judgement:
Appeal No. 1464 of 1968.
Appeal ,from the judgment and order dated March 18, 1968 of the Patna High Court in C.W.J.C. No. 816 of 1967.
A. K. Sen, Bhola Sen, D. Parkar Gupta, Om Khetan, B.P. Maheshwari and R.K. Maheshwari, for the appellant.
M.C. Chagla and R.C. Prasad, for respondents Nos. 1 and 2.
M.C. Chagla, D.P. Singh, S.C. Agarwal, Uma Dutta and section Chakravarti, for respondent No. 5.
Sobhugmal Jain and Krishna Sen, for respondent Nos. 6 to 8.
The Judgment of the Court was delivered by Hegde, J.
This appeal by certificate arises from the decision rendered on 18th March 1968 by the Patna High Court in C.W.J.C. No. 816 of 1967.
That was a petition filed by the appellant under article 226 of the Constitution praying, inter alia, that the High Court may be pleased to quash the two orders made by the Cane Commissioner, Bihar on November 14, 1967 under which he excluded 99 villages from the area reserved by him in favour of the appellant under cl. 6 of the Sugar Cane (Control) Order 1966 (to be hereinafter referred to as the 'order ') and included those villages in the area reserved in favour of New Siwan Mill (5th respondent in this appeal).
The High Court dismissed that writ petition.
The appellant Co. was established in 1903.
Though its sugar mill is in U.P. it used to draw its sugarcane requirement mainly from the neighboring areas in Bihar State.
The mill in question is within about 100 yards of the Bihar border.
The appellant 's case is that for the last over 30 years the 208 villages of Bihar, with which we are concerned in this appeal had been the principal source of its supply of sugarcane and that the Bihar authorities used to reserve those villages for it.
The appellant claims to have spent huge amount in the development of sugarcane growing areas in the said 208 villages in the course of years.
It also claims to have advanced large sums to the sugarcane growers in the said villages, such sums to be adjusted later on against the price of the sugarcane purchased.
In 1955 the Central Govern 810 ment promulgated the 'order ' in exercise of its powers under the Essential Commodities Act.
One of the main purpose of that order was to regulate the supply and distribution of sugarcane.
Reservation of the said 208 villages in favour of the appellant continued under that order.
But in view of the agitation carried on by the 5th respondent and others, .during the two seasons 1962 63 and 1963 64 those villages were kept unreserved.
Hence any factory was free to make purchases in that area.
Even during that period the appellant continued to get its supplies from that area.
On February 3, 1964, there was a meeting of the Cane Commissioners of Bihar and U.P. with the object of deciding on a long term basis the question of allotting sugarcane grown in the border area among the sugar factories situated near the Bihar U.P. border.
In that meeting it was decided inter alia that the aforementioned 208 villages should be reserved in favour of the appellant; at the same time some of sugarcane growing areas in U.P. were reserved for some of the Bihar sugar mills.
Accordingly the Cane Commissioner of Bihar passed orders reserving the aforementioned 208 villages for the appellant for two seasons i.e. 1964 65 and 1965 66.
For the New Siwan mill (5th respondent) 100 more villages were reserved in Guthani area.
The representation of the New Siwan mill for reserving the 208 villages mentioned earlier was rejected by the Cane Commissioner.
The powers of the Central Government under cls.
6, 7, 8 and 9 of the 'order ' were delegated to the several States and the Cane Commissioners mentioned in the notification issued by the Central Government on July 16, 1966.
The State Government of Bihar and the Cane Commissioner of Bihar are amongst the authorities to whom the powers under those clauses were delegated.
By its order of November 4, 1966, the State Government of Bihar rejected the representation made by New Siwan mill by its application of February 17, 1966 asking for reservation of the 208 villages mentioned earlier.
Thereafter by his order of December 30, 1966, the Cane Commissioner Bihar reserved those villages for the appellant under el.
6(1)(a) of the 'order ' for two seasons (1966 67 and 1967 68).
The New Siwan mill challenged the validity of that order in C.W.J.C. No. 63 of 1967 in the Patna High Court.
The appellant filed its counter affidavit in that proceeding on March 21, 1967.
The application was heard in part on Aprii 13, 1967 and April 14, 1967 but thereafter the case was adjourned.
Later the appellant learnt that the 5th respondent had moved the Chief Minister of Bihar to revoke the reservation made in favour of the appellant.
Apprehending that the appellant 's interest may be jeopardised, one of the Directors of the appellant company wrote to the Chief Minister on June 15, 1967 praying that the reservation made in favour of the appellant should 811 not be disturbed.
Subsequent to that, the appellant made numerous other representations both to the Chief Minister as well as to the Cane Commissioner.
One of the Director of the appellant company met the Chief Minister as well as his Private Secretary.
Meanwhile the 5th respondent was also making representations, to the Chief Minister as well as to the Cane Commissioner.
From the records produced before us, it is clear that the Cane Commissioner was firmly of the opinion that there was no justification for disturbing the reservation made in favour of the appellant.
He strongly recommended to the Chief Minister against interfering with the said reservation.
According to him it was in the interest of the Sugar industry as well as that of the Sugar mills in Bihar not to disturb the agreement arrived at the meeting of the Sugar Cane Commissioners of U.P. and Bihar.
From the records.
produced before us it is seen that one of the grounds urged by the 5th respondent in support of his plea was that while it was a Bihar mill, the appellant was a U.P. mill and as such the Bihar villages should be reserved for its use.
From the note submitted by Shri Taring Sahai, an officer in the Cane Commissioner 's department, to the Assistant Cane Commissioner on July 5, 1967, it is seen that the Chief Minister was interesting himself ' in the controversy between the appellant, and ' the 5th respondent.
That is also clear from the note submitted by section Asanullah another officer in the same department to the Cane Commissioner ' on 7 7 1967.
It is unnecessary to refer to the correspondence that passed between the Cane Commissioner and the Chief Minister but one thing is clear from that correspondence that while the Cane Commissioner was firm in his opinion that the agreement entered into between him and his counter part in U.P. should be respected, the Chief Minister was inclined to alter the reservation made in favour of the appellant.
In the notes submitted by the Assistant Cane Commissioner to the Cane Commissioner we find the following statement: "As verbally ordered by the Cane Commissioner in the background of the above notes of the Assistant Cane Commissioner in connection with the discussions held with the Chief Minister the undersigned examined the geographical positions given in the map.
208 villages of Bihar are reserved for Pratabpur mill.
They are divided as follows: (a) Mirganj police station . 87 (b) Siwan police station . 106 (c) Darauli police station . 15 Total .
208 ", 812 In the note submitted by the Cane Commissioner to the Chic Minister on October 27, 1967, it is stated: "As per order, the above two suggestions (Ka and Kha) have been given for division of 208 villages between the New Siwan Mill and the Pratabpur Mill.
According to one (Ka) the New Siwan Mill gets 121 villages and according to the second proposal (Kha) it gets 99 villages.
As it is clear from the notes of the Assistant Cane Commissioner, the Chief Minister has ordered that most of these 208 villages may be given to the New Siwan Mill.
This order is carried out under proposal 'Kha ', but under it, about 20 22 such villages come as are at a distance of only 2 3 miles from the Pratabpur Mill and the farmers of those villages can also have some objection on account of it.
Hence only after obtaining a clear order from the Chief Minister, the necessary notification will be issued.
Sd/ Illegible 27 10.
" On November 7, 1967, the Chief Minister passed the following order on the above note.
"I agree with the notes as at Kha of page 33.
99 villages be left to the New Siwan Mill and 109 villages to the Pratabpur Mill.
None of the two mills will have the right to keep the weigh bridge of sugar cane collecting centre in the area of each other.
Sd/ Mahamaya Pd.
