Appeal No 73 of 1961
Appeal from the judgment and order dated January 23 1961 of the Bombay High Court in Appeal No 5 of 1960
C K Daphtary Solicitor General of India Purshottam Tricumdas F section Nariman Suresh D Parekh and I N Shroff for the appellants
M K Nambiar K section Cooper Anil Dewan RaMesh A Shroff section N Andley J B Dadachanji Rameshwar Nath and P L Vohra for the respondents
February 27
The Judgment of the Court was delivered by HIDAYATULLAH J
This is an appeal with certificate by Messrs Dhanrajamal Gobindram against a judgment of the Divisional Bench of the High Court of Bombay by which a petition under section 20 of the Indian was held to be maintainable and the decision of the learned Judge Original Side who held otherwise was reversed
The respondents are Messrs Shamji Kalidas  Co a registered firm who were the petitioners in the High Court
The facts of the case are as follows On October 24 1957 Messrs Dhanrajamal Gobindram referred to as buyers hereafter entered into an agreement with Messrs Shamji Kalidas  Co referred to as sellers hereafter for purchase of 500 bales of African raw cotton
The contract was in the form of a letter 1023 written by the sellers and confirmed by the buyers
The material portions of the letter which bears No SKBom132014 and was stamped as an agreement  are as follows We confirm having sold to you African raw cotton on the following terms and conditions subject to the usual Force Majeure Clause Description ARBP 52 F A Q Crop58 Quality  500 Five Hundred bales
Price  at Rs 1401 nett per candy CIF Bombay
Payment  Against shipping documents in Bombay
Packing  420 lbs
approximately per bale
Shipment  FebruaryMarch 1958
Remarks The terms and conditions on the reverse form part of the contract
This contract is subject to the Bye laws of East India Cotton Association Ltd Bombay other than the bye law 35 for arbitration on Quality in case of East African cotton
Terms and Conditions
The shipment is subject to any cause beyond seller s or seller s shipper s control and is also subject to availability of freight
This contract is subject to the jurisdiction of the High Court of Bombay
It will be the duty of the buyers to obtain the import licence and to communicate the number thereof to the sellers immediately on the same being obtained but in any event not later than 20th February 1958 and in the event of their failure to do so for any reasons whatsoever including the reason that the Government of India may not allow the imports of the contracted goods the sellers shall be entitled at their discretion either to carry over the goods in which event the buyers shall pay to the seller all carry over charges in addition to the contracted price or to call upon the buyers to pay for the contracted goods and take immediate delivery thereof in
British East Africa and upon 1024 the buyers failing to do so to sell the contracted goods at Kampala or Mombasa at the rates prevalent there in convenient lots and as and when it may be practicable to do so at the risk and account of the buyers and to claim from them any deficit that arise between the contracted price and such resale price and also all expense incidental thereto
Even if the Government of India may announce the import policy of the contracted goods in such manner that only the consumers would be entitled to obtain the licences it will be the duty of the buyers to see that necessary import licences for the contracted goods are obtained in the consumers  name or in the joint names of themselves and those of the consumers the intention being that in all eventualities it is the duty of the buyers to obtain licences under any policy that may be followed by the Government of India for the import of the contracted goods and to communicate the number thereof to the sellers within the time as specified hereinabove and on the buyer s failure to do so all the eventualities contemplated under clause 6 shall operate
 By a letter dated November 30 1957 the contract was later amended by the parties as follows   With reference to the above mentioned contracts we hereby confirm that if necessary we shall carry over the contracted goods for two months namely March and April and you will pay as the carry over charges for the same
The interest payable under such carry over charges will be at the rate prevalent in Mombasa
The other terms and conditions remain unaltered  The contract was not performed
The sellers wrote as many as five letters between March 1 1958 and May 26 1958 before they received a reply from the buyers dated June 3 1958
By that time the sellers had carried forward the contract and also invoked their right of resale after giving notice and claimed Rs 34103
15 nP for which a debit note had been issued
This note was returned by the buyers with a letter of June 3 1958 stating that the contract was 1025 void andor illegal that they were not obliged to perform it that there was no right of any sale on their account andor on their behalf and that the alleged sale was not binding upon them
exhibit  D  Colly No 6 The sellers then invoked the arbitration clause of the agreement and Bye law 38 A of the Bye laws of the East India Cotton Association Ltd Bombay and moved the Bombay High Court on the Original Side under section 20 of the Indian  requesting that the agreement be filed in Court and the dispute referred to arbitration
The buyers appeared and resisted the petition on grounds which they set forth in affidavits filed from time to time
By their first affidavit dated July 31 1958 the buyers contended that cls
6 and 7 quoted above were unlawful as the liability created under them amounted to a contravention  of the import policy of Government of India  and the Foreign Exchange Regulation Act 1947 and the Rules made thereunder
