Case: Gordhandas Purshottamdas Sonawala &amp; Another Vs. Eastern Cotton &amp; Company

the parties would have to pay to or received from one another the differences calculated on the difference between the contract rates and those settlement rates.29. The whole of this discussion, however, is academic by reason of the fact that in practice delivery contracts were not put through any periodical settlements and at all material times the operation of this term in the official contract form had become obsolete. This position was not disputed on behalf of the appellants and their counsel stated before the Court that he did not wish to dispute the fact that delivery contracts were at no time submitted to periodical settlements in the Association. The effect of this procedure being adopted in the Association was tacitly to suspend the operation of these by-laws as to periodical settlements in respect of delivery contracts and it would be superfluous, nay absurd, on the part of the business people entering into contracts subject to the by-laws of the Association to incorporate in the contract form provisions which had become obsolete. If the contracts were not to pass through the periodical settlements in the clearing house no question would ever arise of settlement rates requiring to be fixed, much less of the basis of such settlement rates being determined, or of the difference of Rs.... above or below the settlement rate of hedge contracts being over agreed upon between the parties. If under those circumstances, the parties did not fill in those blanks which required to be filled in the official contract 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.30. 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 in tended to perpetrate an illegality at the very inception of the contracts and the contracts were therefore void. There is considerable force in this argument; but we do not feel called upon to consider the same in view of the fact that that was not the ground of which the validity of the suit contract was challenged in the plaint.31. We are therefore of the opinion that the omission to fill in those blanks in the contract notes did not spell any departure from an essential or a characteristic part of the contract form nor was the legal effect of the contracts in any manner changed thereby rendering the contracts void within the meaning of S. 8 of the Bombay Cotton Contracts Act, 1932.32. Both these grounds of attack against the validity of the contracts in question therefore fail and we are of the opinion that the contracts entered into between the appellants and the respondent were not void as alleged. The appellants were therefore not entitled to recover from the respondent the said sum of Rs. 1,80,099-8-0 or any part thereof as alleged or at all and we are of the opinion that the appellate Court was right in rejecting the appellants claim.33. We cannot part with this appeal without observing that the whole difficulty has been created by reason of the Association not having made the necessary alterations in the contract form in accordance with the situation as it obtained from time to time. When By-law 101 was suspended in operation the Association ought to have deleted the term as to measurement from the contract form. When the By-laws 139 and 141 were virtually abrogated by reason of the delivery contracts not being subjected to periodical settlements in the clearing house, the Association ought to have similarly deleted the last clause from the official contract form which required the difference of Rs....... above or below the settlement rates of hedge contract No.......to be filled in by the parties. Equally untenable was the retention of the expression "Hedge Contract No........." when the five different varieties of hedge contracts were abolished and one hedge contract named I.C.C. was substituted therefore. We fully endorse the observations made by the appellate Court in the course of its judgment :"We have had occasion to point out in the past now badly the by-laws of the East India Cotton Association are drafted and how clumsily the forms also settled, and the present form is an illustration of what we have had occasion to say in the past."The manner in which the official contract form which had been settled when the By-laws of the Association came first to be promulgated has been retained in its pristine glory in spite of the various changes made in the operation of the By-laws and the practice of the trade only enhances the difficulties of the parties sand enables the parties who are so minded to raise all sorts of disputes tenable or otherwise in order to avoid their liability in respect of the transactions effected by them in the Association. It may be hoped that the Association will take effective steps to bring the official contract form in conformity with the By-laws in operation from time to time and the practice of the trade prevailing in the Association.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]22. 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 Bye-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 allowances were in accordance with the resolution of the Board dated 20th November 1942, to be fixed before the commencement of the season and if such allowances were provided for there was nothing further to be done in regard to the difference in measurement, if any. If the situation which obtained after 20th November 1942, provided for a tender of bales bound with ropes instead of bales bound with hoops in fulfillment of the contracts entered into between the parties, that was well known to all the members of the Association and it was open to them while fixing the prices themselves to take count of the extra charges for insurance and freight, which would be payable by the purchaser in the event of bales bound with ropes being tendered instead of bales bound with hoops.It, therefore, follows that the omission to mention the measurements in the contract notes did not render the contracts not in accordance with the By-laws. There was no such By-law in operation at the time and even otherwise there was no need whatever to incorporate in the contract notes any term as to measurement. It could not therefore be said that there was any departure from an essential or a characteristic part of the contract form or that the legal effect of the contracts was changed so as to invalidate the same.It appears that the contention urged on behalf of the appellants would be more in 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 recognising 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 refereed to, to agree upon the difference above or below the settlement rate of hedge contract for the purpose of facilitating the settlement through the clearing house.But if no such difference above or below the settlement rate of hedge contract 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 fact that no difference above or below the settlement rate of hedge contract was agreed upon in the manner contemplated would be enough to spell out an agreement that no such difference was to be computed in arriving at the settlement rates in respect of these contracts. If that was the true position it would be superfluous to write the word "nil" as contended for by the appellants and the consequences, of such non-mention would be the same as if the difference agreed upon was nil.By-law 141(2) could then be worked out without any difficulty and the settlement rates in the case of delivery contracts would be fixed on the basis of the settlement price of the hedge contract taking into account the facts that there was either no difference which was agreed upon or a that the difference agreed upon was a specific one which was mentioned in the contract notes.We are therefore of the opinion that the omission to fill in those blanks in the contract notes did not spell any departure from an essential or a characteristic part of the contract form nor was the legal effect of the contracts in any manner changed thereby rendering the contracts void within the meaning of S. 8 of the Bombay Cotton Contracts Act, 1932.32. Both these grounds of attack against the validity of the contracts in question therefore fail and we are of the opinion that the contracts entered into between the appellants and the respondent were not void as alleged. The appellants were therefore not entitled to recover from the respondent the said sum of Rs. 1,80,099-8-0 or any part thereof as alleged or at all and we are of the opinion that the appellate Court was right in rejecting the appellants claim.33. We cannot part with this appeal without observing that the whole difficulty has been created by reason of the Association not having made the necessary alterations in the contract form in accordance with the situation as it obtained from time to time. When By-law 101 was suspended in operation the Association ought to have deleted the term as to measurement from the contract form. When the By-laws 139 and 141 were virtually abrogated by reason of the delivery contracts not being subjected to periodical settlements in the clearing house, the Association ought to have similarly deleted the last clause from the official contract form which required the difference of Rs....... above or below the settlement rates of hedge contract No.......to be filled in by the parties. Equally untenable was the retention of the expression "Hedge Contract No........." when the five different varieties of hedge contracts were abolished and one hedge contract named I.C.C. was substituted therefore. We fully endorse the observations made by the appellate Court in the course of its judgmenthave had occasion to point out in the past now badly the by-laws of the East India Cotton Association are drafted and how clumsily the forms also settled, and the present form is an illustration of what we have had occasion to say in themanner in which the official contract form which had been settled when the By-laws of the Association came first to be promulgated has been retained in its pristine glory in spite of the various changes made in the operation of the By-laws and the practice of the trade only enhances the difficulties of the parties sand enables the parties who are so minded to raise all sorts of disputes tenable or otherwise in order to avoid their liability in respect of the transactions effected by them in the Association. It may be hoped that the Association will take effective steps to bring the official contract form in conformity with the By-laws in operation from time to time and the practice of the trade prevailing in the Association.