Firm Girdhar Mal Kapur Chand Vs. Firm
Dev Raj Madan Gopal  INSC 25 (11 February 1963)
11/02/1963 GUPTA, K.C. DAS GUPTA, K.C. DAS
CITATION: 1963 AIR 1587 1964 SCR (1) 995
Partnership-Partnership registered before
partition of India-Suit by firm, if barred-Indian Partnership Act, (IX of
1932), s. 69 (2).
Forward Transaction-Such transaction in
cotton and edible oil seeds, if prohibited by law-Essential Supplies (Temporary
Powers) Act, 1946 (XXIV of 1946), ss. 2, 3, 5- Cotton Options (Forward
Contracts and Prohibition) Order, 1943-Oil Seeds (Forward Contracts and
Prohibition) Order, 1943-Defence of India Rules, r. 81.
The respondent, a partnership firm, brought a
suit for recovery of the amount with interest due to it on account of the
purchases and sales of cotton-seeds and bales of cotton on behalf of the
appellant firm. In contesting the suit the appellant while admitting trade
relations with the plaintiff firm disputed the correctness of the accounts. It
was urged that the transactions were wagering contracts and so void in law,
that they being forward transactions were prohibited by law and that the
plaintiff firm which was registered at Lahore before the partition of India
ceased to be a registered firm thereafter for purposes of the Indian
The trial court accepted the plaintiffs story
as regards the transactions but held as regards the accounting that the
plaintiffs were bound to give certain credits to the defendants and the price
of 2300 bags of cotton seeds and 50 bales of 'cotton on the final sale was
directed to be credited in favour of the defendant at the market rate on May
28, 1947. Other directions as regards calculations of incidental charges and
interest were also given. The learned judge passed a final decree in favour of
tile plaintiff with appropriate costs. Against this decree both the respondent
and the appellant appealed to the High Court.
The High Court dismissed the appellants appeal
and allowed the respondent's appeal increasing the decretal amount.
Two points of laws were raised by the
appellant in this Court, namely, 996 (i) the requirement of s. 69 (2) of the
Indian Partnership Act was not satisfied and (ii) the transaction being a
forward transaction in cotton and edible oil seeds was illegal and thus
prohibited by law.
Held, that once there was registration under
the Indian Partnership Act, it continues to be effective and valid under that
Act in the area to which it applied before the partition of India so long as it
was not cancelled in accordance with law.
Bombay Cotton Export & Import Go. v.
Bharat Sarvodaya Mill Co., r. L. R. Bom. (1958) 1351, approved.
Held, further, that the forward contracts in
cotton seeds were not prohibited by law. A cotton and cotton seeds are not
included in the definition of essential commodity, any previous order with
respect to them will be inconsistent with the new order and cannot continue
under s. 5 of the Essential Supplies Act, 1946.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 240 of 1961.
Appeal from the judgment and decree dated
November 21, 1958, of the Punjab High Court at Chandigarh in Regular First
Appeal No. 266 of 1951.
C. B. Agarwala and A. N. Goyal, for the
A.V. Viswanatha Sastri, O. P. Malhotra and
Mohan Behari Lal, for the respondent.
1963. February 11. The judgment of the Court
was delivered by DAS GUPTA, J.-The respondent a partnership firm carrying on
business as commission agents in the town of Khanna in Punjab brought the suit
out of which this appeal has arisen against the appellant firm for recovery of
Rs. 17,615/10/- claimed to be due to it on account-of the purchases and sales
made on behalf of the appellant firm. Between December 1946 997 and February 3,
1947, 7600 bags of cotton seeds were, according to the plaint purchased by the
respondent on behalf of the appellant firm at various rates, out of which 5300
bags are said to have been sold by it on behalf of the appellant firm between
the dates of January 2, 1947 and February 3, 1947. Thus, on February 3, 1947,
2300 bags of cotton-seeds were left on its hands. ID May 1947 the market for
cotton seeds was falling and so the respondent firm asked the appellant either
to remove the goods within 48 hours on payment of the full price or pay
something more by way of margin and informed them that otherwise the goods
would be sold As no reply was received these 2300 bags were sold on May 24some
at the rate of Rs. 11/11/16 per maund and the rest at the rate of, Rs. 11/12/-
per maund. Apart from these transactions in cotton-seeds the respondent firm,
according to the plaint, also purchased 100 bales of cotton of which 50 bales
were also sold on behalf of the' appellant firm, so that after February 14,
1947, 50 bales of cotton purchased by the appellant firm were lying with the
respondent. These 50 bales were also sold by the respondent on May 24, 1947 at
the rate of Rs. 27/12/- per maund, as the appellant took no action when the
respondent asked them either to take away these bales on payment of the price
or to put in more money by way of margin. On the accounts, it was said, Rs.
