# Khardah Company Ltd v. Raymon & Co. (India) Private

- **Citation:** [1964] 2 S.C.R. 686
- **Court:** Supreme Court of India
- **Decided:** 1964
- **Case number:** Civil Appeal No. 164 of 1961
- **Bench:** B. P. Sinha C. J, J. C. SH All, N. Rajagopala Ayyangar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/khardah-company-ltd-v-raymon-co-india-private-2953
- **Pages:** 17

## Headnote

Foru:urd
Co11tracl-1'ran•ferabilit1/
of
contrart-S u
specific stipulations in co11trrir,t-lf indicates trant1JerabilityJVhethtr
other
circu1n~ta11ces can he looked into-Sauraslttra
Groundnut aJtd GruuJUlnut Products (l?or11:ard Cu1itn1ctg Proh1/,ition) Ordtr, 194!1.
The appellant entered into contracts \Vith the 1espondent
(for sale of groundnuts) which were de'!Cribcd as ready delivery
contracts and \Vere subject to the rules and regt1lations of the
Vcraval Merchants Associati:>n.
·rhc contraccs specified the
price and quality of the goods and stipulated delivery at a
specific price.
But there was nothing in the contracts indicating \vhethcr they were transferable to third parties.
The
respondent clai1ncd certain arnounts of money in respect of
these transactions but the appellant resisted the claitn 011 the
ground that the contracts, being forv,rard contracts, were prohibited by the Saarashtra Groundnut and Groundnut Product'
(Forward Contracts Prohibition) Order, 1949, and were illegal.
The appellant c0n1cnded that the contracts for the delivery of
groundnuts at a future dat(", even though they \\'ere for specific
quality and for specific delivery at a specific price, must be
deemed to be forward contracts unless it was expressly recited
that they \Vere not transferable to third parties.
Held
that the contracts \Vere not fur\vard contracts and
were 1•ot hit by the Prohibition Order.
A contmct for delivery
of goods at a future date, even
tho~gh for a specific price and
specific quality, can be excluded fro1n the definition of forward
contracts only if the contract is no:1-transfcrablc.
But from
the mere absence of au express stipulation as to non-transfer·
ability in the contract, it canno~ be <lcerned to bt~ transferable
and outside the exception.
It is not re.quired either by the
Order or by the object of rite Order that the <:on<lirion regard.
ing nou-trdnsferability ~hould he mentioned iu the contract
itself before the contract can be excluded frorn the definition of
forward contract.
:\bsence of a specific stipulation in this
regard is not conclusive.
It has tu be SL'Cn whether upon the
2 S.C.R.
SUPREME -cotJRT REPORTS
687
language of the contract interpreted in the light of surrounding
circumstances it can be held that there was an agreement
between the parties that the contract was not transferable.
The rules and regulations of the Association to which the
contracts in dispute were su!Jjecl clearly sho\ved that the contracts were not transferable.
Khardah Company Ltd. v. Raymon & Co. (India) Private
Ltd., [1963] 3 S.C.R. 183, applied.
Firm Hansraj v. Vasanji (1948) 4 D.L.R. Born. 7, Uma
Satyanarayanamurty v. Kothamasit Sitaramayya & Co. (1950)
1 ML.J. 557. Boddit Seetharamaswami v. Bhagavathi Oil
Company, I.L.R. (1951) Mad. 723, Hussain Kasam Dada v.
Vijayanagaram
Commercial
Association,
A.LR.
(1954)
Mad.
528
and Vaddadi
Venkataswami v. Hanura Noor
Muhammad Beegum, A.I.R. (1956) Andhra 9, referred to.

## Text

1963
Mtnch tY
686 SUPREME COURT REPORTS [1964] \rot.
HEl\JRAJ KESHA VJI
"().
SHAH HARIDA~ JETHABHAI
(B. P. SINHA C. J ., J. C. SH All and
N. RAJAGOPALA AYYANGAR jj.)
Foru:urd
Co11tracl-1'ran•ferabilit1/
of
contrart-S u
specific stipulations in co11trrir,t-lf indicates trant1JerabilityJVhethtr
other
circu1n~ta11ces can he looked into-Sauraslttra
Groundnut aJtd GruuJUlnut Products (l?or11:ard Cu1itn1ctg Proh1/,ition) Ordtr, 194!1.
