vil Appeal No 164 of 1961
Appeal from the judgment and decree dated December 17 1957 of the former Bombay High Court Now Gujarat in Civil First Appeals Nos
14 and 24 of 1956 from Original Decree
BRL Iyengar Atiqur Rehman JL Doshi and KL Hathi for the appellant
Purshottam Tricumdas JB Dadachanji OC Mathur and Ravinder Narain for the respondent
March 29
The Judgment of the Court was delivered by SHAH J
The appellant instituted Suit No 250 of 1950 in the Court of the Civil judge Senior Division Junagadh for a decree for Rs 7269311alleging that the appellant had a personal account with the respondent in respect of drafts cheques hundis and cash and at the foot of that account Rs 58000 as principal amount and Rs 579312as interest remained due and payable by the respondent that beside the amount due on the said 688 personal account an amount of Rs 8899153 was due to him in respect of a transaction of sale of 1300 bags of groundnut sent by him between January 16 to January 28 1950 and the price of gunny bags and groundnut oil cakes delivered to the respondent
The appellant further alleged that forward contracts were prohibited with effect from November 19 1949 by the Saurashtra Groundnut and Groundnut Products forward Contracts Prohibition order and that the said contracts being illegal the appellant was not subject to any liability arising from adjustments of credits and debits or differences in rates relating to forward contracts and the respondent was not entitled nor authorised to make credit and debit entries in the appellant s account and that nothing was due by him in respect thereof
The respondent by his written statement contendedthat in the appellant s personal account an amountof Rs 158000 stood initially credited but at the foot of that account only a sum of Rs 18000 was due and this sum was credited in the current account of the appellant in the name of Hemraj Keshavji Oil Mills and Ginning Factory and therefore nothing was due in the personal account that the transaction effected by the appellant through the commission agency of the respondent in groundnut seed for December January Samvat 2006 Settlement did not contravene the order dated November 19 1949 of the United States of Saurashtra and that the respondent has not committed any breach of the order that all the transactions for the December January Settlement were in ready goods of specific quality and that there was a condition relating to giving and taking of delivery on fixed dates and the same were all effected at the direction of the appellant and that the appellant was legally responsible for all payments made in respect of those transactions by the respondents as the appellant s pucca adatia
He then contended that in Samvat year 2006 the appellant had sold 689 9000 bags of groundnut through the agency of the respondent and had purchased 2300 bags through him that the appellant thereafter gave delivery of only 2000 bags of groundnut and did not deliver the balance and on that account there resulted a loss of Rs 922179 which the appellant was bound to reimburse
The respondent admitted that the appellanthad sent 1300 bags of groundnut but these bags were delivered towards the sale of 2000 bags of December January settlement and the price thereof and of the balance of 700 bags was credited in the account of the appellant and that the appellant was not entitled to a decree for any amount except the amount found due at the foot of the account
The trial Court decreed the claim by awarding Rs 305893 and interest
Against the decree of the Trial Court the respondent as well as the appellant appealed to the High Court of the Saurashtra
The appeals were transferred for trail under the States Reorganization Act to the High Court of judicature of Bombay at Rajkot
The High Court allowed the appeal of the respondent and dismissed the appeal of the appellant
The appellant has with certificate issued by the High Court appealed to this Court against the decree passed by the High Court
The appeal raises a dispute about the liability of the appellant for transactions in groundnut seed effected through the agency of the respondent after November 19 1949 for December 1949 and January 1950 settlement
The appellant says that these were forward transactions in groundnut and were prohibited under the Saurashtra Groundnut and Groundnut Products Forward Contract Prohibition Order 1949 and that these transactions gave rise to no liability which the appellant is obliged to discharge
The respondent says that the transactions were ready delivery contracts which were not 690 prohibited by law and in respect of the losses suffered thereunder the appellant was bound to indemnify the respondent and that the losses suffered in those transactions were duly debited in the personal account of the appellant
There is no dispute before us about the correctness of the entries in the personal account of the respondent
If the respondent s case is held proved that the transactions were ready delivery transactions and not prohibited by the Saurashtra order the decree passed by the High Court must be maintained
The Saurashtra Groundnut and Groundnut Products Forward Contract Prohibition Order 1949 was issued on November 19 1949 and was extended to the whole of the United States of Saurashtra
By cl 2 a contract  was defined as meaning a contract made or to be performed in whole or in part in the United States of Saurashtra relating to the sale or purchase of groundnut whole groundnut seeds or groundnut oil By cl 3 forward contracts in groundnut and groundnut products were prohibited
The clause provided  No person shall henceforth enter into any forward contract in groundnut whole or groundnut seeds or groundnut oil except under and in accordance with the permission granted by Government By cl 4 all outstanding forward contracts on the date of the publication of the order are to be closed immediately and at such rates and in such manner as may be fixed by the Association concerned under their respective bye laws or other regulations that may be applicable to such contracts
