judgement:
iminal Appeal No. 69 of 1961.
Appeal by special leave from the Judgment and order dated December 23, 1960, of the Punjab High Court (Circuit; Bench) at Delhi in Criminal 'Appeal NO.: 10 D of 1960.
WITH CRIMINAL APPEAL NO. 62 of 1960.
Appeal from the judgment and order dated December 23, 1959, of the Allahabad High Court in Criminal Revision No. 1694 of 1958.
Sarjoo Prasad and K. K. Sinha, or the appellant in Cr. A. No. 69 of 1961.
B. K. Khanna and P. D. Menon., for the respondent in Cr. A. No. 69 of 1961.
R. K. Garg, D. P. Singh and section C. Agarwala, for the respondent in Cr. A. No. 62 of 1960.
G. C. Mathur and C. P. Lal, for the respondent in Cr. A. No. 62 of 1960.
May 3.
The Judgment of the Court was delivered by VENKATARAMA AIYAR, J.
The appellant in Criminal Appeal 69 of 1961 Jia Lal Was searched by the Delhi Police on April 15, 1959, and was found to be in possession of ' an ' English pistol for Which he held no licence.
He was then prosecuted for an offence under section 20 of the Indian Arms Act of 1878 (XI of 1878), hereinafter referred to as 'the Act ' 867 before the Additional Sessions Judge; Delhi who convicted him under section 19 (f) of the Act, and sentenced him to rigorous 'imprisonment for nine ,months.
No sanction for the prosecution had been obtained as required by section 29 of the Act.
the appellant then took the matter in appeal to the High Court of Punjab which confirmed his conviction but reduced the sentence to 4 1/2 months rigorous imprisonment.
It is against this judgment that this appeal by special leave is directed.
Bhagwana was searched by the Saharanpur Police on August 6, 1956, and was found to be in possession of a country made pistol and four cartridges for which he held no licence.
He was prosecuted before the City Magistrate, Saharanpur under a. 19(f) of the Act and was convicted and sentenced to six months rigorous imprisonment.
No sanction was obtained for his prosecution, obviously because under section 29 of the Act it is not required when the offence are committed in certain areas and Saharanpur is within those areas.
The appellant preferred an appeal against his conviction and sentence to the Sessions Judge, Saharanpur but the appeal was dismissed and the conviction and sentence were confirmed.
The appellant then took the; matter in revision to the High Court of Allahabad which rejected the same but granted certificate under article 134(1) of the Constitution.
This , is how this appeal comes before us.
Though the two appeals arise out of two different prosecutions un.
connected with each other, they were heard together as the same questions of law arise for determination in both.
The first question that arises for our decision is whether a. 29 of the Act is unconstitutional and void as contravening article 14, in that it requires sanction for prosecution for offences under the Act, 868 when they axe committed in some areas, but not in others.
Section 29 of the Act is as follows: "Where an offence punishable under section 19, clause (f), has been committed within three months from the date on which this Act comes into force in any State, district or place to which section 32, clause 2 of Act XXXI of 1860 applies at such date, or where such an offence has been committed in.
any part of India not being such a district, State or place, no proceedings shall be instituted against any person in respect of such offence without the previous sanction of the Magistrate of the district or in a presidency town, of the Commissioner of police.
" For a correct understanding of the true scope of the section, it is necessary to refer to the history of the Legislation relating to it.
The earliest enactment dealing with this subject is the Arms and Ammunition and Military Stores Act 18 of 1841 which came into force on August 30, 1841, and that prohibited the export of arms and ammunition out of the territories belonging to the East India Company and enacted certain prohibitions as regards the storing of ammunition.
This Act was repealed by Act 13 of 1852.
After the uprising against the British rule in 1857, the Government felt that a more stringent law was required for preventing insurrections and maintaining order and so a new Act was passed, Act 28 of 1857.
This Act is a comprehensive one dealing with many matters not dealt with in previous legislation, and contains elaborate provisions as regards the manufacture, import, sale, possession and use of arms and ammunition.
of particular relevance to the present discussion is P. 24 of this Act which empowered the Governor 869 General to order general search for arms and ammunition in any district.
In exercise of the power conferred by this section, the Governor General issued a notification on December 21, 1858, ordering a general search and seizure of arms in in the territories north of the Jumna and Ganga then known as North Western Provinces.
The reason for this was that it was this territory that was the main seat of the disturbances of 1857.
Act 28 of 1857 was a temporary Act which was to be in force for a period of two years and after some extentions it finaly lapsed on October 1, 1 60.
On that date a new Act, Arms and Ammunition Act 31 of 1860 came into force.
This statute contains in addition to what was enacted in Act 28 of 1857, certain new provisions, of which a. 32 is material for our discussion.
It is as follows: " 'Clause 1.
It shall be lawful for the Governor General of India in Council or for the Executive Government of any Presidency or for any Lieutenant Governor, or with the sanction of the Gevernor General in Council for the Chief Commissioner or Commissioner of any Province, District or place subject to their administration respectively, when.
ever it shall appear necessary for the public ,safety, to order that any Province, District, or place shall be disarmed.
"Clause 2.
In every such Province, District, or place as well as in any Province, District, or place in which an order for a general search for arms has been issued and is still in operation under Act XXVIII of 1857, it shall not be lawful for any person to have in his possession any arms of the description mentioned in section 6 of this Act, or any percussion caps, sulphur, gunpowder or other ammunition without a licence.
870 This Act ,,a, in was repealed, in 1878,and the present Indian Arms Act (XI of 1878) was enacted.
Now examining section 29 in the light of the history of the legislation as aforesaid, it will be seen that it makes a distinction between the areas to which section 32 of Act 31 of 1860 applied and the other areas.
The former included territories which had been disarmed under orders of the Governor General in accordance, with cl.
(1) and those in which a general search had been ordered under cl.
(2) which under the notification of December 1858 comprised the territories north of the Jumna and Ganga.
Section 29, provides,.that for prosecution for offences committed within the rem to which section 32 applied, No. sanction was required but suoh sanction was required, for a prosecution for the same offence when committed in 'other areas.
The point for decision is whether this, discrimination which is hit by article, 14 of th Constitution.
Now the principles governing the application of Art 14 are ,Well, settled and there is no need to restate them.
Article, 14 prohibits hostile legislation directed against individuals or groups of individuals, but it does not forbid reasonable Classiit scation.
And in order that a classifcation might be valid, it must rest on an intelligent ,differentia which distinguishes it from others and that further that must ' have, a reasonable relation to the ob ject of the legislation.
There can be a valid classi fication based on a geographical differentia, but even then, that differentia must be, ,pertinent to the object of the legislation.
The short question before decision the are fore is whether the differentiation between the territories north of, the; Jumna and Ganga on theme band and the other Territories on the other, has any relevance to the object of 871 the legislation.
As already Pointed out this differen tiation came to be made as a result of the political situation during 1857, and has reference to the fact ' that the largest opposition to the British Grovernment came from the Taluqdars to the north of the Jumna and Ganga.
But more, than a ventury has since elapsed and the conditions have so radically, changed that if is impossible now to sustain any distinction between the territories, north of the Jumna and Ganga and the other territories on any ground pertinent to the object of the law in question and on the well known principles differentiation is discrimination repugnant to article 14.
That was the the view taken by, the Allhabad High Court in Mehar Chand vs State(1) and we are in agreement with it.
The correctness of this decision on this point has been assailed, before us.
On this conclusion two questions arise,for decision: (i) Is a. 29, omitting that part, of it which" contravenes article 14, valid, and are the prosecutions in the instant cases bad for want of sanctions thereunder; and (ii) if a. 29 is void in toto whether a. 19 also 'becomes void and unenforceable.
On the first question our attention has, been drawn to two decisions of the High Court of Allahabad where this Point has been considered.
in Mehar Chand 's case (1) already referred to, after holding that the distinction made in section 29 between offences committed in territories to the north of the Jamuna and Ganga and those committed elsewhere was repugned to Art, 14, the learned Judges stated as its consequence that sanction for prosecution under the Act was necessary in all cases.
But this decision was overruled by a Full Bench of the Allahabad High Court in Bhai Singh vs The State(2) (1) A.I.R. (1959) All. 660.
(2) A.I.R. (1960) All 369. 872 where it was held that the effect of the finding that the section was in part unconstitutional was to render it void in its entirety and that accordingly no sanction was necessary for instituting prosecutions under the Act.
The respondent relies on this decision, and contends that the present proceedings are not illegal for want of sanction.
The position of the appellants in the two appeals in relation to this question is somewhat different.
In Criminal Appeal 69 of 1961 the appellant comes from an area which is not to the north of the Jumna and Ganga and under s.29 sanction would be required for his prosecution but the appellant in Criminal Appeal 62 of 1960 comes from an area north of the Jumna and Ganga and no sanction would be required under that section for his prosecution.
The arguments of learned counsel on this question therefore proceeded on somewhat different lines.
