in such a manner as to give efficacy to the contract rather than to invalidate it.
It would not be right while inter preting a contract, entered into between two lay parties, to apply strict rules of construction which are ordinarily applicable to a conveyance and other formal documents.
The meaning of such a contract must be gathered by adopting a commensense approach and it must not be allowed to be thwarted by a narrow pedantic and legalistic interpretation.
Here, at the time when the arbitrator came to be nominated and the reference was made, there was a Ministry of Food & Agriculture and there was a Secretary in that Ministry, but the only difficulty, according to the High Court, was that there were.
instead of one, two Secretaries and it could not be predicated as to which Secretary was intended to exercise the power of nominating an arbitrator.
We do not think this difficulty is at all real.
Let us consider, for a moment, why in clause (17), the power to nominate an arbitrator was conferred on the Secretary in the Ministry of Food & Agri culture and not on a Secretary in any other Ministry.
The reason obviously was that at the date of the contract the Secretary in the Ministry of Food & Agriculture was the Officer dealing with the subject matter of the contract.
If this object and reason of the provision of clause (17) is kept in mind, it will become immediately clear that the "Secretary in the Ministry of Food & Agriculture"authorised to nominate an arbitrator was the Secretary incharge of the Department of Food who was concerned with the subject matter of the contract.
The Secretary incharge of the Department of Food filled the description "Secretary in the Ministry of Food & Agriculture" 'yen in clause (17).
The respondents relied strongly on the use of the definite article 'the ' before the words "Secretary in the Ministry of Food & Agri culture" and urged that what the parties to the contract had in mind was not a Secretary in the Ministry of Food & Agri culture, but the Secretary in the Ministry of Food & Agri culture and that clearly postulated one definite Secretary in the Ministry of Food & Agriculture and not one of two Secretaries in that Ministry.
This is, in our opinion, a hyper technical argument which seeks to make a 489 fortress out of the dictionary and ignores the plain intend ment of the contract.
We fail to see why the Secretary in the Ministry of Food & Agriculture incharge of the Depart ment of Food could not be described as the Secretary.
He would be the Secretary in the Ministry of Food & Agriculture concerned with the subject matter of the contract and dearly and indubitably he would be the person intended by the parties to exercise the power of nominating the arbitra tor.
The parties to the contract obviously could not be expected to use the words "a Secretary in the Ministry of Food & Agriculture", because their intendment was not that any Secretary in the Ministry of Food & Agriculture should be entitled to exercise the power of nominating an arbitra tor, but it should only be the Secretary in the Ministry of Food & Agriculture concerned with the subject matter of the contract.
That is why the use of the definite article 'the '.
It is also significant to note that when the Secre tary in charge of the Department of Food in the Ministry of Food & Agriculture nominated the arbitrator, the respondents did not raise any objection to the appointment of the arbi trator and participated in the arbitration proceedings without any protest.
The respondents knew at that time that there were two Secretaries in the Ministry of Food and Agriculture and the appointment of the arbitrator was.
made by the Secretary in charge of the Department of Food and yet they acquiesced in the appointment of the arbitrator and took part in the proceedings.
This circumstance is also clearly indicative of the intendment of the parties that the Secretary in the Ministry of Food & Agriculture concerned with the subject matter of the contract should be the person entitled to nominate the arbitrator.
Or else the respondents would have objected to the appointment of the arbitrator and declined to participate in the arbitration proceedings or at any rate, participated under protest.
We are, therefore, of the view that the arbitrator was validly nominated by the Secretary in charge of the Department of Food in the Minis try of Food & Agriculture.
This view renders it unnecessary for us to consider whether by participating in the proceedings before the arbitrator without objection or protest and taking the chance of obtaining an award in their favour, the respond ents could be said to have waived the defect in the appointment of the arbitrator.
We accordingly allow the appeal, set aside the order of the High Court and while dismissing the application for setting aside the award, pass a decree in terms of the award.
Having regard to the peculiar facts and circum stances of the case, we make no order as to costs through out.

dataset_name: IN-Abs

summary/full:
The respondent partnership firm, entered into contract with the appellant for the supply of East German sugar.
Provision for arbitration was made in clause (17) of the contract, and the arbitrator was to be nominated by the Secretary in the Ministry of Food & Agriculture.
In the present dispute, before an arbitrator was nominated, the Ministry of Food & Agriculture was bifurcated into two separate Ministries and the subject matter of the contract was allotted to the Ministry of Food.
The respondents took the stand that there was no longer any Secretary in the non existent Ministry of Food and Agriculture and clause (17) of the contract was a dead letter.