The appellant entered into contracts \Vith the 1espondent
(for sale of groundnuts) which were de'!Cribcd as ready delivery
contracts and \Vere subject to the rules and regt1lations of the
Vcraval Merchants Associati:>n.
·rhc contraccs specified the
price and quality of the goods and stipulated delivery at a
specific price.
But there was nothing in the contracts indicating \vhethcr they were transferable to third parties.
The
respondent clai1ncd certain arnounts of money in respect of
these transactions but the appellant resisted the claitn 011 the
ground that the contracts, being forv,rard contracts, were prohibited by the Saarashtra Groundnut and Groundnut Product'
(Forward Contracts Prohibition) Order, 1949, and were illegal.
The appellant c0n1cnded that the contracts for the delivery of
groundnuts at a future dat(", even though they \\'ere for specific
quality and for specific delivery at a specific price, must be
deemed to be forward contracts unless it was expressly recited
that they \Vere not transferable to third parties.
Held
that the contracts \Vere not fur\vard contracts and
were 1•ot hit by the Prohibition Order.
A contmct for delivery
of goods at a future date, even
tho~gh for a specific price and
specific quality, can be excluded fro1n the definition of forward
contracts only if the contract is no:1-transfcrablc.
But from
the mere absence of au express stipulation as to non-transfer·
ability in the contract, it canno~ be <lcerned to bt~ transferable
and outside the exception.
It is not re.quired either by the
Order or by the object of rite Order that the <:on<lirion regard.
ing nou-trdnsferability ~hould he mentioned iu the contract
itself before the contract can be excluded frorn the definition of
forward contract.
:\bsence of a specific stipulation in this
regard is not conclusive.
It has tu be SL'Cn whether upon the
2 S.C.R.
SUPREME -cotJRT REPORTS
687
language of the contract interpreted in the light of surrounding
circumstances it can be held that there was an agreement
between the parties that the contract was not transferable.
The rules and regulations of the Association to which the
contracts in dispute were su!Jjecl clearly sho\ved that the contracts were not transferable.
Khardah Company Ltd. v. Raymon & Co. (India) Private
Ltd., [1963] 3 S.C.R. 183, applied.
Firm Hansraj v. Vasanji (1948) 4 D.L.R. Born. 7, Uma
Satyanarayanamurty v. Kothamasit Sitaramayya & Co. (1950)
1 ML.J. 557. Boddit Seetharamaswami v. Bhagavathi Oil
Company, I.L.R. (1951) Mad. 723, Hussain Kasam Dada v.
Vijayanagaram
Commercial
Association,
A.LR.
(1954)
Mad.
528
and Vaddadi
Venkataswami v. Hanura Noor
Muhammad Beegum, A.I.R. (1956) Andhra 9, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 164 of 1961.
Appeal from the judgment and decree dated
December 17, 1957, of the former Bombay High
Court (Now Gujarat), in Civil First Appeals Nos. 14
and 24 of 1956 from Original Decree.
B.R.L. Iyengar, Atiqur Rehman, J.L. Doshi
and K.L. Hathi, for the appellant.
Purshottam Tricumdas, J.B. Dadachanji, 0.0.
11lathur and Ravinder Narain, for the respondent.
1963. March 29. The Judgment of the Court
was delivered by
SHAH J.-The appellant instituted Suit No. 250
of 1950 in the Court of the Civil Judge (Senior
Division), Junagadh for a decree for Rs. 72693/11/-
alleging that the appellant had a personal account
with the respondent in respect of drafts, cheques,
hundis and cash, and at the foot of that account
Rs. 58,000(-as principal amount and Rs. 5, 793/12/-
as interest remained_ due and payable by the
respondent, that beside the amount due on the said
1963
H1mraj K1shavji
v.
1-!aridaJ Jelhahh«i
Shah J.
1963
lltrnraj Krsh1,::.ji
'"
}/a,; ·'ai }tfl nbhai
688
SUPREME COURT REPORTS [1964]VOL.
personal account au amount of Rs. 8,899/15/3 was
due to l1i111 in respect of a transaction of sale of
I :mo bags of groundnut
sent by him
between
.January {(i tJ Januarv
~1'. I \J.iO, and lite pr:cc of
gunny bags and groundnut oil cakes delivered to the
respondent. The appellant further alleged
that
forward contracts were prohibited with effect from
November 1 !J, l 949 by the Saurashtra Groundnut
and
Groundnut Products
(forward
Contracts
Prohibition) order, and that the said contracts being
illegal the appellant was not subject to any liability
arising from adjustments of credits and debits or
differences in rates relating to forward contracts and
the respondent was not entitled nor authorised to
make credit and debit entries in the appellant's
account and that nothing was due by him in respect
thereof.
