# 60S SUNDERLAL a SON v. BHARAT HANDICRAFCS (P.) LTD

- **Citation:** [1968] 1 S.C.R. 608
- **Court:** Supreme Court of India
- **Decided:** 1967-09-20
- **Bench:** J.C. Shah, S. M. S!Kri, J.M. Shelat
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/60s-sunderlal-a-son-v-bharat-handicrafcs-p-ltd-4148
- **Pages:** 9

## Headnote

Forward Contracts (Regulation) Act (74 of 1952), ss. 15(4), and
20(2)-Validity of contract without consent or authority of party who
teas not a member of recognised association.
Code of Civil Procedure (Act 5 of 1908), O. XLI, r. 27-Additicmat
evidence tendered in Appellate Court-C-0ndition for receiving.
Under s. 15(1) of the Forward Contracts (Regulation) Act 1952,
forward contracts for the sale or purchase of specified goods may be
<entered into only between members of a recognised association or
with a member or through any member of such association 0th.er·
wise, the contract will be invalid. By sub-s. (4), Parliament imposed
c
a prohibition upon every member of a recognised association against
entry into a contract on his ouni account, v.·ith a non-member, in D
respect of the specified goods: the prohibition is lifted when in the
memorandum. agreement of sale or purchase, or in the bought and
sold notes H is expressly disclosed that the contract is by the member on his own aC'count and that he has secured the consent or authority of the other person \Vho is a party to the contract. and. if such
consent or authority be not in writing, the member has obtained a
written confirmation by such person of such consent or authorit.».
within three days from the date of the contract.
E.
A notification was issued by the Central Government declaring
s. 15(1) to be applicable to forward contracts in jute goods, and the
appellants, \vho \Vere members oi an Association recognised by the
Act, entered into a contract with the respondents-who were not
C1embers of any such association-for buying jute bags on their O\\'ll
account. The appellants applied to the High Court, under s. 33
ofi
the Arbitration Act. 1940. for an order declaring that there existed F
a valid arbitration agreement contained in the relevant bought and
sold notes. No evidence was tendered in the High Court to show that
the appellants had secured the writtten consent or authority of the
respondents. to the contract. and it was not their case that they had
secured any written confirma\ion of an oral consent or authority by
the respondents. within three days of the date of the contract. The
High Court held that the requirements of s. 15(4) were not com- a
plied with, and that the contract was therefore invalid.
In appeal to this Court. the appellants contended (I) that s. 1~4)
was complied with, because, the respondents did confirm the con·
tract in the slip provided for such confirmation at the foot of the
sold note, that the slip was detached from the sold note but was n<>t
tendered in evidence in the High Court as its importance \\'as not
realised; and that this Court should receive the document in evi· B
dence: and (2) that even if there was a breach of the prohibition in
s. 15(4) the contract was enforceable. and the breach would merely
expose the appellants to a criminal prosecution under s. 20(2)
HELD: (!) The additional evidence could not be allowed to be
brought on record. [613H]
A
The document was in the possession of tije appellants and no
rational explanation was furnished for not producing It before the
High Court. Further the document did not prove itself and did not
establish that the respondents had consented in writing to the terms
of the contract. This Court as the 111>pellate court, did not require the
additional evidence to enable it to pronounce judgment, nor was
any substantial cause made out which would justl!y an order allowing additional evidence to be led in this Court, within the meanB ing of O. XL!, r. 27 of the Civil Procedure Code. [613C-D, G-HJ
(2) The l>rohibition imposed by s. 15(4) Is not imposed in the
interest of revenue: the clause is conceived in the larger Interest of
the public to protect them against the malpractices indulged in by
members of recognised associations in respect of transactions in
which their duties as agents conflict with their personal Interest.
Parliament has made a writing, evidencing or confirming the consent
C o

## Text

60S
SUNDERLAL a SON
v.
BHARAT HANDICRAFCS (P.) LTD.