They contended that in view of the invalidity of the contract as a whole the arbitration clause in the agreement was not binding and that the agreement could not be filed
In the second affidavit which was filed on February 4 1959 they added the reason that the words  subject to the usual Force Majeure Clause  were vague and uncertain and made the contract  void ab initio as there was no consensus ad item between the parties
They contended that the con
tract being void the arbitration clause was also void
By yet another affidavit filed on February 27 1959 they averred that the letter dated November 30 1957 was void being in contravention of the Import Trade Control Act and the Foreign Exchange Regulation Act and the Rules made under the two Acts inasmuch as the consideration was one forbidden by law and was likely to defeat the provisions of law
They also stated that the words  if necessary  in that letter rendered the contract void ab initio for vagueness and uncertainty
The case was heard by K T Desai J as he then war
On March 3 1959 the learned Judge dismissed 1026 the petition as not maintainable on the ground that the dispute was about the legality or validity of the contract including the agreement about arbitration and that such a dispute could only be considered under sections 32 and 33 of the by the Court and not by the arbitrator in a reference under section 20 of the Act
He declined to consider the question under the former sections because the petition had not asked for that relief observing that if by a proper petition the question were raised it would be decided
Against the order of the learned Judge 0 section an appeal was filed by the sellers
This appeal was heard by Chainani C J and section T Desai J on April 28 1959
The learned Judges held that a claim was made by the sellers and was denied by the buyers that there was thus a dispute arising out of or in relation to a contract as contemplated by Bye law 38 A that in showing cause against the petition under section 20 the buyers had averred that the contract was illegal and void and that such a question could be decided by the Court before making the reference
The learned Judges pointed out that a petition under sections 32 and 33 of the Indian questioning the existence or validity of an arbitration agreement was not to be expected from one making a claim under a contract that the plea was always likely to be raised by one resisting the petition and that when such a plea was raised the Court must decide it even though the proceedings be under section 20 of the Act for making a reference
The case was therefore remanded with the following direction  As the respondents have challenged the validity of this agreement the Court will have to decide this question before passing further orders in the matter
Accordingly we set aside the order passed by Mr Justice K T Desai dismissing the petition filed by the petitioners and remand the matter to the trial court for deciding the objections raised by the respondent under sub section 3 of section 20 of the Act to the arbitration agreement being filed in Court and then disposing of the matter in accordance with law 1027 When the case went back for retrial the buyers filed their fourth affidavit on November 16 1959
They stated in that affidavit that Bye law 38 A was a statutory Bye law of the East India Cotton Association Ltd Bombay a recognised Institution under the Forward Contracts Regulation Act No 74 of 1952 and that section 46 of the was ap plicable
They contended that inasmuch as the Bye laws of the Association prescribed a different machinery inconsistent with and repugnant to section 20 of the  the latter section was inapplicable and that the petition was incompetent
By his order dated November 26 and 271959 K T Desai J hold that the petition did not disclose sufficient materials and that the sellers were not entitled to have the agreement of reference filed or to have an order of reference made
Though be held that the Bye laws of the East India Cotton Association Ltd were statutory and that sections 46 and 47 of the applied he was of opinion that section 20 could not be invoked because no action under sub section
4 of a 20 could be taken
The reason given by the learned Judge was that under that sub section the Court had to appoint an arbitrator if the parties failed to agree and that sub section was not applicable because the machinery of Bye law 38 A left no power of action to the Court
He also felt that there was no averment in the petition that the parties had not agreed
On the rest of the points raised by the buyers in their affidavits the learned Judge held against them
He held that in view of sections 212 and 213 of the Foreign Exchange Regulation Act there was no infringement of that Act by the agreement entered into though he expressed a doubt if the words  legal proceedings  in section 213 were wide enough to include an arbitration
He also held that cl 7 of the conditions under which the contract was to be performed was at least in part and under certain circumstances not a contravention of the Import and Export Control Act 1947 or the Import Trade Control Order issued Under sections 3 and 4 A of that Act and thus not wholly void
He held lastly that the contract was not void for vagueness or 1028 uncertainty either on account of the reference to  the usual Force Majeure Clause  or because of the words if necessary  in the letter of November 30 1957
The sellers appealed against the dismissal of the petition and the buyers cross objected against the adverse findings and the disallowance of costs