Sinha 7 11 67.
" On the basis of this direction the Cane Commissioner made the impugned orders on November 14, 1967, which were duly published in the Gazette.
In the High Court the validity of the order made by the Cane Commissioner on November 14, 1967 was challenged on six different grounds i.e. (1 ) that the Cane Commissioner had no jurisdiction to pass those orders; (2) in passing those orders, the Cane Commissioner practically abdicated his statutory functions and mechanically implemented the directions issued by the Chief Minister; (3) the orders are vitiated as the proceeding before the authority culminating in those orders was a quasi judicial proceeding and the authority had failed to afford a reasonable opportunity to the appellant to represent against the orders proposed to be made; (4) even if the proceeding in question should be 813 considered as an administrative proceeding as the orders made involve civil consequence and the proceeding having not been conducted consistently with the rules of natural justice, the impugned orders cannot be sustained; (5) those orders were passed mala fide and lastly (6) they are discriminatory against the petitioner and hence hit by article 14 of the Constitution.
The High Court rejected every one of the contentions.
It came to the conclusion that the Cane Commissioner who had the power to make reservations under cl. 6 of the 'order ' had also the power to modify Or cancel those reservations in view of section 21 of the General Clauses Act; the impugned orders were that of the Cane Commissioner both in fact as well as in law; the proceeding before the Cane Commissioner which resulted in making the impugned orders is a purely administrative proceeding; even if it is considered to be quasi judicial proceeding, reasonable opportunity had been given to the appellant to represent its case and in fact it had represented its case fully and effectively; the plea of mala fide is unsubstantiated and the orders in question did not contravene article 14 of the Constitution.
In this Court Shri A.K. Sen, learned Counsel for the appellant attacked the impugned order on the following grounds: (1) The orders in question though purported to have been made by the Cane Commissioner, were in fact not so; the Cane Commissioner merely acted as the mouth piece of the Chief Minister; in truth he had abdicated his statutory functions and therefore the orders are bad; (2) Every proceeding to modify any reservation made under cl.
6 of the 'order ' is a quasi judicial proceeding.
As the impugned modifications were made without affording the appellant reasonable opportunity for representing its case they are bad in law; (3) Even if the said proceeding is considered as an administrative proceeding, the impugned orders are liable to be set aside on the basis of the rule laid down by this Court in State of Orissa vs Dr. (Miss) Binapani Dei and Ors.
(1), and ( 4 ).
The impugned modifications contravene article 301 of the Constitution.
Shri Sen did not address any arguments on the last ground formulated by him.
Therefore we shall not deal with the same.
The contentions of Shri M.C. Chagla, learned Counsel for the State of Bihar as well as the 5th respondent were as follows: Though the Cane Commissioner had consulted the Chief Minister, the impugned orders were really made by the former, hence it cannot be said that he had abdicated his statutory func (1) ; 814 tions.
According to him, the proceeding before the Cane Commissioner was administrative in character and to such a proceeding rules of natural justice are not attracted.
He further urged that even if it is held that the said proceeding was a quasi judicial proceeding, there was no contravention of the principles of natural justice as the appellant had represented his case fully both before the Chief Minister as well as before the Cane Commissioner.
Before we proceed to examine the contentions advanced on behalf of the parties, it is necessary to refer to the relevant provisions of law.
Clause 5 of the 'order ' which deals with the power to regulation, distribution and movement of sugarcane reads as under: (1) The Central Government may, by order notified in the official gazette: (a) reserve any area where sugarcane is grown (hereinafter in this clause referred to as reserved area) for a factory having regard to the crushing capacity of the factory, the availability of sugarcane in the reserved area and the need for production of sugar, with a view to enabling the factory to purchase the quantity of sugarcane required by it; (b) determine the quantity of sugarcane which a factory will require for crushing during any year; (c) fix, with respect to any specified sugarcane grower or sugarcane growers generally in a reserved area, the quantity or percentage of sugarcane grown by such grower or growers, as the case may be, which each such grower by himself or, if he is a member of a co operative society of sugarcane growers operating in the reserved area, through such society; shall supply of the factory concerned; (d) direct a sugarcane grower or a sugarcane growers ' cooperative society supplying sugarcane to a factory, and the factory concerned to enter into an agreement to supply or purchase, as the case may be, the quantity of sugarcane fixed under paragraph (c); (e) direct that no gur (jaggery) or khandsari sugar or sugar shall be manufactured from sugarcane except under and in accordance with the conditions specified in the licence issued in this behalf; (f) prohibit or restrict or otherwise regulate the export of sugarcane from any area (including a reserved 815 area) except under and in accordance with a permit issued in this behalf.
(2) Every sugarcane grower, sugarcane growers ' co operative society and factory, to whom or to which an order made under paragraph (c) of sub clause (1) applies, shall be bound to supply or purchase, as the case may be, that quantity of sugarcane covered by the agreement entered into under the paragraph and any wailful failure on the part of the sugarcane growers ' cooperative society or the factory to do so, shall constitute a breach of the provisions of this Order: Provided that where the default committed by any sugarcane growers ' co operative society is due to any failure on the part of any sugarcane grower, being a member of such society such society shall not be bound to make supplies of sugarcane to the factory to the extent of such default.
Clause (11 ) deals with delegation of powers.
It reads: "The Central Government may, by notification in the Official Gazette, direct that all or any of the powers conferred upon it by this Order shall, subject to such restrictions, exceptions and conditions, if any, as may be specified in the direction, be exercisable also by: (a) any officer or authority of the Central Government; (b) a State Government or any officer or authority of a State Government." As seen earlier, the Central Government had delegated its power under cl.
(6) to the State Government of Bihar as well as to the Cane Commissioner, Bihar.
In the matter of exercise of the power under rule 6(1) the State Government and the Cane Commissioner are concurrent authorities.
Their jurisdiction is co ordinate.
There was some controversy before us whether a Cane Commissioner who had reserved an area for a sugar factory for a particular period can alter, amend, or modify the area reserved in the middle of the period fixed.
As seen earlier 208 villages With which we are concerned in this case were reserved for the appellant for two seasons i.e. 1966 67 and 1967 68.
The contention was that the Cane Commissioner could not have interfered with that reservation within that period.
The High Court has come to the conclusion that the Cane Commissioner who had the power to make the reservation in question must be held to have had the power to alter or modify that reservation.
But it is not necessary for us to pronounce on this question as we are of the opinion that the 816 impugned orders though purported to have been made by the Cane Commissioner were in fact made by the Chief Minister and hence they are invalid.
We have earlier seen that the Cane Commissioner was definitely of the view that the reservation made in favour of the appellant should not be disturbed but the Chief Minister did not agree with that view.
It is clear from the documents before us that the Chief Minister directed the Cane Commissioner to divide the reserved area into two portions and allot one portion to the 5th respondent.
In pursuance of that direction, the Cane Commissioner prepared two lists 'Ka ' and 'Kha".
Under the orders of the Chief Minister, the villages contained in list 'Ka ' were allotted to the appellant and in list 'Kha ' to the 5th respondent.
The Cane Commissioner merely carried out the orders of the Chief Minister.
It is true that the impugned orders were issued in the name of the Cane Commissioner.
He merely obeyed the directions issued to him by the Chief Minister.
We are unable to agree with the contention of Shri Chagla that though the Cane Commissioner was initially of the view that the reservation made in favour of the appellant should not be disturbed, he changed his opinion after discussion with the Chief Minister.
From the material before us, the only conclusion possible is that the Chief Minister imposed his opinion on the Cane Commissioner.
The power exercisable by the Cane Commissioner under cl.
6(1) is a statutory power.
He alone could have exercised that power.
While exercising that power he cannot abdicate his responsibility in favour of anyone not even in favour of the State Government or the Chief Minister.