September 20, 1967
(J.C. SHAH, S. M. S!KRI AND J.M. SHELAT, JJ.]
Forward Contracts (Regulation) Act (74 of 1952), ss. 15(4), and
20(2)-Validity of contract without consent or authority of party who
teas not a member of recognised association.
Code of Civil Procedure (Act 5 of 1908), O. XLI, r. 27-Additicmat
evidence tendered in Appellate Court-C-0ndition for receiving.
Under s. 15(1) of the Forward Contracts (Regulation) Act 1952,
forward contracts for the sale or purchase of specified goods may be
<entered into only between members of a recognised association or
with a member or through any member of such association 0th.er·
wise, the contract will be invalid. By sub-s. (4), Parliament imposed
c
a prohibition upon every member of a recognised association against
entry into a contract on his ouni account, v.·ith a non-member, in D
respect of the specified goods: the prohibition is lifted when in the
memorandum. agreement of sale or purchase, or in the bought and
sold notes H is expressly disclosed that the contract is by the member on his own aC'count and that he has secured the consent or authority of the other person \Vho is a party to the contract. and. if such
consent or authority be not in writing, the member has obtained a
written confirmation by such person of such consent or authorit.».
within three days from the date of the contract.
E.
A notification was issued by the Central Government declaring
s. 15(1) to be applicable to forward contracts in jute goods, and the
appellants, \vho \Vere members oi an Association recognised by the
Act, entered into a contract with the respondents-who were not
C1embers of any such association-for buying jute bags on their O\\'ll
account. The appellants applied to the High Court, under s. 33
ofi
the Arbitration Act. 1940. for an order declaring that there existed F
a valid arbitration agreement contained in the relevant bought and
sold notes. No evidence was tendered in the High Court to show that
the appellants had secured the writtten consent or authority of the
respondents. to the contract. and it was not their case that they had
secured any written confirma\ion of an oral consent or authority by
the respondents. within three days of the date of the contract. The
High Court held that the requirements of s. 15(4) were not com- a
plied with, and that the contract was therefore invalid.
In appeal to this Court. the appellants contended (I) that s. 1~4)
was complied with, because, the respondents did confirm the con·
tract in the slip provided for such confirmation at the foot of the
sold note, that the slip was detached from the sold note but was n<>t
tendered in evidence in the High Court as its importance \\'as not
realised; and that this Court should receive the document in evi· B
dence: and (2) that even if there was a breach of the prohibition in
s. 15(4) the contract was enforceable. and the breach would merely
expose the appellants to a criminal prosecution under s. 20(2)
HELD: (!) The additional evidence could not be allowed to be
brought on record. [613H]
A
The document was in the possession of tije appellants and no
rational explanation was furnished for not producing It before the
High Court. Further the document did not prove itself and did not
establish that the respondents had consented in writing to the terms
of the contract. This Court as the 111>pellate court, did not require the
additional evidence to enable it to pronounce judgment, nor was
any substantial cause made out which would justl!y an order allowing additional evidence to be led in this Court, within the meanB ing of O. XL!, r. 27 of the Civil Procedure Code. [613C-D, G-HJ
(2) The l>rohibition imposed by s. 15(4) Is not imposed in the
interest of revenue: the clause is conceived in the larger Interest of
the public to protect them against the malpractices indulged in by
members of recognised associations in respect of transactions in
which their duties as agents conflict with their personal Interest.
Parliament has made a writing, evidencing or confirming the consent
C or authority of a non-member, as a condition of the contract, If the
member has entered into a contract on his own account. So long as
there is no such writing, as is contemplated by s. 15(4) or its proviso
there is no enforceable contract. (6150.F]
The penal clause in s. 20(2) cannot be utilised to restrict the prohibition contained in s. 15(4). What is penalized under s. 20(2) Is
entry into a forward contract by a member on his own account without disclosing to the non-member contracting party that the contract
D is on the member's own account; and not, for failing to secure th~
consent. or authority of the other party to the contract. [615G-HJ
Shri Ba;mng Ju.le Mills Ltd. v. Lalchand Dugar, (1963-64) 68
C.W.N. 749, overruled.