Mr. Sarju Prasad appearing on behalf of the appellant in Criminal Appeal 69 of 1961 contended that the decision in Bhai Singh 's case (1) was erroneous, that the fact that the section was invalid in its operation as regards territories to the north of the Jumna and Ganga did not render it invalid in its application to the other territories, as the two parts of the section were distinct and severable and that on the principles enunciated by this Court in R.M.D. Chamarbaugwalla vs The Union of India (2), that portion of the section which requires sanction must be held to be valid.
Mr. Garg appearing for the appellant in Criminal Appeal 62 of 1960 also contended that sanction was required for prosecution under the Act and his argument in support of the contention may thus be stated It "the portion of section 29 873 which offends article 14 is , struck out, what remains will read as follows: "Where an offence under section 19 clause (f) has been committed in any part of India; No proceedings shall be instituted against any, person in respect of such of offence without the previous sanction of the Magis trate of the District.
" The section as thus expurgated is complete in itself and in harmony with the rest of the Act.
The appropriate rule of interpretation applicable to this situation is thus stated in Chamarbaugwalla 's Case "On the other hand, if they are so distinct and separate that after striking out what is invalid, what remains is in itself a complete code independent of the rest, then it will be upheld notwithstanding that the rest has become unenforceable. " (p. 951).
On this test, the part of section 29 which requires sanction must be held to be severable from the portion, under which no sanction is required, and therefore valid.
This contention must fail for the simple reason, that if accepted it must result in defeating the intention clearly and unequivocally expressed in the section, that no sanction is required for prosecution for offences committed north of the Jumna and Ganga.
It will be opposed to all recognised canons of interpretation, to construe a statute as forbidding what it expressly authorises.
We cannot therefore so read the section as to require sanction for prosecution for offences in the areas north of the Jumna and Ganga.
When once this conclusion is reached it is difficult to accept (1) ; 874 the contention, of Mr. Sarju Prasad that the section insofar as it requires sanction for prosecution for offences committed in territories other than those to the north of the Jumna and Ganga is severable from the rest and that to that extent the law is valid.
If this contention is correct, it must necessarily result in discrimination between persons who commit offences in the territories to the north of the Jumna and Ganga and those who commit the same offences elsewhere in that while the latter cannot be prosecuted without sanctions the former can be.
It will then be open 'to the persons who are charged with offences committed to the north of the Jumna and Ganga to assail the law on the, ground that it discriminates against them.
, and there can be no answer, to it as we have held that, the classification made by the section is not valid.
The fact is that it is inherent in the very vice of discrimination that it is incapable.of being broken up into what is good and what is bad.
The gravemen of the charge that article 14 has been contravened is that it makes an irrational distinc tion among persons who are similarly circumstanced and where such a charge is well founded the section must in its entirety be struck down.
We are accordingly of the opinion that on our conclusion that the section is repugnant to article 14 in that it discriminates between the persons who commit offence in areas north of the Jumna and Ganga and those who commit the same offences elsewhere, the whole of it ought.
to to be held to be bad.
It is next contended that if section 29 is void in its entirety, section 19(f) of the Act should also be held to be void, as both these provisions form integral parts of a single scheme and must stand or fall together. 'it is, argued that the policy behind section 29 was manifestly. , to give protection to innocent subjects, against, frivolous and, vexatious prose cution, and that sanction under that section must 875 therefore be regarded as one of the essential elements, which go to make the offence.
Support for this contention was also sought in the statement of objects and reasons, made when the measure 'was introduced in the Legislature, wherein it was said that ample safeguards were provided "to prevent this prohibition pressing unfairly against respectable persons".
It was strongly pressed on us that in view of the above statement. it ought to be inferred that the Legislature would not have enacted section 19, if it had known that section 29 was void, and on that the conclusion must follow that the two sections are inseverable.
In support of this argument reliance was placed on certain observations in Daris vs Wallace (1) and Lemke vs Farmers ' Grain Company (2).
In Davis Wallace (1) the point for decision was whether when a provision which is in the nature of an exception in held to be unconstitutional, the main provision which it is intended to qualify can be enforced in its own terms.
In answering it in the negative the Court observed : "Here the excepting provision was in the statute when it was enacted, and there can be no doubt that the legislature intended that the meaning of the other provisions should be taken as restricted accordingly.
Only with that restricted meaning did they receive the legislative sanction which was essential to make them part of the statute law of the State '; and no other authority is competent to give them a larger application." In Lemke Farmers Grain Company (2), a law of North Dakota was assailed as unconstitutional on the ground that it was one on interstate commerce which the State Legislature could not enact.
One of the contentions raised was that there were certain provisions in the Act which could be sustained as within the competence of State Legislature In rejecting this contention the Court (1) ; (1921) 257 U.S. 477 ; , 329.
(2) (1921) 258 V.S. 506 876 observed : ,It is insisted that the price fixing feature of the statute may be ignored, and its other regulatory features of inspection and grading sustained if not contrary to valid Federal regulations of the same subject.
But the features of this act, clearly regulatory of interstate commerce, are essential and vital parts of the general plan of the statute to control the purchase of grain and to, determine the profit at which it may be sold.
It is apparent that, without these sections, the State legislature would not have passed the act.
Without their enforcement the plan and scope of the act fails of accomplishing its manifest purpose.
We have no authority to eliminate an essential feature of the law for the purpose of saving the constitutionality of parts of it.
" It is contended that on the rule of construction laid down above, a. 19 must be held to be inseverable from section 29, and must be struck down.
We are unable to agree.
The contention that sanction under section 29 should be regarded as an essential ingredient of the offence under a. 19 proceeds on a misconception as to the true scope of that section.
The scheme of the act is that it imposes certain obligations and breaches thereof are made offences for which penalties are prescribed.
These provisions pertain to the domain of substantive law.
Thus with reference to the, matters involved in this appeal, sections 14 and 15, enact that no person shall have possession of arms, and ammunition, specified therein, without a licence, and under section 19(f) a contravention of these sections is an offence punishable, as provided therein.
The offence is complete, when the conditions mentioned in sections 14 and 15 are satisfied, and sanction is thus not one of the elements which enter into the constitution of the offence.
Then comes section 29.
It is purely procedural.
It comes 877 into operation only when there is an offence already completed.
It cannot therefore be regarded as an ingredient of the offence, which is" to be punished under a. 19 (f) .
This must be further clear from the fact that offences under the Act are punishable under a. 19, without sanction under a. 29, when they are committed in the territories to the north of the Jumna and Ganga.
It cannot be contended that the contents of as.
14 and 15, for example , which are punishable under a. 19(f) differ according as they are to be applied to areas north of the Jumna and Ganga or elsewhere.
We agree with the appellants that the object a. 29 was to give protection to subjects against harassment.
That appears clearly on the reading of the section.
There was some argument before us as to whether the statement of objects and reasons relied on for the appellants is admissible in evidence.
It is well settled that proceedings 'of the Legislature cannot be called in aid for constructing a Section, vide Administrator General of Bengal, vs Prem Lal Mullick Krishna Ayyangar vs
Nellapuru mal (2).
"It is clear" observed Lord Wrightin Assam Railway & Trading Co. Ltd. vs
Inland Revenue Commissioner (3) "that the languageof a Minister of the Crown in proposing in Parliament a measure which eventually becomes law is inadmissible.
" The question whether the statement of objects and reasons admissible in evidence for construing the statue arose directly for decision In Aswini Kumar Ghosh vs Arabinda Bose (4), and it was held that it was not.
It was argued that the history of a legislation Would be admissible for ascertaining the legislative intent when the question is one of severability.
That is so as held by this Court in B.M.D. Chamarbaugwalla 's case (5) at pages 951 952.
(1) (1895) 221.A.107,118.
(2) (1919) L.R. 47 I.A. 33, 42.
(3) ; , 458.
(4) (1953) S.C.R. I. 28.
(5) ; 878 But the statement of objects and reasons is not a part of the history of the legislation.
It is merely an expression of what according to the mover of the Bill are the scope and purpose of the legislation.
But the question of severability has to be judged on the intention of the legislature as expressed in the Bill as passed, and to ascertain if the statement of the mover of the Bill is no more admissible than a speech made on the floor of the House.
It may be mentioned that there are observations in some of the, judgments of this Court judgments of this that the statement of objects and reasons but for Act right be admissible not for construing the Act but for ascertaining the conditions which prevailed when the legislation was enacted.
Vide the State of West Bengal vs Subodh Gopal Bose (1), M. K. Ranganathan vs Government of Madras (2), A. Thangal Kunju Mudaliar vs M. Venkitachalam Potti (3) and Commissioner of Income tax, Madhya Pradesh V. Sm.
Sodra Devi It is sufficient for the purpose of this case to say that the statement of objects and reasons is sought to be used by the appellants not for ascertaining the conditions which existed at the time When the statute was passed but for showing that the legislature would not have enacted the law without the protection afforded by section 29.
In our opinion it is clearly not ' admissible for this purpose.
But even apart from the statement of objects, it is clear on the face of the section that it has been enacted with a, view to giving protection to the subjects.