15,556/10/- remained due to the plaintiff firm from the defendant firm. The
suit was brought for the recovery of this amount together with interest.
In contesting the suit the appellant while
admitting trade relations with the plaintiff firm disputed the correctness of
the accounts. The plaintiff's case about the purchase of cotton-seeds and
cotton bales and the fact that 2300 bags of cotton seeds and 50 bales of cotton
purchased by it remained with the plaintiff firm was also denied. - It Was also
urged that the transactions were wagering contracts, and so Void 998 in law,
that they being forward transactions were prohibited by law and further that
the plaintiff firm was not a registered firm under the Indian Partnership Act,
and therefore the suit did not lie.
The Trial Court rejected all the contentions
in law and accepted the plaintiff's story as regards the transactions but held
as regards the accounting, on a consideration of the evidence, that the
plaintiffs were bound to give credit to the defendants for the sale of 2300
bags of cotton-seeds at the contract rate of Rs. 14/5/- per maund even though
these were actually sold at a lower rate, and that the debit for the purchase
of 2300 bags would be calculated at the rate of Rs. 13/8/- and Rs. 13/10/- per
maund, the rates at which they were actually purchased even though they were
agreed to be purchased at the rate of Rs. 14/5/- per maund on February 3, 1947.
The price of 2300 bags of cotton seeds and 50 bales of cotton on the final sale
was directed to be credited in favour of the defendant at the market rate on
May 28, 1947. Other directions as regards calculations of incidental charges and
interest were also given. The Court appointed an Advocate as Commissioner
for-the purpose of calculating the amount due after ascertaining the market
price. After consideration of the report submitted by the Commissioner, the
learned judge passed a final decree in favour of the plaintiff for s. 9,749/3/9
with proportionate costs.
Against this decree both the plaintiff and
the defendant appealed to the High Court of Punjab. In the defendant's appeal
it was contended that the suit was not properly entertained as the plaintiff
firm was not registered under the Indian Partnership Act, 1932. It was also
urged that the transactions were illegal being forward transactions in cotton
and edible oil-seeds and thus prohibited by law.
Both these contentions were rejected by the
High Court. Two other minor points which were taken before 999 the High Court
and were rejected by it have not been repeated before us.
In the plaintiff's appeal, it was urged that
the Trial Court had erred in its directions as regards the debits and credits
for 2300 bags of cotton seeds for the purchases and sales on February 23, 1947.
The High Court accepted the plaintiff's contention in part and held that the
plaintiff was entitled to an extra amount of Rs. 3,244,/12/-. In the result,
the High Court dismissed the defendant's appeal but allowed the plaintiff's
appeal to the extent that the decretal amount was increased by Rs. 3,244/12/-
thus making the decree one for Rs. 12,694/.
On the strength of the certificate granted by
the High Court under Art. 133(1)(a) of the Constitution; the defendant firm has
preferred the present appeal.
The appellant's first contention is, as in
the courts below, that the suit should have been dismissed altogether.
Two grounds of law are urged in support of
this. The first is based on the requirement of S. 69(2) of the Indian Partnership
Act. It is no longer disputed that the firm was registered by the Registrar of
Firms, Punjab, on August 16, 1946, under the Indian Partnership Act, 1932, as
it stood on that date. That was an order made before the partition of India
took place. The entire Province of Punjab was then within British India; there
was one Registrar for the entire Province and it is not disputed that
registration made by the Registrar whose office was at Lahore was up to August
14, 1947 good registration for the whole of what was then British India. The
appellant contends that as soon as the partition of India took place that
registration caused to be effective for that part of the old British India
which became the Dominion of alia and it so continued to be ineffective for
this 1000 entire area also after the Constitution of India came into force. It
is argued that the Registrar of the Punjab, within his office at Lahore, ceased
to be a Registrar under the Indian Act, when on the partition of India Lahore
became part of a foreign country. So, it is said, the registration became the
registration of a foreign country and thus ceased to be a registration for
India. In our opinion, this argument is wholly unsound. Once there was
registration under the Indian Partnership Act that registration in our opinion,
continues to operate as registration under that Act and continues to be
effective-in other words, valid registration in the eye of law as administered
in India so long as the registration is not cancelled in accordance with law.