OVIL APPELLATE JURISDICTION: Civil Appeal No. 32 of 1965.
Appeal by special leave from the judgment and order dated
E May 13, 1963 of the Calcutta High Court in Award Case No. 119
of 1963.
Suchin Chowdhury, M. G. Potldar and D. N. Mukherjee, for
the appellant.
Sardar Bahadur, for the respondent.
F
The Judgment of the Court was delivered by
Sllah, J. Messrs Sunder Lal & Son-hereinafter called 'the
appellants'-are members of the East India Jute and Hessian Exchange Ltd. an Association recognised under the provisions of
the Forward Contracts (Regulation) ·Act. 1952. The appellants applied to the High Court of Judicature at Calcutta on its original
G side under s. 33 of the Indian Arbitration Act JO of 1940 for an
order, inter alia. declaring that "there exists a valid arbitration
agreement contained in contract Ng. 750 dated September 16, 1960
between the petitioners" and the·· respondents. The appellants
claimeil that they entered into a contract with the respondents on
September 16, 1960, for the purchase of 6,00,000 bags of B Twill
anhe rate of Rs. 132.50 nP per 100 bags, "on their own account"
B in Transferable Specific Delivery Form prescribed under the byelaws of the Association and on terms and c<inditions set out therein. The respondents denied the existence of the contract and also
its validity. The High Court dismissed the application holding that
MJJ(N)6SCI-13
610
SUPBl!Jlll COURT lllll'011'1'8
[1008) l 8.0.B.
the contract was invalid in that it did not comply with the require- A
ments of s. 15 sub-s. (4) of the Forward Contracts
(Regulation)
Act, 1952. By special leave, the appellants have appealed to this
Court.
The relevant recitals in the notes, which, it was claimed, con·
stituted the contract between the parties may first be set out:
Sunder Lal & Son.
"7A, dive Row,
Calcutta-I
Contract No. 750
Messrs. Bharat Handicrafts lPriwte) Ltd.
Dear Sirs,
We have, subject to the terms aud conditions hereinafter referred to, this day sold to Messers. Sunderlal & Son
B
c
by your order, and on your account:
D
Yours faithfully,
Sunderlal & Sons.
"Calcutta,
16th September, 1960
Messrs. Sunderlal & Son
No. 150
Dear Sirs,
..
We have, subject to the terms and conditions hereinafter referred to this day bought from. Bharat Handicrafts
(Private) Ltd., by your CKder, and on your actount:
•
B
F
Yours faithfully,
G
Sundcrlal & Son. "
Validity of the contract was challenged by the respondents on
two grounds-0) that the appellants were not at the relevant time
members of the Association; and (2) that the requirements of s. 15
(4) of the Forward Contracts (Regulation) Act were not complied
with and the contract was on that account invalid. The High Court B
decided both the grounds in favour of the respondents.
The appellants averred in their petition that they were at all
material times members of the Association. Baburam Saraf-principal officer of the Company-in his affidavit in reply merely stated
SUNDEil LAL V BHARAT ltui'D!ca&nll (Shah, J.)
611
A· that he did not admit that averment. The learned Judge observed
that he was "unable to hold that the appellants had proved that the
appellants were members of the Association at the time of the formation of the contract". It is unfortunate that the attention of 1hc
learned Judge was not invited to the admission made by the respondents in paragraph 6 of the plaint filed by them in the City Civil
B Court, Calcutta, for a cdeclaration that there was in fact no contract
between them and the appellants bearing No. 750 dated September
16, 1960, in which the respondents had averred that they had discovered that the appellants "at all material times were the members
of the said B:5t India Jute & Hessian Exchange Ltd''. In view of
this evidence, counsel for the respondents did not seek to support
the decision of the High Court on the first ground, and nothing
C more !!eed be said in that behalf.