The appeal was heard by Tarkunde and Chitale JJ and by separate but concurring judgments the appeal was allowed and the cross objection dismissed and the buyers were ordered to pay costs throughout
The Divisional Bench agreed with K T Desai J on all the points decided by him against the buyers
They left open the question whether  legal proceedings  in section 213 of the Foreign Exchange Regulation Act were wide enough to include an arbitration for the decision of the arbitrators to be appointed and addressing themselves to the question raised about section 20 held that the petition was maintainable
They were of opinion that the Court could order the arbitration agreement to be filed and also to refer the dispute to arbitrators to be chosen in accordance with Bye law 38 A though they felt that if the latter action could not be taken at least the first could be because the procedural part could not destroy the power conferred to file the agreement
In this appeal all the arguments which had failed before the High Court were urged before us
Shortly stated they are that the contract was void a for illegality and b for uncertainty and vagueness on two grounds that the petition under section 20 of the Indian was incompetent as that section was inapplicable and that the law governing the parties was not the Indian law but the law of British East Africa
We shall now deal with these contentions
The first contention is that cl 7 of the agreement involves a breach of the Foreign Exchange Regulation Act
Reliance is placed upon section 5 of the Act which reads as follows  5 Restrictions on payment8 1 Save as may be provided in and in accordance with any general or special exemption from the provisions of this subsection which may be granted conditionally or 1029 unconditionally by the Reserve Bank no person in or resident in British India shall e make any payment to or for the credit of any person as consideration for or in association with1 the receipt by any person of a payment or the acquisition by any person of property outside India ii the creation or transfer in favour of any person of a right whether actual or contingent to receive a payment or acquire property outside India  It is contended that the agreement envisaged a payments for goods in Africa against shipping documents b payment in Africa of carrying over charges and c in the event of resale payment of deficit also in Africa
It is also contended that the two clauses 6 and 7 contemplate acquisition of property in Africa
The clauses it is submitted also involved acquisition of foreign exchange if the goods were resold in Africa and credit for the price was given to the buyers
This it is argued was a breach of section 5 unless there was a general or special exemption granted by the Reserve Bank in connection with this contract and that no such exemption was in existence when the contract was made
In this connection section 21 of the Foreign Exchange Regulation Act may be read
It provides  21
Contracts in evasion of this Act 1 No person shall enter into any contract or agreement which would directly or indirectly evade or avoid in any way the operation of any provision of this Act or of any rule direction or order made thereunder
2 Any provision of or having effect under this Act that a thing shall not be done without the permission of the Central Government or the Reserve Bank shall not render invalid any agreement by any person to do that thing if it is a term of the agreement that thing shall not be done unless permission is granted by the Central Government or the Reserve Bank as the case may be and it shall be an implied term of every contract governed 1030 by the law of any part of British India that anything agreed to be done by any term of that contract which is prohibited to be done by or under any of the provisions of this Act except
with the permission of the Central Government or the Reserve Bank shall not be done unless such permission is granted
3 Neither the provisions of this Act nor any term whether expressed or implied contained in any contract that anything for which the permission of the Central Government or the Reserve Bank is required by the said provisions shall not be done without that permission shall prevent legal proceedings being brought in British India to recover any sum which apart from the said provisions and any such term would be due whether as a debt damages or otherwise but a the said provisions shall apply to sums required to be paid by any judgment or order of any Court as they apply in relation to other sums and b no steps shall be taken for the purpose of enforcing any judgment or order for the payment of any sum to which the said provisions apply except as respects so much thereof as the Central Government or the Reserve Bank as the case May be may permit to be paid and c for the purpose of considering whether or not to grant such permission the Central Government or the Reserve Bank as the case may be may require the person entitled to the benefit of the judgment or order and the debtor under the judgment or order to produce such documents and to give such information as may be specified in the requirement
 No doubt sub section 1 prohibits contracts in contravention or evasion directly or indirectly of the Foreign Exchange Regulation Act and if there was nothing more then the argument would be understandable
But sub section
2 provides that the condition that a thing shall not be done without the permission of the Reserve Bank shall not render an agreement 1031 invalid if it is a term of the agreement that the thing shall not be done unless permission is granted by the Central Government or the Reserve Bank and further that it shall be an implied term of every contract governed by the law of any part of India that anything agreed to be done by any term of that contract which cannot be done except with the permission of the Reserve Bank shall not be done unless permission is granted
