9911796707
TMI Blog1958 (3) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... Commission Agents in the name and style of Messrs. Narrondass Manordass, the 2nd appellant (hereinafter referred to as the partnership firm ). The respondents are a partnership firm and also a member of the Association. 3. Between September 23, 1947, and December 10, 1947, the member firm sold to the respondents 2,300 bales of Broach Vijay fine 3/4 Navsari and/or Bardoli 7/8 Cotton for March/April 1948 Delivery. Out of these 2,300 bales, 1,100 bales were disposed of by means of Havalas and in respect of 500, out of the remaining 1,200 bales, there were cross-contracts. In the result when the time for Delivery arrived, sales in respect of 700 bales remained outstanding and the member firm was liable to give delivery of 700 bales to the respondents. As however, the member firm failed to give delivery of the said 700 bales to the respondents, under the relevant by-laws of the Association, the respondents Invoiced Back these 700 bales to the member firm on May 3, 1948, and as a result of this Invoicing Back a sum of ₹ 1,07,530-8-0 became due and payable by the member firm to the respondents and with regard to the transactions of all the 2,300 bales taken together a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitions. The respondents to the petitions thereupon filed petitions under Art. 136 of the Constitution for special leave to appeal to this Court against the said judgment of Mr. Justice Shah. These petitions were, however, dismissed by this Court on or about April 6, 1951. 7. The appellants thereafter by their attorney's letter dated May 2, 1951, called upon the respondents to return the said sum of ₹ 1,80,099-8-0 (being the aggregate of the said two sums of ₹ 1,79,749-8-0 and ₹ 350) with interest thereon at the rate of 6 per cent. per annum. The respondents failed and neglected to pay to the appellants the said sum or any part thereof with the result that on May 7, 1951, the appellants filed the suit against the respondents of repayment to them of the said sum with interest and costs. 8. In the plaint as filed the appellants averred that the said contracts were void under the Bombay Cotton Contracts Act, 1932, as being not in accordance with the by-laws of the Association inter alia in the following respects : (1) The contract notes produced by the respondents omitted to state the difference of Rs..... above or below the settlement rate of hedge contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants' suit with costs. 12. The appellants preferred an appeal against this decision and the appellate Court dismissed the appeal and confirmed the decreed passed by the learned trial Judge, though on different grounds. The appellate Court agreed with the learned trial Judge that the omission of the term regarding measurement in the contract notes did not affect the character or legal effect of the contracts. In regard to the omission to fill-up the difference above or below the settlement rate fixed for the hedge contracts in the last clause of the contract notes, however, the appellate Court was of the opinion that there was no obligation on the parties to agree to add or deduct the difference above or below the settlement rate as contended by the appellants. If the parties did agree then the contract form provided that the agreement should be set out therein. If, however, they did not agree then the first part of clause (2) of by-law 141 would come into play and the settlement of the delivery contract would go through on the basis of the settlement rate of the hedge contract. The omission to fill-up the difference was thus of no consequence and did not invalidat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urement..... tons/per 100 bales. ............................... ............................... (For delivery contracts only) For the purpose of periodical settlement of this contract we agree to a difference of Rs.... above/below the settlement rate of hedge contract No. Remarks..... Bombay....194 (For delivery contracts only) For the purpose of periodical settlement of this contract we agree to a difference of Rs... above/below the settlement rate of hedge contract No. Remarks..... Bombay....194 Remarks..... Bombay....194 Remarks..... Bombay....194 15. The contract notes which are rendered between the member firm and the respondents, however, contained no term as to measurement and so far as the last clause was concerned the blanks in regard to the difference of Rs... above or below the settlement rate of hedge contract No... were not filled in. 16. The relevant by-laws in connection with these two terms contained in the official contract form were by-law 101, and by-laws 139 and 141 :- By-law :- 101. Claims for excess measurement. 17. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e added to or deducted from the said settlement price. In the case of contracts for descriptions which are not tenderable against the Hedge contract the parties may either agree in their contract upon an allowance above or below the Hedge Contract for the purpose of their periodical settlement or may apply to the Board to fix settlement rates. .................................................................. 20. The only question for our determination in this appeal is whether the contracts between the parties were not in accordance with the by-laws of the Association and therefore void. There is no doubt that all the contracts were subject to the by-laws of the Association. The question still remains whether they were in accordance with the by-laws because if they were not in accordance with those by-laws they would be void. The expression not in accordance with has been the subject of judicial interpretation in Radhakisson Gopikisson v. Balmukund Ramachandra (1932) L.R. 60 I.A. 63. Their Lordships of the Privy Council there held that the form prescribed was not a stereotyped one and that literal compliance with it was not essential. The only thing required was that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the minimum space either in transport by rail or by steamer and initially they were bound with hoops. The baling hoops were however difficult to obtain from Japan and therefore the bales came to be bound with ropes made of cotton, jute coir and hemp. The bales thus bound otherwise than with hoops occupied more space and difficulties were encountered by the merchants because of their being obliged to pay extra insurance and freight charges in respect of such bales. Not only did the railways charge more for the transport of such bales, the shipping companies also did so and the insurance companies charged higher rates for insurance because the bales were not pressed in a manner which would minimise