But is this sufficient to support the conclusion that the legislature would not have enacted section 19 if it had known that a. 29 was void ? It is this that the appellant has to establish before he (1) ; , 628.
(2) ; , 385.
(3) ; , 1237.
(4) ; 879 can succeed, and the policy behind a. 29 is only one element in the decision of it.
Now it appears to us ' that what is really determinative of the question is what has been already stated that section 19 is a substantive provision, whereas section 29 is an adjectival one, and in general, the invalidity of a procedural enactment cannot be held to affect the validity of a substantive provision.
It might be possible to conceive of oases in which the invalidity of a procedural section or rule might so react on substantive provision, as to render it ineffective.
But such cases must be exceptional.
And we see nothing in the present statute to take it out of the general rule.
On the other hand, the paramount intention behind the law was to punish certain offences.
No doubt section 29 was enacted with a view to give some measure of protection to the subjects.
But if the legislature had been told that section 29 would be bad, can there be any doubt as to whether it would have enacted the statute without section 29 ? The consequence of withdrawing the protection of that section is only that the accused will have to take up his trial in a court, but there ultimately justice will be done.
Therefore if the choice was given to the legislature between allowing an offence against the State to go unpunished, and failing to give protection to a subject against frivolous prosecution, it is not difficult to see where it would have fallen.
We cannot, be mistaken if we conclude that the intention of the legislature was to enact the law, with section 29 if that was possible, without it, if necessary.
And that is also the inference that is suggested by the provision in section 29, exempting certain areas from its operation.
The American authorities cited for the appellants do not require detailed consideration, as the principles laid down therein have been approve by this Court in Chamarbaugwalla 's case (1) at pages 950 951.
The question is only one of application (1) ; 880 of the rules of interpretation laid down therein to particular legislation.
It is however worthy of note that in Davis V. Wallace (1) as well as Lemke vs Farmers Grain Company the point for decision was to what the effect was of holding that a substantive provision in a law was unconstitutional, on another substantive law in the same statute.
We are aware that it has some times been stated that a distinction should be made in the matter ' of severability between Criminal and Civil Laws, and that a penal statute must be construed strictly against the State.
But there are numerous decisions in which the same rules of construction have been applied in deciding a question of severability of a Criminal statute as in the case of a Civil Law, and on principle it is difficult to see any good ground for the distinction.
"Perhaps the moist that can be said" ' says Sutherland, for the distinction between criminal and civil statutes is that the penal nature of a statute may be a make weight on the side of inseparability" Vide Statutory Construction Vol.
2 p. 197 para 2418.
In the present case the fact that a. 29 is a procedural and not a substantive enactment is sufficient to turn.
the scale heavily in favour of the State.
On a consideration of the scheme of the Act, and its provisions, we are of opinion that section 29 is severable from the other portions of the Act, and that its invalidity does not affect the validity of 19.
In Criminal Appeal 69 of 1961 a contention was also raised that the pistol of which the appellant was 'in possession was not in a fit condition to be effectively used, and it bad no chamber, and it therefore did not fall within the definition of 'Arms ' in section 4(1) of the Act.
There is no force in this (1) ; 7: ; 329, (2) ; ; 881 contention which is accordingly rejected.
In Criminal Appeal 62 of 1960 an argument was advanced that the State had launched prosecutions under the De Act, some with, and others without ' sanction, and that was discrimination bit by article 14.
There is no substance in this contention, which also is rejected.
In the result both these appeals are dismissed.
Appeal dismissed.

dataset_name: IN-Abs

summary/full:
Section 29 of the Indian Arms Act, 1878, provided that for prosecution for an offence under section 19(f) of the Act com mitted in the territories north of the jumna and Ganga no sanction was required but sanction was required for the pro. section if the offence was committed in other areas.
j was found in possession of an unlicensed firearm in Delhi, and though sanction under section 29 was necessary, he was tried and convicted without obtaining such sanction.
B was found in possession of an unlicensed firearm in Saharanpur and as no sanction under section 29 was necessary for his prosecution he was tried and convicted without obtaining any sanction.
The respondents contended that section 29 offended article 14 of the Constitution and was unconstitutional.
j contended that even if section 29 was invalid in its operation as regards territories to the. ,North of the jurnna and Ganga it was not invalid in its 865 application to the other territories as the parts of section 29 were separate and severable.
B contended that if the portion of section 29 which offended article 14 was struck down the remaining portion was complete in itself and required sanction for prosecution in all cases, and that if s.29 was void in toto s.19 could not stand and also become void and unenforceable.
Held, that section 29 Arms Act offended article 14 and was unconstitutional and as such no sanction was necessary for the prosecution of either j or B. The differentiation between the territories north of the jumna and Ganga and the other territories had no relevance now to the object of the legislation.
The differentiation had come into being an account of the fact that the largest opposition to the British Government in 1857 had come from the people to the north of the jumna and Ganga and they had been disarmed.
But now after more than a century conditions have changed and the distinction could not be sustained on any ground pertinent to the object ,of the law in question.
Mehar Chand vs State, A.I.R. (1959) All. 660, approved.
Held, further, that it was not permissible to strike out only the offending words from section 29 and to read the section as requiring sanction for prosecution for offences in areas north of the jamna and Ganga.
The section could.
not be construed as for bidding what it expressly authorised.
Nor could the section insofar as it required sanction for prosecution for offences committed in other territories be severed from the rest and held valid as that would necessarily again result in discrimination.
The entire section 29 must be struck down.
Bhai Singh vs State, A.I.R. (1960) All. 369.
approved.
Chamarbaugwalla vs Union of India, ; , referred to.
Held, further, that section 29 was severable from the other, provisions of the Act and that its invalidity did not affect the validity of section 19.
Section 19 was a substantive provision providing punishment for violation of sections 14 and 15 and section 29 was merely procedural and in general the invalidity of a procedural provision could not be held to affect the validity of a substantive provision.
There was nothing in the Arm Act to take it out of the general rule.
Section 29 was intended for giving protection to the subjects against frivolous and vexatious prosecutions but sanction was not one of the elements of the under offence s, 19(f).
It could not be said that the legislature 866 would not have enacted the ' law without the; protection afforded by section 29.
Davis vs Wallace, (1921)257 U.S. 477; ; and Lemka
Parmers ' Grain Company; , ; 66 L. Ed. 458, referred to.


judgement:
Appeals Nos. 98 and 99 of 1960.
Appeal from the judgment and order dated April 16, 1958, and April 11, 1958, of the Calcutta High Court in Appeal from Original Order and decree Nos. 173 and 151 of 1957, respectively.
H.N. Sanyal, Additional Solicitor General of Indin, M. G. Poddar and D. N. Mukherjee, for the appellant.
C.B. Aggarwala and section N. Mukherjee, for the respondent.
May 4.
The Judgment of the Court was delivered by VENKATARAMA AIYAR, J.
These are appeals against the judgment of the High Court of Calcutta, setting aside an award of the arbitrators, which directed the respondent to pay to the appellants Rs. 41,250 as compensation for breach of contract, on the ground that the said contract was in con travention of a notification of the Central Government dated October 29, 1953, and was in consequence illegal and void.
The facts are that the appellants own a Jute Mill at Calcutta and carry on the business of manufacture and sale of Jute.
On September 7, 1955 they entered into a contract with the respondents who are doing business as 186 dealers in jute, for the purchase of 750 bales of Jute cutting 'raw) of Pakistan at Rs. 80 per bale of 400 lbs.
to be delivered in October, November and December at the rate of 250 belles every month.
Clause 14 of the agreement provides that all disputes arising out of or concerning the contract should be referred to the arbitration of the Bengal Chamber of Commerce.
The respondents failed to deliver the goods as agreed whereupon the appellants applied to the Bengal Chamber of Commerce for arbitration in accordance with el.
14 of the agreement.
The respondents appeared before the arbitrators, and contested the claim on the merits.
The arbitrators made an award in favour of the appellants for Rs. 41,250 with interest, and that was filed under section 14(2) of the Indian in the High Court of Calcutta in its original side and notice was issued to the respondents.
Thereupon the respondents filed an application in the High Court, presumably under section 33 of the arbitration Act, wherein they prayed for a declaration that the contract dated September 7, 1955, was illegal, as it was in contravention of the notification of the Central Government dated October 29, 1953, and that in consequence proceedings taken thereunder before the Chamber of Commerce and the award in which they resulted were all void.
The learned Judge on the original side before whom the application came up for hearing dismissed it, and passed a 'decree in terms of the award.
Against both this judgment and order, the respondents preferred appeals to a Division Bench of the High Court, Appeals Nos. 154 and 173 of 1957.
They were heard by Chakravartti, C. J., and Lahari, J., who hold that the contract dated September 7, 1955, was illegal as it fell within the prohibition of the notification aforesaid and accordingly allowed the appeal and set aside the award.
The appellants 187 then applied for a certificate under article 133 (1) of the Constitution and the same was granted.
This is how the appeals come before us.