Sub section 3 allows legal proceedings to be brought to recover sum due as a debt damages or otherwise but no steps shall be taken to enforce the judgment etc except to the extent permitted by the Reserve Bank
The effect of these provisions is to prevent the very thing which is claimed here namely that the Foreign Exchange Regulation Act arms persons against performance of their contracts by setting up the shield of illegality
An implied term is engrafted upon the contract of parties by the second part of sub section
2 and by sub section
3 the responsibility of obtaining the permission of the Reserve Bank before enforcing judgment decree or order of Court is transferred to the decree holder
The section is perfectly plain though perhaps it might have been worded better for which a model existed in England
It is contended that section 21 uses the word  permission  while section 5 speaks of an exemption and that sections 212 and 213 do not cover the prohibition in a 5
The Foreign Exchange Regulation Act no doubt uses diverse words like  authorise   exempt  and  permission  in different parts
The word  exempt  shows that a person is put beyond the application of law while  permission  shows that he is granted leave to act in a particular way
But the word SC permission  is a word of wide import
 Permission  in this section means only leave to do some act which but for the leave would be illegal
In this sense exemption is just one way of giving leave
If one went only by the word and searched for those sections where the word  permission  is expressly used sections 212 and 3 are likely to prove a dead letter
This could not have been intended and the very 1032 elaborate provisions in those sub sections show that those matters were contemplated which are the subject of prohibition in section 5
In our opinion the argument is without foundation
The contention that on resale the price would have accrued to the buyers in the first instance as the sellers would be acting as the agents of the buyers is also incorrect
It has been rightly pointed out by K T Desai J that the right of resale given by sections 542 and 4 of the Indian Sale of Goods Act is exercised by the seller for himself and not as an agent of the buyer when the latter is given a notice of sale
This is indeed clear from the fact that the buyer is not entitled to the profit on resale in that contingency though liable for damages
The position is different when no notice is so sent
Then the profits go to the buyer
Perhaps in that event it may be possible to say that the seller acted as an agent
But in the case of resale with prior notice there is no payment to the buyer and no contravention of the Foreign Exchange Regulation Act
The contention that the contract involved an actual or at least a contingent right to or acquisition of property abroad is not correct
Even if it were so the contract is saved by section 21 as already explained
In our opinion the contract was not void for illegality
The agreement is said to be void because of vagueness and uncertainty arising from the use of the phrase  subject to the usual force majeure clause 
The argument is that there was no consensus ad idem and that the parties had not specified which force majeure clause they had in mind
We were taken through the Encyclopaedia of Forms and Precedents and shown a number of force majeure clauses which were different
We were also taken through a number of rulings in which the expression force majeure  had been expounded to show that there is no consistent or definite meaning
The contention thus is that there being no consensus ad idem the contract must fail for vagueness or uncertainty
The argument on the other side is that this may be regarded as a surplusage and if meaningless ignored
It is 1033 contended by the respondents that the addition of the word  usual shows that there was some clause which used to be included in such agreements
The  respondents also refer to section 29 of the Indian Contract Act which provides Agreements the meaning of which is not certain or capable of being made certain are void  and emphasise the words  capable of being made certain  and contend that the clause was capable of being made certain and ex facie the agreement was not void
McCardie J in Lebeaupin vs Crispin 1 has given an account of what is meant by force majeure  with reference to its history
The expression force majeure  is not a mere French version of the Latin expression Vis major 
It is undoubtedly a term of wider import
Difficulties have arisen in the past as to what could legitimately be included in force majeure 
Judges have agreed that strikes break down of machinery which though normally not included in Vis Major are included in force majeure 
An analysis of rulings on the subject into which it is not necessary in this case to go shows that where reference is made to force majeure  the intention is to save the performing party from the consequences of anything over which he has no control
This is the widest meaning that can be given to  force majeure  and even if this be the meaning it is obvious that the condition about force majeure  in the agreement was not vague
The use of the word  usual  makes all the difference and the meaning of the condition may be made certain by evidence about a force majeure clause which was in contemplation of parties
Learned counsel for the appellants relies strongly on a decision of McNair J in British Industries vs Patley Pressings2
There the expression used was subject to force majeure conditions 
The learned Judge held that by conditions  was meant
