# WAVERLY JUTE MILLS CO. LTD v. RAYMON & CO. (INDIA) PRIVATE LTD

- **Citation:** [1963] 3 S.C.R. 209
- **Court:** Supreme Court of India
- **Decided:** 1963
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/waverly-jute-mills-co-ltd-v-raymon-co-india-private-ltd-2592
- **Pages:** 21

## Headnote

3 S.O.R.
StJl>REME COURT REPORTS
I
WAVERLY JUTE MILLS CO. LTD.
v.
RAYMON & CO. (INDIA) PRIVATE LTD.
(And connected appeals)
209
.. ,'
(B. P. SINHA, c. J., K. SUBBA RAO, N. RAJAGOPALA
AYYANGAR, J. R. ALUDHOLKAR, and
.
-
•
T. L. VENKATARAMA AIYAR, JJ,)
Forward Gontract-iegiBlative validity of enactmentGonstitutlonal
validity-Notification. prohibiting . forward
contracts other than non-transferable specific delivery contractGontract for sale of goods-Validity--Glause providing
for
arbitration-Parties appearing
before
arbitration-EffectForward Contracts (Regulation) Act, 1952 (74 of 1952), ss.2(f),
17, 18-Gonstitution of India, Art. 14, Sch. 7, List I, EnJry 48,
Li&t II, Entries 26, 27, List fl!, Entry 7.
The appellant company entered into a contract with the
respondents on September 7, 1955, for the purchase of certain
bales of jute cuttings to be delivered by the respondents in
equal instalments every month in October, November, and
December, 1955.
Under cl. 14 all disputes arising out of or
concerning the contract should be referred. to the arbitration of '
the Bengal Chamber of Commerce.
As the respondents failed
to deliver the goods as agreed, an application was made by the
appellant for the arbitration as provided in cl. 14.
The
respondents appeared before the arbitrators and contested the
claim, but an award was made in favour of the appellant.
Thereupon the respondents filed an application in the High
Court of Calcutta under s. 33 of the Arbitration Act challenging the validity of the award on the ground that the contract
dated-September 7, 1955, was illegal as it was in contravention of the notification of the Central Government dated
October 29, 1953, issued under s. 17 of the Forward Contracts
(Regulation) Act, 1952, by which no person "shall enter into
any forward contract other than a non-transferable specific
delivery contract for the sale or purchase of raw jute in any
form ....... ". The appellant pleaded (1) that the Forward
Contracts (Regulation) Act, 1952, was invalid and ultra vires
because (a) Parliament had no competehce to enact it, and (b)
the provisions of the Act were repugnant to Art. 14 of the
Constitution of India, and, therefore, the notification dated
October 29, 1953, was null and void; (2) that on the terms of
the arbitration clause the question whether the contract dated
196!
Moiy 4.
Waverl1 Jut1 Mills
Co. Lid.
••
Raymon dJ Oo.
(India) P•t. Lid.
•
210
SUPREME COURT REPORTS
~1963]
September 7, 1955, was illegal was one for the arbitrators to
decide and that it was not open to the respondents to raise the
same in an applicaticm under s. 33 of the Arbitration; (3)
that the respondents submitted to the jurisdiction of the
arbitrators and that amounted to a fresh agreement for arbitration and tiierefore, the award was valid and binding on
them; and (4)
that, in any case,
the contract dated
September 7, 1955, was a non-transferable specific delivery
contract and, therefore, was not hit by the' notification
dated October 29, 1953.
Held, that: ( 1) a legislation on Forward Contracts would
be a legislation on Futures Markets and, therefore, the' "'
Forward Contracts (Regulation) Act, 1952, fell within the
exclusive competence of Parliament under entry 28 List I of
Sch. 7 of the Constituti.on of India, accordingly, the Act could
not be challenged on the ground of legislative incompetence .
Duni Chand Rateria v. Dhuwalka Brothers Ltd., (1955]
I S.C.R. 1071, follow~d.
(2) the Act did noi infringe Art. 14 of the Constitution. ,
M/s. Ragh'llbar Dyal Jai Prakash v. The Union of India.
[1962] 3 S. C.R. 547, followed,
'
(3) if a contract was illegal and void, an a~bitration
clause which was one of the terms thereof must perish along
with it, and a dispute relating to the validity of ~ contract
was in auch cases, for the court and not the arbitrators to.
'
decide.
Khardah Company Ltd. v. Raymon & Co. (India)
Private Ltd., [1963] 3 s.c.R. 183, followed.
(4) the respondents were not.pre~luded by what they did
before

## Text

_Characters 0–39,727 of 41,986. This is a partial read: ask again with offset=39727 for what follows._

3 S.O.R.
StJl>REME COURT REPORTS
I
WAVERLY JUTE MILLS CO. LTD.
v.
RAYMON & CO. (INDIA) PRIVATE LTD.
(And connected appeals)
209
.. ,'
(B. P. SINHA, c. J., K. SUBBA RAO, N. RAJAGOPALA
AYYANGAR, J. R. ALUDHOLKAR, and
.
-
•
T. L. VENKATARAMA AIYAR, JJ,)
Forward Gontract-iegiBlative validity of enactmentGonstitutlonal
validity-Notification. prohibiting . forward
contracts other than non-transferable specific delivery contractGontract for sale of goods-Validity--Glause providing
for
arbitration-Parties appearing
before
arbitration-EffectForward Contracts (Regulation) Act, 1952 (74 of 1952), ss.2(f),
17, 18-Gonstitution of India, Art. 14, Sch. 7, List I, EnJry 48,
Li&t II, Entries 26, 27, List fl!, Entry 7.