The appellant 's proposal to amend clause (17) to suit the changed circum stances, was rejected by the respondents.
Thereafter, the two Ministries were reintegrated into a Ministry of Food & Agriculture and two Secretaries were put incharge of the two departments.
The Secretary, Food Department, on a request from the appellant under clause (17), appointed an arbitra tor.
The respondents served on the appellant a notice under C.P.C. Sec. 80 but instead of proceeding to sue the appel lants, they submitted to the jurisdiction of the Arbitrator without protest until award was made, The appellant 's appli cation to the Sub Judge, Delhi, for passing a decree in terms of the award was resisted by the respondents who sought to set aside the award, challenging the validity of the Arbitrator 's appointment and contending that the arbi tration agreement under clause (17) was made by only one of the partners, and was not binding on the others.
The Sub Judge rejected their objections and made the award a rule of the court.
An appeal to the High Court was allowed on the ground that on bifurcation of the Ministries clause (17) of the contract became dead, and could not be revived on their re integration.
Allowing the appeal the Court, HELD: There were, after integration, two Secretaries in the Ministry of Food & Agriculture, but the argument that this event rendered the arbitration agreement vague and uncertain, is based on a highly technical and doctrinaire approach and is opposed to.
plain common sense.
A contract is a commercial document between the parties and must be interpreted in such a manner as to give it efficacy rather than to invalidate it.
It would not be right while inter preting a contract entered into between two lay parties, to apply strict rules of construction which are ordinarily applicable to formal documents.
The meaning of such a contract must be gathered by adopting a common sense ap proach and it must not be allowed to be thwarted by a narrow pedantic and legalistic interpretation.
The Secretary in the Ministry of Food and Agriculture in charge of the De partment of Food, would be the Secretary in the Ministry of Food and Agriculture concerned with the subject matter of the contract and under clause (17), he would be the person intended by the parties to exercise the power of nominating the arbitrator.
Furthermore, the respondents did not raise any objection to the appointment of the arbitrator and participated in the arbitration proceedings without protest, indicating the clear intendment of the parties that the Secretary in the Ministry of Food & Agriculture concerned with the subject matter of the contract should be the person entitled to nominate the arbitrator.
[488 B E, 489 A E] 484


judgement:
Criminal Appeal No. 264 of 1971 (Appeal by Special Leave from the Judgment and Order dated 19/20th August, 1971 of the Bombay High Court in Cr.A. No. 650 of 1970 with Crl.
Rev. No. 886/70).
B.R. Agarwala and P.B. Agarwal, for the appellant.
H.R. Khanna and M.N. Shroff, for the respondent.
The Judgment of the Court was delivered by BHAGWATI, J.
The appellant was tried before the Presi dency Magistrate, 25th Court, Mazgaon, Bombay for offence under clauses (a) and (b) of section 135 read with section 135(ii) of the and Rule 126H(2)(d) read with Rule 126P(2)(iv) of the Gold Control Rules 1963.
The prosecution case against the appellant was that on 7th September, 1965 about 3.45 p.m. Inspector Tilwe, who was at the material time Senior Grade Inspector of Customs attached to Gold Circle, Central Excise, Bombay, received information that two persons would be coming down from a building known as Hira Mahal, situated at Kalbadevi Road, and they will be carrying gold in the handle, of a cane basket and also in their shoes 17 1104SC1176 520 Inspector Tilwe, on receipt of this information, sent for Inspector Nichani and both of them kept guard outside Hira Mahal building from about 8.00 p.m. Around 8.45 p.m., the appellant accompanied by his material uncle 's son Dwarkapra sad, his son Dalip aged 9 years and his servant by the name of Mahadev, came out of Hira Mahal building.
The appellant was carrying a basket in his hand and after coming out of the building, the appellant and his companions got into a Victoria and proceeded towards Victoria Terminus Station.
Inspector Tilwe and Inspector Nichani followed these persons and when the appellant and his companions got down from the Victoria and entered the platform, Inspector Tilwe accosted them and took them to the office of the Assistant Station Master and searched them there in the presence of three panchas.
Two of the panchas were selected by Inspector Tilwe while the third volunteered to act as Pancha.
On taking search, it was found that the shoes worn by the appellant and Dwarkaprasad had specially made cavities and four gold biscuits with foreign markings were found in the shoes of each of these two persons.
The basket carried by the appellant also contained 27 gold biscuits with foreign markings concealed in the handle which was made of brass and which had a specially made cavity in it for concealing gold biscuits.
While the search was going on, one Ticket Collec tor called Tharandas Bhatia arrived on the scene and he also witnessed the search.