The learned Additional Solicitor General who appeared for the appellants urged the following contentions : (1)On the terms of the arbitration clause the questionwhether the contract dated September 7.
1955, isillegal is one for the arbitrator to decide and that it was not open to the respondents to raise the same in the present proceedings under section 33 of the , (2)The respondents are estopped from questioning the validity of the award by reason of their having submitted to the jurisdiction of the arbitrators.
(3)The agreement dated September 7. 1955, is a non transferable specific delivery contract within section 2(f) of the Act and it is not hit by the notification dated October 29, 1953.
We now proceed to discuss these questions seriatim : (1)Taking up the first questions, cl, 14 of the agreement which provides for arbitration is as follows : "All the matters, questions, disputes, differences and/ or claims arising out of and/ or concerning and/ or in connection with and/ or in consequence of or relating to this con tract including matters relating to insurance and demurrage whether or not the obligations of either or both parties under this contract be subsisting at the time of such dispute and whether or not this contract has been termi nated or purported to be terminated or com 188 pleted shall be referred to the arbitration of the Bengal Chamber of Commerce and Industry under the rules of its Tribunal of Arbitration for the time being in force and according to such rules the arbitration shall be conducted and any Award made by the said Tribunal under the clause.
shall be final, binding and conclusive on the parties.
" Now the contention of the appellants is that the clause is general in its terms and is wide enough to include dispute as to the validity of the contract that in consequence the only right of the respondents is to agitate this question before the arbitrators and if the award goes against them to move the Court either to modify it under section 15 of the or to remit it under section 16 or to set it aside under section 30 on the grounds mentioned therein and that the present application for a declaration that the contract is illegal, and that the arbitration proceedings are without jurisdiction is therefore incompetent and misconceived.
it cannot be disputed that the expression "arising out of " or "concerning" or " in connection with" or "in consequence of" or "relating to this contract" occurring in el.
14 are of sufficient amplitude to take in a dispute as to the validity of the agreement dated September 7, 1955 Vide Ruby General Insurance Co. Ltd. vs Pearey Lal ,Kumar (1) But the question is not whether el.
14 is all comprehensive but whether it could be enforced when the agreement of which it forms an integral part is held to be illegal.
Logically speaking, it is difficult to conceive how when an agreement found to be bad, any portion of it can held to be good.
When the whole perishes, its parts also must perish. 'Ex nihilo nil fit '.
On principle therefore it must be held that when an 189 agreement is invalid every part of it including the clause as to arbitration contained therein must also be invalid.
That indeed is what has been laid down in the decisions which have been cited before us.
The leading case on the subject is the decision of the House of Lords in Heyman vs Dacwins Ltd(1).
There the question was whether repudiation of a contract by a party thereto had the effect of annulling ' the arbitration clause contained therein.
It was held that it had not.
It was in this context that the law as to the circumstances under which an arbitration clause in an agreement would become unenforceable came in for elaborate discussion.
Summing up the law on the subject Viscount Simon, L. C. observed: "If the dispute is whether the contract which contains the clause has ever been entered into at all, that issue cannot go to arbitration under the clause, for the party who denies that he has ever entered into the contract is thereby denying that he has ever joined in the submission.
Similarly, if one party to the alleged contract is contending that it is void ab initio (because, for ,example, the making of such a contract is illegal), the arbitration clause cannot operate, for on this view the clause itself also is void.
But, in a situation where the parties are at one in asserting that they entered into a binding contract, but a difference has arisen between them whether there has been breach by one side or the other, or whether circumstances have arisen which have discharged one or both parties from further performance, such differences should %be regarded as differences which have arisen "in respect of" or "with regard to" or, "under" the contract, and an arbitration clause which.
uses these.
or similar, expressions ,should be construed accordingly." (1) 190 Lord Macmillan with whom Lord Russel agreed observed: "If it appears that the dispute is whether there has ever been a binding contract between the parties, such a dispute cannot be covered by an arbitration clause in the challenged con tract.
If there has never been a contract at all, there has never been as part of it an agreement to arbitrate.
The greater includes the less.
Further, a claim to set aside a contract on such grounds as fraud, duress or essential error cannot be the subject matter of a reference under an arbitration clause in the contract sought to be set aside.
" in the speech of Lord Wright there are the following observations on which the appellants rely: "Hence, if the question is whether the alleged contract was void for illegality or being voidable was avoided because induced by fraud or misrepresentation, or on the ground of mistake, it depends on the terms of the submission whether the dispute falls within the arbitrator 's jurisdiction.
" The argument is that if the arbitration clause is general and unqualified it will include a question as to the legality of a contract also.
The above observation does lend support to the view that if it was a term of the contract that a dispute as to its legality could be referred to arbitration, then it is valid.
If that is what was meant by Lord Wright it maybe difficult to reconcile it with the view expressed in the passages already cited.
But it is to be noted that the noble Lord wound up with the following observation "Finally, I agree with the general conclusions on the matter summarised by the Lord Chancellor in the closing paragraphs of his opinion".
The appellants also rely on the following observations in the speech of Lord Porter: "If two parties purports to enter into a contract and a dispute arises whether they have done so or not, 191 or whether the alleged contract is binding on them.
I see no reason why . hey should not submit that dispute to arbitration.
Equally I see no reason why, if at the time when they purport, to make the contract they foresee the possibility of such a dispute arising, they should not provide in the contract itself for the submission to arbitration of a dispute whether the contract ever bound them or continues to do so. .
It may require very clear language to effect this result, and it may be true to say that such a contract is really collateral to the agreement supposed to have been made, but I do not see why it should not be done".
But these dicta must be read with the following observations in the same speech: "Where the contract itself is repudiated in the sense that the original existence or its binding force is challenged, e. g., where it is said that the parties never were ad idem, or where it is said that the contract is voidable ab initio (e. g., in cases of fraud, misrepresentation or mistake) and that it has been avoided, the parties are not bound by any contract and escape the obligation to perform any of its terms including the arbitration clause unless the provisions of that clause are wide enough to include the question of jurisdiction" According to Lord Porter, then; there can be an agreement to refer a dispute as to the validity of a contract to arbitration, that where such an agreement is part of the contract which is impugned as invalid, then it can have no existence apart from it and there can be no reference based thereon, but where such an agreement is distinct and separate from the impugned contract.
a reference pursuant thereto will be valid and if is possible that both these agreements might be contained in one document.
192 The law is thus summarised in Halsburys Laws of England, Third Edition, Vol. 2, p. 24,.
par& 56: The matter in question in the legal proceedings which it is sought to stay must be within the scope of the arbitration agreement. . .
If, however, the point in dispute is whether the contract containing the clause was ever entered into at all, or was void ab initio, illegal, or obtained (for example) by fraud duress or undue influence, the clause does not apply and a stay will be refused.
" This question arose incidentally for discussion in the Union of India vs Kishorilal Gupta and Brothers(1) where on an examination of the authorities, including Heyman vs Darwins Ltd. (2) this Court held that an arbitration clause embodied in an agreement is an integral part thereof and that it that agreement is non est either because.
it was never legally in existence or because it was void ab initio.
, then the arbitration clause would also perish with it.
Similar decisions had been given in Tolaram Nathmull vs Birla Jute Mfg. Company Ltd.(3) and Hussain Kasam Dada vs Vijayanagaram Commercial Association(4).
Reference might in this connection be made to section 33 of the which enacts that a party to an arbitration agreement who desires to challenge the existence or validity of an arbitration agreement should apply to the Court for determination of the question.
This section represents the law on the subject as understood in England at the time of that legislation and as declared later by the House of Lords in Heyman vs Darwins Ltd. (2).
The scope of section 33 came up for consideration before this Court in Shiva Jute Baling Ltd. vs Hindley & Co. Ltd. (5).
There a petition had been filed under that section praying inter alia for a declaration that the contract between the parties containing an (1) ; (2) I. (3)) A.I.R. 1945 Mad.
(4) ; (5) (1861) 30 Law.
J. Rep. (N.S.) Banks.
193 arbitration clause, was void ab initio on the ground of uncertainty and that there was in fact no contract owing to mutual mistake and it was held that these were questions for decision by Courts and not by arbitrators.
We are accordingly of the opinion that the dispute that the contract ' dated September 7, 1955, is illegal and void is not one which the arbitrators are competent to decide under cl. 14 and that inconsequence the respondents are entitled to maintain the present application under section 33 of the .
(2)It is next contended for the appellants ,that even if cl. 14 should be held to be inoperative by reason of the fact that the dispute is one relating to the validity of the contract, the respondents are estopped from now challenging the award on that ground, because they appeared before the arbitrators and took part in the proceedings before them.
The decision in Ex p. Wyld (1) is relied on in support of this contention.
In that case a dispute between an assignee in bankruptcy and a creditor, Mr. Wyld, was referred to arbitration on the, basis of an agreement in writing between them.
An award having been pronounced against Mr. Wyld, he disputed its validity on the ground that the assignee had not obtained the leave of the Court for entering into the arbitration.
