Full Judgment Text
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PETITIONER:
FIRM GIRDHAR MAL KAPUR CHAND
Vs.
RESPONDENT:
FIRM DEV RAJ MADAN GOPAL
DATE OF JUDGMENT:
11/02/1963
BENCH:
GUPTA, K.C. DAS
BENCH:
GUPTA, K.C. DAS
GAJENDRAGADKAR, P.B.
WANCHOO, K.N.
HIDAYATULLAH, M.
SHAH, J.C.
CITATION:
1963 AIR 1587 1964 SCR (1) 995
ACT:
Partnership-Partnership registered before partition of
India-Suit by firm, if barred-Indian Partnership Act, (IX of
1932), s. 69 (2).
Forward Transaction-Such transaction in cotton and edible
oil seeds, if prohibited by law-Essential Supplies
(Temporary Powers) Act, 1946 (XXIV of 1946), ss. 2, 3, 5-
Cotton Options (Forward Contracts and Prohibition) Order,
1943-Oil Seeds (Forward Contracts and Prohibition) Order,
1943-Defence of India Rules, r. 81.
HEADNOTE:
The respondent, a partnership firm, brought a suit for
recovery of the amount with interest due to it on account of
the purchases and sales of cotton-seeds and bales of cotton
on behalf of the appellant firm. In contesting the suit the
appellant while admitting trade relations with the plaintiff
firm disputed the correctness of the accounts. It was urged
that the transactions were wagering contracts and so void in
law, that they being forward transactions were prohibited by
law and that the plaintiff firm which was registered at
Lahore before the partition of India ceased to be a
registered firm thereafter for purposes of the Indian
Partnership Act.
The trial court accepted the plaintiffs story as
regards the transactions but held as regards the accounting
that the plaintiffs were bound to give certain credits to
the defendants and the price of 2300 bags of cotton seeds
and 50 bales of ’cotton on the final sale was directed to be
credited in favour of the defendant at the market rate on
May 28, 1947. Other directions as regards calculations of
incidental charges and interest were also given. The
learned judge passed a final decree in favour of tile
plaintiff with appropriate costs. Against this decree both
the respondent and the appellant appealed to the High Court.
The High Court dismissed the appellants appeal and allowed
the respondent’s appeal increasing the decretal amount.
Two points of laws were raised by the appellant in this
Court, namely,
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(i) the requirement of s. 69 (2) of the Indian Partnership
Act was not satisfied and (ii) the transaction being a
forward transaction in cotton and edible oil seeds was
illegal and thus prohibited by law.
Held, that once there was registration under the Indian
Partnership Act, it continues to be effective and valid
under that Act in the area to which it applied before the
partition of India so long as it was not cancelled in
accordance with law.
Bombay Cotton Export & Import Go. v. Bharat Sarvodaya
Mill Co., r. L. R. Bom. (1958) 1351, approved.
Held, further, that the forward contracts in cotton
seeds were not prohibited by law. A cotton and cotton seeds
are not included in the definition of essential commodity,
any previous order with respect to them will be inconsistent
with the new order and cannot continue under s. 5 of the
Essential Supplies Act, 1946.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 240 of 1961.
Appeal from the judgment and decree dated November 21,
1958, of the Punjab High Court at Chandigarh in Regular
First Appeal No. 266 of 1951.
C. B. Agarwala and A. N. Goyal, for the appellant.
A.V. Viswanatha Sastri, O. P. Malhotra and Mohan Behari
Lal, for the respondent.
1963. February 11. The judgment of the Court was
delivered by
DAS GUPTA, J.-The respondent a partnership firm carrying on
business as commission agents in the town of Khanna in
Punjab brought the suit out of which this appeal has arisen
against the appellant firm for recovery of Rs. 17,615/10/-
claimed to be due to it on account-of the purchases and
sales made on behalf of the appellant firm. Between
December 1946
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and February 3, 1947, 7600 bags of cotton seeds were,
according to the plaint purchased by the respondent on
behalf of the appellant firm at various rates, out of which
5300 bags are said to have been sold by it on behalf of the
appellant firm between the dates of January 2, 1947 and
February 3, 1947. Thus, on February 3, 1947, 2300 bags of
cotton-seeds were left on its hands. ID May 1947 the market
for cotton seeds was falling and so the respondent firm
asked the appellant either to remove the goods within 48
hours on payment of the full price or pay something more by
way of margin and informed them that otherwise the goods
would be sold As no reply was received these 2300 bags were
sold on May 24some at the rate of Rs. 11/11/16 per maund and
the rest at the rate of, Rs. 11/12/- per maund. Apart from
these transactions in cotton-seeds the respondent firm,
according to the plaint, also purchased 100 bales of cotton
of which 50 bales were also sold on behalf of the’ appellant
firm, so that after February 14, 1947, 50 bales of cotton
purchased by the appellant firm were lying with the
respondent. These 50 bales were also sold by the respondent
on May 24, 1947 at the rate of Rs. 27/12/- per maund, as the
appellant took no action when the respondent asked them
either to take away these bales on payment of the price or
to put in more money by way of margin. On the accounts, it
was said, Rs. 15,556/10/- remained due to the plaintiff firm
from the defendant firm. The suit was brought for the
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recovery of this amount together with interest.