Inspector Tilwe seized the gold biscuits which were recovered from the appeIIant and Dwar kaprasad, in the reasonable belief that they were smuggled and hence liable to confiscation under section 111 of the .
This search and seizure was recorded in a Panchanama exhibit X, which was witnessed by the three pan chas.
Inspector Tilwe also seized from the appellant two first class Railway Tickets for the journey from Bombay to Kanpur, one Reservation Card and two Platform Tickets and so also were the basket and the shoes seized under the same Panchanama exhibit
X. Inspector Tilwe then took the appellant and Dwarkaprasad to the Central Excise Office and recorded their statements in the presence of Inspector Nichani under section 107 of the .
The statement of the appellant which is marked exhibit W was written by Dwarkaprasad in Hindi and was signed by the appellant.
The appellant admitted in his statement that he was carrying smuggled gold concealed in the handle of the basket and shoes for being handed over to a firm called M/s Pannalal Durgaprasad at Kanpur and that he had been doing this work for the last six months ever since his business as a goldsmith was closed down.
Another statement of the appellant was also subsequently recorded by Inspector Tilwe on 22nd November, 1966 at the shop of the appellant and this statement was written by one MaganIal, an employee of the appellant, in Gujarati and was signed by the appellant.
Both the appel lant and Dwarkaprasad were thereafter prosecuted for of fences under clauses (1) and (b) of section 135 read with section 135(ii) of the , and Rule 126H(2)(d) read with Rule 126P(2)(iv) of the Gold Control Rules, 1963.
Dwarkaprasad pleaded guilty to the charge and was convicted and we are not concerned in this appeal with the conviction and sentence recorded against him.
The appel 521 lant denied the charge and hence he was tried before the leraned Presidency Magistrate.
The only evidence led on behalf of the prosecution against the appellant was that of Inspector Tilwe and Tharandas Bhatia.
None of the panchas was examined as a witness to prove the search and seizure.
The learned Presidency Magistrate observed that in view of the fact that Tharandas Bhatia had not signed the Panchanama exhibit
X nor his statement had been recorded by the Customs Authorities or the Railway Police, and his name had also not been shown as a witness in the complaint, it would not be desirable to rely on his evidence against the appellant.
But the learned Presidency Magistrate found the evidence of Inspector Tilwe satisfactory and convincing and on the strength of this evidence, he held the charge proved against the appellant and convicted.
the appellant of the offence under clause (b) of section 135 read with section 135(ii) of the and Rule 126H(2)(d) read with Rule 126P(2) (iv) of the Gold Control Rules, 1963 and sentenced him to suffer rigorous imprisonment for two months and to pay a fine of Rs. 500/ or in default to suffer rigorous imprisonment for two months for each of these two offences.
Since there was no evidence to show that the appellant himself had smuggled the seized gold into India, he was acquitted of the charge under clause (a) of section 135 read with section 135(ii) of the .
The appellant preferred an appeal against his convic tion and sentence but the High Court agreed with the view taken by the learned Presidency Magistrate and dismissed the appeal of the appellant.
Hence the present appeal with special leave obtained from this Court.
It is true that the conviction of the appellant rests solely on the evidence of Inspector Tilwe.
There were three pan chas who witnessed the Panchanama exhibit X regarding search and seizure of gold from the appellant but unfortunately none of the three panchas could be examined, as they were not trace able in spite of efforts made by the prosecution.
Two of the panchas undoubtedly remained present in the course of the adjudication proceedings but that was in December 1967.
The trial before the learned Presidency Magistrate commenced in April 1969 and evidence was given by Inspector Tilwe in December 1969 and at that time none of the three panchas could be traced and brought for the purpose of giving evi dence.
The statement of Inspector Tilwe that "all the three panchas are now not traceable in spite of great efforts" was not challenged in cross examination and we must, there fore, proceed on the basis that none of the three panchas was available and if that be so, no adverse inference can be drawn against the prosecution for not examining any of the three panchas.
Tharandas Bhatia was no doubt examined but the learned Presidency Magistrate preferred not to rely on his evidence and we think, he was right in doing so.
In spector Nichani could, of course, have been examined as a witness, since he was present at the time of search and seizure, but his non examination cannot help the appellant, since he was also an Inspector in.
the Customs Department like Inspector Tilwe and once Inspector Tilwe gave evidence, it would not have added to the weight of prosecution evi dence by also examin 522 ing him.
The prosecution case against the appellant must, therefore, in the ultimate analysis stand or fall by the evidence of Inspector Tilwe.
The learned Presidency Magistrate as well as the High Court accepted the evidence of Inspector Tilwe and we do not see any reason to interfere with the concurrent view taken by both these courts as regards the appreciation of his evidence.