It was not proper for the Chief Minister to have interfered with the functions of the Cane Commissioner.
In this case what has happened is that the power of the Cane Commissioner has been exercised by the Chief Minister, an authority not recognised by cl.
(6) read with cl.
(11) but the responsibility for making those orders was asked to be taken by the Cane Commissioner.
The executive officers entrusted with statutory discretions may in some cases be obliged to take into account considerations of public policy and in some context the policy of a Minister or the Government as a whole when it is a relevant factor in weighing the policy but this will not absolve them from their duty to exercise their personal judgment in individual cases unless explicit statutory provision has been made for them to be given binding instructions by a superior.
In Commissioner of Police, Bombay vs Gordhandas Bhanji(1) this Court struck down the order purported to have been passed by the Commissioner of Police in the exercise of his powers (1) ; 817 under the Bombay Police Act and the rules made thereunder as the order in question was in fact that of the Government.
The rule laid down in that decision governs the question under consideratiing.
This Court reiterated that rule in State of Punjab vs Hari Kishan Sharma(1).
Therein this Court held that the State Government was not justified in assuming jurisdiction which had been conferred on the licensing authority by section 5 (1 ) and (2) of the Punjab Cinemas (Regulation) Act.
For the reasons mentioned above we hold that the impugned orders are liable to be struck down as they were not made by the prescribed authority.
This takes us to the question whether the proceeding which resulted in making the impugned orders is a quasi judicial proceeding or an administrative proceeding.
There was some controversy before us whether a proceeding under el.
6(1) of the 'order ' is a quasi judicial proceeding.
It is not necessary for us to decide that question as in this case we are only concerned with the proceeding which resulted in making the impugned orders.
In that proceeding the only question before the authorities was whether all or some of the villages reserved for the appellant should be taken out from the reserved area and reserved for the 5th respondent.
The plea of the 5th respondent was that all those villages should be reserved for it whereas the appellant insisted that the reservation made in its favour should not be disturbed.
Whether there was a lis between the appellant and the 5th respondent at an earlier stage or not, we are of the opinion, as soon as the 5th respondent moved the Government for altering or modifying the reservation made in favour of the appellant, a lis commenced.
The dispute that arose between the appellant and the 5th respondent had to be decided on the basis of the objective criteria, prescribed by cl. 6 of the 'order ' i.e. (1) the crushing capacity of the appellant mill; (2) the availability of the sugarcane in the reserved area and (3) the need for the production of sugar.
There is hardly any doubt that the modification of the reservation made in favour of the appellant would have had serious repercussions on the working of the appellant 's mill.
It was bound to affect its interests adversely.
Hence it is not possible to accept the conclusion of the High Court that the proceeding before the Cane; Commissioner was not a quasi judicial proceeding.
The impugned orders are similar to orders revoking or modifying licenses.
It would not be proper to equate an order revoking or modifying a licence with a decision not to grant a licence.
Therefore Shri Chagla is not right in his contention that (1) ; 818 in this case we are called upon to deal with a privilege and not right.
As observed by S.A. De Smith in his Judicial Review Administrative Action (2nd Edn.) at p. 211: "To equate a decision summarily to revoke a licence with a decision not to grant a licence in the first instance may be still more unrealistic.
Here the "privilege" concept may be peculiarly inapposite; and its aptness has not been enhanced by the manner in which it has been employed in some modern cases.
It is submitted that the courts should adopt a presumption that prior notice and opportunity to be heard should be given before a licence can be revoked.
The presumption should be rebuttable in similar circumstances to those in which summary interference with vested property rights may be permissible.
That the considerations applicable to the revocation of licences may be different from those applicable to the refusal of licences has indeed been recognised by some British statutes and a number of judicial decisions in other Commonwealth jurisdictions.
" In Province of Bombay vs Kusaldas section Advani and Ors.(1) Das, J. formulated the following tests to find out whether proceeding before an authority or a tribunal . 'is a quasi judicial proceeding : (i) that if a statute empowers an authority, not being a Court in the ordinary sense, to decide disputes arising out of a claim made by one party under the statute which claim is opposed by another party and to determine the respective rights of the contesting parties who are opposed to each other, there is a lis and prima facie and in the absence of anything in the statute to the contrary it is the duty of the authority to act judicially and the decision of the authority is a quasi judicial act; , 'red (ii) that if a statutory authority has power to do any act which will prejudicially affect the subject, then although there are not two parties apart from the authority and the contest is between the authority proposing to do the act and the subject opposing it, the final determination of the authority will yet be a quasi judicial act provided the authority is required by the statute to act judicially.
These tests were adopted by this Court in Shivji Nathubhai vs The Union of India and Ors.(2).
Therein this Court was (1) ; at p. 725.
(2) ; 819 considering the validity of cancellation in review by the Central Government a mining lease granted by the State Government.
In that context this Court held that even if the act of the State Government in granting a mining lease was an administrative act, it was not correct to say that no right of any kind passed to the lessee until the review was decided by the Central Government where a review had been applied for.
Rule 52 of the rules framed under the Mines and Minerals (Regulation and Development) Act, No. 53 of 1941 which gives the aggrieved party the right to a review created a lis between him and the lessee and, consequently, in the absence of anything to the contrary either in rule 54 or the statute itself there could be no doubt that the Central Government is required to act judicially under rule 54.
This Court in Board of High School and Intermediate Education U.P, Allahabad vs Ghanshyam Das Gupta and Ors.(1) held that where the statute in question is silent as to the manner in which the power conferred should be exercised by the authority acting under it, the exercise of power will depend on the express provisions of the statute read alongwith the nature of the rights affected, the manner of disposal provided, the objective criteria, if any, to be adopted, the effect of the decision on the persons affected and other indicate afforded by the statute.
The mere fact that the Act in question or the relevant Regulations do not make it obligatory on the authority to call for an explanation and to hear the person concerned is not conclusive on the question whet her the authority has to act as a quasi judicial body when exercising its power under the statute.
On applying the various tests enunciated in the above decisions, there is hardly any doubt that the proceeding before the Cane Commissioner was a quasi judicial proceeding.
In this connection reference may be usefully made to the decision of the Court of Appeal of New Zealand in New Zealand Dairy Board vs Okitu Co operative Dairy Co., Ltd.(2).
We are referring to that decision because the facts of that case bear a close resemblance to the facts of the present case.
Therein as a result of a Zoning Order made by the Executive Commissioner of Agriculture in May 1937, the respondent dairy company, carrying on business in Gisborne and the surrounding district, and the Kia Ora Co operative Dairy Co. Ltd. became entitled to operate exclusively in a defined area in the Gisborne district.
They were excluded from operating outside that area.
The zoning conditions so established continued to exist until 1950, when the appellant Board issued the zoning orders which were impugned in that case.
It may be noted that the zoning orders were made in the exercise of the statutory power conferred on the appellant board.
[1962] Supp. 3 S.C.R. 36.
(1953) New Zealand Law Reports p. 366.
820 Before 1942, the respondent Co. was approached by the Health Department with a request that it undertakes the treatment and supply of pasteurised milk to the public ' schools, and it was informed that other dairy companies had declined the proposal.
the company complied with the request, after overcoming the difficulties of finance.
The scheme was put into operation.
In 1942 the respondent company put up a treatment plant and expanded its business.
This expansion resulted in an annual turnover in the company 's milk department going upto about A 90,000 as against pound 43,000 in its butter department.
In March, 1950, the Kia era company, by letter, expressed its desire that the appellant Board (which had been substituted by regulation for the Executive Commission) should examine the question of cream and milk supplies in the Gisborne and surrounding districts.
This letter was, in substance, an application to the Board to review the whole question of zoning and to require the respondent company to cease the manufacture of butter.