The appellant company entered into a contract with the
respondents on September 7, 1955, for the purchase of certain
bales of jute cuttings to be delivered by the respondents in
equal instalments every month in October, November, and
December, 1955.
Under cl. 14 all disputes arising out of or
concerning the contract should be referred. to the arbitration of '
the Bengal Chamber of Commerce.
As the respondents failed
to deliver the goods as agreed, an application was made by the
appellant for the arbitration as provided in cl. 14.
The
respondents appeared before the arbitrators and contested the
claim, but an award was made in favour of the appellant.
Thereupon the respondents filed an application in the High
Court of Calcutta under s. 33 of the Arbitration Act challenging the validity of the award on the ground that the contract
dated-September 7, 1955, was illegal as it was in contravention of the notification of the Central Government dated
October 29, 1953, issued under s. 17 of the Forward Contracts
(Regulation) Act, 1952, by which no person "shall enter into
any forward contract other than a non-transferable specific
delivery contract for the sale or purchase of raw jute in any
form ....... ". The appellant pleaded (1) that the Forward
Contracts (Regulation) Act, 1952, was invalid and ultra vires
because (a) Parliament had no competehce to enact it, and (b)
the provisions of the Act were repugnant to Art. 14 of the
Constitution of India, and, therefore, the notification dated
October 29, 1953, was null and void; (2) that on the terms of
the arbitration clause the question whether the contract dated
196!
Moiy 4.
Waverl1 Jut1 Mills
Co. Lid.
••
Raymon dJ Oo.
(India) P•t. Lid.
•
210
SUPREME COURT REPORTS
~1963]
September 7, 1955, was illegal was one for the arbitrators to
decide and that it was not open to the respondents to raise the
same in an applicaticm under s. 33 of the Arbitration; (3)
that the respondents submitted to the jurisdiction of the
arbitrators and that amounted to a fresh agreement for arbitration and tiierefore, the award was valid and binding on
them; and (4)
that, in any case,
the contract dated
September 7, 1955, was a non-transferable specific delivery
contract and, therefore, was not hit by the' notification
dated October 29, 1953.
Held, that: ( 1) a legislation on Forward Contracts would
be a legislation on Futures Markets and, therefore, the' "'
Forward Contracts (Regulation) Act, 1952, fell within the
exclusive competence of Parliament under entry 28 List I of
Sch. 7 of the Constituti.on of India, accordingly, the Act could
not be challenged on the ground of legislative incompetence .
Duni Chand Rateria v. Dhuwalka Brothers Ltd., (1955]
I S.C.R. 1071, follow~d.
(2) the Act did noi infringe Art. 14 of the Constitution. ,
M/s. Ragh'llbar Dyal Jai Prakash v. The Union of India.
[1962] 3 S. C.R. 547, followed,
'
(3) if a contract was illegal and void, an a~bitration
clause which was one of the terms thereof must perish along
with it, and a dispute relating to the validity of ~ contract
was in auch cases, for the court and not the arbitrators to.
'
decide.
Khardah Company Ltd. v. Raymon & Co. (India)
Private Ltd., [1963] 3 s.c.R. 183, followed.
(4) the respondents were not.pre~luded by what they did
before the arbitrators from agitatmg the .quesuon of the
validity of the contract in the present proceedmgs before the
High Court.
.
Sh'va Jute Baling Ltd. v. Hindley and Company Ltd.'
(l9GO] l 's.c.R. 569 and East India '!rading Co. v. Badat and
Co., 1.L R. [l959] Born. 1004, considered.
(5) the contract dated September 7, 1955,. was a non•
transferable specific delivery coutr~ct as defined. m s.~(f) of the
Act and; therefore, was not hit by the notificat10n dated
October 29, 1953.
..
~
Khardah Company
fA.d.
v. R1Jymon & Co.
(India) 1•
Priwte [Jd., [1963] 3 S.C.R. 183, followed,
>
)
<
3 S.C.R.
SUPREME COURT REPORTS
.
I
211
CIVIL APPELLATE JuruSDICTION: Civil Appeal
Noa. 389 to 392 of 1960.
Appe1tls by speci1tl lea..-e from the judgment and
orders dated July 15, 16, 1958. of the Calcutta High
Court in Appeals from Original Orders and Decrees
Nos. 140 to 143 of 1957 respectively.
B. Das and Ghosh, for the appellant (in C. A.
Nos. 389 and 39,0 of 11:160).
B. Sen, Shankar Ghosh and B. N. Ghosh, for.
the appellant (in C. A. Nos. 391 and 392 of 1960).
O. B. Aggarwala and S. N. Mukherjee, for the
respondents.
0. K. Daphtary, Solicitor-General of India,
Da'ldat Ram Prem and P. D. Menon, for the
Attorney-General of India (lntt>rvener).
1962. May ~-
The Judgment of the Court
W&il delivered by
VENKATARA.MA AIYAR, J.-These are appeals
by special le<tve against judgments of High Court
of Calcutta setting aside awards which directed the.
respondents to pay compensation to the appellants
for Breach of contracts, on the ground that they
were in contravention of a notification of the
Central Government dated October :W, 1953., and
were in consequence illegal and void. These appeals
were heard along with Civil Appeals Nos. 98 & 99
of 1960 as there were common questions of law to
be decided in all.
In Civil Appeals Nos. 389 & 390 of 1960 the
facts are tpat on September 7, l!J55, the appellants
who are a company owning a Jute Mill at Calcutta
entered into an agreement with the respondents
-, '"'
who are also a Company doing business as dealers
in jute, for the purchase of 2,250 bales of the jute
Kha,dah Compa~)I
Ltd.
v.