In contesting the suit the appellant while admitting
trade relations with the plaintiff firm disputed the
correctness of the accounts. The plaintiff’s case about the
purchase of cotton-seeds and cotton bales and the fact that
2300 bags of cotton seeds and 50 bales of cotton purchased
by it remained with the plaintiff firm was also denied. - It
Was also urged that the transactions were wagering
contracts, and so Void
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in law, that they being forward transactions were prohibited
by law and further that the plaintiff firm was not a
registered firm under the Indian Partnership Act, and
therefore the suit did not lie.
The Trial Court rejected all the contentions in law and
accepted the plaintiff’s story as regards the transactions
but held as regards the accounting, on a consideration of
the evidence, that the plaintiffs were bound to give credit
to the defendants for the sale of 2300 bags of cotton-seeds
at the contract rate of Rs. 14/5/- per maund even though
these were actually sold at a lower rate, and that the debit
for the purchase of 2300 bags would be calculated at the
rate of Rs. 13/8/- and Rs. 13/10/- per maund, the rates at
which they were actually purchased even though they were
agreed to be purchased at the rate of Rs. 14/5/- per maund
on February 3, 1947. The price of 2300 bags of cotton seeds
and 50 bales of cotton on the final sale was directed to be
credited in favour of the defendant at the market rate on
May 28, 1947. Other directions as regards calculations of
incidental charges and interest were also given. The Court
appointed an Advocate as Commissioner for-the purpose of
calculating the amount due after ascertaining the market
price. After consideration of the report submitted by the
Commissioner, the learned judge passed a final decree in
favour of the plaintiff for s. 9,749/3/9 with proportionate
costs.
Against this decree both the plaintiff and the defendant
appealed to the High Court of Punjab. In the defendant’s
appeal it was contended that the suit was not properly
entertained as the plaintiff firm was not registered under
the Indian Partnership Act, 1932. It was also urged that
the transactions were illegal being forward transactions in
cotton and edible oil-seeds and thus prohibited by law.
Both these contentions were rejected by the High Court. Two
other minor points which were taken before
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the High Court and were rejected by it have not been
repeated before us.
In the plaintiff’s appeal, it was urged that the Trial
Court had erred in its directions as regards the debits and
credits for 2300 bags of cotton seeds for the purchases and
sales on February 23, 1947. The High Court accepted the
plaintiff’s contention in part and held that the plaintiff
was entitled to an extra amount of Rs. 3,244,/12/-. In the
result, the High Court dismissed the defendant’s appeal but
allowed the plaintiff’s appeal to the extent that the
decretal amount was increased by Rs. 3,244/12/- thus making
the decree one for Rs. 12,694/.
On the strength of the certificate granted by the High
Court under Art. 133(1)(a) of the Constitution; the
defendant firm has preferred the present appeal.
The appellant’s first contention is, as in the courts
below, that the suit should have been dismissed altogether.
Two grounds of law are urged in support of this. The first
is based on the requirement of S. 69(2) of the Indian
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Partnership Act. It is no longer disputed that the firm was
registered by the Registrar of Firms, Punjab, on August 16,
1946, under the Indian Partnership Act, 1932, as it stood on
that date. That was an order made before the partition of
India took place. The entire Province of Punjab was then
within British India; there was one Registrar for the entire
Province and it is not disputed that registration made by
the Registrar whose office was at Lahore was up to August
14, 1947 good registration for the whole of what was then
British India. The appellant contends that as soon as the
partition of India took place that registration caused to be
effective for that part of the old British India which
became the Dominion of alia and it so continued to be
ineffective for this
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entire area also after the Constitution of India came into
force. It is argued that the Registrar of the Punjab,
within his office at Lahore, ceased to be a Registrar under
the Indian Act, when on the partition of India Lahore
became part of a foreign country. So, it is said, the
registration became the registration of a foreign country
and thus ceased to be a registration for India. In our
opinion, this argument is wholly unsound. Once there was
registration under the Indian Partnership Act that
registration in our opinion, continues to operate as
registration under that Act and continues to be effective-in
other words, valid registration in the eye of law as
administered in India so long as the registration is not
cancelled in accordance with law.