The respondent by his written statement
contended that in the appellant's personal account
an amotmt of Rs. 1,58,000/. stood initially credited
but at the foot of that account only a sum of
Rs. 18,000/- was due and this sum was credited in
the current account of the appellant in the name of
Hemraj Keshavji Oil .\-fills and Ginning Factory
and therefore nothing was due in the personal
account,
that
the
transaction effected
by
the
appellant through the commission agency of the
respondent in groundnut seed for December-January
(Samvat 2006) S<'ttlement did not contravene the
onlcr dated November 19, 1\149, of the United States
of Saurashtra and that the
respondent
has not
committed any breach of the order, that all the
transactions for the December-January Settlement
were in ready goods of specific quality and that
there was a condition relating to giving and taking
of delivery on fixed dates and the same were all
effected at the direction of the appellant and that the
appellant was legally responsible for all payments made
in respect of those transactions by the respondents as
the appellant's p1u;c.a arlatia.
He then contended
that in Samvat year 2006 the appellant had sold
2 S.C.R.
SUPREME COURT REPORTS
689'
9000 bags of groundnut through the agency of the
respondent and had purchased 2300 bags through
him, that the appellant thereafter gave delivery of
only 2000 bags of groundnut and did not deliver the
balance and on that account there resulted a loss of
Rs. 9,221/7 /9 which the appellant was bound to
reimburse.
The respondent admitted that
the
appellant had sent 1300 bags of groundnut but these
bags were delivered towards the sale of 2000 bags of
December-January settlement and the price thereof
and of the balance of 700 bags was credited in the
account of the appellant, and that the appellant was
not entitled to a decree for any amount except the
amount found due at the foot of the account.
The trial Court decreed the claim by awarding
Rs. 30,589/3/- and interest.
Against the decree of
the Trial Court the respondent as
well as the
appellant appealed to the High Court of the
Saurashtra.
The appeals were transferred for trail
under the States Reorganization Act to the High
Court of .Judicature of Bombay at Rajkot. The
High Court allowed the appeal of the respondent
and dismissed the appeal of the appellant. The
appellant has with certificate issned by the High
Court, appealed to this Court against the decree
passed by the High Court.
The appeal raises a dispute about the liability
of the appellant for transactions in groundnut seed
effected through the agency of the respondent after
November 19, 1949, for December 1949,
aud
.January 1950, settlement. The appellant says that
these
were forward transactions in groundnut and
were prohibited under the Saurashtra Groundnut
and Groundnut Products (Forward Contract Prohibition) Order, l!J49, and that these transactions gave
rise to no liability which the appellant is obliged to
discharge. The respondent says that the transactions
were ready delivery contracts which were not
1963.
Hem1aj
tesh~vji
••
Hariias Jethabh«i
Shah J.
IHJ
H1mraj K1slt•rji
v.
Hatii•s J1thUli•i
SMll J,
690 SUPREME COURT REPORTS [lll64] VOL.
prohibited by law and in respect of the losses suffered
thereunder the appellant was bound to indemnify
the respondent and that the losses suffered in those
transactions were duly debited in the personal account of the appellant.
There is no dispute before
us about the correctness of the entries in the personal
account of the respondent. If the respondent's case
is held proved that the transactions were ready delivery
transactions, and not prohibited by the Saurashtra
order the decree passed by the High Court must be
maintained.
The Saurashtra Groundnut and Groundnut Products (Forward Contract Prohibition) Order, 1949,
was issued on November 19, J\M9, and was extended
to the whole of the United States of Saurashtra.
By
cl. 2 (a) 'contract' was defined as meaning "a contract
made or to be performed in whole or in part in the
United States of Saurashtra relating to the sale or
purchase of groundnut whole, groundnut seeds, or
groundnut
oil.·• By cl. 3 forward contracts in
groundnut and groundnut products were prohibited.