In dealing with the sei;ond ground. it is necesary to summariso
the relevant provisions of the Forward Contracts (Regulation) Act.
1952. The Act was enacted to provide for the reguiation of certain
matters relating to forward contracts, the prohibition of options in
goods and for matters connected therewith. By Ch. II the Central
D Government is given authority to establish and constitute a For~
ward Markets Commission with certain functions and powers. By
Ch. III provision is made for granting recognition to associati<'ns.
withdrawal of recognition and other incidental matters. By s. J I
sub-s. ()) any recognised association may. subject to the previous
approval of the Central Government, make bye-laws for the regulaE tion and control of forward contracts. By sub-s. (2). it is provided
that such bye-laws may provide inter alia for the terms, conditions
and incidents of contracts_ including the prescription of margin requirements, if any. and conditions relating thereto, and the forms
of contracts in writing. Sub-sections (l), (2) and (4) of s. 15 in force
at the date of the contract were these:
F
B
"(I) The Central Government may by notification in
the Official Gazette, declare this section to apply to such
g~s or class. of g?Ods and in such areas as may be specified ·m the not1ficallon, and thereupon, subject to the provisions contained in section 18. every forward contract for
the sale or purchase of any goods specified in the notification w~ich is entered into in the area specified therein
~therw1se than betwc:en members of a recognised association or through or with any such member shall be illegal.
(2) Any forward contract in goods entered into in
pursuance of sub-section (I) which is in contravention of
any of the. bye-laws specified in this behalf under clause
(a) of sub-section (3) of section 11 shall be void-
(i) as. respects f!ie.rights of any member of the recogmsed association who has entered into such eon-
~: in contravention of any such bye-law. and
612
SUPUU COURT U1'0llTll
{11168) 1 S.0.B,
(ii) as respects the rights of any other person who
A
has knowingly participated in the transaction en·
tailing such contravention.
(3) .
(4) No member of a recognised association shall, in
respect of any goods specified in the notification under
sulrsection (l), enter into any contract on his account with
any person other than a member of the recognised association-;- unless he has secured the consent or authority of
such person and discloses in the note, memorandum or
agreement of sale or purchase that he has bought or sold
the goods, as the case may be, on his own account:
'
Provided that where the member has secured the consent or authority of such person ot11erwise thati in writing
he shall secure a written confirmation by such person of
such consent or authority within three days from the date
of such contract:
Provided further
Section 20 prescribed, penalties for breach of the provisions of the
Act. The relevant section at the date of the contract insofar as it
relates to the penalty for infringement of s. 15(4) read as follows:
"(l),
(2) any person who enters into any forward contract
in contravention of the provisions contained in subsection (4) of section 15 shall on conviction be punishable with fine."
It is common ground that the Central Government has issued
B
Cl
D
B
a notification declaring s. 15()) of the Act as applicable to forward p
contracts in jute and jute goods. The ;1ppellants entered into the
contract with the respondents-who are. not members of the association-for buying jute bags on their own account. Sub-section (4)
of s. 15 imposes a prohibition against the entry into a contract on
his 1>wn account by a member of the association with any person
who is not a member of that association, unless the member has
secured the consent of such other person and discloses in the note, G:
memorandum or agreement of sale or purchase that he has bought
or sold the goods, as the case may be, l>n his own account. The
prohibition is removed only if two conditions exist-(i) that the
note must disclose that the purchase or sale is on the account of the
member of the recognised association; and (ii) consent or authority
of the other person has been secured independently of the disclosure B
in the note. Where the consent or authority of the other person is
secured but not in writing, the member h,as to secure a written confirmation Of such consent or authority within three days from the
date of sμch contract.
BUNDBB L4L V BHARAT llAHDIOBU'J.'8 (Shah, J.)
