# MESSRS. BASANT LAL BANARSI LAL v. BANSI LAL DAGDULAL

- **Citation:** [1961] 2 S.C.R. 780
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** Civil Appeal No. 264of1956
- **Bench:** P. B. Gajendragadkar, A. K. Sarkar, K. Subba Rao, K. N. Wanchoo, J. R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/messrs-basant-lal-banarsi-lal-v-bansi-lal-dagdulal-2041
- **Pages:** 10

## Headnote

Forward Contracts in Oilseeds-If illegal in Greater Bombay--
Bombay Forward Contracts Control Act, r947 (Bom. LX IV of r947),
s. 3-Essential Supplies (Temporary Powers) Act, r946 (XXlV of
r946), 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 bad received the assent
of tbe 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 I which
is entered info, 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 forwarJ contracts illegal if not
'
2 s.c.R. SUPREME COURT REPORTS
781
made in compliance with its terms while the Central Act ma.de
:c96o
the contracts to which itapplied, illegal. There was, therefore,
no repugnancy between the Bombay Act and the Central Act and Mess 15• Ba~anl
both of them applied to Bombay.
Lal Banarsi Lal
Article 372 of the Constitution continued both these Acts,
Ban:i Lal
and so there is n.1 provision in the Constitution under which any
one of them may be said to apply to the exclusion of the other.
Dacdult1I
A composite award in respect of more than one dispute
which is not Se\'erable, must be set aside as a whole if any of
the disputes had been illegally referred.

## Text

z960
November 30.
780
SUPREME COURT REPORTS
[1961]
MESSRS. BASANT LAL BANARSI LAL
v.
BANSI LAL DAGDULAL
(P. B. GAJENDRAGADKAR, A. K. SARKAR, K. SUBBA
RAO, K. N. WANCHOO and J. R. MUDHOLKAR, JJ.)
Forward Contracts in Oilseeds-If illegal in Greater Bombay--
Bombay Forward Contracts Control Act, r947 (Bom. LX IV of r947),
s. 3-Essential Supplies (Temporary Powers) Act, r946 (XXlV of
r946), 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 bad received the assent
of tbe 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 I which
is entered info, 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 forwarJ contracts illegal if not
'
2 s.c.R. SUPREME COURT REPORTS
781
made in compliance with its terms while the Central Act ma.de
:c96o
the contracts to which itapplied, illegal. There was, therefore,
no repugnancy between the Bombay Act and the Central Act and Mess 15• Ba~anl
both of them applied to Bombay.
Lal Banarsi Lal
Article 372 of the Constitution continued both these Acts,
Ban:i Lal
and so there is n.1 provision in the Constitution under which any
one of them may be said to apply to the exclusion of the other.
Dacdult1I
A composite award in respect of more than one dispute
which is not Se\'erable, must be set aside as a whole if any of
the disputes had been illegally referred.
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
264of1956.
·
Appeal by special leave from the· Judgment and
Order dated Jurie 29, 1954; of the Bombay High Court
in Appeal No. 127 of 1953.
A. V. ViswanathaBastri, He.mendra Shah, S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra,
for the Appellant.
·
J. O. Bhatt, 0. J. Shah and Naunit Lal, for the Respondent.
1960. November 30. The Judgment of the Court
was delivered by
. ·
SARKAR, J.-The appellant is a commission agent
Sarkar f.
and pucca aratiya and has been acting as such for the
respondent since November 7, 1951, in the course of
which yarious contract.s 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 inaking 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
SUPREME COURT RE.PORTS
(1961)
Court under the Arbitration Act, 1940, for a judgment
Messrs. Basant being passed on it. Thereafter, on July 17, 1953, the
iaz llanarsi Lal respondent made an application to the Bombay City
v.
Civil Court for setting aside the award contending
Bansi Lal
that forward contracts in groundnuts were illegal as
Dagdulal
the making of such contracts was prohibited by the
Sarkar ].
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
Essentia~ 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
2 s.c.R. SUPREME COURT REPORTS
783
an Act on March 26, 1946, called the India (Central
r96o
Government and Legislature) Act, 1946 (9 & 10 Geo. M
8
VI, Ch. 39), hereafter called the British Act. Section 2 La;s;;:~ar:t~~l
of this Act provided that the Central Legislature of
v.
India would have power to make laws with respect to
Bansi Lal
various matters therein mentioned notwithstanding
Dagdulal
anything in the Government of India Act, 1935, and
Sarkar J.
that that power could be exercised during the period
mentioned in s. 4 and furt)ler that the laws so made
to the 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 dispute.
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, passed
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
I960
A! essYs. Bas ant
Lal Banarsi Lal
v.
Bansi Lal
Dagdulal
Sarkar ].
784
SUPREME COURT REPORTS
[1961]
life of the Central Act was extended till January 26,
1955.
Section 3(1) of the Central Act is in these terms:
"The Central Government, so far as it appears to
it to be necessary or expedient for maintaining or increasing supplies of any essential COI!lmodity, 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
2 S.C.R. SUPREME COURT REPORTS
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 II 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 Centni,l 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 stittes 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 sectii:>ns of the Act in the
Messrs .. Basant
Lal BanaJSi Lal
v.
Bansi Lal
Dagdulal
Sarkar ].
786
SUPREME COURT REPORTS
[1961)
.1960
MessYs, Basant
Lal Banarsi Lal
whole of the Province of Bombay or parts thereof on
such. ·date and in respect of such goods as might be
spemfied. The Government of Bombay issued notifica-
~ions under th!-8 .section o~ _December 19, 1950, applyv.
Bansi Lal
Dngdulal
Sarkar ].
mg the remamrng prov1s1ons 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 follows:
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 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-
(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 bye-laws 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 court.
(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 ExchB>nge 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 thi_s Association. The case
before us has proceeded on the basis that the impugned contract in groundnut had been made in compliance
2 s.c.R. SUPREME COURT REPORTS
78'1
with the requirements of s. 8 and there is no finding
to the contrary by the Courts below. We have henc~ Messrs. Basant
to proceed on the same basis.
Lal Banarsi Lal
The appellant contends that s. 8 of the Bombay
v.
Act and s. 3 of the Central Act are repugnant to each
Bansi Lal
other. Nows. 8 of the Bombay Act, it will be noticed,
Dagdulal
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, enables 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
concerned.
We find nothing in s. 8 from which it can be said
Sarkar ].
Messrs.
Basant
Lal Banarsi Lal
v.
Bansi Lal
Dagdulal
Sarkar ] .
78S
SUPREME COURT REPORTS
(1961)
that it rendered any contract legal. Its only intent
&nd 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 agree.
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 contra.ct 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 la.id
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
2 S.C.R. SUPREME COURT REPORTS
789
applying the provisions of s. 107(2) of the Government
of India Act, 1935. That would bA 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 between them. 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
a.ward was rightly set aside.
The appeal, therefore, fails and is dismissed with
costs.
.Appeal diBmiBsed.
100
Messrs. Basant
Lal Banarsi
v.
Bansi Lal
D?gdulal
Sarkar ].