The Trial Court held that out of the transactions which took place on or after November 19 1949 only one transaction which was for delivery on January 25 1950 was not hit by the order
The remaining transactions according to the Trial Court must be regarded as wagering transactions i e transactions in which it was intended by the parties that delivery of the goods contracted for could not 691 be demanded without breach of the understanding
The Court did not consider whether the transactions were invalid as being in violation of the prohibition contained in the order
The High Court held that according to the rules of the Association by which the contracts were governed delivery of the goods contracted for was invariably to be given at the godown of the purchaser and therefore delivery orders railway receipts or bills of lading were not contemplated by the parties and the contracts being for specific quality or type of groundnut for specific delivery and for specific price in respect of ready delivery goods the transactions were not hit by the order
By cl 3 of the order all forward contracts in groundnut and groundnut products except those in accordance with the permission granted by the Government were prohibited
It is not the case of the respondent that permission was obtained from the Government in respect of those transactions but he contends that the transactions were not forward contracts and therefore not within the prohibition of the order
The definition of the expression forward contract  is somewhat obscure and the precise significance of the expression against which contracts are not transferable to third parties is difficult to guage
A forward contract is in the first instance defined as meaning a contract for delivery of groundnut whole or groundnut seeds or groundnut oil at some future date
 The contracts in dispute in the present case were indisputably contracts for delivery of groundnut at some future date
 But the definition expressly excludes certain contracts from its operation even if they are contracts for future delivery viz contracts for specific qualities or types for specific delivery at specific price delivery orders railway receipts or bills of lading against which contracts are not transferable to third parties
Why the draftsman should in prescribing the condition of 692 non transferability of a contract against delivery orders railway receipts or bills of ladnng should have referred to contracts is difficult to appreciate
The contracts in dispute were effected according to the rules and regulations of the Veraval Merchants Association
A sample form of the contracts between the parties may be set out  This Sauda is to be treated as subject to the rules and regulations of the Association
No 143 Ready Delivery Veraval Dt
21 11 49 Sheth Thaker Hemraj Keshavji at Malia
Please accept Jay Gopal from Shab Haridas Jethabhai
We have this day transacted the Sauda as under on your behalf and as per your order
Having made a note of it and having signed the slip below the counterpart return it imme diately
It is left to our choice whether on the deposit being exhausted to let the Sauda remain outstanding or not
Sold Groundnut seeds small new crop ready December january Bags 100 one hundred bags at Rs 31 63 rupees thirty one annas six and pies three Standard filling 177 1bs 2
Sold Groundnut seeds small new crop ready December January Dated 25th Bags 500 five hundred bags at Rs 31 11 6 rupees thirty one annas eleven and pies six Standard filling 177 lbs 3
Sold Groundnut seeds small new crop ready December January Bags 100 one 693 hundred bags at Rs 31 6 6 rupees thirty one annas six and pies six Standard filling 177 lbs Sd
Chhaganlal for Shah Haridas jethabhai 1st Shukla Margashirsh St 2006 Monday
 At the foot of the contract is the acknowledg ment as under  Shah Haridas jethabhai at Veraval
We have received your Sauda nondh Chitti No 143 and have noted accordingly
2nd Shukla Margashirsh St 2006Dt
21 11 49 Sd
Kalidas Bhagwanji for Sheth Hemraj Keshavji
 The contract is described as a ready delivery contract and is made subject to the rules and regulations of the Association
The price of the goods and the quality of the goods are specified and delivery at a specific price is also stipulated
There is nothing in the contract indicating whether it was transferable to third parties
But the appellant submits that where the contract is silent as to whether it is transferable against delivery orders railway receipts or bills of lading it must be deemed capable of being transferred to third parties and so for the purpose of the order be deemed to be a forward contract
The 694 argument in substance is that a contract for delivery of groundnut at a future date even for specific quality and for specific delivery at a specific price would not be excluded from the definition of forward contract unless it is expressly recited in the contract that it is not transferable to third parties against delivery orders railway receipts or bills of lading
This it is urged is so because it was the object of the order to prohibit speculation in groundnut and groundnut products and to achieve that purpose it sought to prohibit forward transactions which were transferable to third parties
By insisting upon completion of the contract between the parties thereto it is urged it was intended to prevent speculation in essential commodities
Reliance in this behalf was sought to be placed upon several decisions of the Bombay Madras and Andhra Pradesh High Courts dealing with the interpretation of clauses similar to the definition of forward contract in the Saurashtra order in which it was held that exclusion from the prohibition against forward contracts can be regarded as effective only if the stipulation about non transferability is expressly mentioned in the contract and silence of the contract imported transferability even in respect of contracts for specific quality for specific delivery at specific price
