MODI & CO. v. UNION OF INDIA
Citation: [1968] 2 S.C.R. 565; 1967 INSC 291
Court: Supreme Court of India
Bench: J.C. SHAH , V. RAMASWAMI, VISHISHTHA BHARGAVA
Judgment date:
Case summary
1967 INSC 291. Supreme Court of India judgment dated 1967-12-07. MODI & CO. v. UNION OF INDIA. Read the judgment and case details on LawSphereX.
Judgment text
568 SUPREME COURT REPORTS MODI & CO. v. UNION OF INDIA December 1, 1967 (J. C. SHAH, V. R. AMASWAMI AND V. BHARGAVA, JJ. ) Forward Contract (Regu/aJion) Act 74 of 1952, ss. 2(/) and 15(1)- C on tract for sale of Twills providing for delivery on specified date-if ~ 'non-transferable specific delivery contact tvitltin s. 2(/l-Principles for determinin1:. The appellant entered into a contract in September 1960 With the respondent through the Director-General. Supplies and Disposals, whereby ® agreed to sell 500 bales Twills on terms and conditions contained in an exchange of letters. 'file date of delivery ,.. ·as fixed as November 30, 1960 and after the contract was entered into, the appellant depositecl with the Resen·e Bank of India an amount by way of security deposit in accor-dance with the terms of the contract.
On November 30, the appellant informed the respondent t:hat the contract was void and illegal being in violation of the provisions of the:Forward Contract (Regulation) Act 74 of 1952 and that the security deposit should therefore be refunded. The respondent however took the position that the contract was legal ~nd bincling and as the appellant had . failed to deliver the goods as stipulated, it would purchase the goods elsewhere at the risk of the appellant. The respondent thereafter incurred an extra expenditure of about Rs. 76,000 and after giving credit to the app. ellant for the amount of security deposit claimed the balance amount of about R,. 56. 000 from the appellant. Upon the latter's failure to pay, the respondent took recourse to the arbitration clause of th~ contract and appointed an arbitratr1 r to determine the dispute. Before the arbitrator could give his award. the appellant filed an application before the High Court under s.
33 of the Arbitration Act, praying for a declaration that the arbitration clause was illegal and, void and fo1 an injunction restraining the respondent from prosecuting the arbitratiOn proceedings. The High Court dismissed the application holding that the contract \Vas a "non-transferable specific delivery contract'' ri. nJ. was not hit by the provisions of the Act. On appeal to this Court, HELD : (dismissing the appeal) The questioo as to whether the coo. tract was a transferable or non-transferable specific delivery contract is a question \vhich ultimately depends on a reasonable construction of the contract. On a proper construction of the terms of the contract and hB. ving regard to the surrounding circumstances, there was an implied agreement between the parties that the rights and liabilities under the cont'ract were not to be transfeFrc ' are divided into 'transferable specific delivery contracts' and 'non-transferable specific Jclivcry contracts'.
Section 18( 1) cxcn1pts from the operation of the Act non-transferable specific delivery contracts. The net result of these statutory provisions is :hat all foiward contracts except those which are non-tr~nsfcrable specific delivery contracts, - can be declared illegal by a notification issued under the Act. Such a notification was issued in this case by the Central Go\·ernmcnt on March 29, 1958 which is to the following effect : "In exercise of the powers conferred by sub-sc. :-tion ( 1) of section 15 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) the Central Govern. ment hereby declares that the said Section shall apply to Jute/goo conclusive as to the intention of the parties.