It was not the case of the appellant that he and Dwarkaprasad along with Dalip and Mahadev did not proceed from Hira Mahal building to Victoria Terminus or that they were not taken by Inspec tor Tilwe to the office of the Assistant Station Master for purpose of search or that gold was not found as a result of the search, but his defence was that the seized gold was found from Dwarkaprasad and not from him and that both the basket and the shoes belonged to Dwarkaprasad and he had nothing to do with the same.
Now, it is difficult to see why Inspector Tilwe should have falsely implicated the appellant if, in fact, the seized gold was found only from the person of Dwarkaprasad and the appellant was completely innocent.
It may also be noticed that the case of the appellant was that Mahadev was the servant of Dwarkaprasad and it was Dwarkaprasad who was going from Bombay to Kanpur along with his servant Mahadev and the two Railway Tickets from Bombay to Kanpur were meant for Dwarkaprasad.
But it is difficult to understand why in that event there should have been two first class Railway Tickets.
Mahadev could not possibly be travelling by first class along with his master.
The fact that there were two first class Railway Tickets shows that the appellant and Dwarkaprasad were going to travel from Bombay to Kanpur.
This is also.
borne out from the statement exhibit H given by the appellant to Inspector Tilwe.
The appellant tried to wriggle out of the statement exhibit H by showing that it was taken from him under threat and was not a voluntary statement containing the true facts.
But it is evident from the contents of the statement exhibit H that it is a genuine document.
There are several details in the statement exhibit H which could never have been dictated by Inspector Tilwe.
There is inherent evidence in the contents of the statement exhibit H showing that the statement is true.
It was admitted in the statement exhibit H, that the appellant was carrying gold from Bombay to M/s Pannalal Durgaprasad at Kanpur and this statement is clearly support ed by the seizure of two First Class Railway Tickets from Bombay to Kanpur.
It is true that the reservation card seized at the time of search did not show in whose name the reservations were made and it would have been better, if the prosecution had summoned the railway authorities to produce the Reservation Chart of the train for the purpose of show ing in whose name the reservations were made.
But even so, the fact that the reservation card was seized from the appellant shows that the appellant was travelling from Bombay to Kanpur.
We do not see any cogent reasons for taking a different view from that taken concurrently by the learned Presidency Magistrate and the High Court in regard to the evidence of Inspector Tilwe and we think this evi dence is sufficient to found the conviction of the appel lant.
The appellant, however, contended that even if it be held that gold was found from the person of the appellant, as alleged by the 523 prosecution, it was smuggled gold and hence not covered by the Gold Control Rules, 1963 and, in the circumstances, no offence under Rule 126H(2)(d) read with Rule 126P(2)(iv) could be said to have been committed by the appellant in acquiring such gold.
The argument of the appellant was that the Gold Control Rules, 1963 apply only in relation to what may be called legal gold or non smuggled gold and smuggled gold is outside their scope and ambit and hence acquisition of smuggled gold would not constitute an offence under the Gold Control Rules, 1963.
This is an argument of despair and cannot be sustained even for a moment.
Rule 126H(2)(d) provides, inter alia, that no person other than a licensed dealer shall buy or otherwise acquire or agree to buy or acquire gold, not being ornaments, except in accordance with a permit granted by the Administrator or in accordance with such authoriation as the Administrator may make in this behalf.
The word 'gold ' is defined in clause (c) of the Explanation to Rule 126A to mean gold, including its alloy, whether virgin, melted, remelted, wrought or unwrought, in any shape or form, of a purity of not less than nine carats and include any gold coin (whether legal tender or not), any ornament and any other article of gold".
This definition does not restrict the meaning of the word 'gold ' to legal or non smuggled gold.
It is wide enough to include any kind of gold, whether smuggled or non smuggled.
The restrictions imposed by the Gold Control Rules, 1963 could not have been intended merely to apply to legal gold.
The object and purpose of the restrictions.
would be frustrated by exclud ing from their ambit and coverage smuggled gold.
The Gold Control Rules, 1963 seek to control and regulate dealings in gold and 'gold ' within the meaning of these rules must include not only non smuggled gold but also smuggled gold, We fail to see on what principle of construction can smug gled gold.
which is 'gold ' within the meaning of the defini tion, be excluded from the operation of these Rules.
There is no scope for inferring any such exclusion nor is there anything in the Rules which supports such exclusion.
Take, for example, Rule 126 B which says that a dealer shall not make or manufacture any article of gold other than ornament.
Can it be suggested for a moment that this Rule does not prohibit a dealer from making or manufacturing articles out of smuggled gold? Then again, look at Rule 126 C.