Ra.>mon di Co.
(lndi11) Pot. Ltd.
Aiyar J,
Wa1'tr{1 Jute Milla
Co. Lid.
v.
Rcomon &: Oo.
(India) Pot. Lid.
.Ai)'tlr J.
212
SuPREME COURT REPORTS (1963]
cuttings at Rs. 80 per bale of 400 lbs. to be d.eli-
~
vered 750 bale!! every month in October, November
and December, 1955.
Clause 14 of the agreement
provides that all disputes arising out of or concerning the contract should be referred to the arbitration of the Bengal Chamber. of Commerce.
The
respondents delivered, pursuant to the oontraot, in
"· ;.
all 2000 bales and made default in the delivery of
the balance.
The appellants then applied to the
Bengal Chamber of Commerce for arbitration in
aocordance with cl. 14 of. the agr~ement.
The
respondents appeared before the arbitrators and
contested the claims on the merits. The arbitrators
made an award in favour of the appellant11 for
Rs. 10,525, and that w~s filed under s. 14(2) of the
~
Indian arbitration Act in the High Glourt of .
Calcutta. on its original side and notice was issued
to the respondents.
Thereupon they filed an
application presumably under s. 33 of the Arbitration Act for a declaration that the con tract · dated
September 7, 1955, was illegal as it was in contravention of dth1'
0
. notbificat
2
io
9
n o
9
f
53
the dCenhtral Govern-
\. (;
ment date
cto er
, l
, an t at the award
based tht-reon was a nullity. · The learned Judge
on the original side before whom the application
came up for hearing dismissed it, and passed a
decree in terms of the award.
Against both the
judgment and the order, the respondents preferred
appeals to a Division Bench of the High Court,
'-.
appeals Nos. 148 & 141 of 1957;
They were heard
by Chakravartti, C. J., and Lahiri, J., who held
that the contraot dated September 7, 1955, was
illegal, as it fell within the prohibition contained in
a notification of the Central Government dated
October i9, 1953, and ac~ordingly allowed the
appeals and set aside the award. The appellants
then applied for a certificate under Art. 133(3) of ,,
the Constitution but the same was refused:
Therer ,....
after they applied to this Court for leave under
•
3 S.O.R.
SUPREME COURT REPORTS
213
Art. 136 of the Constitution and that was· granted.
This is how these appeals come before us.
In Civil Appeals Nos. 391 and 392 of 1960
the facts are similar. The appellants' who are a
company carrying on business in t,he manufacture
of jute entered into a contract with the respondents
on October 17, 1955, for the purchai:ie of 500 bales
of jute cuttings at Rs, 87-8-0 per bale of 400 lbs.,
to be delivered in equal instalment of 250 bales
in November and in December 1955.
Clause 14 of
the agreement provides that all differences arising
out of or concerning the contract should be referred
to the Bengal Chamber of Commerce for arbitra·
tion.
rhe
re:ipondents made default in the
delivery of the goods and thereupon the appellants
moved the Chamber of Commerce for arbitra.tion
under cl. 14 of the agreement. The respondents
appeared before the arbitrators and contested the
claim on the merits.
·rhe arbitrators made an
award in favour of the ~ppellants for Rs. 17 ,500,
and that was filed in the High Court of Calcutta
on it original side and notice under s. 14(2) of the
Arbitration Act was served on the respondentfl.
' Thereupon they filed an application in the High
Court of Calcutta, presumably under s. 33 of the
Arbitration Act, for a
declaration that the contract datf.ld October 17, 1955, was in contravention
of the notification of the Central Government dated
October 29, 1953, and was therefore illegal and that
the arbitration proceedings pursuant thereto and
the award passed therein were all void.
The
learned single Judge on the original side before
whom the application came up for hearing dismissed it and passed a decree in terms of the award.
Against the above judgment and order the respondents preferred appeals to a Division Bench of the
High Court, Appeals Nos. l42 and 1±3 of Hl57.
'.fhey were heard by Chakra.va.rtti, O.J., a.nd La.biri1 J ••
1662
WaveT/V Ju~ Mills
Co. Ltd.
v.
Raym1n ch Co.
(India) Pvt. Ltd.
1962
lls•1r~Jut1 Mill•
c •. Lti.
v.
R•yrMn "1 c •.
{/nlllr<) ~ ... Lid.
Ary.1 J.
214
SUPREME COURT RJ«pPRTS [1963).
who held that the contract dated October 17,
1955, was illegal, as it fell within the prohibition
contained in, the n·otification of the Central Govornment dated October 29, 1953, and accordingly
allowed the appeals an§".set aside the awards.
Th~
appellant thereafter applied under Art. 133(1)( c) for
a certificate and that having been refused they
obtained from this Court leave under Art. 136 of
the Constit'utinn and that is how theae appeals
come before us.
The points for decision in &11
these ap}ieals a•e the same and this Judgment will
govern all of them.
The following contentionli have 9efm urged
in support of these app1lals:-
( I) The Forward Contracts (R&'1!l&tion)
Act, 1952, iA ultru tiires ancf the l!lotificatioR
dated October 29, 1953, is in conael!utmee Bull
&Bel '\l'oid.
(t) On the termli
ef tlte &rlilitratieu
clause
the question
whother
the
C!OB·
tracts
dated
September
7,
1955, &nd
October
17,
1955,
&re
illegal
ie
one
for the arbitrators to decide and that it w&11
not open to respondents to raise the same in
applications under s. 33 of the .. rbitr&tion
Act.
