Messrs Basant Lal Banarsi Lal Vs.
Bansi Lal Dagdulal  INSC 250 (30 November 1960)
CITATION: 1961 AIR 823 1961 SCR (2) 780
Forward Contracts in Oilseeds--If illegal in
Greater Bombay--Bombay Forward Contracts Control Act, 1947 (Bom. LXIV of 1947),
s. 3--Essential Supplies (Temporary Powers) Act, 1946 (XXIV of 1946), s. 8.
Various contracts for sale of goods had been
made between the parties in Bombay each of which contained an arbitration
clause. Disputes having arisen in March, 1952, in respect of these contracts,
they were referred to arbitration and a composite award was made on October 7, 1952, against the respondent. One of these disputes had arisen out of a forward
contract in groundnuts. The respondent applied to have the award set aside on
the ground that the forward contract in groundnuts was illegal as such a
contract was prohibited by the Oilseeds (Forward Contract Prohibition) Order,
1943, issued under the Essential Supplies (Temporary Powers) Act, 1946, passed
by the Central Legislature. The appellant contended that the Essential Supplies
(Temporary Powers) Act, 1946, was repugnant to the Bombay Forward Contracts Control
Act, 1947, passed by the Provincial Legislature of Bombay which had received
the assent of the Governor-General of India and therefore under s. 107(2) of
the Government of India Act, 1935, which applied, the Bombay Act prevailed in
Bombay in preference to the Central Act and under the Bombay Act Forward
Contract in groundnut was valid. The High Court accepted the contention of the
respondent and set aside the award.
Section 8 of the Bombay Act provided:
"Every forward contract for the sale or purchase of, or relating to, any
goods specified in the notification under sub-section (3) of section 1 which is
entered into, made or to be performed in any notified area shall be illegal if
it is not entered into, made or to be performed" and thereafter, set out
the manner in which and the persons between whom such contracts could be made
and also made punishable a person making a contract declared illegal.
Section 3 of the Central Act provided,
"The Central Government may by notified order provide for prohibiting
trade and commerce" in any essential commodity. Under this section the
Oilseeds (Forward Contract Prohibition) Order was passed prohibiting forward
contracts in groundnuts, which was one of the essential commodities specified
in the Central Act.
Held, The Bombay Act did not make any
contract legal. Its only effect was to render certain forward contracts illegal
if not 781 made in compliance with its terms while the Central Act made the
contracts to which it applied, illegal. There was, therefore, no repugnancy
between the Bombay Act and the Central Act and both of them applied to Bombay.
Article 372 of the Constitution continued
both these Acts, and so there is no provision in the Constitution under which
any one of them may be said to apply to the exclusion of the other.
A composite award in respect of more than one
dispute which is not severable, must be set aside as a whole if any of the
disputes had been illegally referred.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 264 of 1956.
Appeal by special leave from the Judgment and
Order dated June 29, 1954, of the BombayHigh Court in Appeal No. 127 of 1953.
A. V. Viswanatha Sastri, Hemendra Shah, S. N.
Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for,the Appellant.
J. C. Bhatt, C. J. Shah and Naunit Lal, for
1960. November 30. The Judgment of the Court
was delivered by SARKAR, J.-The appellant is a commission agent and pucca
aratiya and has been acting as such for the respondent since November 7, 1951,
in the course of which various contracts were made between them in Greater
Bombay. On February 26, 1952, two of such contracts were outstanding, one of
which was in respect of groundnuts and was a forward contract.
In March 1952, disputes arose between the
parties as to whether these contracts had been closed, each side making a claim
on the other on the basis of its own contention.
Eventually, on March 18, 1952, the appellant
referred the disputes to arbitration under the arbitration clause contained in
the contracts. On October 7, 1952, the arbitrators made one composite award for
Rs. 22,529-15-9 against the respondent in respect of the said disputes. It is
not very clear whether this award covered other disputes also.
This award was duly filed in the Bombay City
Civil 99 782 Court under the Arbitration Act, 1940, for a judgment being passed
on it. Thereafter, on July 17, 1953, the respondent made an application to the
Bombay City Civil Court for setting aside the award contending that forward
contracts in groundnuts were illegal as the making of such contracts was
prohibited by the Oilseeds (Forward Contract Prohibition) Order, 1943, issued
under the Essential Supplies (Temporary Powers) Act, 1946, and hence the
arbitration clause contained in the forward contract in groundnuts between the
parties was null and void. It was said that the award based on that arbitration
clause was therefore a nullity. The appellant's answer to this contention was
that the Essential Supplies (Temporary Powers) Act did not apply to Greater
Bombay where forward contracts were governed by the Bombay Forward Contracts
Control Act, 1947, hereafter called the Bombay Act, and as the contract in
groundnuts had been made in terms of that Act, it was legal, and, therefore,
the award in terms of the arbitration clause contained in it was a valid and
enforceable award. The learned Principal Judge of the Bombay City Civil Court
accepted the respondent's contention and set aside the award. An appeal by the
appellant to the High Court at Bombay against the judgment of the City Civil
Court failed. The appellant has now come to this Court in further appeal.