The earliest decision of this clause was a decision of a single judge of the Bombay High Court in Firm Hansraj vs Vasanji 1
In that case the contract was for spot delivery ie where no delivery order or railway receipt or bill of lading would ordinarily be issued
But the learned judge held that such a contract in the absence of an express stipulation prohibiting transfer would not fall within the Notification granting exclusion from the prohibition of forward contracts because the condition regarding non transferability would not be fulfilled
It was observed by Mr justice M V Desai  The only classes of cases of forward contracts which were exempted were those which contained in them the guarantee against speculation by reason of a provision 1 1948 4 DLR Bom
695 that the Delivery Orders Railway Receipts or Bills of Lading which were contemplated by the contracts and would be issued should not be transferable to third parties    and he recorded his conclusion as follows   In my opinion if Delivery Orders were con
templated under these contracts they were illegal as the Delivery Orders were not made non transferable
If Delivery Orders Railway Receipts or Bills of Lading were not contemplated under the contracts then the exemption which deals with cases where Delivery Orders Railway Receipts or Bills of Lading are issued has no application
 This decision was approved in Uma Satyanarayanamurty vs Kothamasu Sitaramayya  Co 1 where in considering whether a disputed contract was a forward contract  within the meaning of the Vegetable Oils and Oilcakes Forward Con tract Prohibition Order 1944 Rajamannar C J held that the intention underlying the notification being to grant exemption only to cases of forward contracts in respect of which there could be some guarantee that they would not be subject to speculation exclusion from the prohibition imposed by the notification may be established only if one of the terms of the contract is that the delivery order or railway receipt or bill of lading relating thereto is not transferable
It is not enough that such documents are not contemplated because it cannot be said that they are prohibited
This view was followed in Bodhu Seetharamaswami vs Bhagavathi Oil Company 2 Hussain Kasam Dada vs Vijayanagaram Commercial Association 3 and Vaddadi Venkataswami vs Hanura Noor Muhammad Beegum 4
The phraseology of the notifications and the definitions of forward contract were not in terms identical in each of these cases but these cases lay down that before a contract 1 3 2 1
L R AIR 1956 Andhra 9 696 for delivery of a commodity at a future date could be regarded as excluded from the definition of forward contract even if the contract was for a specific price or specific quality it must be stipulated that the contracts were not transferable to third parties by expressly prohibiting the transfer of delivery orders railway receipts or bills of lading
We are unable to hold that a contract for delivery of goods at a future date would fall within the exception in the definition of forward contract if other conditions are fulfilled only if there is an express stipulation recorded in the contract prohibiting the transfer of delivery orders railway receipts or bills of lading against the contract thereof
The order issued by the Saurashtra Government excluded from the definition of forward contract all contracts for specific qualities or types of groundnut whole or groundnut seeds or groundnut oil and for specific delivery at a specific price delivery orders railway receipts or bills of lading against which contracts were not transferable to third parties
But the Legislature did not impose the condition that the contracts for delivery of goods at some future date must recite that the contracts were not to be transferable and there is no indication of such an implication
Nor is the object of the order sufficient to justify an overriding reason for implying that condition
In a recent case Khardah Company Ltd vs Raymon it Company India Private Ltd 1 this Court had to adjudicate upon the validity of a forward contract relating to jute
By cl
2 of section 17 of the Forward Contracts Regulations Act 74 of 1952 forward contracts in contravention of the provisions of sub section
1 of section 17 were declared illegal but the Notification did not apply to non transferable specific delivery contracts for the sale or purchase of any goods
In a dispute relating to non delivery of jute which was one of the commodities to which the Act was made applicable 1  697 the Bengal Chamber of Commerce made an award
In a petition to set aside the award it was urged that in the absence of a specific clause prohibiting transfer in the contract itself the plea that the contract is not transferable is not open to the party supporting the contract and that evidence aliunde is not admissible to establish the condition and in Support of that argument Seetharamaswani vs Bhagwathi Oil Co 1 Hanumanthah vs U Thimmaiah 2 and Hussain Kasam Dada vs Vijananagaram Commercial Association 3 were cited
Venkatarama Aiyar J observed in dealing with this contention x x x that when a contract has been 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 constitute a term of the contract between the parties
If on 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 term
The terms of a contract can be express or implied from what has been expressed
x x x x on the question whether there was an agreement between the parties that the contract was to be nontransferrable the absence of a specific clause forbidding transfer is not conclusive