The clause provided "No person shall henceforth
enter into any forward contract in groundnut whole,
or groundnut seeds, or groundnut oil except under
and in accordance with the permission granted by
Government."
By cl. 4 all
outstanding forward
contracts on the date of the publication of the order
are to be closed immediately and at such rates and
in such manner as may be fixed by the Association
concerned under their respective bye-laws or other
regulations that may be applicable to such contracts.
The Trial Court held that out of the transactions
which took place on or after November 19, I 949,
only one transaction which was for delivery on
January 25, 1950, was not hit by the order.
The
remaining transactions, according to the Trial Court
must be regarded as
wagering transactions i. e.
transactions in which it was intended by the parties
that delivery of the goods contracted for could not
2 S.C.R.
SUPREME COURT REPORTS
691
be demanded without breach of the understanding.
The Court did not consider whether the transactions
were invalid as being in violation of the prohibition
contained in the order. The High Court held that
according to the rules of the Association, by which
the contracts were governed, delivery of the goods
contracted for
was invariably to be given at the
god own of the purchaser and
therefore deli very
orders, railway receipts or bills of lading were not
contemplated by the parties and the contracts being
for specific quality or type of groundnut for specific
delivery and for specific price in respect of ready
delivery goods the transactions were not hit by the
order.
By cl. 3 of the order all forward contracts in
groundnut and groi;ndnut products except those in
accordance with the permission
granted by the
Government
were prohibited. It is not the case
of the respondent
that permission was obtained
from the Government in respect of those transactions,
but he contends that the transactions were not "forward cantracts" and therefore not within the prohibition of the order.
The definition of the expression
'forward contract'
is somewhat obscure and the
precise significance of the expression "against which
contracts are not transferable to third parties" is
difficult to guage.
A forward contract is in the first
instance defined as meaning "a contract for delivery
of groundnut whole, or groundnut seeds or groundnut
oil at some future date." The contracts in dispute
in the present case were indisputably contracts for
delivery of groundnut at "some future date." But
the definition expressly excludes certain contracts
from its operation even if they are contracts for future
delivery viz.
contracts for specific qualities or types
for specific delivery at specific price, delivery orders,
railway receipts or bills of lading, against which
contracts are not transferable to third parties. Why
the draftsman should in prescribing the condition of
1953
Hemrai KtJhavji
..
ha1idtu Jtth«bhoi
Shah J.
IJ63
Hmer•j K11J,nji
••
H•rii.r /llhUMi
•
692
SUPREME COURT REPORTS [1964)VOL.
non.transferability of a contract against delivery
orders, railway receipts or bills of lading, should have
referred to "contracts" is difficult to appreciate •
The contracts in dispute were effected according
to the rules and regulations of the Veraval Merchants
Association.
A sample
form
of the contracts
between the parties may be set out :
"This Sauda is to be treated as subject to the
rules and regulations of the Association.
No. 143 Ready Delivery Veraval, Dt. 21-11-49
Sheth Thaker Hemraj Keshavji at Malia.
Please accept Jay Gopal
from
Shah
Haridas Jethabhai.
We have this day transacted the Sauda as
under, on your behalf and as per your order.
Having made a note of it and having signed
the slip below the counterpart, return it immediately.
P. S. It is left to our choice whether on
the deposit being exhausted to let the Sauda
remain outstanding or not.
1. Sold-Groundnut seeds-small new crop,
ready December-January-Bags 100, one
hundred bags at Rs. 31·6·3 rupees thirtyone annas six and pies three-Standard
filling 177 (lbs.)
2. Sold-Groundnut seeds-small new crop,
ready
December-January lDated
25th
Bags 500, five hundred bags at Rs. 31-11-6
rupees thirty one annas eleven and pies
six-Standard filling 177 (lbs.)
3. Sold-Groundnut seeds-small new crop,
ready Decemb~r. fanuary Bags 100 Qne
2 S.C.R.
SUPREME COURT REPORTS
693
hundred bags-at Rs.
31-6-6
rupees
thiry one, annas six and pies six-Standard
filling 177 (lbs.)
•
Sd. Chhaganlal for Shah
Haridas Jethabhai
1st Shukla Margashirsh,
St. 2006, Monday."
At the foot of the contract is th~ acknowledgment as under :-
"Shah Haridas Jethabhai, at Vera val.