In rejecting this contention the Court observed that under the law the agreement was binding on Mr. Wyld even though the leave of the Court was not obtained and that therefore he was not entitled to take this objection based on the informality of the submission as he had himself acted on it.
This decision is clearly of no assistance to the appellants because there was a valid and subsisting submission on which the jurisdiction of the arbitrators to bear the dispute was complete, and that was not affected by the failure of the assignee to obtain the requisite (1) (1861) 30 Law J. Ref.
(N.S.) Bankr.
194 leave because that was a matter between him and the Court.
But here if the agreement dated September 7, 1955, is void then there was no submission which was alive on which the arbitrators could act and the proceedings before them would be wholly without jurisdiction.
If there had been another arbitration agreement apart from and independent of cl. 14 of the contract dated September 7, 1955, it might have been possible to sustain the proceedings before the arbitrators as referable to that agreement.
But none such has been set up or proved in the present case.
All that is alleged is that the respondents acquiesced in the proceedings.
But what confers jurisdiction on the arbitrators to hear and decide a dispute is an arbitration agreement as defined in section 2(a) of the , and where there is no such agreement, there is an initial want of jurisdiction which cannot be cured by acquiescence.
It may also be mentioned that the decision in exhibit p. Wyld (1) has been understood as an authority for the position that when one of the parties to the submission is under a disability that will not be a ground on which the other party can dispute the award if he was aware of it.
Vide Russel on Arbitration, 16th Edn, p, 320.
We are therefore Unable to accept the contention of Mr. Sanyal, that the respondents are estopped by their conduct from questioning the validity of the award.
(3)We may now proceed to consider the question whether the contract dated September 7, 1955, is illegal as falling within the prohibition enacted in the notification of the Central Government dated October 29, 1953.
It will be convenient to set out the relevant statutory provisions bearing on this question.
Section 2(i) of the Forward Contracts (Regulation) Act, 1952, (Act 74 of 1952) hereinafter referred to as 'the Act ' (1) (1861) 30 Law J. Ref.
(N.S.) Bank.
10 . 195 defines ready delivery contract ' as meaning "a contract which provides for the delivery of goods and the payment of a price therefore, either immediately or within such period not exceeding eleven days after the date of the contract". 'Forward contract ' is defined in section 2(c) as meaning "a contract for the delivery of goods at a future date and 'which is not a ready delivery contract".
Section 2(m) defines specific delivery contract ' as meaning "a forward contract which provides for the actual delivery of specific qualities or types of goods during a specified future period at a price fixed thereby or to be fixed in the manner thereby agreed and in which the names of both the buyer and the seller are mentioned".
Section 2(f) defines 'nontransferrable specific delivery contract ' as meaning "a specific delivery contract the rights or liabilities under which or under any delivery order, railway receipt, bill of lading, warehouse receipt or any other document of title relating thereto are not transferable" and finally section 2(n) defines transferable specific delivery contract as meaning "a specific delivery contract which is not a non transferable specific delivery contract".
Chapter IV of the Act contains provisions conferring authority on the Central Government to prohibit certain classes of forward contracts.
,Section 15(1) of the Act enacts: "15(1) The Central Government may by notification in the Official Gazette, declare this section to apply to such goods or class of goods and in such areas as may be specified in the notification, and thereupon, subject to the provisions contained in section 18, every forward contract for the sale or purchase of any goods specified in the notification which is entered into in the area specified 196 therein otherwise than between members of a recognised association or through or with any such member shall be illegal.
" Where a notification has been issued under 15(1) it is provided in section 16 that all forward contracts falling within the notification shall be deemed to be closed out and that the seller shall not be bound to give and the buyer shall not be bound to take delivery of the goods".
Then comes section 17 which is as follows: "1711).
The Central Government may, by notification in the Official Gazette, declare that no person shall, save with the permission of the Central Government, enter into any forward contract for the sale or purchase of any goods or class of goods specified in the notification and to which the provisions of section 15 have not been made applicable, except to the extent and in the manner, if any, as may be specified in the notification.
(2)All forward contracts in contravention of the provisions of subsection (1) entered into after the date of publication of the notification thereunder shall be illegal.
(3)Where a notification has been issued under subsection (1), the provisions of sec tion 16 shall, in the absence of anything to the contrary in the notification, apply to all forward contracts for the sale or purchase of any goods specified in the notification entered into on or before the date of the notification and remaining to be performed after the said date as they apply to all for ward contracts for the sale or purchase of any goods specified in the notification under sec tion 15.
" 197 Section 18(1) provides that these provisions shall not apply to non transferable specific delivery contracts for the sale or purchase of any goods.
To analyse the scheme of the Act; it divides Contracts of sale of goods into two categories, 'ready delivery contracts, and 'Forward Contracts '.
Forward Contracts are classified into those which are Specific delivery contracts ' and those which are not.
, Then again "specific delivery contracts ' are divided into transferable specific delivery contracts ' and non transferable specific delivery contracts. ' Section 18(1) exempts from the operation of the Act "non transferable specific delivery contracts '.
The net result of these provisions is that all forward contracts except those which are non transferable specific delivery contracts can be declared illegal by notification issued under the Act.
Such a notification was issued by the Central Government in exercise of the powers conferred by section 17 of the Act, on October 29, 1953.
It is as follows : "No. 2(24) Jute/53 In exercise of the powers conferred by section 17 of the Forward Contracts (Regulation) Act, 1952 (LXXIV of 1952), the Central Government hereby declares that no person shall enter into any forward contract other than a nontransferable specific delivery contract for the sale or purchase of raw jute in any form, except to the extent and in the manner specified below, that is to say: (1)all forward contracts, other than non transferable specific delivery contracts for the sale or purchase of raw jute entered into before the date of this notification and repaining to be Performed after the said date 198 shall be deemed to be closed out at the rate prevailing at the time at which the Forward Market closed on the said date: (2)all differences arising out of any contracts so deemed to be closed out shall be payable on the basis of the rate specified in clause (1) of this notification and the seller shall not be bound to give and the buyer shall not be bound to take delivery of raw jute.
" The contract with which we are concerned in these appeals was entered into on September 7, 1955, when the notification aforesaid was in force, and so it would be hit by it, unless it is a non transferable specific delivery contract and the point for decision is whether it is that.
There is no dispute between the parties that it is a specific delivery contract.
It is between named buyers and sellers the goods are specified, as also the period during which they have to be actually delivered and their price is fixed.
What is in controversy is whether it is transferable or non transferable.
There was considerable argument before us on the question as to assignability of a contract.
The law of the subject is well settled and might be stated in simple terms.
An assignment of a contract might result by transfer either of the rights or of the obligations thereunder.
But there is a well recognised distinction between these two classes of assignments.
As a rule obligations under a contract cannot be assigned except with the consent of the promisee, and when such consent is given, it is really a novation resulting in substitution of liabilities.
On the other hand rights under a contract are assignable unless the contract is personal in its nature the rights are incapable of assignment either under the law or under an agreement between the parties.
199 In the light of the principles stated above, we shall now consider whether the contract dated September, 7, 1955, is or is not transferable.
As it is only a benefit under a contract that can be assigned, the discussion really centres round two questions, are the buyers entitled to assign their right to got the goods on payment of price ? And are the sellers entitled to assign their right to receive the price on delivery of the goods ? On the question as to the rights of the buyers to assign their right to the goods, the matter is clear beyond all doubts, The licence which authorises the appellants to import the goods from East Pakistan also prohibits them expressly from assigning the same.
In this connection it should be noted that, owing to the exigencies of Foreign Exchange, there have been in force, at all material times, restrictions on import of goods.
The nature of these restrictions and the policy behind them were examined by this Court quite recently in Daya vs Joint Controller of imports and Exports (1) and it is unnecessary to repeat them.
It is sufficient for the present purpose to state that the issue of import licences by the Government was restricted to persons who had been engaged in the business of import during a specified period and there were also limitations on the extent to which they could import.
Manufacture of jute occupies the pride of place among the industries of West Bengal.
Raw jute required for the business is largely imported from East Pakistan, and for that purpose import licences were being granted from time to time, to manufactures of jute.
During the period of the contract with which we are concerned the appellants held two import licences from the Government of India (1) No. A 062290/52 and (2) A 063733/52.
The licence No. A 062291)/52 which is in the standard.
(1) ; 200 form is.
so far as it is material for the present dis cussion, as follows: "Import Trade Control.
Office of the Joint Chief Controller of Imports, Calcutta.
Licence No. A 062290152/A.U./C.C.I/C. For Exchange Control purposes only.
Class of Importer.
Actual User or Contract.
(Valid at any Indian Port).
(Not transferable except under a letter of authority from the authority who issued the licences or from any Import Trade Controller).
Messrs. Khardah Co. Ltd. of 7.
Wel lesley Place, Calcutta are hereby authorised to import the goods of which particulars are given below : 1.
Country from which consigned .
Pakistan 2.
Country of origin . " 3.
Description of goodsRaw Jute .