clauses and not contingencies or circumstances and that there being a variety of force majeure clauses in the trade there 1 2 1034 was no concluded agreement
The case is distinguish
able because the reference to force majeure clauses was left at large
The addition of the word  usual  makes it clear that here some specific clause was in the minds of the parties
Learned counsel also relies upon a decision of the House of Lords in Scammell G and Nephew Ltd vs Ouston HC and JG 1 where the reference to  on hire purchase terms was held to be too vague to constitute a concluded contract
It will appear from the decision of the House of Lords that the clause was held to be vague because no precise meaning could be attributed to it there being a variety of hire purchase clauses
The use of the word usual here enables evidence to be led to make certain which clause was in fact meant
The case of the House of Lords does not therefore apply
Both the cases to which we have referred were decided after parties had entered on evidence which is not the case here
Our case is more analogous to the decision referred to in Bishop  Baxter Ld
vs Anglo Estern Trading  Industrial Co Ld
2 namely Shamrock section section Co vs Storey 3
In speaking of the condition there Lord Goddard observed as follows  Abbreviated references in a commercial instrument are in spite of brevity often self explanatory or susceptible of definite application in the light of the circumstances as for instance where the reference is to a term clause or document of a wellknown import like cif or which prevails in common use in a particular place of performance as may be indicated by the addition of the epithet usual   see Shamrock section section Co vs Storey a where usual colliery guarantee  was referred to in a charter party in order to define loading obligations
 The addition of the word  usual  refers to something which is invariably to be found in contracts of a particular type
Commercial documents are sometimes expressed in language which does not on its face bear a clear meaning
The effort of Courts is to give a meaning if possible
This was laid down by the 1 2 3  1035 House of Lords in Hillas  CO
vs Arcos Ltd 1 and the observations of Lord Wright have become classic and have been quoted with approval both by the Judicial Committee and the House of Lords ever since
The latest case of the House of Lords is Adamastos Shipping Co Ltd vs Anglo Saxon Petroleum Co Ltd2
There the clause was  This bill of lading  whereas the document to which it referred was a charter party
Viscount Simonds summarised all the rules applicable to construction of commercial documents and laid down that effort should always be made to construe commercial agreements broadly and one must not be astute to find defects in them or reject them as meaningless
Applying these tests to the present case and in the light of the provisions of section 29 of the Indian Contract Act it is clear that the clause impugned is capable of being made certain and definite by proof that between the parties or in the trade or in dealings with parties in British East Africa there was invariably included a force majeure clause of a particular kind
In our opinion the contract was not void for vagueness or uncertainty by reason of the reference in the terms stated to the force majeure clause
Mr Daphtary posed the question as to on whom was the burden of proving the usual force majeure clause
In our opinion if the agreement is not void for uncertainty that question would be a matter for the decision of the arbitrators
It is too early to say by what evidence and by whom the usual force majeure clause must be established
The next ground on which it is said that the agreement was void for uncertainty has reference to the employment of the words  if necessary  in the letter of November 30 1957
The effect of that letter is to make an alteration in cl 6 of the agreement which has been quoted already
Under that clause the buyers were to obtain the import licence and to communicate the number thereof to the sellers not later than February 20 1958 and in the event of their failure to do so for any reason whatsoever the sellers 1  2  153
132 1036 were entitled at their discretion  either to carry over the goods or to ask the buyers to pay for the contracted goods and take delivery in British East Africa
By that letter the sellers confirmed that  if necessary  they would carry over the contracted goods for two months namely March and April subject to payment of charges
It is contended that the words  if necessary  are entirely vague and do not show necessary for whom when and why
In our opinion this argument has no force whatever
Under cl 6 the sellers had an absolute discretion either to carry over the goods or to insist on delivery being taken
By this letter they have said that if necessary that is to say
if the buyers find it difficult to supply the number of the import licence the contract would be carried over to March and April
By this amendment the sellers surrendered to a certain extent their absolute discretion
The clause means that the contract was not extended to March and April but that the sellers would extend it to that period
if occasion demanded
Since both the parties agreed to this letter and the buyers confirmed it it cannot be said that there was no consensus ad idem or that the whole agreement is void for uncertainty
We shall now consider the next argument which was very earnestly urged before us
It is that section 20 of the cannot be made applicable to this case at all
We have already quoted extracts from the agreement which include the clause by which the Bye laws of the East India Cotton Association Ltd Bombay were applied to this contract except Bye law 35which deals with arbitration on quality in case of East African cotton