,
We have received your Sauda nondh Chitti
No. 143 and have noted accordingly.
2nd Shukla Margashirsh,
St. 2006,Dt. 21-11-49
Sd. Kalidas Bhagwanji for
Sheth Hemraj Keshavji."
The contract is described as a ready delivery
contract and is made subject to the rules and regulations of the Association. The price of the goods and
the quality of the goods are specified and delivery at
a specific price is also stipulated. There is nothing
in the contract indicating whether it was transferable
to third parties. But the appellant submits that where
the contract is silent as to whether it is transferable
a~ainst delivery orders, railway receipts or bills of
lading, it must be deemed capable of being transferred to ·third parties and so for the purpose of the
order, be deemed to be a forward contract. The
1'i3
Htmr•j E1sh11i1
••
Hcriic1
Jetkcih~
Sh<ii J
/95J
Htmr11.j Kt.>hrnji
v.
lla1itf1U J ttA.1.~bai
Sltizh J.
•
694 SUPREME COURT REPORTS [1964]VOL.
argument in subitance is that a contract for delivery
of groundnut at a future date even for specific quality
and for specific delivery<11t a specific price would not
be excluded from the definition of forward contract,
unless it is expressly recited in the contract that it is
not transferable to tlurd parties
against delivery
orders, railway receipts or bills of lading.
This, it is
urged, is so because it was the object of the order to
prohibit speculation in groundnut and groundnut products, and to achieve that purpose it sought to
prohibit forward transactious which were transferable to third parties. By insisting upon completion of
the contract between the parties thereto, it is urged
it was intended to prevent speculation in essential
commodities.
Reliance in this behalf was sought to
be placed upon several decisions of the Bombay,
Madras and Andhra Pradesh High Courts dealing
with the interpretation of clauses similar to the defini·
tion of forward contract in the Saurashtra order, in
which it was held that exclusion from the prohibition
against forward contracts can be regarded as effective
only if the stipulation about non-transferability is
expressly mentioned in the contract, and silence of
the contract imported transferability even in respect
of contracts for specific quality for specific delivery
at specific price. The earliest decision of this clause
was a decision of a single Judge of the Bombay High
Court in Firm Ilansraj v. Vasanji (').
In that case
the contract was for spot delivery i.e. where no deli·
very order or railway receipt or bill of lading would
ordinarily be issued.
But the learned Judge held that
such a contract in the absence of an express stipulation prohibiting transfer would not fall within the
Notification granting exclusion from the prohibition
of forward contracts, because the condition regarding
non-transferability would not be fulfilled.
It was
observed by Mr. J ustic~ .M. V. Des'ai : "The only
classes of cases of forward contracts which were
exempted were those which contained in them the
guarantee against speculation by reason of a provision
(I) (1948) 4 D.L.R, Bom, 7.
2 S.C,R.
SUPREME COURT REPORTS
695
that the Delivery Ordern, Railway Receipts, or Bills
of Lading (which were contemplated by the contracts
and would be issued) should not be transferable to
third parties ..................... ", and he recorded his
conclusion as follows :
"In my opinion, if Delivery Orders were contemplated under these contracts, they were
illegal, as the Delivery Orders were not made
non-transferable. If Delivery Orders, Railway
Receipts or Bills of Lading were not contemplated under the contracts, then the exemption
(which deals with cases where Delivery Orders,
Railway Receipts or Bills of Lading are issued)
has no application."
This decision was approved in Uma Satyanarayana·
murty v. Kothamasu Sitaramayya & Go. (1), where
in considering whether a disputed contract was a
'forward
contract'
within
the
meaning
of
the Vegetable Oils and Oilcakes (Forward Contract Prohibition) Order, 1944, Rajamannar, C. J.,
held that the intention underlying the notification
being to grant exemption only to cases of forward
contracts in respect of which there could be some
guarantee that they would not be subject to speculation, exclusion from the prohibition imposed by the
notification may be established only if one of the terms
of the contract is that the delivery order or railway
receipt or bill of lading relating thereto is not transferable. It is not enough that such documents are not
contemplated, because it cannot be said that they are
prohibited.
This view was followed
in Bodhu
Seetharamaswami v. Bhagavathi Oil Company ('),
Hussain Kasam Dada v. Vijayanagaram Commercial
Association(') and Vaddadi Venkataswami v. Hanura
Noor Muhammad Beegum (').