(3) The respondents submitted to the
jurisdiction
of the &rbitrators and that
amounts to fresh agreement for arbitration
and the award is accordingly valid and binding on them.
(4)
The contracts dated September 7;
1955, and O~tobE1r, 17, 1955 are non-ti:ansferable
~yecific delivruy contracts and they are not hit
·flf the potifif'.atjop dp.ted 9ct?ber 291 l95?,
•
3 S.O.R.
SUPREMg COURT REPORTS
215
(1) The first question relates to the vires
of Forward Contracts (Regulation) Act, 1952 (Act
74 of 1952), hereinafter referred to as 'the Act'.
This statute was enacted by Parliament and received the assent of the President on December 26, 1952.
Its validity is attacked on two grounds; that Parliament had no competence to enact it, and that the
provisions of the Act are repugnant to Art. 14 and
Art. 19(l)(g) of the Constitution and therefore void.
If this oontention is well founded, then the notification dated October 29, 1953, which was issued by
the Central Government in exercise of the powers
conferred by s. 17 of the Act would be null and void.
Dealing first with the question as to the com· ·
•'
petence of Parliament to enact the impugned law,
it will be convenient to set out the entries in the
Legislative Lists in Seventh Schedule of the Consti·
tution bearing on this question.
'y
List I-Entry 48-Stock Exchanges and
Futures Markets.
List II-Entry 26-Trade and commerce
within the State subject to the provisions of
entry :>3 of List III.
Entry 27-Production, supply and distribution of goods subject to the provisions of
entry 33 of List III.
List III-Entry 7-Contracts, including
partnership, 11gency, contracts of carriage, a.nd
other special forms of contracts, but not in·
eluding contracts relating to agricultural land.
Now the contention of the appell11nts is that
the subject-matter of the impugned legiBlation is
either Trade and Commerce or Production, supply
and difitribution of good .. , within entries ~· 6 or 2·1 in
List II of the Seventh Schedule, and that it is with·
in the exclusive domain of the State Legislature.
1962
Wa111r1, Juli Miila
Oo. Lit/
••
Rspnon ~.c •.
(I n/ia) :f'1t. Lt/.
Aiyar J.
I96Z
~;t.6
SUPREME COURT REPORTS,[1963]
rhe. contention of the respondents, and 9£ the
Union which has intervened, is that the impugned
Act ~s legislation on •Futures Markets' falliqg under.
en~ry 48 in List.I and that it is Parliament whic)l
has the exclusive" competence over it, and.in tlie
alternative it is one on contracts, and that is covered by entry 7 in List III in the Seventh Sclied~~e
and is intra vires.
To decide this question, it is
micessary to ascertain the true nature and sco,pe of
the legislation, its pith and substance, The objecp,
of the Act as stated in the preamble is "to provide
for thQ regulation of certain matters ·relating to
foi;ward contracts, the prohibition of opti9ns in
goods and for the matters connected therewith".
The statute makes a distinction between "ready
delivery contracts"
and
"forward
contracts.''
When a contra.ct provides for the delivery, ef goods.
and payment of price therefor either immediately.
or within a period not exceeding eleven days it is a
ready delivery contrac~. All other contracts a.re
forward· contracts. Forward contra.eta are again
divided into two categories 'specific deliTery contracts' and 'no:1-tranRferable specific delivery contr:
acts', 'Specific delivery contracts' mean fol'Ward
contracts which provide for actual delivery of
specific goods at the price fixed during specified
future . period.
'Non-transferable
specific delivery contracts' are specific
delivery contracts
the
ri~hts or
liabilities under which are not
transferable. Section 15 confers power on the
Government t'o issue notifications declaring illegal
forward contracts with reference to such goods or
class of goods and in such areas as may be specified.
Section 17 authorises the Government to prohibit
by notification any forward contract for the, sale or
purchase of any goods or class of goods to which
the provisions of s.15 have not been mad!J appl.icable. Section 18 exempts non-transferabl~ specific:i
9eliverr contra.ate {row the operatioμ. of t}\e~~
..
•
'·
a s.c.R.
SUPREME COURT REPORTS
217
secti~ns. Thus the law is what it purports to be,
a law regulating Forward Contracts.
That being the scope of the enactment, the
point debated before us is whether it is a law on
Trade and Commerce or Production, supply and
distribution of goods within entries 26 or 27 in List
11 or on Futures Markets within entry 48 in List I.
It would be noticed that both the entries 26 and 27
in List II are subject to entry 33 in List III. Entry
33 as it now stands is: "1'rade and commerce in,
and the Production, supμly distribution of ...... ( e)
raw jute". The impugned Act in so far as it relates
to raw jute-and that is what we are concerned with
in these appeals-will clearly be intra vires if it fell
under this entry. But it should be mentioned that
cl. (e) in entry 33 was inserted by the Constitution
(Third Amendment) Act, 195·! and as the impugned
Act was passed in 1952, its
validity must be
determined on the provisions of the Constitution as
they stood prior to the Amendment Act in 1954 and
entry 33 in List III therefore must be excluded
from consideration.
