1952 (5) TMI 25 - HC - Indian Laws

Summary

Issues Involved:
1. Validity and effect of the West Bengal Jute Goods Futures Ordinance, 1949.
2. Whether the settlement contracts are void under the Ordinance.
3. Whether the original contracts should be settled based on the last closing rate in a notified market.
4. Whether the Ordinance is ultra vires.

Detailed Analysis:

1. Validity and Effect of the West Bengal Jute Goods Futures Ordinance, 1949:
The judgment examines the West Bengal Jute Goods Futures Ordinance, 1949, promulgated by the Governor of West Bengal under Section 88 of the Government of India Act, 1935. The Ordinance aimed to prevent speculative dealings in jute goods futures. The Ordinance defines "contract relating to jute goods futures" and provides the Provincial Government with the power to prohibit such contracts. Section 3 of the Ordinance allows the Provincial Government to prohibit the making of contracts relating to jute goods futures and stipulates that contracts made in contravention of such prohibition are void and unenforceable.

2. Whether the Settlement Contracts are Void Under the Ordinance:
The defendant argued that the settlement contracts made after the notification under Section 3 of the Ordinance are void and unenforceable. The plaintiff contended that the contracts should be settled based on the agreed difference. The court analyzed whether the settlement contracts fell within the purview of the Ordinance. It was established that neither party possessed a godown or had control over the storage of jute goods, and the delivery was to be by means of delivery orders, which the court determined did not constitute "actual delivery of possession" of goods as required by the Ordinance. Consequently, the court held that the settlement contracts were void under the Ordinance.

3. Whether the Original Contracts Should be Settled Based on the Last Closing Rate in a Notified Market:
The court held that since the settlement contracts were void, the original contracts, which remained outstanding, must be settled based on the last closing rate in a notified market as stipulated by Section 3(2)(c)(ii) of the Ordinance. The notified markets were specified as East India Jute and Hessian Exchange Ltd., Calcutta Wheat and Seeds Association, and Indian Jute and Cotton Association Ltd. The court noted that the rate fixed by these associations was significantly lower than the rate agreed upon in the settlement contracts.

4. Whether the Ordinance is Ultra Vires:
The plaintiff argued that the Ordinance was ultra vires and invalid, as it dealt with contracts, which fell under the Concurrent Legislative List requiring the assent of the Governor-General. The court examined the legislative competence of the Provincial Legislature under the Government of India Act, 1935. It was argued that the Ordinance fell within the scope of "Trade and Commerce within the Province" under List II, making it within the legislative competence of the Provincial Legislature. The court held that the pith and substance of the Ordinance was to regulate the jute trade within the province, and the provisions relating to contracts were incidental. Therefore, the Ordinance was intra vires and valid.

Conclusion:
The appeal was allowed, and the decree of the learned trial Judge was set aside. The court declared the Ordinance to be intra vires and held that the original contracts must be settled based on the last closing rate in a notified market. The plaintiff was entitled to the difference based on this rate, and the settlement contracts were void and unenforceable. The court emphasized that the Ordinance aimed to regulate the jute trade within the province and address the speculative transactions that had caused instability in the market.