The phraseology of
the notifications and the definitions of forward contract were not in terms identical, in each of these
cases; but these cases lay down that before a contract
(I) (1950) 1 M. L. J. 557
{S) A.l.R. (1954) Mad. 528.
(2) J.L.R. (1951) Mad. 723.
(4) A.I,R. (1956) Andbra 9;
1969
Hemraj Kesht11ji
v.
H•rii«s Jeth<bhai
Shah J;
Htm1aj Krsliarji
••
/!nriias Jttl,Rbhm
696 SUPREME COURT REPORTS [1964] VOL.
for delivery of a commodity al a future date could be
regarded as excluded from the definition of forward
contract, even if the contract was for a specific price
or specific quality, it must be stipulated that the
contracts were not transferable to third parties by
expressly prohibiting the transfer of delivery orders,
railway receipts or bills of lading.
We arc unable to hold that a contract for
delivery of goods at a future date would fall within
the exception in the definition of forward contract
if other conditions are fulfilled only if there is
an express stipulation recorded in the contract
prohibiting the transfer of delivery orders, railway
receipts
or bills of lading against the contract
thereof.
The
order
issued
by
the Saurashtra
Government excluded from the definition of forward
contract all contracts for specific qualities or types
of groundnut whole or groundnut seeds or groundnut
oil and for specific delivery at a
specific price,
delivery orders, railway receipts or bills of lading
against which contracts, were not transferable to
third parties.
But the Legislature did not impose
the condition that the contracts for delivery of goods
at some future <late must recite that the contracts
were not to be transferable, and there is no indication
of such an implication.
Nor is the object of the
order sufficient to justify an overriding reason for
implying that condition. In a recent case Kliardah
Company Ltd v.
Raymon .C:
Compan11 (India)
Private Ud. ('),
this Court had to adjudicate upon
the validity of a forward contract relating to jute.
By cl. (2) of s. 17 of the Forward Contracts Regu·
lations Act 74 of I 952 forward contracts in contravention of the provisions of sub-s. (I) of s. 17 were
declared illegal, but the Notification did not apply
to non-transferable specific delivery contracts for the
sale or purchase of any goods.
In a dispute relating
to non-delivery of jute, which
was one of the
commodities to which the Act was made applicable,
(I) (1963] 3 8.C.R. lij3,
-
2 S.C.R.
SUPREME COURT REPORTS
697
the Bengal Chamber of Commerce made an award.
In a petition to set aside the award it was urged
that in the absence of a specific clause prohibiting
transfer in the contract itself, the plea that the
contract is not transferable is not open to the party
supporting the contract and that evidence aliunde is
not admissible to establish the condition, and in
support of that argument
Seetharanmswani v.
Bhagwathi Oil Co.
(1l,
Hanumanthah v.
U.
Thimmaiah ('),
and Hussain
Kas11m
Dada v.
Vijayanagaram Commercial
Association (') were
cited. Venkatarama Aiyar, J, observed in dealing
with this conteFJtion:
"x x x that when a contract has been
reduced to writing, we must look only to that
writing for ascertaining the terms of the agreement between the parties, but it does not follow
from this that it is only what is set out
expressly and in so many words in the document that can constitute a term of the contract
between the parties. If on a reading of the
document as a whole, it can fairly be deduced
from the words actually used therein that the
parties had agreed on a particular term, there
is nothing in law which prevents them from
setting up that term. The terms of a contract
can be express or implied from what has been
expressed.
x x x x on
the
question
whether there was an agreement between the
parties that the contract was
to
be nontransferable, the absence of a specific clause
forbidding 'transfer is not conclusive.
What
has to be seen is whether it could be held on
a reasonable interpretation of the contract,
aided by such considerations as can legitimately be taken into account that the agreement of the parties was that it was not to be
transferred. When once a conclusion is reached
that such was the understanding of the parties,
(I) (1951) I M.L.J. 147.
(I) A.I.R. (1954) M•d. 87.
(3) A,!.j.t, ( 1954) M•4• 528,
1'1i!I
Hemr11j Kdsliavji
••
Haridas Jethiiluii
Shah J,
Htm,si Kt.rliaojl
•.