Now turning to the question whether the
impugned Act is legislation on Futures Markets or
on Trade and commerce, the contention of the
appellants is that a law with respect to Forward
Contracts, is not a law with respect to Futures
Markets, because the ordinary and accepted meaning of •Market' is that it is a place where business
in the sale and purchase of goods is carried on, In
support of this contention we are referred to the
Dictionary moaning of the word •Market' and the
decisions of the Madras High Court reported in Puhlic
Prosecutor v. Cheru Kutti (1)
and Commissioner,
Coimbatore Municipality v. Ohettimar Vinayagar
Ttmple Committee(2l. According to the Concise Oxford
Dictionary the word 'market' means •gathering of
people for purchase & sale of provi11ions. livestock,
etc.;
open
epaoe
or
covered
building
in
~ J) AJ.R. 1925 Mad. 109,,
( 2) [ l956J 2 MJ..J, 56S.
1968
Wav•r!Ji Jut1 Mills
Co. LU.
..
R aymon & Co.
(India) Pvt. Ltd,
Aiyar J,
1962
I
"'
'
Wa1.1erly J..qte .Milla
C<>. Lkl.
Y.
Ra1tnon..c6 Oo.
(India) P~t. Ltd.
.21s·
SUPREME OOURT REPORTS [1963]
which cattle etc. a.re exposed for sale".
In
Public
Prosecutor
v. · Cheru
K utti
(1)
the
facts were that the accused was cha.rged under
s. 170 of the Madras Local Boards Act", 1920 for
4eeping open a new private i:na.rket without a
licence.
His defence was that the place where the
sales· were held was not truly a market, and tha.t
was accepted. In that ·context, discussing· the
meaning of the word.~market', ·the Court observed
that it meant "a place set apart for the meeting of
the general public of buyer~ and sellers, freely open
to any such to assemble together, where any seller
may expose his goods for sale and any buyer .ma.y
purchase". In Commissioner, Coimbatore Municipality v. Ohe,ttir.nar Vinayagar Temple Committee (1),
the question arose this time with reference to the
provision in Madras District Municipalities Act,
1920, requiring a place used as an open market
under the Act to be licensed.
The Court held that
the ordinary meanii)g of market was place where
the public coqld go during particular 'times for
purpose of buying and selling and that on the facts·
the place in question was market. It is contended
on the strength of. the above rulings th11t
11.s the
impugned Act is not one with reference to building
where business is qeing transacted it is not a law
with reference to m.o.rkets.
We are unable to agree with this contenti9n.
Mp,rket no doubt ordinarily means a place where
business is being tr11.nsacted.
That was probably
all that it meant at a time when trade was not
developed and when transactions took place at
sp(lcified places. ;But with the development of commerce, bargains came to be concluded more often
than not through correspondence and the connotation of the word 'market' underwent a corresponding expansion. In modern parlance the word
'market' has coine to mean business as well as the
place where business is carried on.
Labour Market
for example, i,s not a. place where ]abc.urers a.rn
.-eoruited but the conditions' of q1e J:rps;pess of
ii) _11956] 2 M·L./ • ~~·
' , '
<I
I
-
r
I
.,'
3 S.C.R.
stJPREME COURT REPORTS
219
labour. The word 'market' being thus capable of
signifying both business and the place where the
business is carried on, the question in what sense it
is used in a particular statute must be decided on a
consideration of the context of that statute. Thus
in Public Prosecutor v. Cheru K11,tti (1) and Commissioner, Coimbator
111 unicipality v.
Chet~imar
Vinayagar
Tempk Committee (2),
the question
arose
with
reference
to provisions
as to
licensing
by
local authorities,
and for that
purpose market was interpreted as meaning a place.
So we must examine what the word market means
in entry 48 ''Futures' Markets" in List I. The word
'Futures' is thus defined in Encyclopaedia Britannica: "contracts which consist of a promise to
deliver specified qualities of some commodity at a
specified
future
time.
The
obliga.tion
is
for a single quantit,y in a given montb ...... Futures
are thus a. form of security, analogous to a bond or
promissory note". In this sense a market can have
reference only to business and not to any loca.tion.
In our opinion a legislation on Forward Contracts
would be a legi1o1lation on Futures Markets.
It is next a.rgued for the appellants that even
if a law on Forward Contracts can be said to be a
law on Futures Markets, it must be held to be
legislation falling under entry 26 in List II, and
not entry 48 in list I, because Forward Contracts
form a. major sector of modern trade, and constitute
it1 very core, and to exclude them from the ambit
of entry 26 in List II, would be to rob it of much
of its contents. Reliance was placed in support
of this contention, on the rule of construction that
the entries in the Lists should be construed liberally
and on the decision in Bhuwalka Brothers Ltd. v.
Dunichand Rateria ("), which, on this point was
affirmed by this Court in Duni Chand Rattria
v. Bhuwalka Brothers Ltd. ('). • The rule of construction is undoubtedly well established that the
(I) A.I.R. 1925 Mad.1095.
(2) [1956] 2 M.L.J. 563.
(3) A.J.R. 1952 c111. 74().
(f) [1955] I s.c.R. 1071.
1962
Waverly Jute Mi!l1
'c,, Lid.
v.
Raymon &1 Co.
(India) Pvt• Ltd.
Aiyar J,
196~
-''-
WbHriy :ride Mills
Co: f.L)ff.
••
Raymon'&,· Co.
(lndi'.'.).'_:'.'_'.: Ltd,
Aiyar ~·
22!).
su_PREME COU,&T R.EPO.fl.XS J:l963]
entries in tlici Lists 8hould be· construed broadly
and ·nq} in a narrow or pedantic sense.
But there
is no need for the appellants to call this rulfl in a,id
of their contention, as trade and commerce would,
in tb.eir .ordinary and accepted sense, include forward contracts.
That was the view whioh was
adoptea iii.'Blmwalka Brothers Ltd. case(1) and which
commended itself. to this Court in Duni Chand,
Rateria's case (').