Bye law 1B relates to East African cotton and it says that Bye laws 1 to 46 inclusive with certain exceptions shall apply to contracts in respect of East African cotton
It was conceded before the High Court and also before us that the Bye laws are statutory
The buyers were members of the Association but not the sellers but the Bye laws on arbitration with which we are concerned include arbitrations between a member and a 1037 non member
We are concerned directly with Bye law 38 A Bye law 38 A in its opening portion reads All unpaid claims whether admitted or not and all disputes other than those relating to quality arising out of or in relation to contracts whether forward or ready and whether between members or between a member and a non member made subject to these Bye laws shall be referred to the arbitration of two disinterested persons one to be chosen by each party
The arbitrators shall have power to appoint an umpire and shall do so if and when they differ as to their award
 Then follow certain provisions which were stressed but which need not be quoted in extension Shortly stated they are that the arbitrators must make their award in 15 days unless time be extended by the Chairman
The umpire is to be appointed within 15 days or such extended period as may be fixed by the Chairman and the umpire is to make his award within 10 days unless time be extended by the Chairman
In case of disagreement or failure of a party to appoint an arbitrator the Chairman may appoint an arbitrator and similarly the Chairman is to appoint the umpire and he may even appoint himself
Other powers are conferred on the Chairman who is the Chairman of the Board of Directors of the East India Cotton Association Ltd The contention is that arbitrations under the  like those under Sch
11 of the Code of Civil Procedure are of three kinds described by Lord Macnaghten in Ghulam Jilani vs Muhammad Hassan 1 and that this belongs to the second category there described in which  all further proceedings are under the supervision of the Court 
It is argued that by the application of the Bye laws the Court is left no powers under section 20 which is being invoked and that section 20 cannot thus apply
Section 20 of the  in so far as it is material to this point is as follows  20
Application to file in Court arbitration agreement 1 Where any persons have entered into an 1 1901 LR 29 IA 51 56 57
1038 arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it and where a difference has arisen to which the agreement applies they or any of them instead of proceeding under Chapter II may apply to a Court having jurisdiction in the matter to which the agreement relates that the agreement be filed in Court
3 On such application being made the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants requiring them to show cause within the time specified in the notice why the agreement should not be filed
4 Where no sufficient cause is shown the Court shall order the agreement to be filed and shall make an order of reference to the arbitrator appointed by the parties whether in the agreement or otherwise or where the parties cannot agree upon an arbitrator to an arbitrator appointed by the Court
5 Thereafter the arbitration shall proceed in accordance with and shall be governed by the other provisions of this Act so far as they can be made applicable
 The sellers rely upon cl
5 which enjoins the application of the provisions of the  so far as they can be made applicable
Reference is then made to provisions of Chap
II and the Schedule of the Act laying down the powers of the Court and they are contrasted with the provisions of the Bye laws to show that if the latter prevail no residuum of power is left to the Court and that after filing the agreement the Court must abdicate in favour of the Chairman and the Act in terms ceases to apply
Reference is also made to section 47 of the  which provides Subject to the provisions of section 46 and save in so far as is otherwise provided by any law for the time being in force the provisions of this Act shall apply to all arbitrations and to all proceedings thereunder   Proviso omitted 1039 The opening words of section 47 takes us to a 46 which may be read at this stage
It provides The provisions of this Act except subsection 1 of section 6 and sections 7 12 36 and 37 shall apply to every arbitration under any other enactment for the time being in force as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement except in so far as this Act is inconsistent with that other enactment or with any rules made thereunder Section 46 makes the provisions of any other enactment or any rules made thereunder to prevail over the  if inconsistent with the latter
In view of these several provisions it is clear that the applies to all arbitrations and Chap
III makes it applicable also to arbitrations in which the arbitration agreement is asked to be filed in Court under section 20 subject however to this that the provisions of any other enactment or rules made thereunder if inconsistent with the  are to prevail
Learned counsel for the buyers contends that nothing is saved of the Act
This is not correct
To begin with questions as to the existence or validity of the agreement are saved from decisions by arbitrators or umpires however appointed
Since such a plea can only be raised in bar of an application by persons seeking a reference to arbitration at least that portion of the Act still applies and that power can only be exercised by the Court
Other provisions of Chap
II like sections 15 and 16 still remain applicable