Hariicr J1thabht1i
Sh<h J.
•
698 SUPREME COURT REPORTS [1964] VOL.
there is nothing in law which prevents effect
from being given to it."
In our view this principle applies to the interpretation
of the Saurashtra Groundnut and Groundnut Products
(Forward Contract Prohibition) Order, 194.9.
From
the absence of a clause expressly prohibiting transfer
of the contract against delivery
orders, railway
receipts or bills of lading it cannot be inferred r.hat
the contract is transferable.
The question whether
an impugned contract is transferable must depend
upon the language of the contract interpreted in the
light of surroun:ling cirrnmstances, and silence of the
contract cann<Jt be regarded as
an indication of
transferability· -much less would it justify an inference that it is transferable.
We must then consider havinfS" regard to the
surrounding circumstances if such a term can be
implied.
The contracts arc made subject to the rules
and regulations of the Vera val Merchants' Association.
These rules are designated "Rules and Regulations of groundnuts ready delivery". Rule 5 provides
that the buyer has to supply empty bags to the seller
and he has to supply a Bardan Chitti within 48 hours
from the receipt of the letter of the seller to the buyer
asking for empty b~gs. In the event of failure to
supply a Bardan Chilli within 48 hours a penalty of
Rs. 2;. per 100 bags is to be paid to the seller for
every 24 hours.
Rule ()deals with delivery.
The
seller has to give de livery at the godown of the buyer
and the seller is to unload the carts at his own cost.
The buyer has, on presentation of the receipt of the co·
mmodity at his godown to pay 90% of the invoice
price, and 10% may be retained against defects or
shortage discovered in weighment (Ru lei). Weighment
has to be made at the godown of the buyer, at the
earliest moment according to the convenience of the
seller and the buver, after the commodity has reached
the buyer's godoivn. A sample has to be preserved, if
2 S.C.R.
SUPREME COURT REPORTS
699
the seller so chooses, at the buyer's place. At the convenience of both the buyer and the seller and at the
earliest opportunity the sample should be analysed at
the buyer's place but after weighment of the commodity, cleaning of sample should not take more than
6 days and if a person makes any del.iy he would be
liable to pay a penalty of -/8/ · eight annas for every
24 hours per every lot of 100 bags.
Rule 9 deals
with shortages and provides for reimbusement of loss
to the buyer. Rule 10 deals with payment of price.
On taking delivery of the commodity, the person
receiving the commodity, having obtained a kutcha
receipt, is to make 90% payment to the person
giving delivery immediately. If the person giving
delivery of a commodity so desires, the person
taking delivery has to furnish surety for the value of
commodity and acceptable to the Association. After
weighment and shortages are settled and on receiving
the invoice, the buyer must pay in full the balance
of 10% within 96 hours. The buyer paying after
96 hours must pay interest at the rate of -/1"2/- twelve
annas per centum per mensem.
Rule 11 provides
for "survey of disputes" arising between the members
at the time of delivery of "weighed commodity."
The application may be made both by the buyer
and the seller.
Rule 15 provides for steps to be
taken if the seller or the buyer be "unable to meet
amount" found due at the settlement regarding the
commodity. The Managing Committee, after hearing the seller and buyer, may grant extension of
time on receipt of an application to the Association
from such buyer or seller, or the Association may
determine and fix a reasonable rate after considering
the rates as well
as circumstances in the local as
well as other centres of Saurashtra between seller
and the buyer and that the transactions between the
buyer and the seller have to be settled at the rate so
fixed.
The transactions for purchase and sale are to
be carried through between two members of the
H1mr•j K1shavji
••
Haridas JeJhahhai
/9i3
Httr1raj A'1shatji
••
Harii•1 Jtlh•lh1i
Sh•h J,
700 SUPREME COURT REPORTS (1964] VOL.
Association and uuder the rules and regulations of
the Association.
Delivery has to be given at the
warehouse of the purchaser and detailed rules about
sampling, surveying, payment of price etc., arc made.
Prima Jacie, these rules apply to the persons named
as the seller and the buyer in the transactions of sale
and purchase.
But I\fr. Ayyanger appearing on
behalf of the appellant contended that the expression
'buyer' would include a purchaser from the buyer
because under the general law of contracts the benefit of a contract to purchase goods can be assigned
and therefore the rights of the buyer would be
enforceable by the transferee of the buyer.