Therefore, if the question were
simply whet)ler a law on Forward Contracts would
be a law with respect to Trade and commerce, there
should be no difficulty in answering it in the affirmative. But the point which we have got to decide
is as to the scope pf the entry •Trade and commerce'
read in juxtaposition with entry 48 of List I. As
the, two entries relate to the powers mutually
exclusive of two different legislatures, the question
is how ·these two are to be reconciled.
Now it is a
rule of construction as well established as that on
which the appellants rely, that the entries in the
Lists s)l.ou!d be so construed as to give effect to .all
of them ,and that.a canstruotion which will result.
in any of them beii:ig rendered futile or otiose .must
be avoided. It follows from this that where there
a~e two entries, one genera.I in its character and
the oJ;her specific, the former must be construed as
excluding the latter: This is only an application
of the genei:;i.l maxim that Ge:neralia specialibus non
derogant. It is obvious that if entry 26 is to be construed as comprehending Forward Contracts, then
"Futures Markets" in entry 48 will be rendered
useless. We are therefore of opinion that legisJa.
tion on Fo1;ward Contracts must be held to fall
w,ithin the exclusive competence of the Union urn;ler
entry 48 in List I. ,
It now remains to deal with the decisions on
which tl\e appellants rely in support of their con-
.•
\~
•
.~elition that the legislation is really one on :rra.d\)
'\ ....
ll) A.,.R. l?~~ ~L 11(1,•
(2) p955] I S.C.R.19'1Ji
~ s.c.tt.
SUPREME COURT REPORTS
221
and oommeroe falling within entry 26. In Bhuwalka
Brothers Ltd.
case (1)
the question
was with
referenoe to the validity of the West Bengal Jute
Goods Futures Ordinance, 1949. That Ordinance
had been promulgated by the Governor without
obtaining the consent of the Governor-General and
the contention was that the legislation fell within
entry 7 'Contracts' in List III and as the consent
of the Governor-General had not been obtained
it was invalid. As against this it was contended
that the legislation was with respect, to Trade and
commerce which fell within List II and that therefore the consent of the Governor-General was not
necessary. In accepting the latter contention the
Court ,observed : "In pith and substance
th~ legislation was one on trade and commerce and not on
contracts and that therefore it was . within the
powers of the provinoial legislature".
There was
an appeal taken against this decision to this Court
and there the correctness of this view was accepted.
Vide Duni Ohand Rareria's case( 2 ). Now the contention before 1,1s is that on this authority it should be
held that the legislation was one on Trade and oommerce falling within entry 26.
We are unable to accept this oontention. The
validity of the West Bengal Jute Goods Futures
Ordinanoe, 1949, has to be judged in accordance
with the provisions of the Government of India
Aot, 1935, which was the Constitution Act then in
force. In that Act there was no specific entry
relating to 'Futures Markets'. Suoh an entry was introduced for the first time in the present Constitution in 1952. The contest in Bhuwalka Brothers Ltd.
case(1) therefore was not between a g1meral entry on
trade and commerce and a specific entry on the
futures markets, as in the present case, but between
"
'-'
Trade and commerce in List II and Contracts in List
(I) A.I.R.1952 Cal. 74-0.
\2) [1955] I S.C.R. 1071.
196~
Wa~•rb' Jut• Mills
Co. Lid.
v.
Roymon rh Oo.
(India) Pvt. Ltd.
4i;lar J,
J9MI
Wa1J1rly,Jut1 Mills
,[Jq. Ltd.
.v •
. llajmon ~. G;o.
,!India) Pvt .,~td.
~22
SUPn.l!lME 00t:t.K1' REPoRTS t1963J
.•
.
!IE In the absence of a specific entry like theone. contained in entry 48 in List I, the decision
iQ Bhuwalka Brothers Ltd. case (1) would be correct
but 'it is no longer ll!>W in view of the change in t)he
Constitution.
/
In the present case the question was. ·also
raised whether the impugned legislation would fall
under entry 7 of List III. While the respondents
insisted that it fell under entry 48 in List I, they
were also prepared, in case that contention failed,
to fa.II back on entry 7 in List III as a second line
of defence. Entry 7 is general in its terms·and
cannot prevail as against specific entry such a.a
entry 4~ in List I or 26 in List II. On this point,
we are in agreement. with the decision in Bhuivalka
Brotliers Ltd. case('). Io the-re~ult we mu~t hold that
the attack on the impugned Act on the ground of
· legislative incompetence must. fail.
The second ground of attack on the nires. of
the Act is that it is .repugnant to Art. H a'.!ld to
Art. 19( l )(g) of th~ Constitution and is, therefore,
void,. So far as Art. 14 is concerned, the, question
is now concluded by the decision of this Court in
M/s. RU1]huhar Dayal. Jai Prakash v. The Union of
India ( 2) where it has. been held that the impugned
Act does not infringe that Article and is v~lid. This
point is therefore DO longer Open to 'debate and
indeed th{)
appellants addressed no arguments
on it.
Then as regard,s the attack based on Art.
19( l )(g) the position is that though the appellants
raised this contention in the pleadings they did
not press it before the learned Judges in the Court
below because there .was a decision of the Bench
of the Calcutta High Court which had <;Iecided the
point against .the appellants. The point, how,ev,er
WI!{! taken in the grounds of appeal to this Court,
(I) A.1.R. m2 Oat. 7411.
(2) [1962] s s.c.R. 547.
,_
.~
•.
'
-,
3 S.C.R.
SUPREME COURT REPORTS
and has been sought to be pressed before us.