Moreover the letter set out the circumstances in a manner prejudicial to the respondent company.
After various meetings and negotiations between the appellant Board, companies concerned, and interested parties, at none of which were the contents of the Kia Ora company 's letter to the Board disclosed to the respondent company, no agreement was reached.
The result of discussions with the Kia Ora company and detailed replies to complaints were given to the Board by the respondent company, and its letter ended with a statement to the effect that it would appreciate the privilege of appearing before the full Board with the object of stating its case more fully or of answering any questions.
The Board ignored this specific request.
At a full meeting of the Board held on May 31, 1950, the Board decided that only one butter factory should operate in the Gisborne district.
On August 3, the Board by resolution, decided to give notice of its intention of issuing a zonal order to operate as from October 1, 1950 assigning to the Kia Ora company the cream collection area over which the two companies then operated.
On August 29, the respondent company wrote to the Board protecting against its proposal and asking for recession of the Board 's resolution and ,for an opportunity of being heard.
On September 2, 1950, the appellant Board in exercise of the power conferred upon it by Regulation 716 of the Dairy Factory Supply Regulations, 1936 and in terms of its resolution of August 3, 1950, made Zoning Order No./20 which was the subject of the proceedings before the Supreme Court of New Zealand.
That order was to come into force on October 1, 1950.
Its effect was to assign exclusively to the Kia Ora Co. the area defined in Zoning Order (No. 30) of 1937 as that in which the two companies could jointly collect cream produced in supplying dairies situated in that area, and ' to prohibit the res 821 pondent dairy company after October 1, 1950 from collecting or receiving any cream so produced for the purposes of manufacture into cream or butter.
The respondent company and others presented a petition to the Parliament praying for relief and remedy by way of legislation either in the direction of reversing and setting aside the Board 's decision in the matter of the zoning order or setting aside such decision and rehearing of the matter by an independent tribunal.
The petition was heard by a select Committee of the House of Representatives, which decided to make no recommendation on the petition.
On August 4, the Board made an amended Zoning Order (No. 120A) postponing until June 1, 1951, the date of the coming into operation of Zoning Order No. 120 already made, but otherwise confirming that order.
The respondent company commenced an action against the Board claiming (a) a declaration that Zoning Orders Nos. 120 and 120A issued by the Board were invalidly passed and were of no legal effect; (b) an order of certiorari to remove into the Supreme Court and quash the zoning orders; and (c) an injunction restraining the Board from carrying out its intention of promulgating the zoning orders or from proceeding further or exercising any jurisdiction in accordance with the same.
The action was heard by Mr. Justice Hay, who found that, in the conduct of the inquiry instituted by the Board, following the application made to it by the Kia Ora Company, there was, in the various respects mentioned in the judgment, a departure from those principles of natural justice which were incumbent on the Board; and in particular, the plaintiff company was denied a hearing on the crucial issue as to whether or not a zoning order should be made.
The learned Judge held that the plaintiff company was entitled to succeed in the action in respect of all the reliefs it claimed and he gave the judgment in its favour with costs against the Board.
The Court of Appeal affirmed by majority the judgment of the learned trial judge.
The Court held that the New Zealand Dairy Board in making its zoning order No. 120 on September 1, 1950 was determining a question affecting the rights of the respondent company and further that the order of the Board was that of a body that was, at least primarily, an administrative body and the question whether such a body was under a duty to act judicially in the course of arriving at an administrative decision was to be determined on the true construction of the authorising legislative provisions and the conditions and circumstances under which, and in which, the jurisdiction fell to be exercised.
It held that on the facts and circumstances of the case the power exercised by the Board vitiated as the Board had failed to conform to the principles of natural justice in making the zoning order in question and hence the same is unsustainable.
The decision 822 Of the Privy Council in James Edward Jeffs and Ors.
vs New Zealand Dairy Production and Marketing Board and Ors.
(1) proceeded on the basis that the aforementioned decision of the Court of Appeal is correct.
Shri Chagla contended that even if we are to hold that the power exercised by the authorities in making the impugned orders had to be exercised judicially, on the facts of his case we must hold that there was no contravention of the principles of natural justice.
He took us to the various representations made by the appellant.
According to him the appellant had stated in its representations to the authorities all that it could have said on the subject.
Therefore we should not hold that there was any contravention of the principles of natural justice.
It is true as observed by this Court in Suresh Koshy George vs The University Kerala and Ors.(2) that "the rules of natural justice are not embodied rules.
The question whether the requirements of natural justice have been met by the procedure adopted in a given case must depend to a great extent on the facts and circumstances of the case in point, the constitution of the tribunal and the rules under which it functions.
" In this case what has happened is that both the appellant as welt as the 5th respondent were making repeated representations to the Chief Minister as well as to the Cane Commissioner.
The representations made by the 5th respondent or even the substance thereof were not made available to the appellant.
The proposal to split the reserved area into two or the manner in which it was proposed to be split was not made known to the appellant and his objections invited in that regard.
The appellant complains that the manner in which the area had been divided had caused great prejudice to it.
Its grievance may or may not be true but the fact remains that it had no opportunity to represent against the same.
Hence the appellant is justified in complaining that the principles of natural justice had been contravened.
In view of our finding that the proceeding which resulted in the making of the impugned orders was a quasi~judicial proceeding, it is unnecessary to decide whether the impugned orders could have been validly made in an administrative proceeding.
We see no merit in the contention advanced on behalf of the 5th respondent that the Cane Commissioner was not competent to reserve the area in question for the appellant as its mill is in U.P.
The reserved area is in Bihar.
The Cane Commissioner of Bihar had power to reserve that area for any sugar mill whether situated in Bihar or not.
[1967] A.C. 551.
(2) ; 823 The contention of Shri Chagla that as no orders had yet been passed under cls.
6(c) and (d) of the 'order ' the ,appellant cannot be considered as an aggrieved party is not correct.
As soon as a portion of the area reserved for the appellant was ordered to be taken away and added to the reserved area of the 5th respondent, the appellant 's interest was adversely affected.
Therefore it is immaterial for the appellant what orders are passed under sub cls.
(c) and (d) of el.
6 of the 'order ', because it can no more get any sugarcane from the area in question.
What hurts the appellant is the impugned orders and not the further orders that may be passed.
For the reasons mentioned above this appeal is allowed and the orders impugned quashed.
The State of Bihar as well as the 5th respondent shall pay the costs of the appellant both in this.
Court as well as in the High Court.
G.C. Appeal allowed.

dataset_name: IN-Abs

summary/full:
The Sugar Cane (Control) Order, 1955 was promulgated by the Central Government in the exercise of its powers under the Essential Supplies Act.
Under cl. 6 of the Order the Central Government could reserve any area where sugarcane was grown for a factory taking into account various relevant 'factors.
Clause 11 allowed the Central Government to delegate its power under el. 6, and the Central Government by a notification dated July 16, 1966 delegated the said power to the several State Governments and the Cane Commissioners of those States.
The appellant was a sugar mill situated in U.P. near the border of Bihar State.
For a long time its source of supply of sugarcane had been the neighboring area of Bihar State consisting of 208 villages.
For the seasons 1966 67 and 1967 68 the 5th respondent a sugar mill situate on the Bihar side of the order sought to have the area reserved for itself but by order dated November 30, 1966 the request was rejected by the State Government.
In December 1966 the Cane Commissioner, Bihar passed an order under el.
6(1) of the Sugar Cane (Control) Order reserving the said area of 208 villages for the appellant for the seasons 1966 67 and 1967 68.
The 5th resportdent made representations to the Chief Minister.
Acting on directions given by the Chief Minister the Cane Commissioner, Bihar passed orders on November 14, 1967, whereby by a notification in the Bihar Government Gazette 121 of the aforesaid villages were reserved for the appellant and 99 villages for the 5th respondent.