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 agree
ment of the parties was that it was not to be transferred
When once a conclusion is reached that such was the understanding of the parties 1 1 AIR 1954 Mad
3AIR 698 there is nothing in law which prevents effect from being given to it
 In our view this principle applies to the interpretation of the Saurashtra Groundnut and Groundnut Products Forward Contract Prohibition Order 1949
From the absence of a clause expressly prohibiting transfer of the contract against delivery orders railway receipts or bills of lading it cannot be inferred that the contract is transferable
The question whether an impugned contract is transferable must depend upon the language of the contract interpreted in the light of surrounding circumstances and silence of the contract cannot be regarded as an indication of transferability much less would it justify an inference that it is transferable
We must then consider having regard to the surrounding circumstances if such a term can be implied
The contracts are made subject to the rules and regulations of the Veraval Merchants  Association
These rules are designated  Rules and Regulations of groundnuts ready delivery
Rule 5 provides that the buyer has to supply empty bags to the seller and he has to supply a Bardan Chitti within 48 hours from the receipt of the letter of the seller to the buyer asking for empty bags
In the event of failure to supply a Bardan Chitti within 48 hours a penalty of Rs 2 per 100 bags is to be paid to the seller for every 24 hours
Rule 6 deals with delivery
The seller has to give delivery at the godown of the buyer and the seller is to unload the carts at his own cost
The buyer has on presentation of the receipt of the commodity at his godown to pay 90 of the invoice price and 10 may be retained against defects or shortage discovered in weighment Rule7
Weighment has to be made at the godown of the buyer at the earliest moment according to the convenience of the seller and the buyer after the commodity has reached the buyer s godown
A sample has to be preserved if 699 the seller so chooses at the buyer s place
At the con venience of both the buyer and the seller and at the earliest opportunity the sample should be analyzed at the buyer s place but after weighment of the commodity cleaning of sample should not take more than 6 days and if a person makes any delay he would be liable to pay a penalty of 8 eight annas for every 24 hours per every lot of 100 bags
Rule 9 deals with shortages and provides for reimbusement of loss to the buyer
Rule 10 deals with payment of price
On taking delivery of the commodity the person receiving the commodity having obtained a kutcha receipt is to make 90 payment to the person giving delivery immediately 
If the person giving delivery of a commodity so desires the person taking delivery has to furnish surety for the value of commodity and acceptable to the Association
After weighment and shortages are settled and on receiving the invoice the buyer must pay in full the balance of 10 within 96 hours
The buyer paying after 96 hours must pay interest at the rate of 12 twelve annas per centum per mensem
Rule II provides for survey of disputes arising between the members at the time of delivery of  weighed commodity
 The application may be made both by the buyer and the seller
Rule 15 provides for steps to be taken if the seller or the buyer be unable to meet amount found due at the settlement regarding the commodity
The Managing Committee after hearing the seller and buyer may grant extension of time on receipt of an application to the Association from such buyer or seller or the Association may determine and fix a reasonable rate after considering the rates as well as circumstances in the local as well as other centres of Saurashtra between seller and the buyer and that the transactions between the buyer and the seller have to be settled at the rate so fixed
The transactions for purchase and sale are to be carried through between two members of the 700 Association and under the rules and regulations of the Association
Delivery has to be given at the warehouse of the purchaser and detailed rules about sampling surveying payment of price etc are made
Prima facie these rules apply to the persons named as the seller and the buyer in the transactions of sale and purchase
But Mr Ayyanger appearing on behalf of the appellant contended that the expression buyer  would include a purchaser from the buyer because under the general law of contracts the benefit of a contract to purchase goods can be assigned and therefore the rights of the buyer would be enforceable by the transferee of the buyer
But the scheme of the rules indicates that the entire transaction has to be carried through between the parties to the transaction and not between the seller and a transferee of the rights of the buyer
In carrying out the transactions under the rules diverse obligations are imposed upon the buyers and it is settled law that without the consent of the seller the burden of a contract cannot be assigned
The rules provide as we have already pointed out that the empty bags are to be supplied by the buyer
Such an obligation cannot be transferred by the buyer
Again diverse rules provide liability for payment of penalty
If a buyer connot transfer the Obligations under a contract which is made subject to the rules and regulations of the Association ail the obligations prescribed by the rules being made part of the contract a very curious result would ensue in that whereas an assignee of the buyer would be entitled to demand delivery at his own godown at the rate fixed for his default the buyer would remain liable for the diverse obligations including liability to pay penalty for default of his assignee under the rules