The
respondents complain and rightly that a point like
this should not be allowed to be taken at this etage
as a decision thereon will turn on investigation
of facts which has not been made. It is also contended that thoce being a strong presumption in
favour of the constitutionality of a legislation the
appellants must fail as they have not placed any
materials before the Court to rebut that presumption.
The answer of the appellants to this contention is
that as the Act is on the face of it violative of
the fundamental rights under Art. 19{ I )(g), it was
for the other side to place materials for showing
that it was protected by Art. 19 (6) as one which
is reasonable and ma.de in the interests of the
general public, and not for them to show negatively that it was not and reliance was placed on
the observations oft.his Court in Saghir Ahmed v.
The State of Uttar Pra4esh and Others (1).
We
a.re of opinion that those observations cannot be
read as negativing the presumption as to the
cJnstitutionality of a statute. But it is unnecessary
to say more about it, as the appellants abandoned
this point after some argument.
This contention
also must therefore be found against the appellants.
(2) It is next contended for the appellants
that the question as to the validity of the contracts
between the parties was one for the arbitrators to
decide and that in consequence it was not open to
the respondents to raise it in an independent application under s. 33 of the Arbitration Act, This
question has been considered by us in Khardah Company Ltd. v. Raymon &:
Oompany (India) (P)
Ltd. (2 ) with which these appeals were heard
and therein we have held that it a contra.ct is
illegal and . void, an arbitration clause which is
one of the terms thereof, must also perish along
(I) [1955] l S.C.R.101, 726.
(2) (1963) 3 S.C.R. I83,
Wavwly J11te Mill•
Co. Lid.
v.
Raymon &: Co.
(India) Pot, Ltd,
Aiyar J.
1962 .
" \W:01'1r{7 Jut1tMills
Cq.Lta.
v.
•
.R.rymon &> Co.
(India) P" •IM.
. ~ ()'oi il.
224
SUPREME COURT REl'OR'.l'S (1963)
with it and that a dispute relat.ing to the validity
of a contract is in such oases for the Court a~
not for. the ar~itrators to decide. '!"ollowing that
decision we must overrule this contention.·
::(3) The appellants next contend that .even
if the- aroitration clause in the original agrf)t'IIl,ent
between the parties shoqld be held to be inopNa·
tive by reason ·of the validjty of the COl),,tr.act
itself
being
in
•question,
when
the
respondents
subsequently appeared
befo,re
.the
arbitrators and filed
statements in support of
. their defence, that must be held to amount .to a
new ag~eement by them for arbitration, 'on ~hich
the arbitrators would be entitled to act and ·that
·in consequence the award could not be attacked _on
the ground ofw!\nt of jurilldiction. T4is t}j.e respondents. dispute.
They contend that mer!l .participation in thii arbitration proceedings C\Lnnot' be
:held to be a new agreement for arl)itration, and
that the jurisdiction of the arbitrators mu.s,t. be
decided solely. with reference to. cl. 14 .of the agreement. The point for decision is as to t4e true
effect of what happened before the 11-rbitrators on
their jurisdiction to .hear the·dispute. :r'he prin·
ciples applicable in the determination of this ques·
tion ate well settled. A dispute as to the valiqity
of
a
contract·
could
be
the
subjectmatter of an agreement of arbitration in the" same
mannei: as a: dispute relati:μg to a claim made
under ·the' contract. But such an agreement wi:Ju'ld
be effedtive arld qperative only when it is separate
from and independent of the qontract whi<lh is
imp\lgned aa illegal.· Where, however, it . is a
term of the very contract whose validity is· in
question, it has,'·a:s held by us in Khardah Oo. Lid.
· case·(1), no existence apart from the impU'gned
contract and ·mus't perish with it.
(1)
(1963) 3 S.C.R. J83.
<
J
a s.c.R.
SUPREME COURT REPORTS
225
We shall now refer to the decisions cited
bafore us, bearing on this distinction between the
two categories of agreements. In Shiva Jute Baling
LUl. v. Hindley and Company Ltd., (1) the difference
between these two classes of agreements was
noticed, though in a somewhat different context.
A decision ~irectly bearing on this distinction is
the one iu East India Trading Company v. Badat
and Go. (2). There the facts were that there was a
general agreement between the parties as to the
terms on which they should do business and ;t was
provided therein that all disputes arising out of
the contract should be settled by orbitration.
Subsequent thereto the parties entered into several
contracts and then a dispute arose with reference
to one of them. One of the parties denied the
contracts and the question was whether an award
passed by the arbitrators with reference to that
dispute was without jurisdiction. In holding that
the arbitrators had jurisdiction to decide the
matter by virtue of the agreement antecedent to
the disputed one, the Cuurt observed: "Now, the
principle of the matter is this that when a party
denies the arbitration agreement, the very basis ·
on which the arbitrator can acts is challenged and
therefore the Courts have taken the view that in
such a case the arbitrator has no jurisdi<'tion to
decide whether he himself has jurisdiction to adjudicate upon the dispute .......................... If the
arbitration agreement is part and parcel of the
contract itself, by denying the factum of the contract the party is denying the submission clause
and denying the jurisdiction of the arbitrators. But
in this case the position is different. We have an
independent agreement by which the parties agreed
to refer the disputes to arbitration. Pursuant to
this agreement, contracts were entered into and
when the plaintiffs made a claim against t'i.te defen·
dants,
the defendants
denied their liability.
(I) [I960] l s.C.R. 569.
(2) [1959] I.L.R Bom-. to!l4 tol6, 1011.
196!