It is true that when a contract is 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 con-stitute a term of the contract between the parties. If upon 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 tem1. The terms of the contract can be expressed or there can be a necessary implication of a term from what has been expressed in the contract. The question therefore-resolves in the ultimate analysis upon the construction of the-terms of the contract between the parties. In this connection it is. well-established that in construing such a contract it is legi-timate to take into account .
the surrounding circumstances for· Jsccrtaining the intention of the parties. As was pointed out by this Court in Khardah Company Lrd. v. Raymon & Co. (India) Privare Lrd. , ( ), the absence of a specific clause prohibiting lransfer is not conclusive one way or the other on the que;tion whether there was an agreement betWeen the parties that the contract was to be non-transferable. 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 between the parties was that it was not to be transferred. In the present case, it should be noticed that the contract cannot be sublet or assigned by the selier under condition IO read with para 3(b) of the "Conditions of Contract contained in Form D. G. S. & D. 68 governing contracts placed by the Central ' Purchase Organisation of the Government of India. 1959 edition". Para 3(b) states: " ( b) Subletting of Contract.
-The Contractor ~i1ali not subject, transfer or assign the contract or any part thereof without the written permission of the Purchaser. In the event of the Contractor contravening this condition the Purchaser shall be entitled to place the con· tract elsewhere on the Contractor\ account and at hi> risk and the Contractor shall be liable for any loss or damage which the. Purchaser may sustain in consequence or arising out of S. Uch replacing of the contract. " So far as the buyer is concerned, the contract itself shows that the jute bags were intended for "packing foodgrains which were arriving in bulk'" at an lndian port. The last paragraph 0f the letter of acceptance dated September 16, 1960 states that "the guunies are very urgently. required at the destination fo: packing imported foodgrains whi~h arc arriving in bulk". and "it was therefore of utmost impol1ance that shipment of the total quan-tity ordered shall be made in the vessels nominated by chc purchaser.
" There is also a specific provision in the contract that the "stores shall be inspected prior to shipment by the i\. T. l. G. S. , East fndia, Hastings, Calcutta, or his representative. " There is also a further stipulation that after the goods are inspected arrangements should be made to ship the stores in acc0r<lan. :c with the instructions contained in the· contract and that goods which arc not accepted in inspection should not be shipped. The name of the consignee is given in the contract as Asst. Director (Storage), Ministry of Food & Agriculture, Transit Shed No. 4, Visakhapatnam Port, Visakhapatnam and payment is to be made according to the procedure specified in the contract an·J the cost w::3 dcbitable to the Pay & Accounts Officer, Ministry ol Food & Agriculture, Bombay or New Delhi as the case may be under (I) l1963J 3 s. c. R. 183. MODI & co. v. pNION (Ra~ami, /. ) 571 Head of Account "87-Capital Outlay on the Schemes of Govt.
Trading-Schemes for purchases of Foodgrains A. I. (3) (I) expenditure in India Section IV Special Purclttses both for Civil & Defence requirements-other Purchases-Purchase of gunni~ for imported food grains". In view of all these circ. umstances we an: of opinion that it was not contemplated by the parties that the rights under the contract should be transferred either by the buyers or by the sellers. It was pointed out for Lhe appellant that normally the Bill of Lading partakes of the nature of a nego-tiable instrument and by endorsing it the holder of the l:iill of Lading can transfer ihe property in the goods to which the Bill of Lading relates and by parting with it the holder parts uot only with the property· in the goods but also with :heir possession.
The proposition contended for by Counsel for the appellant is no doubt correct, but the question in this case is not the ab&tract question as to what the purchaser could or might haye done but what was in fact contemplated by the parties who were entering into the contract. For the reasons already given, we hold that on a proper construction of the terms of the contract and having regard to the surrounding circumstances there was an implied agreement between the parties that the rights and liabilities under the contract were not to be transferred and the Bill of Lading relating to the contract was also not to be transferred. Jt follows therefore that the contract in question was a non-transferable specific delivery contract within the meaning of. s.. 2(t) of the Act and the contract was . 11ot hit by the notification dated March 29, 1958 issued by the Central Government under s. 15(1) of the Act.
For the reasons expressed we hold that the decfaion of the C~lcutta High Court dated September 18, 1963 is correct and this appeal must be dismissed with costs. IF R. K. P. S. Appeal dismissed.
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