It provides, inter alia, that no dealer shall make, manufacture or prepare any ornament having gold of a purity exceeding fourteen carats.
Can a dealer make an ornament of smuggled gold having purity exceeding fourteen carats without commit ting a breach of this Rule? Rule 126 1 provides that every person shall make a declaration to the Administrator as to the quantity, description and other prescribed particulars of gold owned by him.
How can a person, who has smuggled gold, say that he is not bound to make a declaration under this Rule? The object of requiring a declaration is that the Government should know what is the gold possessed by each person, so that dealings in gold can be controlled and regulated and this object would be thwarted if smuggled were not subject to the requirement of declaration.
Then consid er Rule 126 D which says that no person shall make advance or grant any loan to any other person on the hypothecation, pledge, mortgage or charge of any gold other than ornament, unless such gold 524 has been included in a declaration.
If smuggled gold were outside the scope of this rule, it would be open to a person to advance moneys on the security of smuggled gold without involving any violation of this rule.
That surely could not have been the intention of the Government in making the Gold Control Rules, 1963.
We are aware that there is a decision of the Calcutta High Court in Aravinda Mohan Sinha vs Proh lad Chand Samenta(1) where a Division Bench has taken the view that "declaration under Rule 126.
P is in respect of legal gold as opposed to smuggled gold and no question of declaration in respect of smuggled gold can arise under Gold Control Rules, 1963," but we do not think this decision represents the correct law on the point.
We are of the view that the Gold Control Rules 1963 are applicable alike to smuggled gold as to non smuggled gold, and the inhibition of Rule 126H(2) (d) that no person other than a licensed dealer shall acquire gold except in accordance with a permit or authorisation granted by the Administrator is not con fined in its operation to non smuggled gold but applies equally in relation to smuggled gold.
The learned Presiden cy Magistrate and the High Court were, therefore, right in convicting the appellant under Rule 126 H(2)(d) read with Rule 126 P(2) (iv) of the Gold Control Rules, 1963.
Since the appellant is convicted of the offence under Rule 126P (2) (iv) of the Gold Control Rules, 1963, the sentence of imprisonment to be imposed on him cannot be less than .six months and the High Court was right in enhancing the sentence to six months imprisonment.
But so far as the sentence of fine is concerned, we do not think that the facts and circumstances of the case justify a heavy fine of Rs. 3,000/ for each of the two offences for which the appellant is convicted.
It appears from the statement of the appellant exhibit H that he was a carrier of gold for M/s Pannalal Durgaprasad of Kanpur and the purchase price of Gold was provided substantially by this Kanpur firm and the appellant was merely to receive some commission.
The appel lant was a goldsmith who had lost his business for the last six months and perhaps economic necessity drove him to carry on this nefarious activity.
The sentence of imprisonment which has been imposed on the appellant would be sufficient deterrent to him and many others who indulge in this anti social activity which is calculated to disrupt the economy of the country.
We feel that in the circumstances, the ends of justice would be met if the sentence of fine is reduced from Rs. 3,000/ to Rs. 500/ for each of the two offences.
We accordingly confirm the conviction of the appellant as also the sentence of imprisonment imposed on him but reduce the sentence of fine from Rs. 3,000/ to Rs. 500/ for each of the two offences for which the appellant is convicted with a direction that in default of payment of fine, the appellant will suffer rigorous imprisonment for a period of two months.
The appeal is allowed to this limited extent.
M.R. Appeal partly allowed.

summary/full:
The appellant was found carrying smuggled gold with foreign markings, concealed on his person.
He was convicted by the Presidency Magistrate under Section 135(b) read with Section 135(ii) of the , and Rule 126H (2)(d) read with Rule.
126 P(2)(iv) of the.
Gold Control Rules, 1965.
The High Court upheld the convictions.
The appellant con tended that the gold, allegedly recovered from him was smug gled gold, and hence not covered by the Gold Control Rules, 1963.
Dismissing the appeal the Court.
HELD: The Gold Control Rules, 1963, seek to control and regulate dealings in gold, and are applicable alike to smuggled gold as to non smuggled gold, and the inhibition of Rule 126 H(2)(d) that no person other than a licensed dealer shall acquire gold except in accordancee with a permit or authorisation granted by the Administrator, is not confined in its operation to nonsmuggled gold but applies equally in relation to smuggled gold.
The object and pur pose of the restrictions imposed by the Gold Control Rules, 1963, would be frustrated by excluding from their abmit and coverage, smuggled gold.
[523 A D; 524 B C] Aravinda Mohan Sinha vs Prohlad Chand Samenta AIR 1970 Cal 437 over ruled.