613
A
The "bought" and "sold" notes which are set out earlier are
in the form prescribed in the Appendix to the Bye>laws of .the association. At the foot of the prescribed form of the note there is a
slip in which normally the confirmation of the other party to the
co.ntract would be obtained. The confirmation slip was it appears
detached from the "sold" note, but it was not produced before the
B High Court by the appellants. Counsel for the appellants says that
the respondents did give a slip confirming the contract in the
"sold" note, but it was unfortunately not tendered in ·evidence in
the High Court, and he applies foc leave to tender in evidence that
confirmation slip in this Court. The confirmation slip sought to be
produced in this Court purports to bear the confirmation by a person who has signed ii as 'M.L. Bahati'. This document was admitC tedly in the possession of the appellants and could have been produced by them in the High Court. No rational explanation ii. furnished for not producing the document before the High Court.
Again the document does not prove itself: to make out the case that
the respondents had consented in writing to the terms of the contract, evidence that the signature "M. L. Bahati" was subscribed by
D the person bearing-that name and that he was authorised to confirm
the note on behalf of the respondents would be necessary. The
"sold" note is addressed to the appellants: it purports to be made
out in the name of the respondents, and is signed by the appellants
as "Member Licensed Broker of the Association". It is claimed that
the appellants subscribed their signature to the "sold" note under
E the authority of the respondents. The authority of the appellants
from the respondents to enter into the transaction does not appear
from the terms of the "sold" note. But it is urged on behalf of the
appellants that the bye-laws framed by the association prescribe that
this form of the note shall be adopted even in transactions in wbicli
a broker is enterieg into a contract on bis own account, and if the
contract is not in the form prescribed under the bye-laws the conF trac.t would be void. We need not dilate upon that question, for we
are only concerned to point out that there is no evidence on the record that the appellants had secured the written consent or authority of the respondents to the contract. Where the Appellate Court
requires any document to be produced or witnesses to be examined
to enable it to pronounce judgment, or for any other substantial
G cause, the Court may allow such document to be produced or witnesses to be examined. We do not require additional evidence to
be produced in this case to enable us to pronounce· judgment, nor
do we think that any substantial cause is made out which would
justify an order allowing additional evidence to be led at this stage.
The document relied upon was admittedly in the possession of the
appellants, but they did not rely upon it before the High Court. It
Jl was said at the Bar that the importance of the document was not
realized by those in charge of the case. We do not think that the
plea would bring the case within the expression "other substantial
cause" in 0. 41 r. 27 of the Code of Civil Procedure. We therefore
decline to allow this additional evidence to be brought on the record
614
BUPBPB COURT l\BPOllTB
[1968] 1 s.c. :.
There is accordingly no wrlting evidencing tho consent or ~
A
to the appellal)ts entering into a contract on their own account with
the· ·responden!S in respect of jute goods, and it is not the case of
the appellants that they had secured written confirmation of sue.It
consent or authority by the respondents within three days from the
date of the contract.
B
Counsel. for the appellants, however, contends that sub-s. (4)
of s. 15 does not invalidate a contract merely because there is no
writing evidencing or confirming the consent or authority of the
hon-member, even if the member has entered into a contract in respect of goods purchased or sold on his own account Counsel says
that the prohibition imposed by the Parliament against the entry c
into such a contract does not make it void: only by entering into
the contract the appellants are rendered guilty of an offence under
s. 20 sub-s. (2) of the Act. In support of that contention, counsel
says, that since in ss. 15(1), 15(2), 17(2) And 19. the Parliament has
expres$ly enacted that in certain eventualities forward contracts
shall be illegal or void, but in s. 15(4) no such consequence is
indicated, a contract even in breach of the prohibition is enforce- D
able, though it may expose the appellants to a criminal prosecution. Reliance is placed in support of that pl~ upon Shri Bajrang
Jute· Mills Ltd. v. La/chand Dugar('), in which the .Calcutta High
Court observed in dealing with the validity of a contract entered
into by a member of a recognised association on his own account
with a non-member in respect of specified goods:
E
" ......... We think that the first proviso to section 15(4) is
directory in the sense that the securing of the written confirmation of the contract is no more than a oondition subsequent as to which the responsible members may bt'
blameable or punishable if he does not secure it, but his
failure to do so does not invalidate the contract.