The appellant filed a writ petition in the High Court challenging this order of the Cane Commissioner but the petition was rejected.
With certificate appeal was filed in this Court.
The contentions urged on behalf of the appellant were: (i) The orders in question though purported to have been made by the Cane Commissioner were in fact not so, and were therefore invalid; (ii) Every proceeding to modify any reservation under cl. 6 is a quasi judicial proceeding.
As the impugned notifications were made without affording the appellant reasonable opportunity for representing its case they were bad in law; (iii) Even if the said proceeding was considered an administrative proceeding the impugned orders were liable to be set aside on the basis of the rule laid down by this Court in State of Orissa vs Dr. (Miss) Binapani Dei, ; HELD: (i) From the material on record the only conclusion possible was that the Chief Minister imposed his opinion on the Cane Commissioner.
The power exercisable by the Cane Commissioner under cl.
6(1) is a statutory power.
He alone could have exercised that power.
While exercising that power he cannot abdicate his responsibility in favour of anyone not even in favour of the State Government or the Chief Minister.
It was not proper for the Chief Minister to have interfered with the 808 functions of the Cane Commissioner.
In this case what had happened was that the power of the Cane Commissioner had been exercised by the Chief Minister, an authority not recognised by el.
(6) read with cl.
(11) but the responsibility for making those orders was asked to be taken by the Cane Commissioner.
The executive officers entrusted with statutory discretions may in some cases be obliged to take into account considerations of public policy and to some context the policy of a Minister or the Government as a whole when it is a relevant factor in weighing the policy but this will not absolve .
them from their duty to exercise their personal judgment in individual cases unless explicit statutory provision has been made for them to be given binding instructions by a superior.
[816] Commissioner of Police, Bombay vs Gordhandas Bhanji, ; and State of Punjab vs Hari Kishan Sharma, A.I R. , applied.
(ii) As soon as the 5th respondent moved the Government for altering or modifying the reservation made in favour of the appellant, a lis commenced.
The dispute that arose between the appellant and the 5th respondent had to be decided on the basis of the objective criteria, prescribed by el. 6 of the order i.e. (1 ) the crushing capacity of the appellant mill; (2) the availability of the sugarcane in the reserved area and (3) the need for the production of sugar.
There could hardly be any doubt that the modification of the reservation made in favour of the appellant would have had serious repercussions on the working of the appellant 's mill.
It was bound to affect its interests adversely.
Hence it was not possible to accept the conclusion of the High Court that the proceeding before the Cane Commissioner was not a quasi judicial proceeding.
[817 E H] Province of Bombay vs Kusaldas section Advani & Ors., ; at p. 725, Shivji Nathubhai vs The Union of India, ; , Board of High School and Intermediate Education U.P. Allahabad vs Ghanshyam Das Gupta & Ors., [1962] 3 Supp.
S.C.R. 36.
New Zealand Dairy Board vs Okitu Co operative Dairy Co. Ltd., (1953) New Zealand Law Reports.
p. 366, and James Edward Jeffs & Ors.
vs New Zealand Dairy Production & Marketing Board & Ors., [1967] A.C.p. 551, referred tO. (iii) In the present case both the appellant and the 5th respondent were making repeated representations to the Chief Minister as well as to the Cane Commissioner.
The representations made by the 5th respondent or even the substance thereof were not made available to the appellant.
The proposal to split the reserved area into two or the manner in which it was proposed to be split was not made known to the appellant and his objection invited in that regard.
It had no opportunity to represent against the same.
Hence the appellant was justified in complaining that the principles of natural justice had been contravened.
[822 D F] Suresh Koshy George vs The University of Kerala & Ors., ; , referred to.
(iv) The appellant 's interest was adversely affected by the impugned order and the contention of the respondent that as no orders had been passed under cls.
6(c) and (d) of the 'order ' the appellant could not be considered as an aggrieved party.
was not correct.
[823 A] 809 [The Court did not consider it necessary to decide the questions (a) whether the impugned orders could have been validly made in an administrative proceeding, (b) whether the Cane Commissioner who. had the power to make the reservation in question also had the power to alter or modify that reservation]


judgement:
Appeals Nos. 2251 and 2252 of 1968.
Appeals by special leave from the judgment 'and order dated ' October 9, 1968 of the Madras High Court in O.S.A. Nos. 26 and 27 of 1968 and Civil Appeals Nos. 2305 and 2306 of 1968.
Appeals by special leave from the judgment and order dated April 12, 1968 of the Madras High Court in Applications Nos. 1760 and 2455 of 1967 in C.S. No. 118 of 1967.
M.C. Setalvad, V.P. Raman, D.N. Mishra and 1.
B. Dadachanji for the appellant (in C.As.
Nos. 2251 and 2252 of 1968) and respondent No. 1 (in C.As. 2305 and 2306 of 1968).
section Mohan Kumaramangalam, M.K. Ramamurthi, Shyamala Pappu and Vineet Kumar, for respondent No. 1 (in C.As.
Nos. 2251 and 2252 of 1968) and the appellant (in C.As. 2305 and 2306 of 1968).
Rameshwar Nath and Mahinder Narain, for respondent No. 2 (in all the appeals).
The Judgment of the Court was delivered by Hegde, J.
These are connected appeals.
They arise from Civil Suit No. 118 of 1967 on the original side of the High Court of Judicature at Madras.
Herein the essential facts are few and simple though the question of law that arises for decision is of considerable importance.
The suit has been brought by M/s. Tarapore & Co., Madras (hereinafter referred to as the "Indian Firm").
That firm had taken up on contract the work of excavation of a canal as a part the Farakka Barrage Project.
In that connection they entered into a contract with M/s. V/O Tractors Export, Moscow (which 922 will hereinafter be referred to as the "Russian Firm") for the supply of construction machinery such as Scrapers and Bulldozers.
In pursuance of that contract, the Indian Firm opened a confirmed, irrevocable and divisible letter of credit with the Bank of India, Limited for the entire value of the equipment i.e., Rs. 66,09,372 in favour of the Russian Firm negotiable through the Bank for Foreign Trade of the U.S.S.R., Moscow.
Under the said letter of credit the Bank of India was required to pay to the Russian Firm on production of the documents particularised in the letter of credit alongwith the drafts.
One of the conditions of the letter of credit was that 25 per cent of the amount should be paid on the presentation of the specified documents and the balance of 75 per cent to be paid one year from the date of the first payment.
The agreement entered into between the Bank of India and the Russian Firm under the letter of credit was "subject to the Uniform Customs and Practice for Documentary Credits (1962 Revision), International Chamber of Commerce Brochure No. 222".
Article 3 of the brochure says that: " 'An irrevocable credit is a definite undertaking on the part of an issuing bank and constitutes the engagement of that bank to the beneficiary or, as the case may be, to the beneficiary and bona fide holders of drafts drawn and/or documents presented thereunder, that the provisions for payment, acceptance or negotiation contained in the credit will be duly fulfilled, provided that all the terms and conditions of the credit are complied with.
An irrevocable credit may be advised to a beneficiary through another bank without engagement on the part of that other bank (the advising bank), but when an issuing bank authorises another bank to confirm its irrevocable credit and the latter does so, such confirmation constitutes a definite undertaking on the part of the confirming bank either that the provisions for payment or acceptance will be duly fulfilled or, in the case of a credit available by negotiation of drafts, that the confirming bank will negotiate drafts without recourse to drawer.
Such undertakings can neither be modified nor cancelled without the agreement of all concerned.
" Article 8 of the brochure says: "In the documentary credit operations all parties concerned deal in documents and not in goods.