In coming to this conclusion, we have not
overlooked the fact that difficulties may in certain circumstances arise as
regards the recording of alterations in the firm name or its principal place of
business (s. 60); noting of closing and opening of branches (s. 61); noting of
changes in the name and address of partners (s. 62); recording of changes on
dissolution of a firm and recording withdrawal of a minor from the firm (s.
63); rectification of mistakes in the register (s. 64); and amendment of
register by order of court (s. 65), by the fact of the Register, on whom duties
are laid by these sections in connection with the above matters, being now at
Lahore, that is, outside India. We have not thought it necessary however to,
investigate in the present case as to what arrangements have been made to cope
with these difficulties. For, it is clear to us that the presence of such
difficulties cannot in any way change the legal position that registration that
was good registration under the Indian Act does not cease to be good
registration under the same Act. so long as it is not cancelled in accordance
with law. This view of law was taken by the Bombay 1001 High Court in Bombay
Cotton Export & Import Co., v. Bharat Savodaya Mill Co., (1), and is, in
our opinion, the only possible view.
It is unnecessary for us to consider, for the
purpose of the present appeal, whether such a registration would be effective
registration, in an area which was outside British India, at the time of the
registration; and on that we express no opinion.
For his next legal contention, viz., that the
transactions were prohibited by law, Mr. Aggarwala argued, first that forward
contracts in cotton as also oil seeds were prohibited by the orders made in
1943 under the Defence of India Rules and these prohibitions remained effective
up to the date of the contracts in the present case by virtue of s. 5 of the
Essential Supplies (Temporary Powers) Act, 1946 (Act XXIV or 1946). That these
were forward contracts is not disputed. It does appear that forward contracts
in cotton and in oil-seeds including cotton seeds were prohibited by the Cotton
Options (Forward contracts and prohibition) Order, 1943 of May 1, 1943 and
oilseeds (Forward Contracts and Prohibition) Order, 1943 of May 29, 1943
respectively. Tile Defence of India Rules under which these orders were made
had however ceased to be in force long before the date of the contracts in the
Unless therefore the prohibition orders were
kept alive by some other provision of law the present transactions would not be
hit by the prohibitory orders. To show that they had been kept alive, Mr.
Aggarwala relied on s. 5 of the Essential Supplies (Temporary Powers)
Ordinance, 1946 and the same section of the Essential Supplies (Temporary
Powers) Act, 1946 by which it was replaced. The section is in these words
"5. Continuance in force of existing Until other provisions are made under
this (1) I.L.R. Bom. (1952) 1351.
1002 Ordinance any order, whether notified or
not, made by whatever authority under rule 80-B, or sub-rule (2) or sub-rule
(3) of rule 81 of the Defence or India Rules, in respect of any matter
specified in s. 3, which was in force immediately before the commencement of
the Ordinance shall, notwithstanding the expiration of the said rules, continue
in force as far as Consistent with this Ordinance and be deemed to be an order
made under s. 3; and all appointments made, licences or permits granted and
directions issued under any such order and in force immediately before such
commencement shall likewise continue in force and be deemed to be made, granted
or issued in pursuance of this Ordinance." The Act continued the same
phraseology. These provisions of the Ordinance or the' Act, are however clearly
of no assistance to Mr. Aggarwala's arguments. It is clear that before the
order made under rule 81 of the Defence of India Rules continues in force
notwithstanding the expiration of the Defence of India Rules, it is necessary
that the order must be in respect of any matter specified in s. 3. Section 3
empowers the Central Government to make various orders but only in connection
with essential commodities. No order can therefore be considered to be
"'in respect of any matter specified in s. 3" unless it is in respect
of an essential commodity.
"Essential Commodity" is defined in
s. 2 to mean any of the following classess of commodities: (i) foodstuffs, (ii)
cotton and woollen textiles, (iii) paper, (iv) petroleum and petroleum
products, (V) spare parts of mechanically propelled vehicles, (vi) coal, (vii)
iron and steel and (viii) mica, "Foodstuffs" was also defined thus :
"'Foodstuffs" shall include edible
oilseeds and oils." Cotton seed is an oilseed but it cannot be for a
moment be suggested that it is 1003 fit for human consumption. So, 'Clearly, it
is not an oilseed which is edible. Mr. Aggarwala as a last resort argued that
what "'edible oil seed" means is a seed from which edible oil can be
prepared. Such an argument has only to 'be mentioned to deserve rejection. The
phrase "edible oil-seed" can never mean what the learned Counsel
suggests and can and does mean only an oil seed which is edible as an oil.
seed. Cotton-seed, not being edible, falls outside the class of "edible
oil-seed" and so is not foodstuff within the meaning of s. 2 of the
Ordinance or the Act of 1946.