In coming to this conclusion, we have not overlooked the
fact that difficulties may in certain circumstances arise as
regards the recording of alterations in the firm name or its
principal place of business (s. 60); noting of closing and
opening of branches (s. 61); noting of changes in the name
and address of partners (s. 62); recording of changes on
dissolution of a firm and recording withdrawal of a minor
from the firm (s. 63); rectification of mistakes in the
register (s. 64); and amendment of register by order of
court (s. 65), by the fact of the Register, on whom duties
are laid by these sections in connection with the above
matters, being now at Lahore, that is, outside India. We
have not thought it necessary however to, investigate in the
present case as to what arrangements have been made to cope
with these difficulties. For, it is clear to us that the
presence of such difficulties cannot in any way change the
legal position that registration that was good registration
under the Indian Act does not cease to be good registration
under the same Act. so long as it is not cancelled in
accordance with law. This view of law was taken by the
Bombay
1001
High Court in Bombay Cotton Export & Import Co., v. Bharat
Savodaya Mill Co., (1), and is, in our opinion, the only
possible view.
It is unnecessary for us to consider, for the purpose of
the present appeal, whether such a registration would be
effective registration, in an area which was outside British
India, at the time of the registration; and on that we
express no opinion.
For his next legal contention, viz., that the
transactions were prohibited by law, Mr. Aggarwala argued,
first that forward contracts in cotton as also oil seeds
were prohibited by the orders made in 1943 under the Defence
of India Rules and these prohibitions remained effective up
to the date of the contracts in the present case by virtue
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of s. 5 of the Essential Supplies (Temporary Powers) Act,
1946 (Act XXIV or 1946). That these were forward contracts
is not disputed. It does appear that forward contracts in
cotton and in oil-seeds including cotton seeds were
prohibited by the Cotton Options (Forward contracts and
prohibition) Order, 1943 of May 1, 1943 and oilseeds
(Forward Contracts and Prohibition) Order, 1943 of May 29,
1943 respectively. Tile Defence of India Rules under which
these orders were made had however ceased to be in force
long before the date of the contracts in the present case.
Unless therefore the prohibition orders were kept alive by
some other provision of law the present transactions would
not be hit by the prohibitory orders. To show that they had
been kept alive, Mr. Aggarwala relied on s. 5 of the
Essential Supplies (Temporary Powers) Ordinance, 1946 and
the same section of the Essential Supplies (Temporary
Powers) Act, 1946 by which it was replaced. The section is
in these words
"5. Continuance in force of existing Until
other provisions are made under this
(1) I.L.R. Bom. (1952) 1351.
1002
Ordinance any order, whether notified or not,
made by whatever authority under rule 80-B, or
sub-rule (2) or sub-rule (3) of rule 81 of the
Defence or India Rules, in respect of any
matter specified in s. 3, which was in force
immediately before the commencement of the
Ordinance shall, notwithstanding the e
xpiration
of the said rules, continue in force as far as
Consistent with this Ordinance and be deemed
to be an order made under s. 3; and all
appointments made, licences or permits granted
and directions issued under any such order and
in force immediately before such commencement
shall likewise continue in force and be deemed
to be made, granted or issued in pursuance of
this Ordinance."
The Act continued the same phraseology. These
provisions of the Ordinance or the’ Act, are however clearly
of no assistance to Mr. Aggarwala’s arguments. It is clear
that before the order made under rule 81 of the Defence of
India Rules continues in force notwithstanding the
expiration of the Defence of India Rules, it is necessary
that the order must be in respect of any matter specified in
s. 3. Section 3 empowers the Central Government to make
various orders but only in connection with essential
commodities. No order can therefore be considered to be
"’in respect of any matter specified in s. 3" unless it is
in respect of an essential commodity.
"Essential Commodity" is defined in s. 2 to mean any of
the following classess of commodities: (i) foodstuffs, (ii)
cotton and woollen textiles, (iii) paper, (iv) petroleum and
petroleum products, (V) spare parts of mechanically
propelled vehicles, (vi) coal, (vii) iron and steel and
(viii) mica, "Foodstuffs" was also defined thus :
"’Foodstuffs" shall include edible oilseeds and oils."
Cotton seed is an oilseed but it cannot be for a moment be
suggested that itis
1003
fit for human consumption. So, ’Clearly, it is not an
oilseed which is edible. Mr. Aggarwala as a last resort
argued that what "’edible oil seed" means is a seed from
which edible oil can be prepared. Such an argument has only
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to ’be mentioned to deserve rejection. The phrase "edible
oil-seed" can never mean what the learned Counsel suggests
and can and does mean only an oil seed which is edible as an
oil. seed. Cotton-seed, not being edible, falls outside the
class of "edible oil-seed" and so is not foodstuff within
the meaning of s. 2 of the Ordinance or the Act of 1946.