Waverly Jui. M illt
Co. Ltd.
V•
Royrn1111 &r c ••
(Indio) Pvt. L!d
Atjor J.
1962',
W .Qv;.rh1"1ute. Mills
Co. Lld.
. ..
!le;mon &: Co.
(/,.~io) Pot. Lta.
•
226
SUPREME COURT REPORTS [196~]
Therefore, wha.t was denied was not the jurisdi<>-
tion of the arbitrators, not the submission olartse,·
but business qone
pursuant to the submission
clause and to which the submission claus·e applied".
That in our judgment is a. correct statement of tJi.e
true legal position.
·
The point then for decision is whether there
is in this case an agreement for reference to arb1_ tfation apart from cl. 14 of the contra.ct. It is
not contended f<;>r the appellants that there w.as
any expr~ss agreement between the parties for
referring the disputes under the contract date~
Sept~mber 7, ·1955,
to arbitrators. All that is
said is that the respondent fil_e_d statements before
tbe arbitrators setting out their defence on tlje.
me~its, and that must be construed as an indepenqent agreement for arbitration and the decisfona
in National Fire and General Insurance Oo. Ltd. v.
t/niori of India (1)
and PratabmuU BGmeswar' v.
K. 0. Sethia Ltd. (') are cited as au{ho.rities in
f!upport of ~his contention.
• Now a'n agreement for arbitration is the very
foundation on which the jurisdiction of the arbitrators to act rests, and where that is not in
existence, at the time when they enter on their
duties, the proceedings must be held to be wholly
without jurisdiction. And this defect is not cured
by the· appearance of the parties in those proceedings, even if· that· is'withmit protest, because it
is'well settled that consent cannot confer juris·
diction. But in "such a case there is nothipg to
prevent, the· parties from entering into a fresh
agreement to refer the dispute to arbitration while
it is pending adjudication before the arbitrators,
and in'· that event the proceedings thereafter before
them'might be uphelp as· reforrable to that-agr.ee:-
ment, and-the-award will· not be open to attack
a's without jurisdiction. But it will make all· tne
'<Ii. Ah.it: '!'56' ca!Ji.- .. (2) (1959) 64 c.w,Ni 616; '
1
3 S.C.R.
SUPREME COURT REPORTS
227
difference in the result whether the parties have
entered into an arbitration agreement as defined in
r. 2(a) of the Arbitration Aot or have merely taken
eteps in the oonduot of proceedings assumed or
believed to be vatid. In the former case the award
will be valid; in the latter, a nullity.
Now what are the facts in the present case?
We have gone through the statements filed by the
. respondents before the arbitrators, and we do
not find any thing therein out of which a new
agreement to refer the dispute to arbitration could
be spelt. The respondents merely contested the
claim on the merit.a, and then added : "The sellers
submit that this reference is improper, unwarranted, frivolous and vaxatious and should be dismissed
with cost.'' It is impossible to read this statement
as meaning an agreement to refer to arbitration.
The decisions in National Fire and General
lnsurauce
Go.
Ltd's. ca.oe (1)
and Pratabmull
Rame.swar's
Dase
(')
reli~d
on
for
the
appellants are not really in point. In both
these cases there
was a
valid
submission
on which the arbitrators proceeded to act. Before
them the parties filed statements and therein they
put forward a claim which was not actually covered by the reference, and invited them to give
their decision thereon. The party against whom
the award had gone contended that the arbitrators had acted without jurisdiction in decidinir that
·claim. In overruling this contention the Court
, held that it wa.s open to the parties to enlarge the
scope of a reference by inclusion of a fresh dispute, that they must be held to have done that
when they filed their statements putting forward
claims not covered by t~e original agreement,
that tb.ese statements satisfied the requirements
of s. 2( a) of tho Arbitration Act, and that it was
ll) A 1.R. 1956 Cal. U.
(2) [1959] M C.W.N. 616 ..
Wa.-rl1 lul< Mil/1
Co. Lt.d,
v.
R 11mon &I Co.
(Jndio) Pol. Lid •.
ff&iltrU1-·Uute lIIill•
to. 'Lt6.
v.
Rbymun & Co.
(hi.dial Put. LtJ.
228
SUPREME COURT REPORTS [1963]
competent. to the arbitrators to decide the dispute.
The point to be noticed is that in both these cases
there was no want of ·initial jurisdiction, but a
feeding of existing jurisdiction by an enlargement
of the scope of the reference. That this does not
involve any question of jurisdiction of the arbitrators will be clear from the scheme of the Act. If
an award deals with a m;,.tter not covered by the
agreement it could either be modified undei: s. 15(a)
or remitted under s. 16(l)(a). And where such
matter is dealt with on the invitation of the parties contained in the statements, there can be no
difficulty
in holding that the arbitrators aotual
within jurisdiction. In the present case the arbitrators had no jurisdiction when they entered on
their duties, nor is it established that there was
any subsequent agreement which could be held to
ba a submission of the question as to the validity
·of the contracts. We are accordingly of the opinion that the respondents are not precluded by
what they did before the arbitrators from agita~
ting the question of the validity of the contracts
in the present proceedings.
(4) The !a~~ contention of the appellants is
that the coμ,,tracts dated September 7, 1955, and
October 17,'" 1955, are non-transferable specific
delivery contracts, as defined ins. 2(f) of the Act
ancl. under s. 18, they are exempt from the operation of s. l'.7, an~,t~at they are therefore not hit by
the notification dawd October 29, 1953. The facts
are simHkr to those considered by this Court ·in
Khardah Oofnpany Ltd.