Raw Jute 4.
Serial No. and part of the I.T.C. Schedule . 174 IV 5, Quantity . 50,000 Mds. (Fifty thou . sant ma . unds only).
This licence is issued subject to the condition that the goods will be utilised only for consumption as raw material or accessories in the licence bolder 's factory and that no portion thereof will be hold to any party.
" 201 It will be noticed that the licence is non transferable and that further the goods to be imported are not to be sold to any party but to be utilised for manufacture in the factory of the licencee.
In view of the terms of the licence there can be no question of assignment of the contract by the buyers.
That is not disputed.
Turning next to the sellers, can they assign their right to the price on delivery of the goods ? The learned Judges in the Court below held that they could, because there was noting personal in the contract, and nothing in its terms which barred the right to assign a benefit which a party had under the general law.
The appellants assail the correctness of this decision.
They contend the terms of the contract must be construed in the light of the surrounding circumstances, and especially of the import licence, and that if that is done, the pro.per conclusion to come to is that the agreement is not transferable.
This contention must now be examined.
The appellants sought, in the first instance, to establish on the basis of clauses 12 and 14 that the agreement is personal in its character, and is therefore not assignable.
Now the contract in question is one for the sale of goods, and ordinary there can be nothing personal about it.
It is of no consequence to the buyer as to who delivers the goods.
What matters to him is that the goods delivered should be in accordance with the specifications.
But it is argued that the status of the parties was a determinative factor in the making of the agreement, and that is sought to be deduced from el. 12 of the contract.
That clause provides that if either or both the parties to the contract are members of the Indian Jute Mills Association and if either of them is placed in the disapproved list of Association then the contract shall be deemed to 202 have been broken by that party.
That shows, it is said, that the contract was entered into on the faith of the status of the parties as members of the Jute Mills Association.
But it is clear from the wording of the clause that the parties to the contract need not necessarily be members of the Association and that being so, the element of status does not enter into it.
Clause 14, Which is the arbitration clause, is also relied on as an indication that the contract is personal in its character and incapable of assignment on that ground.
But it is settled law that an arbitration clause does not take away the right of a party to a contract to assign it if it is otherwise assignable.
Vide Shayler vs Woolf (1) and Russel on Arbitation, 16th Edition, p. 65.
It is also argued that the rights conferred on the 'sellers under el. 8 are incapable of assignment in law, and that is an indication that the rights under the agreement are not transferable.
Clause 8 confers on the sellers certain rights against buyers, such as the rights to resell and so forth, when the latter refuse to accept the documents.
What is said is that these rights cannot be assigned in law as they are really claims founded on breach of contract by the buyers.
That undoubtedly is so, but that does not conclude the question.
There is in law a clear distinction between assignment of rights under a contract by a party who has performed his obligations thereunder, and assignment of a claim for compensation which one party has against the other for breach of contract.
The letter is a mere claim for damages which cannot be assigned in law, the former is a benefit under an agreement, which is capable of assignment.
The fact therefore that the rights under el. 8 are incapable of assignment does not stand in the way of the respondents assigning their rights to receive the ice after they had performed their obligations.
Pr (1) 203 That brings us on to cl. 3 on which the appellants mainly.
Under that clause the sellers are entitled to receive the price only on their delivering to the buyers the full set of shipping documents.
Now the argument is that as the delivery of documents and payment of cash are to be simul taneous, it is a case of benefit under a contract being burdened with a liability, and that such a benefit is incapable of assignment under the law.
The learned Judges in the Court below took the view that there was nothing in this clause which prevented the seller from transferring the documents to a third party authorising him to deliver them to the buyers, and then to receive the price from them, and they further observed.
"Although in presenting the shipping documents the transferee from the seller may act as his agent, he will not be an agent in receiving payment from the buyer, because the right to receive the payment has been transferred to him and has become his own right".
The respondents maintain that that is the correct view to take of the rights of the parties under this clause and rely on the statements of law in Halsbury 's Laws of England, and the decision British Waggon Co. vs Lea (1).
In Halsbury 's Laws of England, 3rd Edn., Vol. 8, p. 258, para 451, the law is thus stated : "There is, however, no objection to the substituted performance by a third person of the duties of a party to the contract where the duties are disconnected from the skill, character, or other personal qualifications of the party to the contract.
ID such a circumstance, however, the liability of the original contracting party is not discharged, and the only effect is that the other party may be able to look to the third party for the performance of the contractual obligations in addition to the original contracting party".
In British Waggon Co. vs leg(1) the facts (1) , 154.
204 were that a company called the Parkgate Waggon Company had hired waggons to the defendant on the terms that he should pay rent for their use, and that the Company should execute the necessary, repairs for them.
The company then assigned its rights under the contract to another company called the British Company, subject to the obligation to execute the repairs.
In accordance with his agreement the assignee did execute the repairs.
Thereafter Parkgate Waggon Co, demanded rent from the defendant, who resisted the claim on the ground that the Company had disabled itself from performing the contract, by reason of assignment to which he had not consented.
In overruling this contention the Court observed that as the work to be done under the contract did not require personal skill Or confidence, the Parkgate Waggon Company could get it done by any person, and that would be sufficient performance.
This decision would be in point if the respondents had arranged to deliver the jute to the appellants through another person, and then claimed the price, and that claim was disputed.
But it is not an authority on the question which we have to decide, whether the assignment of the benefit under the contract burdened as it is with an obligation would itself be valid.
It is true that the Court observed in passing "That a debt accruing due under a contract can, since the passing of the Judicature Acts, be assigned at law as well as equity, cannot since the decision in Brice vs Bannister(1) be disputed".
But it should be noted that both the companies figured is plaintiffs, and therefore it is not possible to read chose observation as a decision that an assignment of a benefit burdened with an obligation is valid.
It was argued for the respondents that it would have been open to them to first obtain the requisite certificate from the Dank in East Pakistan (1) 205 then deliver it to the appellants, and then assign their right to the price.
But the question is not what could have been done by a seller in a forward contract generally, but what was in fact contemplated by the parties to this contract under el. 3, The provisions that the shipping documents in Pakistan should be taken in the name of ' the buyer that the sellers should deliver them to the buyers and receive the price, and that the goods should be delivered at the Mills of the buyers, strongly suggest that the intention of the parties was, that neither of them should assign the contract.
Whatever doubts one might have as to the true import of cl, 3 it may be conceded, that it lends itself to the construction put on it by the learned Judges in the Court below, the position becomes unmistakably clear when it is construed in the light of the import licence in favour of the appellants.
It has been already mentioned that it is this which authorises the appellants to import raw jute from East Pakistan.
It is statedly not transferable, and further the goods imported thereunder are to be used only for consumption in the Mills of the appellants.
It is contended for the respondents that they are not parties to this licence and that their rights under the general law to assign benefits under the contract remain unaffected by it.
This is to take too narrow a view of the true position.
Far from being strangers to the licence, the evidence clearly establishes that they are very intimately associated with it.
On September 26, 1955, acting under licence No, A 062290/52 the appellants wrote to the Joint Chief Controller of Imports and Exports, Government of India, to "issue a letter of authority in favour of sellers Messrs. Raymon & Company (India) Ltd., for 2,500 maunds jute cuttings to be imported from Narayanganj, (East Pakistan), against the above (licence)." 206 The letter of authority was received by the appellants on September 29, 1956, and they sent it on to the respondents with the following letter "Dear Sirs, Contract No. 2306 We are sending.
here with the Exchange Control Copy of Letter of Authority for 1250 Mds.
Jute cuttings against the above." Contract No. 2306 referred to in this letter is the contract dated September 7, 1955, involved in this dispute.
It is on the strength of this letter of authority that the respondents opened a letter of credit with a Bank in East Pakistan and the goods were imported.
We have not overlooked the fact that while the contract is dated September 7, 1955, the licence is dated September 22, 1955, and the letter of authority to the respondents is even later, and it might strike one as an anachronism to read the licence and the letter of authority into the contract.
But it should be remembered that the licences are in standard form and are renewed from time to time except as to details concerning the imports, and the course of business followed in the jute market was throughout in conformity with the conditions laid down.
in the licence and was of the same pattern.
Now the agreement provides that the shipping documents in Pakistan are to be taken in the name of the buyers that the sellers are "to open letter of credit" and that the goods are to be delivered ,at the buyer 's Mill siding".
We have no doubt that these terms have been inserted with a view to give effect to the conditions on which licences are granted and that it was the understanding of both the sellers and buyers that the rights under the contract were not to be transferred.
207 But it is argued for the respondents that unless there is in the contract itself a specific clause prohibiting transfer, the plea that it is not transferable is not open to the appellants and that evidence aliunde is not admissible to establish it and the decision in Seetharamaswami vs Bhagwathi Oil Company(1), Hanumanthiah vs Thimanthiah(2) and Hussain Kasam Dada vs Vijayanagaram Comm.
Asson.
(3) are relied on in support of this position.