The Cotton Seeds Order of 1943 which has been mentioned
above is therefore not in respect of a matter specified in
s. 3 of the Ordinance or the Act and so was- not kept alive
by s. 5. The Cotton Order has also not been kept alive, for
raw cotton is not one of the articles included in the
definition of "essential commodity" in s. 2. It may -be
added that s. 5 continues only such previous Orders as are
consistent with the new law and clearly, as cotton and
cotton-seeds are not included in the definition of Essential
Commodity, any previous Order with respect to them will be
inconsistent with the new Order and cannot continue under s.
5.
Mr. Aggarwala drew our attention to a Notification by
the Central Government dated on November 4, 1949 by which
cotton seed was excluded from the operation of the Oilseeds
Forward Contracts Prohibition Order, 1943, by omitting it
from the schedule to the order, Mr. Aggarwala rightly
contends that such exclusion would be unnecessary unless as
a result of s. 5 of the Essential Supplies (Temporary
Powers) Act, 1946, the Oilseeds Order had remained alive tin
to November, 1949. We do not know what led the Central
Government to make this Notification. It is not improbable
that a question having arisen before the Government whether
or not forward -contracts in cotton seeds continued to be
prohibited, in view of the provisions
1004
of s. 5 of the Ordinance or the Act as mentioned above, the
Government thought it proper to put the matter beyond doubt
by making the notification excluding cotton seeds altogether
from the Schedule to the Prohibition Order. It is
unnecessary for us to investigate the circumstances under
which the order was made. For, the fact that Government
thought that the effect of s. 5 was to keep alive the
Oilseeds Forward Contracts Prohibition Order, 1943 is not
relevant at all. For the reasons mentioned earlier, we are
clearly of opinion that s. 5 cannot have that effect. Mr.
Aggarwala’s contention that the Forward contracts in cotton-
seeds which are the subject matter of the present litigation
were prohibited by law has therefore no substance.
This brings us to the question whether the High Court
erred in allowing the plaintiff ’s appeal ’in increasing the
amount decreed by Rs. 3,244/12/-. It appears that before
the High Court it was urged on behalf of the plaintiff that
there had been a clerical error in preparing the statement.
Ex. P-8, an extract from the Saudabahi-in that the purchase
price and sale price for the transactions of February 3,
1947 was shown as Rs. 14/5/-and Rs. 14/8/-instead of the
correct figures which were, according to Saudabahi Rs.
13/5/-and Rs. 13/8-. It is obvious that this mistake would
not affect the result as the difference between the credit
entry and the debit entry for these transactions would
remain the same. What the Trial Court did was that it took
the sale price for February 3, transaction to be Rs. 14/5/-
as shown in Ex. P-8; but for the purchase price which had
to be debited against the defendant it rejected the figure
of Rs. 14/8/- shown in Ex. P-8 but took the figure of Rs.
19/8/-and Rs. 13/10/- as shown in the plaintiff’s account
book. It seems to us likely that the arrangement between
the parties was that the debits and credits in the running
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account should be on the basis of the rate at which the
purchases and sales were
1005
actually made and not at the rate mentioned in the
Saudabahi. This is clear from the fact that for both the
sale and the purchase the account book shows the actual
rates at which the purchases and sales were made (the
purchase price being at the rate of Rs. 13/8/- and Rs.
13/10/- per maund and sales being at the rate of Rs. 13/5/-
and Rs. 13/7/- per maund). It is difficult to understand
why the Trial Judge, though making the debits against the
defendant at the lower rate of actual purchase thought it
fit to accept the Saudabahi rate for the sale. If for
both debits and credits the actual rates at which the pur-
chases and sales were effected are accepted, it is clear
that the Tria Court’s direction had resulted in crediting
the defendant with Rs. 3,244/12/-more than what was the
correct figure. The High Court was therefore right in
increasing the decretal amount by this sum of Rs.
3,244/12/-.
It may be pointed out that if the actual rates of
purchases and sales in respect of these ’transactions of
February 3, 1947 for 2300 bags of cotton-seeds are rejected
and the Saudabahi rates (according to Ex. P-8) of Rs. 14/5/-
for the sale and Rs. 14/8/- for the purchase are accepted as
the basis for making the credits and debits, as Mr.
Aggarwala asks us to do, the defendant would gain nothing at
all.
We have therefore come to the conclusion that the High
Court was right in allowing the plaintiff’s appeal in part
and increasing the decretal amount by Rs. 3,244/12/-.
The appeal is accordingly dismissed with costs.
Appeal dismissed.
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