923 Payment, acceptance or negotiation against documents which appear on their face to be in accordance with the terms and conditions of a credit by a bank authorised to do so, binds the party giving the authorisation to take up the documents and reimburse the bank which has effected the payment, acceptance or negotiation . " The only other Article in that brochure which is relevant for our present purpose is article 9 which reads: "Banks assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the general and/or particular conditions stipulated in the documents or superimposed thereon; nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented thereby, or for the good faith or acts and/or omissions, solvency, performance or standing of the consignor, the carriers or the insurers of the goods or any other person whomsoever.
" On the strength of the aforementioned.
contract, the Russian Firm supplied all the machinery it undertook to supply, by about the end of December 1965, which were duly taken possession of by the Indian Firm and put to work at Farakka Barrage Project.
They are still in the possession of the Indian Firm.
After the machinery was used for sometime, the Indian Firm complained to the Russian Firm that the performance of the machinery supplied by it was not as efficient as represented at the time of entering into the contract and consequently it had incurred and continues to incur considerable loss.
In that connection there was some correspondence between the Indian Firm and the Russian Firm.
Thereafter the Indian Firm instituted a suit on the original side of the High Court of Madras seeking an injunction restraining the Russian Firm from realizing the amount payable under the letter of credit.
During the pendency of that suit the parties arrived at an agreement on August 14, 1966 at Delhi (which shah be hereinafter referred to as the Delhi agreement).
The portion of that agreement which is relevant for our present purpose reads as follows: "Tarapore & Co., Madras, agree to withdraw immediately the court case filed by them against 'Tractoro export ' Moscow, in the Madras High Court.
Immediately on Tarapore withdrawing the case, V/O 'Tractoro export ' agree to instruct the Bank for 924 Foreign Trade of the USSR in Moscow, not to demand any further payment against L.C. established by Tarapore & Co., Madras, for a period of six months from the due dates in the first instance.
During this period both the parties shall do theft best to reach an amicable settlement.
In case the settlement between the two parties is not completed within this period of six months V/O Tractors export shall further extend the period of payment by further period of six months for the settlement to be completed.
Tarapore & Co. (shall authorise their Bank to keep the unpaid portions L.C. valid for the extended period as stated above.
" At this stage it may be mentioned that the Russian Firm had received from the Bank of India 25 per cent of the money payable under the letter of credit very soon after it supplied to the Indian Firm the machinery mentioned earlier.
In pursuance of the aforementioned agreement the Indian Firm withdrew the suit.
Thereafter there were attempts to settle the dispute.
In the meantime the Indian Rupee was devalued.
The contract between the Indian Firm and the Russian Firm contains the following term: "Payment for the delivered goods shall be made by the Buyers in Indian Rupee in accordance with the Trade Agreement between the USSR and India dated.
10th June, 1963.
All the prices are stated in Indian Rupees.
One Indian Rupee is equal to 0.186621 grammes of pure gold.
If the above gold content of Indian Rupee is changed the, prices and the amount of this Contract in Indian Rupee shall be revalued accordingly on the date of changing the gold parity of the Indian Rupee.
" This clause will be hereinafter referred to as the 'Gold Clause '.
In view of that clause, the price fixed for machinery supplied stood revised.
Consequently under the contract the Indian Firm had to pay to the Russian Firm an additional sum of about rupees twenty six lacs.
Accordingly the bankers of the Russian Firm called upon the Indian Firm to open an additional letter of credit for payment of the extra price payable under the contract.
They also intimated the Indian Firm that the extension of time for the payment of the price of the machinery supplied, agreed to at Delhi will be given effect to only after the Indian Firm arranges for the additional letter of credit asked for.
The Indian Firm objected to this demand as per its letter of 20th September, 1966.
The relevant portion of that letter reads: 925 "We are rather surprised to see this, because, by our arrangement dated the 14th Aug., 1966, at New Delhi you had agreed to give further time for the payments on the withdrawal of the Madras High Court case.
That was the only condition that was talked about and incorporated in our written agreement.
If you will be good enough to refer to the agreement dated the 14th Aug., 196 '6, you will find that we were obliged to withdraw the Madras suit pending talks of settlement and immediately on our withdrawing this suit, you agreed to instruct your Bankers not to demand any further payment under the letter of credit.
There is absolutely no reference in that agreement to our having to open any additional letter of credit in view of the devaluation of the Indian rupee . .
We would therefore request you to immediately instruct your Bankers in Moscow.
to advise our Bankers regarding the extension of time for payment under the letter of credit without any reference to any additional letters of credit in view of devaluation . .
Moreover, when the entire question is open for amicable settlement between us, it is not possible to determine what exactly will be the amount payable and unless that amount is known, it is not possible to open additional letters of credit to give effect to the gold clause . . " On November 1, 1966, the Russian Firm sent to the Indian Firm addendum No. 1 modifying the original contract in accordance with the gold clause.
The last clause of that addendum recited that "all ,other terms and conditions are as stated in the above mentioned contract" (original contract).
The Indian Firm objected to that addendum as well as to the demand for opening an additional letter of credit.
In that connection the Russian Firm wrote a letter to the Indian Firm on November 29, 1966.
As considerable arguments were advanced on the basis of that letter, we shall quote the relevant portion of that letter : " .
We confirm that you have signed with us the addendum No. 1 to our Contract No. 61/Tarapore 220/65 dated the 2nd Feb., 1965, at our request for the sole and specific purpose of satisfying our bankers.
We confirm further that this addendum will not in any manner prejudice the arrangement we have come to in Delhi on the 14th August, 1966, and is without prejudice to your claims and points of controversy regarding which we shall have further discussions with a view to reach an amicable settlement.
926 Under this addendum, the company will extend the letter of credit for one year and accept the drafts for the difference in value of 57.5 per cent due to devaluation.
The final amount payable will be in accordance with the settlement.
" Thereafter the Russian Firm appears to have drawn drafts on the Indian Firm for the excess amount payable under the gold clause.
For one reason or the other, no settlement as contemplated by the Delhi agreement was reached.
The Indian Firm complained that the Russian Firm never made any serious attempt to resolve the dispute whereas the Russian Firm alleged that it found no substance in the complaint made by the Indian Firm as regards the machinery supplied.
In the suit as brought, as well as in these appeals that controversy is not open for examination.
Suffice it to say that the parties did not amicably settle the dispute in question.
When the extended time granted under the Delhi agreement was about to come to a close, the Indian Firm instituted the suit from which these appeals have arisen.
In that suit the only substantive relief asked for is that the Bank of India as well as the Russian Firm ' should be restrained from taking any further steps in pursuance of the letter of credit opened by the Indian Firm in favour of the Russian Firm.
Therein temporary injunctions were asked for in the very terms in which the permanent injunctions were prayed for.
At a subsequent stage a further injunction restraining the Russian Firm from enforcing its right under the gold clause was also prayed for.
The Russian Firm opposed those applications but the trial judge granted the temporary injunctions asked for.
The Russian Firm took up the matter in appeal to the Appellate Bench of that High Court which reversed the order of the trial judge by its Order dated October 9, 1968 but it certified that they are fit cases for appeal to this Court.
When the applications in the appeals seeking interim orders came up for consideration by this Court the Russian Firm entered its caveat.
It not only opposed the interim reliefs prayed for, it further challenged the validity of the certificates granted by the High Court on the ground that the orders appealed against are not final orders within the meaning of article 133 of the Constitution.
Evidently as a matter of abundant caution, the Indian Firm had filed two separate applications seeking special leave to appeal against the orders of the Appellate Bench of the Madras High Court.
After hearing the parties this Court revoked the certificates granted holding that the orders appealed against are not final orders but at the same time granted special leave to the Indian Firm to appeal against the orders of the Madras High Court.
Civil Appeals Nos.
2051 and 2052 of 1968 are appeals filed by the Indian Firm.