The only question in this appeal is whether
the Essential Supplies (Temporary Powers) Act, which was passed by the Central
Legislature in 1946, applied to Bombay? If it did, then the Oilseeds (Forward
Contract Prohibition) Order, 1943, hereafter called, the Oilseeds Order, issued
under it would make the contract in groundnuts illegal and no award could be
made under the arbitration clause contained in it.
This is not in dispute.
Now, the Oilseeds Order was first passed in
1943 under r. 83 of the Defence of India Rules. The Defence of India Rules
ceased to be in force on September 30, 1946. In the meantime however, as the
situation had not quite returned to normal in spite of the termination of the
war, the British Parliament passed 783 an Act on March 26, 1946, called the
India (Central Government and Legislature) Act, 1946 (9 & 10 Geo. VI, Ch. 39),
hereafter called the British Act. Section 2 of this Act provided that the
Central Legislature of India would have power to make laws with respect to
various matters therein mentioned notwithstanding anything in the Government of
India Act, 1935, and that that power could be exercised during the period
mentioned in s. 4 and further that the laws so made to IV-he extent they could
not have been otherwise made, would cease to have effect at the expiration of
that period. The Governor General under the powers reserved in s. 4 and
subsequently, the Constituent Assembly of India, under the powers conferred on
it under the Indian Independence Act, 1947, extended the period mentioned in s.
4 of the British Act from time to time and eventually up to March 31, 1951. It
would be unprofitable for our purposes to refer to the various statutory
provisions and orders under which this was done for, the extension is not in
Under the powers conferred by the British
Act, the Governor General promulgated the Essential Supplies (Temporary Powers)
Ordinance, 1946, which came into force on October 1, 1946. On November 19,
1946, the Central Legislature under the same powers, passe the Essential
Supplies (Temporary Powers) Act, 1946, hereafter called the Central Act,
repealing the Ordinance and substantially incorporating its terms. The Central
Act originally provided that it would cease to have effect on the expiration of
the period mentioned is s. 4 of the British Act. As the life of the British Act
was extended from time to time, suitable amendments were made in the Central
Act extending its life also.
Our Constitution came into force on January
26, 1950 and by virtue of Art. 372 the Central Act was continued as one of the
existing laws. On August 16, 1950, under powers conferred by Art. 369 of the
Constitution, Parliament passed the Essential Supplies (Temporary Powers)
Amendment Act, 1950, Act LII of 1950, amending the Central Act in various
respects and extending its life up to December 31, 1952. By another amendment
made by Act LXV of 1952, the 784 life of the Central Act was extended till
January 26, 1955.
Section 3(1) of the Central Act is in these
"The Central Government, so far as it
appears to it to be necessary or expedient for maintaining or increasing
supplies of any essential commodity, or for securing their equitable
distribution and availability at fair prices, may by notified order provide for
regulating or prohibiting the production, supply and distribution thereof, and
trade and commerce therein." Section 2 of the Act provides that foodstuffs
would be an essential commodity within the meaning of the Act and would include
edible oilseeds. We have earlier stated that the Oilseeds Order was originally
passed under the Defence of India Rules, which expired on September 30,1946.
The Ordinance of 1946 continued in force, orders issued under the Defence of
India Rules in so far as they were consistent with it and provided that such
orders would be deemed to be orders made under it. Section 17(2) of the Central
Act provided that an order deemed to be made under the Ordinance and in force
immediately before its commencement would continue in force and be deemed to be
an order made under it. As a result of the Ordinance and the Central Act replacing
it and the extension of the life of the latter from time to time, the Oilseeds
Order so far as it related to edible oilseeds including groundnuts, continued
in force after the expiry of the Defence of India Rules till January 26, 1955.
That Order, as so continued, prohibited the making of forward contracts, that
is to say, contracts providing for delivery at a future date, in respect of
certain specified oilseeds including groundnuts. It is the respondent's
contention that it is because of this order, read with the Central Act, that
the contract in groundnuts between the parties was illegal and therefore the
award made under the arbitration clause contained in it was void.