Again the seller by Rule 6 has to deliver the goods at the warehouse of the buyer and if the benefit of the contract is transferable it would imply an obligation to deliver at the warehouse of the buyer s assignee wherever the warehouse of the assignee may be
The 701 warehouse of the assignee of the buyer may be in Veraval or at any other place but the seller having entered into a contract at a rate which would include normal expenses for delivery at the buyer s godown maybe required to undertake an intolerable burden of meeting all the charges for transporting the goods to the warehouse of the buyer s assignee wherever such godown may be situate
Such an obligation could never have been under contemplation of the rule making body
Mr Ayyanger contended that the assignee of the buyer contemplated by the rules would of necessity have to be a member of the Association and therefore resident in Veraval
But the rules to which our attention has been invited do not if the buyer is to include the assignee of the benefit of the contract seem to impose any such restriction
If the general law relating to assignment of benefit under a contract is to be superimposed upon the rules notwithstanding the scheme which prima facie contemplates performance between the parties there is no reason why any such reservation should be made
It was alternatively urged by Mr Ayyangar that the rules of the Association use two expressions buyer  and Persons  and wherever the expression Person  is used it would include an assignee of the buyer
This argument in our judgment is without force
The rules have not been drawn up with any precision and there is nothing to indicate that by using the expression person  a larger category was intended
for instance in rule 5 the obligation to supply empty bags is imposed upon the buyer  and the penalty for failing to carry out that obligation is imposed upon the person  Similarly in rule 10 when delivery is taken by the buyer  the person  receiving the commodity has to make payment of 90 of the price to the person giving delivery
There arc a large number of other rules which deal with the rights of the buyers  and the obligations 702 simultaneously imposed upon persons which in the context may mean only the buyers
The use of the expression Person  does not in our judgment indicate that he was to be any one other than the buyer or his representative
On a careful review of the rules we are of the view that under the rules and regulations of the Veraval Merchants  Association pursuant to which the contracts are made the contracts were not transferable
The contracts were undoubtedly for delivery of groundnut at a future date but they were contracts for specific quality for specific price and for specific delivery under the rules of the Association under which they were made
The contracts were for reasons already mentioned also not transferable to third parties and could not be regarded as forward contracts within the meaning of the order
It is unnecessary therefore to consider whether the respondent who claimed to have acted as Pucca Adatia and therefore as Commission Agent was entitled to claim reimbursement for any amount alleged to have been paid by him on behalf of the appellant for losses suffered in the transactions in dispute
We are therefore of the view that the High Court was right in modifying the decree passed by the Trial Court and in dismissing the appellant s suit
The appeal is dismissed with costs
Appeal dismissed


Summary:
The appellant entered into contracts with the respondent for sale of groundnuts which were described as ready delivery contracts and were subject to the rules and regulations
of the Veraval Merchants Association
The contracts specified the price and quality of the goods and stipulated delivery at a specific price
But there was nothing in the contracts indicating whether they were transferable to third parties
The respondent claimed certain amounts of money in respect of these transactions but the appellant resisted the claim on the ground that the contracts being forward contracts were prohibited by the Saurashtra Groundnut and Groundnut Products Forward Contracts Prohibition Order 1949 and were illegal The appellant contended that the contracts for the delivery of groundnuts at a future date even though they were for specific quality and for specific delivery at a specific price must be deemed to be forward contracts unless it was expressly recited that they were not transferable to third parties
Held that the contracts were not forward contracts and were not hit by the Prohibition Order
A contract for delivery of goods at a future date even though for a specific price and specific quality can be excluded from the definition of forward contracts only if the contract is non transferable
But from the mere absence of an express stipulation as to non transferability in the contract it cannot be deemed to be transferable and outside the exception
It is not required either by the Order or by the object of the Order that the condition regarding non transferability should be mentioned in the contract itself before the contract can be excluded from the definition of forward contract
Absence of a specific stipulation in this regard is not conclusive
It has to be seen whether upon the 687 language of the contract interpreted in the light of surrounding circumstances it can be field that there was an agreement between the parties that the contract was not transferable
The rules and regulations of the Association to which the contracts in dispute were subject clearly showed that the contracts were not transferable
Khardah Company Ltd vs Raymon  Co India Private Ltd   applied
Firm Hansraj vs Vasanji 1948 4 DLR Bom
7 Uma Satyanarayanamurty vs Kothamasu Sitaramayya  Co Boddu Seetharamaswami vs Bhagavathi Oil Company ILR  Hussain Kasam Dada vs Vijayanagaram Commercial Association and Vaddadi Venkataswami vs Hanura Noor Muhammad Beegum AIR 1956 Andhra 9 referred to