The Cotton Seeds Order of 1943 which has been
mentioned above is therefore not in respect of a matter specified in s. 3 of
the Ordinance or the Act and so was- not kept alive by s. 5. The Cotton Order
has also not been kept alive, for raw cotton is not one of the articles
included in the definition of "essential commodity" in s. 2. It may
-be added that s. 5 continues only such previous Orders as are consistent with
the new law and clearly, as cotton and cotton-seeds are not included in the
definition of Essential Commodity, any previous Order with respect to them will
be inconsistent with the new Order and cannot continue under s. 5.
Mr. Aggarwala drew our attention to a
Notification by the Central Government dated on November 4, 1949 by which
cotton seed was excluded from the operation of the Oilseeds Forward Contracts
Prohibition Order, 1943, by omitting it from the schedule to the order, Mr.
Aggarwala rightly contends that such exclusion would be unnecessary unless as a
result of s. 5 of the Essential Supplies (Temporary Powers) Act, 1946, the Oilseeds
Order had remained alive tin to November, 1949. We do not know what led the
Central Government to make this Notification. It is not improbable that a
question having arisen before the Government whether or not forward -contracts
in cotton seeds continued to be prohibited, in view of the provisions 1004 of
s. 5 of the Ordinance or the Act as mentioned above, the Government thought it
proper to put the matter beyond doubt by making the notification excluding
cotton seeds altogether from the Schedule to the Prohibition Order. It is
unnecessary for us to investigate the circumstances under which the order was
made. For, the fact that Government thought that the effect of s. 5 was to keep
alive the Oilseeds Forward Contracts Prohibition Order, 1943 is not relevant at
all. For the reasons mentioned earlier, we are clearly of opinion that s. 5
cannot have that effect. Mr. Aggarwala's contention that the Forward contracts
in cotton- seeds which are the subject matter of the present litigation were
prohibited by law has therefore no substance.
This brings us to the question whether the
High Court erred in allowing the plaintiff 's appeal 'in increasing the amount
decreed by Rs. 3,244/12/-. It appears that before the High Court it was urged
on behalf of the plaintiff that there had been a clerical error in preparing
Ex. P-8, an extract from the Saudabahi-in
that the purchase price and sale price for the transactions of February 3, 1947
was shown as Rs. 14/5/-and Rs. 14/8/-instead of the correct figures which were,
according to Saudabahi Rs. 13/5/-and Rs. 13/8-. It is obvious that this mistake
would not affect the result as the difference between the credit entry and the
debit entry for these transactions would remain the same. What the Trial Court
did was that it took the sale price for February 3, transaction to be Rs.
14/5/- as shown in Ex. P-8; but for the purchase price which had to be debited
against the defendant it rejected the figure of Rs. 14/8/- shown in Ex. P-8 but
took the figure of Rs. 19/8/-and Rs. 13/10/- as shown in the plaintiff's
account book. It seems to us likely that the arrangement between the parties
was that the debits and credits in the running account should be on the basis
of the rate at which the purchases and sales were 1005 actually made and not at
the rate mentioned in the Saudabahi. This is clear from the fact that for both
the sale and the purchase the account book shows the actual rates at which the
purchases and sales were made (the purchase price being at the rate of Rs.
13/8/- and Rs. 13/10/- permaund and sales being at the rate of Rs. 13/5/- and
Rs. 13/7/- per maund). It is difficult to understand why the Trial Judge,
though making the debits against the defendant at the lower rate of actual
purchase thought it fit to accept the Saudabahi rate for the sale. If for both
debits and credits the actual rates at which the purchases and sales were affected
are accepted, it is clear that the Tria Court's direction had resulted in
crediting the defendant with Rs. 3,244/12/-more than what was the correct
figure. The High Court was therefore right in increasing the decretal amount by
this sum of Rs. 3,244/12/-.
It may be pointed out that if the actual
rates of purchases and sales in respect of these 'transactions of February 3,
1947 for 2300 bags of cotton-seeds are rejected and the Saudabahi rates
(according to Ex. P-8) of Rs. 14/5/- for the sale and Rs. 14/8/- for the
purchase are accepted as the basis for making the credits and debits, as Mr.
Aggarwala asks us to do, the defendant would
gain nothing at all.
We have therefore come to the conclusion that
the High Court was right in allowing the plaintiff's appeal in part and
increasing the decretal amount by Rs. 3,244/12/-.
The appeal is accordingly dismissed with