Now the British Act under which the Central
Act was passed, provided in sub-sec. (4) of s. 2 that, "Sub-section (2) of
section 107 of the Government of India Act, 1935, and sub-section (2) of
section 126 785 of that Act shall apply in relation to a law enacted by virtue
of this section with respect to any matter being a matter with respect to which
a Province has power to make laws as if that matter were a matter specified in
Part 11 of the Concurrent Legislative List." Section 107(2) of the
Government of India Act, 1935, laid down that, "Where a Provincial law
with respect to one of the matters enumerated in the Concurrent Legislative
List contains any provision repugnant to the provisions of an earlier Federal
law then if the Provincial law, having been reserved for the consideration of
the Governor-General has received the assent of the Governor-General the
Provincial law shall in that Province prevail It would follow from these
provisions that if a Provincial Act which had received the assent of the
Governor-General, contained anything repugnant to a Central Act passed under
the powers conferred by the British Act, then in the Province concerned, the
Provincial Act would apply and not the Central Act.
Now, the Bombay Act which had been passed by
the Provincial Legislature of Bombay in 1947, came into operation in 1948.
That Legislature had power to pass the Act
and the Act had received the assent of the Governor-General. At that time the
Central Act deriving its force from the British Act, was in, operation. If,
therefore, the Bombay Act was repugnant to the Central Act, in Bombay, the
Bombay Act would apply and not the Central Act. This is not in dispute. The
appellant contends that the Bombay Act is so repugnant and therefore the
Central Act cannot render the forward contract in groundnuts made in, Greater
Bombay, illegal and void.
The question, therefore, is whether the
Bombay Act, contains any provision repugnant to the Central Act. The preamble
of the Bombay Act states that it was enacted as it was thought expedient to
regulate and control forward contracts and for certain other matters. Section 1
of this Act came into force at once and gave power to the Government to bring
into force by notification the remaining sections of the Act in the 786 whole
of the Province of Bombay or parts thereof on such date and in respect of such
goods as might be specified.
The Government of Bombay issued notifications
under this section on December 19, 1950, applying the remaining provisions of
the Act to the area called Greater Bombay in respect of all varieties of
oilseeds as from the said date.
Section 8 of the Bombay Act provides as
S. 8.-(1) Every forward contract for the sale
or purchase of, or relating to, any goods specified in the notification under
sub-section (3) of section I which is entered into, made or to be performed in any
notified area shall be illegal if it is not entered into, made or to be
performed-(a)In accordance with such bye-laws, made under section 6 -or 7
relating to the entering into, making or performance of such contracts, as may
be specified in the bye-laws, or (b) (i) between members of a recognised
association, (ii) through a member of a recognised association, or (iii) with a
member of a recognised association, provided that such member has previously
secured the written authority or consent, which shall be in writing if the byelaws
so provide, of the person entering into or making the contract, and no claim of
any description in respect of such contract shall be entertained in any civil
(2) Any person entering into or making such
illegal contract shall, on conviction, be punishable with imprisonment for a
term which may extend to six months or with fine or with both.
"Recognised association" is defined
in the Bombay Act as an association recognised by the Provincial Government and
on December 19, 1950, the Bombay Oilseeds Exchange Limited was recognised as
such an association by the Government of Bombay. The appellant is a member of
this association. The contracts between the parties were all expressly made
subject to the rules and regulations of this Association.
The case before us has proceeded on the basis
that the impugned contract in groundnut had been made in compliance 787 with
the requirements of s. 8 and there is no finding to the contrary by the Courts
below. We have hence to proceed on the same basis.
The appellant contends that s. 8 of the
Bombay Act and s. 3 of the Central Act are repugnant to each other. Now s. 8 of
the Bombay Act, it will, be noticed, does not purport to make any contract
legal. Its only effect is to render forward contracts in all varieties of
oilseeds illegal if not made in compliance with its terms. The learned Advocate
for the appellant says that the effect of s. 8 was to render a forward contract
in all oilseeds made in terms of it, legal and, therefore, a repugnancy arose
between its terms and the terms of the Oilseeds Order issued under the Central
Act which made forward contracts in edible oilseeds illegal.
The learned Advocate referred to various
other provisions of the Bombay Act and the bye-laws of the Association made in
terms of the Act to show that the Bombay Act was intended to cover the entire
field of forward contracts with respect to all varieties of oilseeds and was
therefore intended to oust the operation of the Central Act in Greater Bombay with
regard to the forward contracts covered by the former. It does not seem to us
that a reference to the other provisions in the Bombay Act or to the bye-laws,
is relevant in deciding the question. If the effect of s. 8 of the Bombay Act
was not to render forward contracts made in terms of it legal, then no question
of repugnancy with the Central Act can arise whatever may be the scope of the
Bombay Act and the provisions in the bye-laws.
Therefore, it seems to us that the question
is whether s. 8 of the Bombay Act by its terms makes any forward contract
legal. Section 3 of the Central Act, as already seen, gives power to the
Central Government to prohibit trade and commerce in oilseeds. That Act,
therefore, enable& the Central Government to make forward contracts in
essential commodities as defined in it, illegal. That is what the Central
Government did by the Oilseeds Order in so far as edible oilseeds are
We find nothing in s. 8 from which it can be
said 788 that it rendered any contract legal. Its only intent and effect is to
declare certain forward contracts illegal. We think that the matter was very
correctly put by Chagla, C. J., who delivered the judgment of the High Court.