the risks of insurance. All these factors brought about a situation creating difficulties between the purchasers and the sellers of cotton and these difficulties had to be resolved by the Association. By-law 101 had proceeded on the basis of cotton bales being bound with hoops, the approximate measurement in tons as agreed and understood in the trade being, 13 1/2 tons per 50 bales. That was the standard measurement. It was open however to the parties to agree upon any other measurement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be specified in the contract form itself. The standard measurement which had been mentioned in by-law 101 had disappeared and it would therefore be necessary to mention in the contract form what was the measurement on the basis of which the price of the contract had been fixed by and between the parties. If the bales actually tendered measured more in weight than what was actually agreed upon, the purchaser would be entitled to obtain from the seller an allowance for such excess measurement and that was the reason why it was necessary after the suspension of by-law 101 to mention the agreed measurement between the parties. 26. This argument however ignores the fact that simultaneously with the suspension of the operation of the by-law 101, by-laws 96 and 119 which referred to forward and hedge contracts respectively were altered and provision was made therein to incorporate measures consequent upon the tender of bales bound with ropes in place of bales bound with hoops. The consequences of such tenders were worked out in the by-laws as thus amended and allowances in the price of bales bound with ropes as against the price of bales bound with hoops were also provided for. These a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to or deducted from the said settlement prices. This was the basis of the provision contained in the relevant term of the contract form. In the case of contracts for descriptions not tenderable against the hedge contract it was open to the parties either to agree upon an allowance above or below the hedge contract or they would make an application to the Board to fix the settlement rates. Whenever there was an agreement in this behalf the parties were to mention the difference thus agreed into the contract form and the periodical settlements of delivery contracts were to be effected on that basis. 28. The question arises as to whether the parties were bound to enter into any such agreement at the time they entered into the contracts. It was contended on behalf of the appellants that such an agreement was necessary because it would otherwise involve the parties not payment of large sums of money on the settlement day next after the day of the contract. The hedge contracts appertained to cotton of the lowest average and if the quality of cotton which was the subject-matter of the contract between the parties was, as was usual, of a higher variety, it would involve the payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consonance with business ideas because no business man would think of immediately forking out a large sum of money on the next ensuing settlement day. It would be tantamount to paying the price of the goods or a substantial part thereof long before the due date of delivery ever arrived. While recognizing the necessity of arriving at an agreement in this manner we are, however, not impressed with the argument that in the event of no such agreement as to the difference having been reached it would even so be necessary to mention in the contract note that the difference agreed upon was nil. When the parties entered into the transactions all the terms and conditions of the contract would certainly be negotiated and agreed upon between them. It would be open to them, in view of the by-laws above referred to, to agree upon the difference above or below the settlement rate of hedge contracts for the purpose of facilitating the settlements through the clearing house. But if no such difference above or below the settlement rate of hedge contracts were agreed upon between the parties, it would not necessarily follow that the word nil had got to be mentioned in the contract notes. The very fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of the contract form, it would be necessary for them to strike out the words hedge contract No... and put in their place and stead the word I.C.C. Even there the I.C.C. appertained to different deliveries which were not on the market all at one time. The months of delivery were nowhere required to be filled in the contract form, whether the contract form required the parties to have regard to the hedge contract No. or the I.C.C., and to that extent, it can be said that the parties were expected to rely upon their commonsense and the practice of the trade as to what particular delivery was contemplated when the contracts were entered into between them. 32. All this goes to show that the parties to the contract were not tied down to a literal compliance with the terms contained in the official contract form but were required to act according to the position as it then obtained and if they substantially complied with the requirements of the contract form that was enough. If the hedge contract No..... was not in vogue in the market they need not conform to that provision in the official contract form but could make the necessary changes in accordance with the type of hedge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct form on the basis of by-laws 139 and 141 being in operation, it could not be said that they had failed to substantially comply with the requirements of the official contract form. The official contract form had to be filled in so far as it was practicable. The operation of these by-laws was in effect suspended and by the tacit understanding of the trade they were to be treated as if they did not exist. It could not therefore be urged that the parties were put to the necessity of agreeing to such differences, if having regard to the circumstances that prevailed, it was impracticable to do so and if these blanks were not filled in as originally contemplated the contract notes could certainly not be impeached as being not in accordance with the by-laws of the Association. 34. It was, however, urged on behalf of the appellants that if the parties to the contracts intended not to comply with the requirements of by-laws 139 and 141 that would by itself vitiate the contracts because in that event the contracts would certainly be not in accordance with the by-laws of the Association. The parties in that event intended to perpetrate an illegality at the very inception of the contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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