We think that on a true construction of section 15(4) the
failure of the member to obtain the written confirmation
of the oral consent or authority to enter into the forward
·contract on his own account does not render the contract
either illegal or void."
Jn our judgment that view cannot be accepted as correct. The Legislature has by the Act imposed diverse restrictions upon the liberty
of contract in respect of forward transactions in commodities speci1ied in a notification under s. 15(1). By the first sub-section of s. IS
F
G
.. it is provided that contracts in respect of the specified goods or classes of goods in certain aremi not between persons who are members R
of a recognized association or through or with any such member
shalfbe illegal. The effect of the sub-section is that a forward contract for the sale or purchase of specified goods may be entered into
(') 68 Cal. W.N. 749.
SUNDD LAL 11 BIUBAT BANDIORAJTS (Shah, J.)
6UI
A only between in.embers of a recognized association or wi,th a membi:r or through 'any member of such an association : otherwise the
contract will be invalid. The Act then proceeds to enact in sub-s.
(2) that a forward ~ontract in goods entered into in pursuance of
sub-s. (!) shall still be void if it is made in contravention of the
bye-laws in that behalf under cl.- (a) of sub-s. (3) of s. 11. By sub-s.
B (4) the Parliament has then imposed a prohibition upon every member of a recognized association against entry into a contract on his
own account with a non-member in respect of specified goods : · the
prohibitio!l is lifted when in the memorandum, agreement of sale or
purchase or in the bought and sold notes it is expressly disclosed
that the contract is by the member on his own account and that he
has secured the consent or authority of the other person who is a
O party to the contract, and if such consent or authority be not in
writing, the member has obtained a written confirmation by such
person of such consent or authority within three days from the date
of the contract It is therefore contemplated that for an enforceable contract to arise there shall be a writing evidencing or confir·
ming the consent or authority of such person. The prohibition imD posed by cl. (4) is not imposed in the interest of revenue; the clause
is apparently conceived in the larger intere~t of the public to protect them against the malpractices indulged in by members of recognized associations in respect of transactions in which their duties
as agents conflict with their personal interest. The Parliament has
clearly made a ·writing evidencing or confirming the consent or
B authority of a non-member as a condition of the contract, if the
member has entered into a contract on his own account. So long as
there is no writing as is contemplated by s. 15(4) or the proviso
thereto, there is no enforceable contract: it is the consent or authority in writing or confirmation of such consent or authority which
brings into existence an enforceable contract. Any othc:r view,
would attribute to the Parliament an intention to impose a prop hibition which would be rendered for all practical purposes futile.
Under s. 20 sub-s. (2) of the Act a penalty is imposed on
any person who enters into a forward contract iii contravention
of the provisions contained in sub-s. (4) of s. S. The penal clause
is not clearly expressed. A reasonable reading of that clause is
Cl that a person who enters into a contract without disclosing that
he. contracts on his own account is liable to be punished. It
could obviously not have been intended by the Parliament to
punish a person for failing to secure the consent or authority of
the other party to the contract-an act which depends solely upon
the volition of that other person. The apparent obscurity in . the
B penal provision cannot however be utilized to restrict the proln'bition contained in s. 15(4). What is penalised under s. 20(2) is entry into a forward contract by a member on his own accbunt
without disclosing to the non-member contracting party
that the
contract is on the member's own account. We therefore hold that
616
SUPUllll OOUllT B11'9:l'l'8
(1988] 1 a.0.11.
the High Court was right in holding that the contract
did not A
comply with the requirements of sul>-s. (4) of s. tS arid was on
that account invalid.
·
The appeal therefore fails and is dismissed with costs.
v.~.s.
Appeal dismissed.
•