He said, "All that Sec. 8 does is to declare that forward contracts will
be illegal unless they comply with the procedure laid down in Sec. 8. But it is
one thing to declare a certain contract illegal. It is entirely another thing
to declare an illegal contract legal. Sec. 8 does not even make an attempt to
declare that forward contracts declared illegal by the Central legislation
shall be legal if they comply with the technicalities laid down in Sec. 8. The
assumption underlying Sec. 8, it seems to us, is that forward contracts which
the Legislature is dealing with are legal contracts, but even if they are legal
they are declared to be illegal unless they are performed or made or entered
into in the manner laid down in Sec. 8". With these observations we fully
In regard to the contention that s. 8 of the
Bombay Act necessarily implies that contracts made in terms of it would be
legal, it seems to us that there is no such necessity indicated in the Act. The
Act clearly intends only to create an illegality, that is to say, as Chagla, C.
J. said, it takes a legal contract and imposes on it certain conditions and
makes it illegal if those conditions are not fulfilled. If a contract is
already illegal, there is no scope for applying the Bombay Act. Furthermore,
the Bombay Act deals with all kinds of goods. Sub-section (4) of s. 2 of this
Act defines goods as any kind of movable property including securities but not
including money or actionable claims. Now the Central Act only applies to
essential commodities as defined in it. Therefore, there would be many
contracts to which the Central Act would not apply and such contracts may be
rendered illegal by the Bombay Act if they come within its scope and are made
in disregard of the conditions laid down in s. 8.
We, therefore, come to the conclusion that
there is no repugnancy between the Bombay Act and the Central Act. It follows
that there is no scope for 789 applying the provisions of s. 107(2) of the
Government of India Act, 1935. That would be the position in 1948, when the
Bombay Act came into force and the Central Act was already in existence. Both
the Acts would then be applying to Greater Bombay as there is no inconsistency
Article 372 of the Constitution continued
both these Acts after the Constitution came into force and there is nothing in
the Constitution which provides that any one of two existing laws, both of
which had applied up to the coming into force of the Constitution, would apply
to the exclusion of the other. It follows that in 1951 or 1952, when the
contract in groundnuts-which it is not disputed, was a forward contract within
the meaning of both the Acts-was made, both the Acts applied to it. The
Constitution had not affected such application. That being the position, the
contract in groundnuts must be held to be illegal under the Central Act which
clearly prohibited the making of it. The Bombay Act could not make it legal
for, as we have said, it was not intended to make any contract legal. It would
follow that the arbitration clause contained in that contract was of no effect.
It has therefore to be held that the award made under that arbitration clause
is a nullity and has been rightly set aside. The award, it will have been
noticed, was however in respect of disputes under several contracts, one of
which we have found to be void.
But as the award was one and is not severable
in respect of the different disputes covered by it, some of which may have been
legally and validly referred, the whole award was rightly set aside.
The appeal, therefore, fails and is dismissed
100 619 of the Act. These rules are called
the Bihar Preservation and Improvement of Animals Rules, 1960. The provisions
of r. 3 have also been impugned by the. petitioners by an amendment petition
filed by them. Rule 3 so far as it is material. for our purpose is in these
"3(1). For the purpose of section 3 of
the Act, the Veterinary Officer and the Chairman or Chief Officer, as the case
may be, shall be the prescribed authority:
Provided that where there is no Chairman or
Chief Officer in respect of any area, the Veterinary Officer shall be the sole
(2) Where the authority prescribed under
subrule (1) or subrule (5) refuses to issue a certificate under the proviso to
section 3, it shall record the reasons for the refusal and no such refusal
shall be made unless the person 'applying for the certificate has been given a
reasonable opportunity of being heard.
(4)A bull, bullock or she-buffalo in respect
of which a certificate has been issued under section 3 shall not be slaughtered
at any place other than the place indicated in the certificate and it shall be
slaughtered within 20 days of the date of the receipt of the certificate by the
person in whose favour it is issued.
(5) In case of difference of opinion between
the Veterinary Officer and the Chairman or Chief Officer, the matter shall be
referred to the Sub-divisional Animal Husbandry Officer or the District Animal
Husbandry Officer, as the case may be, and the certificate shall be issued or
refused according to the decision of the Sub-divisional Animal Husbandry
Officer or the District Animal Husbandry Officer, as the case may be.
(6) (a) Any person aggrieved by an order
refusing to grant a certificate under the proviso to section 3 may, within 15
days of the communication of the order to him, prefer an appeal(i) where the
order is passed by" the District Animal Husbandry Officer under sub-rule
(5) to the Deputy Director of Animal Husbandry;