Before the Appellate Bench of the High Court of Madras, the Indian Firm had objected to be maintainability of the appeals 927 filed by the Russian Firm on the ground that orders appealed against are not judgments within the meaning of el. 15 of the Letters Patent of the Madras High Court but that objection had been overruled by the Appellate Bench following the earlier decisions of that High Court.
That contention was again raised in the appeals filed by the Indian Firm in this Court.
To obviate any difficulty the Russian Firm applied to this Court for special leave to appeal against the interim orders passed by the trial judge.
We allowed those applications and consequently Civil Appeals Nos.
2305 and 2306 of 1968 came to be filed.
In view of the appeals filed by the Russian Firm in this Court against the interim orders made by the trial judge it is not necessary to decide whether the appeals filed by the Russian Firm before.
the Appellate Bench of the Madras High Court were maintainable? On that question, judicial opinion is.
sharply divided as could be seen from the decision of this Court in Asrumati Debi vs Kumar Rupendra Deb Rajkot and Ors.(x) Hence we shall, confine our attention to the question whether the temporary injunctions issued by the trial judge are sustainable? The scope of an irrevocable letter of credit is explained ' thus in Halsbury 's Laws of England (Vol.
34 paragraph 319 at p. 185): "It is often made a condition of a mercantile contract that the buyer shall pay for the goods by means of a confirmed credit, and it is then the duty of the buyer to procure Iris bank, known as the issuing or originating bank, to issue an irrevocable credit in favour of the seller by which the bank undertakes to the seller, either directly or through another bank in the seller 's country known as the correspondent or negotiating bank, to accept drafts drawn upon it for the price of the goods, against tender by the seller of the shipping documents.
The contractual relationship between the issuing bank and the buyer is defined by the terms of the agreement between them under which the letter opening the credit is issued; and ' as between the seller and the bank, the issue of the credit duly notified to the seller creates a new contractual nexus and renders the bank directly liable to the seller to pay the purchase price or to accept the bill of exchange upon tender of the documents.
The contract thus created between the seller and the bank is separate from, although ancillary to, the original contract between the buyer and.
the seller, by reason of the bank 's undertaking to the seller, which is absolute.
Thus the bank is not entitled to, (1) ; L6 Sup.
CI/69 8.
928 rely upon terms of the contract between the buyer and the seller which might permit the buyer to reject the :goods and to refuse payment therefore; and, conversely, the buyer is not entitled to an injunction restraining the seller from dealing with the letter of credit if the goods are defective.
" Chalmers on "Bills of Exchange" explains the legal position in these words: ' "The modern commercial credit serves to interpose between a buyer and seller a third person of unquestioned solvency, almost invariably a banker of international repute; the banker on the instructions of the buyer issues the letter of credit and thereby undertakes to act as paymaster upon the seller performing the conditions set out in it.
A letter of credit may be in any one of a number of specialised forms and contains the undertaking of the banker to honour all bills of exchange drawn thereunder.
It can hardly be over emphasised that the banker is not bound or entitled to honour such bills of exchange unless they, and such accompanying documents as may be required thereunder, are in exact compliance with the terms of the credit.
Such documents must be scrutinised with meticulous care, the maim de minimis non curat lex cannot be invoked where payment is made by later of credit.
If the seller has complied with the terms of the letter of credit, however, there is an absolute Obligation upon the banker to pay irrespective of any disputes there may be between the buyer and the seller as to whether the goods are up to contract or not: Similar are the views expressed in Practice and Law of Banking by H.P. Sheldon 'the Law of Bankers Commercial Credits" by H.C. Gutteridge "the Law Relating to Commercial Letters of Credit" by A.G. Davis "the Law Relating to Bankers ' Letters of Credit" by B.C. Mitra and in several other text books read to us by Mr. Mohan Kumaramangalam, learned Counsel for the Russian Firm.
The legal position as set out above was not controverted by Mr. M.C. Setalvad, learned Counsel for the Indian Firm.
So far as the Bank of India is concerned it admitted its liability to honour the letter of credit and expressed its willingness to abide by its terms.
It took the same position before the High The main grievance of the India Firm is that if the Russian Firm is allowed to take away the money secured to it by the letter ' 929 of credit, it cannot effectively enforce its claim arising from the breach of the contract it complains of.
It was urged on its behalf that the Russian Firm has no assets in this country and therefore any decree that it may be able to obtain cannot be executed.
Therefore, it was contended that the trial court was justified in issuing the impugned orders.
The allegation that Russian Firm has no assets in this country was not made in the pleadings.
That apart in the circumstances of this case that allegation has no relevance.
An irrevocable letter of credit has a definite implication.
It is a mechanism of great importance in international trade.
Any interference with that mechanism is bound to have serious repercussions on the international trade of this country.
Except under very exceptional circumstances, the Courts should not interfere with that mechanism.
For our present purpose we shall assume, without deciding, that the allegations made by the Indian Firm are true.
We shall further assume that the suit as brought is maintainable though Mr. Kumaramangalam seriously challenged its maintainability.
But yet, in our judgment, the learned trial judge was not justified in law in granting the temporary injunctions appealed against.
Ordinarily this Court does not interfere with interim orders.
But herein legal principles of great importance affecting international trade are involved.
If the orders impugned are allowed to stand they are bound to have their repercussion on our international trade.
We have earlier referred to several well known treatises on the subject.
Now we shall proceed to consider the decided eases bearing on the question under consideration.
A case somewhat similiar to the one before us came up for consideration before the Queens Bench Division in England in Hamzeh Malas and Sons vs British Imex Industries Ltd.(1) Therein the plaintiffs, a 10 Jordanian firm contracted to purchase from the defendants, a British firm, a large quantity of reinforced steel rods, to be delivered in two instalments.
Payment was to be effected by opening in favour of the defendants of two confirmed letters of credit with the Midland Bank Ltd., in, London, one in ' respect of each instalment.
The letters of credit were duly opened and the first was realized by the defendants on the delivery of ' t, he first instalment.
The plaintiffs complained that that instalment was defective and Sought an injunction to bat the defendants from realizing the second letter of credit.
Donovan 1.
, the trial judge refused the application.
In appeal Jenkins, Sellers and Pearce L.JJ.
confirmed the decision of the trial judge.
In the course of (1) 930 his judgment Jenkins L.J. who spoke for the Court observed thus: "We have been referred to a number of authorities, and it seems to be plain enough that the opening of a 'confirmed letter of credit constitutes a bargain between the banker and the vendor of the goods, which imposes upon the banker an absolute obligation to pay, irrespective of any dispute there may be between the parties as to whether the goods are up to contract or not.
An elaborate commercial system has been built up on the footing that bankers ' confirmed credits are of that character, and, in my judgment, it would be wrong for this Court in the present case to interfere with that established practice.
There is this to be remembered, too.
A vendor of goods selling against a confirmed letter of credit is selling under the assurance that nothing will prevent him from receiving the price.
That is of no mean advantage when goods manufactured in one country are being sold in another.
It is, furthermore, to be observed 'that vendors are often reselling goods bought from third parties.
When they are doing that, and when they are being paid by a confirmed letter of credit, their practice is and I think it was followed by the defendants in this case to finance the payments necessary to be made to their suppliers against the letter of credit.
That system of financing these operations, as I see it, would break down completely if a dispute as between the vendor and the purchaser was to have effect of 'freezing, ' if I may use that expression, the sum in respect of which the letter of credit was opened." In Urquhart Lindsay and Co. Ltd. vs Eastern Bank Ltd.(1) the King 's Bench held that the refusal of the defendants bank to take and_pay for the particular bills on presentation of the proper documents constituted a repudiation of the contract as a whole and that the plaintiffs were entitled to damages arising from such a breach.