But the
scheme of the rules indicates that the entire transaction has to be carried through between the parties
to the transaction and not between the seller and a
transferee of the rights of the buyer.
In carrying out
the transactions under the rules, diverse obligations
are imposed upon the buyers, and it is settled law
that without the consent of the seller, the burden of
a contract cannot be assigned.
The rules provide,
as we have already pointed out, that the empty bags
are to be supplied by the buyer.
Such an obligation
cannot be transferred by the buyer.
Again diverse
rules provide liability for payment of penalty. If a
buyer connot transfer the obligations under a contract
which is made subject to the rules and re~ulations of
the Association, al! the obligations prescribed by the
rules being made part of the contract, a very curious
result would ensue in that whereas an assignee of
the buyer would be entitled to demand delivery at
his own godown at the rate fixed, for his default
the buyer would
remain
liable for the diverse
obligations including liability to pay penalty for
default of his assignee under the rules.
Again the
seller by Rule Ii has to deliver the goods at the warehouse of the buyer, and if the benefit of the contract
is transferable, it would imply an
obli~ation to
deliver at the warehouse of the buyer's assignee,
wherever the warehouse of the assi(lnee may be. The
2 S.C.R.
stJl>:lU:ME COURT REPORTS
701
\'iarehouse of the assignee of the _buyer may be in
Veraval or at any other place, but the _seller having
entered into a contract at a rate which would include
normal expenses for delivery at the buyer's godown
may be required to undertake an intolerable burden
of meeting all the charges for transporting the goods
to the warehouse of the buyer's assignee wherever
such godown may be situate.
Such an obligation
could never have been under contemplation of the
rule-making body.
Mr. Ayyanger contended that the assignee of
the buyer contemplated by the rules would of necessity have to be a member of the Association and
therefore resident in Veraval. But the rules to
w;1ich our attention has been invited do not, if the
buyer is to includr the assignee of the benefit of the
contract, seem to impose any such restriction. If
the general law relating to assignment · of benefit
under a contract is to be superimposed upon the
rules, notwithstanding the scheme which prirna facie
contemplates performance between the parties, there
is no reason why any such reservation should be
made. It was alternatively urged by Mr. Ayyangar
that the rules of the Association use two expressions -
'buyer' and 'persons'-and wherever the expression
'person' is used it would include an assignee of the
buyer. This argument, in our judgment, is without
force .. The rules.have not been drawn up with any
precision, and there is nothing to indicate that by
using the expression '\)erson' a larger category was
intended. For instance in rule 5, the obligation to
supply empty bags is imposed upon the 'buyer' and
the penalty for failing to carry out that obligation is
imposed upon the 'person.' Similarly in rule 10
when delivery is taken by the 'buyer' the 'person'
receiving the commodiL y has to make payment of
90% of the price to the person giving delivery.
There arc a large number of other rules which deal
with the rights of the 'buyers' and the obligations
1963
H1mrtfj K1~litJoji
••
Hflrirlas I 1thobl"i
Shah J,
/fOJ
llemt•} IruAotji
Y.
Hcriiu l11habMi
SA-A I·
•
702 SUPREME COURT REPORTS [1964) VOL.
simultaneously imposed upon persons which in the
context may mean only the buyers.
The use of the
expression 'person' does not, in our judgment, indicate that he was to be any one other than the buyer
or his representative.
On a careful review of the rules we arc of the
view that under the rules and regulations of the
Veraval Merchants' Association pursuant to which
the contracts are made, the contracts were not
transferable.
The contracts were undoubtedly for
delivery of groundnut at a future date, but they were
contracts for specific quality
for specific price, and
for specific delivery under the rules of the Associa·
tion under which they were made.
The contracts
were, for reasons already
mentioned, also not
transferable to third parties, and could not be regarded as forward contracts within the meaning of the
order. It is unnecessary therefore to consider whether
the respondent who claimed to have acted as Pucw
Adatia and therefore as
Commission
Agent was
entitled to claim reimbursement for any amount
alleged to have been paid by him on behalf of the
appellant for losses suffered in the transactions in
dispute.
We arc therefore of the view that the High
Court was right in modifying the decree passed by
the Trial Court and in dismissing the appellant's
suit. The appeal is dismissed with costs.
Appeal dismissed.