We agree that when a contract has been reduced to writing we must look only to that writing for ascertaining the terms of the agreement between the parties but it does not follow from this that it is only what is set out expressly and in so many words in the document that can constitute a term of the contract between the parties.
If on a reading of the document as a whole, it can fairly be deduced from the words actually used therein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term.
The terms of a contract can be expressed or implied from what has been expressed.
It is in the ultimate analysis a question of construction of the contract.
And again it is well established that in construing a contract it would be legitimate to take into account surrounding circumstances.
Therefore on the question whether there was an agreement between the parties that the contract was to be non transferable, the absence of a specific clause forbidding transfer is not conclusive.
What has to be seen is whether it could be held on a reasonable interpretation of the contract, aided by such considerations as can legitimately be taken into account that the agreement of the parties was that it was not to be transferred.
When once a conclusion is reached that such was the understanding of the parties, there is nothing in law which prevents effect from being given to it.
That was the view (1) (2) A.I.R. 1954 Mod. 87.
(3) A.I.R. 1958 Mad. 528, 531. 208 taken in Virjee Daya & Co. vs Ramakrishna Rice & oil Mills(1), and that in our opinion is correct.
It remains to deal with one other question on which the parties have been at issue.
It turns on a consideration of section 2(f) of the Act.
A non transferable specific delivery contract is defined in section 2(f), omitting what is not material, as a specific delivery contract the rights or liabilities under which are not transferable.
Now the contention of the appellants is that as admittedly the liabilities under the contract are not transferable it is a non transferable contract within section 2(f).
But the res pondents argue that on that construction no forward contract will be hit by the notification because liabilities under the contract can never be transferred and so the notification would become futile.
They accordingly contend that word or ' should be read as an& and that on that construction unless both the rights and liabilities under the contract are non transferable it is not a non transferable contract as defined in a. 2(f).
The appellants urge that on this construction no contract would be non transferable as rights under a contract can always be transferred unless it is personal in its character and the section would become practically useless.
The intention of the legislature as expressed in the section is, it must be admitted, clouded in obscurity and uncertainty.
But in the view we have taken, that the contract is on its terms properly construed, non transferable, it becomes unnecessary to decide between the arrival contentions as to the true import of section 2(f).
In the result the appeals are allowed with costs one set throughout and one hearing fee.
Appeals allowed.
(1) A.I.R. 1956 Mod.

summary/full:
On September 7, 1955, the appellant company entered into a contract with the respondents for the purchase of certain bales of jute cuttings to be delivered by the respondents in equal installments every month in October, November and December, 1955.
Under cl. 3 of the agreement the sellers were entitled to receive the price only on their delivering to the buyers the full set of shipping documents.
Clause 8 conferred on the sellers certain rights against the buyers such as the right to resell if the latter refused to accept the documents.
Clause 14 provided that all disputes arising out of or concerning the contract should be referred to the arbitration of the Bengal Chamber of Commerce.
As the respondents failed to deliver the goods as agreed the appellants applied to the Bengal Chamber of Commerce for arbitration.
The respondents appeared before the arbitrators and contested the claim, but an award was made in.
favour of the appellant.
Thereupon the respondents filed an application in the High Court of Calcutta under section 33 of the , 184 challenging the validity of the award on the ground that the contract dated September 7, 1955, was illegal as it was in contravention of the notification of the Central Government dated October 29, 1953, issued under section 17 of the Forward Contracts (Regulation) Act, 1952, which declared that no person shall enter into any forward contract other than a nontransferrable specific delivery contract for the sale or purchase of raw jute in any form. . .
The appellant pleaded (1) that on the terms of the arbitration clause the question whether the contract dated September 7, 1955, was illegal was one for the arbitrator to decide and that it was not open to the respondents to raise the same in proceedings under section 33 of the ; (2 ) that the respondents were estopped from questioning the validity of the award by reason of their having submitted to the jurisdiction of the arbitrators ; and (3) that, in any case, the contract was a nontransferrable specific delivery contract within section 2 (f ) of the Forward Contracts (Regulation) Act and was not hit by the notification dated October 29, 1933.
Held, that : (1) the dispute as to the validity of the contract dated September 7, 1955, was not one which the arbitrators were competent to decide under cl. 14 and that in consequence the respondents were entitled to maintain the application under section 33 of the .
When an agreement is invalid every part of it including the clause as to arbitration contained therein must also be invalid.
Leyman vs Darwins Lid.
, , Union of India vs Kighorilal Gupta and Brothers, ; , Tolaram vs Birla Jute Manufacturing Company Lid., I. L. R. , relied on.
(2)the respondents were not estopped by their conduct from questioning the validity of the award.
Ex parte Wyld, (1861) 30 Law J. Rep. (N. section) Bank. 10, explained.
(3)on the true construction of the contract dated Sep tember 7, 1955, read with the terms of the import licence in favour of the appellant, the agreement between the parties was that the contract was not to be transferred.
In construing a contract it would be legitimate to take into account surrounding circumstances and, therefore, on the whether there was an agreement between the parties 185 that the contract was to be non transferable, the absence of a specific clause forbidding transfer was not conclusive.
Virjee Daya & Co. vs Ramakrishna Rice & Oil Mills, A. 1.
R. , approved.
British Waggon Co. vs Lea, , dist inguished.
Accordingly, the contract in question was not hit by the notification dated October 29, 1953.


judgement:
iminal Appeal No. 72 of 1961.
Appeal by special leave from the judgment and order dated December 20, 1960, of the Bombay High Court in Criminal Apeal No. 1207 of 1960.
Jai Gopal Sethi, C.L. Sareen and R.L. Kohli, for the appellant, G. C. Mathur and P. D. Menon, for the respondent.
July 24.
The Judgment of the Court was delivered by SHAH, J.
On May 1, 1962, we ordered after arguments were concluded that the appeal be allowed and the conviction of the appellant be set aside.
We now proceed to record our reasons in support of the order.
398 The appellant, Ramesh Amin, and seven others were tried in the Court of Session, Aurangabad, for offences punishable under sections 366, 366A. Indian Penal Code, and abetment thereof.
The appellant was the third accused at the trial.
The Sessions Judge convicted accused Nos. 1 to 4 and 7 of the offences charged against them and sentenced them to suffer rigorous imprisonment for two years for each offence, and acquitted the rest.
The High Court of Bombay entertained appeal of accused Nos. 1 to 4 (but not of accused No. 7) and set aside the order of conviction and sentence against them for the offences punishable under section 366 read with section 34 and section 366A of the Indian Penal Code.
The High Court, however, convicted the appellant of abetting the seventh accused in inducing a minor girl, Anusaya, to go with other persons from her residence at Kabadipura to Gulzar Theatre, and then to a house known as Bohori Kathada with intent that she may or knowing that she was likely to be seduced to illicit intercourse.
With special leave the appellant has appealed to this Court.
The seventh accused, Patilba, is a resident of Aurangabad, and the eighth accused is his wife.
Anusaya is the daughter of Shakuntala by her husband Kashinath.
After the death of Kashinath, Shakuntala brought her infant daughter Anusaya to the house of Patilba and started living with him as his mistress.
Sometime later Shakuntala left the house of Patilba and took up residence at Nasik but Anusaya 'continued to live with Patilba and was brought up by him.
Marriage was arranged by Patilba between Anusaya and one Ramlal, but Anusaya declined to live with her husband.
Pat ilba introduced Anumaya to some "customers" and she started indulging in promiscuous intercourse, for money.
It was the prosecution case that on January 13, 1960, the appellant went to the residence of Patilba and asked him to bring Anusaya and 399 one Chandrakala (a woman following the profession of a prostitute) to the Gulzar Theatre, and accordingly, Patilba, the eighth accused, Chandrakala and Anusaya went to the Theatre.
At the instance of the appellant, Anusaya and Chandrakala were taken by one Devidas (who has given evidence as an approver) to Bohori Kathada.
Sub Inspector Pagare of the Police Station City Police Chowk, Aurangabad, had received information that some persons were consuming illicit liquor in a room at Bohori Kathada and he arranged to raid that house.
Pagare found accused Nos. 1 to 5 and Devidas in a room consuming liquor.
He also found Chandra kala and Anusaya in an inner apartment, Persons found in the room were arrested and sent for medical examination to the local Civil Hospital, and it was found that Anusaya had not attained the age of 18 years.
Pagare then laid an information before the Judicial Magistrate, Aurangabad, for offence punishable under the Bombay Prohibition Act, 1949 (we are informed at the Bar that in respect of those offences the accused were acquitted and we are not concerned in this case with those offence) and also for offences punishable under sections 366 and 366A of the Indian Penal Code against nine persons including the appellant, Patilba and Devidas.
In the course of proceedings for commitment to the Court of Session, Devidas was tendered pardon on condition of his making a full disclosure of the circumstances within his knowledge.
The case was then committed to the Court of Session, Aurangabad for trial.