It may be noted that in that case the price quoted in the invoices was objected to by the buyer and he had notified his objection to the bank.
But under the terms of the letter of credit the bank was required to make payments.
on the basis of the invoices tendered by the seller.
The Court held that if the buyers had an enforceable claim that adjustment must be made by way of refund by the seller and not by way of retention by the buyer.
(1) 931 Similar opinions have been expressed by the American Courts, The leading American case on the subject is Dulien Steel Products Inc., of Washington vs Bankers Trust Co.(1).
The facts of that case are as follows: The plaintiffs,.
Dulien Steel Products Inc., of Washington, contracted to sell steel scrap to the European Iron and Steel Community.
The transaction was put through M/s. Marco Polo Group Project, Ltd. who were entitled to commission for arranging the transaction.
For the payment of the commission to Marco Polo, plaintiffs procured an irrevocable letter of credit from Seattle First National Bank.
As desired by Marco Polo this letter of credit was opened in favour of one Sica.
The defendant bankers confirmed that letter of credit.
The credit stipulated for payment against (1 ) a receipt of Sica for the amount of the credit and (2 ) a notification of Seattle Bank to the defendants that the plaintiffs had negotiated documents evidencing the shipment of the goods.
Sica tendered the stipulated receipt and.
Seattle Bank informed the defendants that the Dulien had negotiated documentary drafts.
Meanwhile after further negotiations between the plaintiffs and the vendees the price of the goods sold was reduced and consequently the commission payable to Marco Polo stood reduced but the defendants were not informed of this fact.
Only after notifying the defendants about the negotiation of the drafts drawn under the contract of sale, the Seattle Bank informed the defendants about the changes underlying the transaction and asked them not to pay Sica the full amount of the credit.
The defendants were also informed that Sica was merely a nominee of Marco Polo and has no rights of his own to the sum of the credit.
Sica, however, claimed payment of the full amount of the credit.
The defendants asked further instructions from Seattle Bank but despite Seattle Bank 's instructions decided to comply with Sica 's request.
After informing Seattle Bank of their intention, they paid Sica the full amount of the credit.
Plaintiffs thereupon brought an action in the District Court of New York for the recovery of the moneys paid to Sica.
The action was dismissed by the trial court and that decision was affirmed by the Court of Appeals.
That decision establishes the well known principle that the letter of credit is independent of an unqualified by the contract of sale or underlying transaction.
The autonomy, of an irrevocable letter of, credit is entitled to protection.
As a rule courts refrain from interfering with that autonomy.
A half hearted attempt was made on behalf of the Indian Firm to persuade us not to apply the principles noticed above as in these appeals we are dealing with a complaint of fraud.
The facts pleaded in the plaint do not amount to a plea of fraud despite the (1) Federal Reporter 2nd Series 298, p. 836.
932 assertions of the Indian Firm that the Russian Firm was guilty of fraud.
Evidently with a view to steer clear of the well established legal position Mr. Setalvad, learned Counsel for the Indian Finn urged that the letter of credit was no more enforceable as the original contract stood modified as a result of the Delhi agreement and the Subsequent correspondence between the parties.
, It was urged that according to the modified contract the Indian Firm is only liable to pay the price that may be settled between the buyer and the seller.
This contention has not been taken either in the plaint or in the arguments before the trial judge or before the Appellate Bench.
It is taken for the first time in this Court.
This is not purely a legal contention.
The contention in question bears on the intention of the parties who entered into the agreement.
NO one could have known the intention better than the plaintiff who was a party to the contract.
If there was such an intention, the plaintiff would have certainly pleaded the same.
That apart, we are unable to accept the contention that either the Delhi agreement or the subsequent correspOndence between the parties modified, the original contract.
The Delhi agreement merely provided that the parties will try and settle the dispute out of court, if possible.
Much was made of the letter written, by the Russian Firm to the Indian Firm on 29 11 1965 wherein as seen earlier it was stated: "that the final amount payable will be in accordance with the settlement".
This letter has to be read along with the other letters that passed between the parties.
If so read, it is clear that the statement that the final payment will be made in accordance with the settlement is subject to the condition that the parties are able ,to arrive at a settlement.
Otherwise the parties continue to be bound by the original contract subject to the extension of the time granted under the Delhi agreement for the payment of the price.
As regards the additional payment demanded by the Russian Firm, there is no occasion for issuing any temporary injunction.
If the Indian Firm does not comply with that demand the law will take its course.
It is for that Firm to choose its course of action.
In the result we allow Civil Appeals Nos.
2305 and 2306 of 1968 with costs of the appellant therein and set aside the temporary injunctions granted by the trial judge.
The other appeals are dismissed with no order as to costs.
The costs to be paid by the Indian Company.
V.P.S. C.A. Nos.
2305 & 2306/68 allowed.
C.A.Nos.
2251 & 2252/68 dismissed.

summary/full:
An Indian Firm (the appellant) entered into a contract with a Russian Firm (the respondent) for supply of certain machinery.
In pursuance of the contract, the appellant opened a confirmed, irrevocable and divisible letter of credit with a Bank in India for the entire value of the equipment.
The respondent supplied all the machinery and received 25% of the money payable under the letter of credit from the Bank.
Thereafter, the appellant complained that the performance of the machinery was not efficient and filed a suit seeking an injunction restraining the respondent from realising the balance of amount payable under the letter of credit.
The parties, however, entered into an agreement, by which it was agreed that the appellant would withdraw the suit, the respondent would not demand any payment under the letter of credit for 6 months, the parties would try to settle the dispute amicably during that period, 'and if no settlement was reached the period would be extended by a further period of 6 months.
The appellant withdrew its suit, but before any settlement was arrived at the Indian rupee was devalued, as a result of which the appellant had to pay an additional sum for the machinery supplied.
There was correspondence between the parties wherein the respondent insisted upon the appellant opening an additional letter of credit.
for the extra amount and the appellant objected to such a course.
The original dispute between the parties was not amicably settled and when the extended time under the agreement was about to expire, the appellant filed a suit on the original side of the High Court for restraining the Bank and the respondent from taking any steps in pursuance of the letter of credit.
A temporary injunction was also prayed for and it was granted, but the order was reversed by the Appellate Bench of the High Court.
In appeal to this Court, on the question whether the order of temporary injunction was sustainable, HELD: (1 ) An irrevocable letter of credit has a definite implication.
It is independent of and unqualified ' by the contract of sale or other underlying transactions.
It is a mechanism of great importance in international trade and any interference with that mechanism is bound to have serious repercussions on the international trade of this country.
The autonomy of an irrevocable letter of credit is entitled to protection 'and except in very exceptional circumstances courts should not interfere with that autonomy.
[929 B C; 931 G] Urquhart Lindsay and Co. Ltd. vs Eastern Bank Ltd., ; Hamzeh Malas and Sons vs British Imex Industries Ltd., and Dulien Steel Products Inc. o/Washington vs Bankers Trust Co., Fed.
Rep. 2nd Series, 298, p. 836, applied.
(2) The allegation of the appellant that the respondent had no assets in this Country and therefore if the respondent was allowed to take away 921 the money secured to it by the letter of credit the appellant could not effectively enforce its claim arising from the breach of the contract, was not made in the pleadings.
Nor do the facts pleaded in the plaint amount to a plea of fraud.
[929 B; 931 H] (3) It could not be contended that the letter of credit was not enforceable as the original contract was modified by the later agreement and subsequent correspondence between the parties.
The contention was not taken either in the plaint or in the High Court.
It is not a mere legal contention as it bears on the intention of parties.
Further, a perusal of the entire correspondence between the parties shows that in the absence of an amicable settlement, the parties continued to be bound by the original contract subject only to extension of time granted for payment of ' price.
[932 B D, F]