We need not give a list of all the provisions which may be saved because that will involve an examination side by side of the sections of the Act and the provisions of the Bye laws
So long as something is saved it cannot be said that the Court after receiving the agreement and ordering that it be filed becomes completely functus officio
But the crux of the argument is that the provisions of tuba
4 of section 20 read with sub s1 ibid cannot apply and the Court after filing the agreement will have 1040 to do nothing more with it and this shows that section 20 is not applicable
This argument overlooks the fact that this is a statutory arbitration governed by its own rules and that the powers and duties of the Court in sub section
4 of section 20 are of two distinct kinds
The first is the judicial function to consider whether the arbitration agreement should be filed in Court or not
That may involve dealing with objections to the existence and validity of the agreement itself
Once that is done and the Court has decided that the agreement must be filed the first part of its powers and duties is over
It is significant that an appeal under section 39 lies only against the decision on this part of sub section
Then follows a ministerial act of reference to arbitrator or arbitrators appointed by the parties
That also was perfectly possible in this case if the parties appointed the arbitrator or arbitrators
If the parties do not agree the Court may be required to make a decision as to who should be selected as an arbitrator and that may be a function either judicial or procedural or even ministerial but it is unnecessary to decide which it is
In the present case the parties by their agreement have placed the power of selecting an arbitrator or arbitrators in which we include also the umpire in the hands of the Chairman of the Board of Directors of the East India Cotton Association Ltd and the Court can certainly perform the ministerial act of sending the agreement to him to be dealt with by him
Once the agreement filed in Court is sent to the Chairman the Bye laws lay down the procedure for the Chairman and the appointed arbitrator or arbitrators to follow and that procedure if inconsistent with the  prevails
In our opinion there is no impediment to action being taken under section 204 of the 
We may dispose of here a supplementary argument that the dispute till now is about the legal existence of the agreement including the arbitration clause and that this is not a dispute arising out of or in relation to a cotton transaction
Reference was made to certain observations in Heyman vs Darwins Ltd1
In 1 1041 our opinion the words of the Bye law arising out of or in relation to contracts are sufficiently wide to comprehend matters which can legitimately arise under section 20
The argument is that when a party questions the very existence of a contract no dispute can be said to arise out of it
We think that this is not correct and even if it were the further words  in relation to  are sufficiently wide to comprehend even such a case
In our opinion this argument must also fail
It was contended lastly that the law applicable to the case is the lex loci solutionis that is to say the law of British East Africa
Reference was made to a passage from Pollock and Mulla s Contract Act Eighth Edn p 11 where it is observed as follows  In ordinary circumstances the proper law of a contract to use Mr Dicey s convenient expression will be the law of the country where it is made
But where a contract is made in one country and to be performed wholly or in part in another  the proper law may be presumed to be the law of the country where it is to be performed Auckland Corporation vs Alliance Assurance Co 1 The learned authors observe on the same page further  But these rules are only in the nature of presumptions and subject to the intention of the parties whether expressly declared or inferred from the terms and nature of the contract and the circumstances of the case
 Reliance was also placed on Chitty s Law of Contract and Rule 148 sub r
3 Second Presumption in Dicey s Conflict of Laws Seventh Edn p 738 on which the statement of the law in Pollock and Mulla is based
Whether the proper law is the lex loci contracts or lex loci solutionis is a matter of presumption but there are accepted rules for determining which of them is applicable
Where the parties have expressed themselves the intention so expressed overrides any presumption
Where there is no expressed intention 1  1042 then the rule to apply is to infer the intention from the terms and nature of the contract and from the general circumstances of the case
In the present case two such circumstances are decisive
The first is that the parties have agreed that in case of dispute the Bombay High Court would have jurisdiction and an old legal proverb says  Qui elicit judicem eligit jus If Courts of a particular country are chosen it is expected unless there be either expressed intention or evidence that they would apply their own law to the case
See N V Kwick Who Tang vs James Finlay  Co 1
The second circumstance is that the arbitration clause indicated an arbitration in India
of such arbitration clauses in agreements it has been said on more than one occasion that they lead to an inference that the parties have adopted the law of the country in which arbitration is to be made
See Hamlyn  Co vs Tallisker Distillery 2 and Spurrier vs La Cloche 3
This inference it was said in the last case can be drawn even in a case where the arbitration clause is void according to the law of the country where the contract is made and to be performed
In our opinion in this case the circumstances clearly establish that the proper law to be applied is the Indian Law
In the result the appeal fails and is dismissed with costs