The Court of Session held that accused Nos. 1 to 4 had in furtherance of their com mon intention kidnapped Anusaya a girl below the age of 18 years in order that she may be forced or seduced to illicit intercourse or knowing it to be likely that she would he forced or seduced to illicit intercourse, and the seventh accused Patilba had abetted the commission of that offence, and that accused Nos.
1 to 4 and 7 had induced Anusaya to 400 go from her residence to the Gulzar Theatre and from the theatre to Bohori Kathada with intent that she may be or knowing that it was likely that she would be forced or seduced to illicit intercourse.
He accordingly convicted accused Nos. 1 to 4 of the offence under section 366 read with section 34 of the Indian Penal Code and also of the offence under a. 366A of the Indian Penal Code.
The High Court of Bombay in appeal acquitted accused Nos. 1 to 4 of the offence of kidnapping because, in their view, accused Nos. 1 to 4 had "nothing whatever to do with the original kidnapping by Patilba (the 7th accused) and since he was not the lawful guardian of this girl, her being bro ught to this room cannot be regarded as kidnapping".
The learned Judges also acquitted accused Nos, 1 to 4 of the offence under section 366A observing that ,,there is no evidence of any direct talk between any of the accused and the girl, nor even of any inducement offered through Patilba (accused No. 7).
Even so far as accused No, 3 is concerned, there is no direct talk between Anusaya and accused No, 3 which can be regarded as an inducement to her to move either from the house of Patilba or from the theatre to the room in question.
" But in their view the case against tile appellant "did not end with this" : They observed.
"The evidence. . . . clearly indicates that accused No. 3 instigated Pat ilba and Devidas to bring the girl to the theatre and thereafter to the room in question.
Patilba, as we have stated, being in custody of this girl and the girl being minor and helpless, induced or forced her to go to the cinema and thereafter to this room and actually left her there.
So far Patilba was concerned, he intended that she should be forced or seduced to illicit intercourse by one or the other of 401 the accused.
Accused No. 3 by asking Patilba to bring the girl to the theatre and asking Devidas and Patilba to bring the girl to the room clearly instigated Patilba in the comm ission of this offence.
He must, therefore, be held clearly guilty of the offence of abet ment of this offence by Patilba.
" The High Court accordingly convicted the appellant of the offence under section 366A read with section 109 of the Indian Penal Code, because, in their view, he had abetted the commission of an offence punishable under section 366A by Patilba by instigating the latter to bring Anusaya to the theatre and by by further instigating Patilba and Devidas to bring Anusaya from the theatre to Bohori Kathada.
In our view, the appellant cannot in law be held guilty of abetting the commission of an offence punishable under section 366A, Indian Penal Code, by Patilba.
The facts proved by the evidence are these: Anusaya at the material time had not attained the age of 18 years.
She was brought up by Patilba and even though she had married Ram Lal she was at the material time and for many months before living under the guardianship of Patilba.
For a long time before the date of the offence Anusaya was accustomed to indulge in promiscuous intercourse with customers" for money.
She used to entertain, as she herself admitted, "one or two customers every day" and bad before the date of the offence been habituated to the life of a prostitute.
On the day in question she and her companion Chandrakala went to the Gulzar Theatre accompanied by Patilba.
In the theatre Anusaya and Chandrakala were seeking customers: they repaired during the break in the show to the entrance of the theatre for that purpose, but she had to return disappointed because they found a police van parked near the 402 entrance.
Anusaya and the 6th accused went to Bohori Kathada for carrying on their profession as prostitutes.
There is no evidence that she was not willing to go to Gulzar Theatre on the night in question nor is there any evidence that she was unwilling to go to Bohori Kathada to which she and her companion were invited for the purpose of prostitution.
Do these facts make out a case against the appellant of abetment of the offence of procuration of a minor girl punishable under section 366A of the Indian Penal Code? Section 366A was enacted by Act XX of 1923 to give effect to certain Articles of the International Convention for the Suppression of Traffic in Women and Children signed by various nations at Paris on May 4, 1910.
There are three principal ingredients of the offence: (a) that a minor girl below the age of 18 years is induceed by the accused, (b) that she is induced to go from any place or to do any act, and (c) that she is so induced with intent that she may be or knowing that it is likely that she will be forced or seduced to illicit intercourse with another person, The evidence clearly establishes that Anusaya had not at the material time attained the age of 18 years.
But there is no evidence on the record that Patilba induced Anusaya to go to the theratre or from the theatre to Bohori Kathada.
It must be assumed that when Patilba accompanied Anusaya to the theatre and from the theatre to the Bohori Kathada at the suggestion of the appellant he knew that she was going for plying her profession as a prostitute.
But in our judgment a person who merely accompanies a woman going out to ply her profession of a prostitute, even if she has not attained the age of eighteen years, does not thereby commit an offence under section 366A of the Indian Penal Code.
It cannot be said that thereby he induces her to go from any place or to do any act with the intent or knowledge contemplated by the section.
We agree that seduction to illicit intercourse contemplated by the section does not mean merely straying from the path of virtue by a female for the first time.
The verb "seduce ' is used in two senses.
It is used in its ordinary and narrow, sense as inducing, a woman to stray from the path of virtue for the first time: it is also used in the wider sense of educing a woman to submit to illicit intercourse at any time or on any occasion.
It is in the latter sense that the expression has been used in as.
366 and 366A of the Indian Penal Code which sections partially overlap.
This view has been taken in a large number of cases by the Superior Courts in India, e. g. Prafula kumar Basu vs The Emperor (1), Emperor vs Laxman Bala (1), Krishna Maharana vs The King Emperor (3), In re Khalandar Saheb (4) Suppiah vs Emperor (5), Pessumal vs Emperor (6), King Emperor vs Nga Ni Ta (7) and Kartara vs The State (8).
The view expressed to the contrary in Emperor vs Baijnath (9), Saheb Ali vs Emperor (11) Aswini Kumar Roy vs The State (10) and Nara vs Emperor (12) that the phrase used in section 366 of the Indian Penal Code is "Properly applicable to the first act of illicit intercourse, unless there be proof of a return to chastity on the part of the girl since the first act" is having regard to the object of the Legislature unduly restrictive of the content of the expression "seduce" used in the Code.
But this is not a case in which a girl who had strayed from the path of virtue when she (1) Cal. 1074 (2) Bom.
(3) Pat.
(4) A. I. R. (5) A. I. R. 1930 Mad.
(6) (7) (8) I. L. R. [1957] Punjab 2003.
(9) All.
(10) Col. 1457 (11) A. I. R. A. I. R. 404 was in the custody of her guardian and had with a view to carry on her affair accompanied her seducer or another person.
Such a case may certainly fall within the terms of s.366 or s.366A whichever applies.
But where a woman follows the profession of a prostitute, that is, she is accustomed to offer herself promiscuously for money to "customers", and in following that profession she is encouraged or assisted by someone, no offence under section 366A is committed by such person, for it cannot be said that the person who assists a girl accustomed to indulge in promiscuous intercourse for money in carrying on her profession acts with intent or knowledge that she will be forced or seduced to illicit intercourse.
Intention on the part of Patilba or knowledge that Anusaya will be forced to subject herself to illicit intercourse is ruled out by the evidence: such a case was not even suggested.
Seduction implies surrender of her body by a woman who is otherwise reluctant or unwilling to submit herself to illicit intercourse in consequence of persuasion, flattery, blandishment or importunity, whether such surrender is for the first time or is preceded by similar surrender on earlier occasions.
But where a woman offers herself for intercourse for money not casually but in the course of her profession as a prostitute there are no scruples nor reluctance to be overcome, and surrender by her is not seduction within the Code.
It would then be impossible to hold that a person who instigates another to assist a woman following the profession of a prostitute abets him to do an act with intent that she may or with knowledge that she will be seduced to illicit intercourse.
Appeal allowed.

summary/full:
The appellant was convicted of the offence under section 366A read with section 109 of the Indian Penal Code.
The case against him was that A who was a minor below the age of 18 years was brought up by P and had before the date of the offence been habituated to the life of a prostitute.
On the day in question the appellant went to the residence of P and asked him to bring A to a theatre, P accompanied A to the 397 theatre where the latter sought some customers.
They were taken by another person to a place called Bohori Kathada at which place A was invited for the purpose of prostitution.
When P accompanied A to the theatre and from there to Bohori Kathada he knew that she was going for plying her profession as a prostitute.
Held, that the appellant could not in law be held guilty of abetting the commission of an offence under section 366A of the Indian Penal Code by P. A person who merely accompanies a woman going out to ply her profession of a prostitute, even if she has not attained the age of 18 years, could not be said thereby to induce her to go from any place or to do any act with the intent or knowledge that she will be forced or seduced to illicit intercourse within the meaning of section 366 A. Seduction implies surrender of her body by a woman who is otherwise reluctant or unwilling to submit herself to illicit intercourse whether such surrender is for the first time or is preceded by similar surrender on earlier occasions ; but where a person in the course of her profession as a prostitute offers herself for profession as a prostitute offers herself for intercourse, there are no sucruples nor reluctance to be overcome, and surrender by her is not seduction within the Code.