Appeal dismissed


Summary:
The appellant entered into an agreement with the respondent to purchase African raw cotton
The agreement included a clause that the contract would be subject to the  usual Force Majeure clause  the Bye laws of East India Cotton Association Ltd Bombay except bye law 35 the said Bye laws having statutory force and to the jurisdiction of the Bombay High Court
Clause 6 of the agreement provided that the buyers were to obtain import licence from the Government of India failing which the seller would be entitled either to carry over the goods at the cost of the buyers or call upon them to take immediate delivery on payment in British East Africa and in default to sell the goods in British East Africa and claim the deficit if any between the contractual price and the price obtained on re sale
Clause 7 further provided that notwithstanding the import policy followed by the Government of India in respect of the import of the contracted goods the buyers would be bound to obtain the necessary import licences and communicate the numbers thereof to the sellers on specified dates failing which cl 6 would operate
The buyers did not perform the contract and the sellers after notice to them re sold the goods and thereafter claimed the deficit which thebuyers refused to pay
The sellers invoked the arbitration clause and the rules contained in bye law 38A of the Bye laws and others following it which conferred on the Chairman of the Board of Directors of the East India Cotton Association Ltd the power of selecting the arbitrator or arbitrators and applied to the High Court under section 20 of the Indian for filing the agreement and referring the dispute to arbitration
The buyers resisted and the trial judge dismissed the application but the Court of appeal reversed that decision
It was urged in this Court on behalf of the buyers that 1 cls
6 and 7 contemplated acquisition of property or Exchange in Africa and thus involved a breach of section 5 of the Foreign Exchange Regulation Act since no general or special exemption had been granted thereunder by the Reserve Bank 2 that the expression  subject to the usual Force Majeure clause  was vague and uncertain and rendered the agreement void 3 that the application of bye law 48A et seq left no powers in the Court to act under sub sections
1 and 4 of section 20n 1021 of the and the section was thus inapplicable and 4 that the law applicable to the case was the law of British East Africa and not that of India
Held that the contentions must fail
The provisions of sub sections
2 and 3 of section 21 of the Foreign Exchange Regulation Act properly construed left no manner of doubt that they contemplated matters which were within the prohibition of section 5 of the Act and had the effect of engrafting on the agreement of parties a term that it would be for the decreeholder before he could enforce the decree or order of the court to obtain the permission of the Reserve Bank and were thus designed to prevent the non performance of the contract under a cover of illegality
The contract involved no actual or contingent right to acquisition of property abroad and even assuming it did it was saved by section 21 of the Act subject to its conditions
The agreement was thus enforceable
Nor was the contract void for uncertainty
It was clear from judicial decisions that a reference to force majeure  means the saving of the performing party from the consequence of factors beyond his control
The condition in respect of force majeure  did not therefore make the contract vague
Further the use of the word  usual  made it clear that the clause could be made certain by evidence and so it was protected by section 29 of the Contract Act
Lebeaupin vs CriSpin  referred to
British Industries vs Patley Pressing and Scammell G and Nephew Ltd vs Ouston H C and J G  distinguished
Bishop  Baxter Ld
vs Anglo Eastern Trading  Industrial Co Ld 1944 IKB 12 Shamrock section section Co vs Storey 1899 5 Corn
Cas 21 Hillas  Co vs Arcos Ltd  and Adamastos Shipping Co Ltd vs Anglo Saxon Petroleum Co Ltd L959 AC 133 relied on
Although by section 46 of the  the Bye laws if inconsistent with the provisions of the Act must prevail it was not correct to say that their application made the Courtfunctus officio under section 20 of the Act
It must not be overlooked that although the present was a case of statutory arbitration governed by its own rules the court under section 204 of the had two distinct powers 1 of judicially considering whether or not the arbitration agreement should be filed in court and 2 whether there should be a reference to the arbitrator or arbitrators appointed by the parties or selected by it
Since in the instant case the parties had by their agreement empowered the Chairman of the Board of Directors of the East India Cotton Association Ltd to select the arbitrator or arbitrators the court could send the agreement to him to be dealt with under the pro cedure laid by the said Bye laws
1022 Whether the law of the country where the contract is made or of the country where it is to be performed should apply is sometimes a matter of presumption
But the declared intention of the parties overrides such presumption
Where there is no such declaration the intention may be inferred from the terms and nature of the contract and the general circumstances of the case
In the instant case since the parties agreed that in case of dispute the Bombay High Court would have jurisdiction and the arbitration clause indicated arbitration in India there could be no doubt that the Indian law was to apply
N V Kwick Who Tong vs James Finlay  Co 1927 AC 604 Hamlyn  Co vs Tallisker Distillery and Spurrier vs La Cloche  referred to