Case: Khardah Company Ltd Vs. Raymon &amp; Company (India) Private Ltd

to assign benefits under the contract remain unaffected by it. This is to take too narrow a view of the true position. Far from being strangers to the licence, the evidence clearly establishes that they are very intimately associated with it. On September 26, 1955 acting under licence No. A 062290/52 the appellants wrote to the Joint Chief Controller of Imports and Exports, Government of India, to "issue a letter of authority in favour of sellers Messers. Raymon and Company (India) Ltd., for 2,500 maunds jute cuttings to be imported from Narayanganj, (East Pakistan), against the above (licence)." The letter of authority was received by the appellants on the 29th September, 1956 and they sent it on to the respondents with the following letter:-"Dear Sirs, Contract No. 2306. We are sending herewith the Exchange Control Copy of Letter of Authority for 1250 Mds. Jute cuttings against the above." 29. Contract No. 2306 referred to in this enter is the contract dated September 7,1955 involved in this dispute. It is on the strength of this letter of authority that the respondents opened a letter of credit with a Bank in East Pakistan and the goods were imported. We have not overlooked the fact that while the contract is dated September 7, 1955, the licence is dated September 22, 1955, and the letter of authority to the respondents is even later, and it might strike one as an anachronism to read the licence and the letter of authority into the contract. But it should be remembered that the licences are in standard form and are renewed from time to time except as to details concerning the imports, and the course of business followed in the jute market was throughout in conformity with the conditions laid down in the licence, and was of the same pattern. Now the agreement provides that the shipping documents in Pakistan are to be taken in the name of the buyers that the sellers are "to open letter of credit" and that the goods are to be delivered "at the buyers Mill siding". We have no doubt that these terms have been inserted with a view to give effect to the conditions on which licences are granted and that it was the understanding of both the sellers and buyers that the rights under the contract were not to be transferred. 30. But it is argued for the respondents that unless there is in the contract itself a specific clause prohibiting transfer, the plea that it is not transferable is not open to the appellants and that evidence aliunde is not admissible to establish it and the decisions in Seetharamaswami v. Bhagwathi Oil Co. 1951-1 Mad LJ 147, Hanumanthah v. U, Thimmaiah AIR 1954 Mad 87 , and AIR 1954 Mad 528 , are relied on in support of this position. We agree 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 norm 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. It is in the ultimate analysis a question of construction of the contract. And again it is well established that in construing a contract it would be legitimate to take into account surrounding circumstances. Therefore, on the question whether there was an agreement between the parties that the contract was to be non-transferable, 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 agreement 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, there is nothing in law which prevents effect from being given to it. That was the view taken in Virjee Daya and Co. v. Ramakrishna Rice and Oil Mills AIR 1956 Mad l10, and that in our opinion is correct. 31. It remains to deal with one other question on which the parties have been at issue. It terms on a consideration of S. 2(f), of the Act, A non-transferable specific delivery contract is defined in S. 2(f) omitting what is not material, as a specific delivery contract the rights or liabilities under which are not transferable. Now the contention of the appellants is that as admittedly the liabilities under the contract are not transferable it is a non-transferable contract within S. 2 (f). But the respondents argue that on that construction no forward contract will be hit by the notification because liabilities under the contract can never be transferred and so the notification would become futile. They accordingly contend that word or should be read as, and, and that on that construction unless both the rights and liabilities under the contract are non-transferable it is not a non-transferable contract as defined in S. 2 (f). The appellants urge that on this construction no contract would be non-transferable as rights under a contract can always be transferred unless it is personal in its character and the section would become practically useless. The intention of the legislature as expressed in the section is, it must be admitted, clouded in obscurity and uncertainty. But in the view we have taken, that the contract is on its terms properly construed, non-transferable, it becomes unnecessary to decide between the rival contentions as to the true import of S. 2 (f).

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

Explanation:
1[ds]4. It cannot be disputed that the expression "arising out of" or concerning or "in connection with" or "in consequence of" or "relating to this contract" occurring in Cl. 14 are of sufficient amplitude to take in a dispute as to the validity of the agreement dated September 7, 1955.Vide Ruby General Insurance Co; Ltd, v. Pearey Lal Kumar, 1952-3 SCR 501; (AIR 1952 SC l19). But the question is not whether Cl. 14 is all comprehensive but whether it, could be enforced when the agreement of which it forms an integral part is held to be illegal. Logically speaking, it is difficult to conceive how when an agreement is found to be bad, any portion of it can be held to be good. When the whole perishes, its parts also must perish, Ex nihilo nil fit." On principle, therefore, it must be held that when an agreement is invalid every part of it including the clause as to arbitration contained therein must also be invalidWe are accordingly of the opinion that the dispute that the contract dated September 7, 1955 is illegal and void is not one which the arbitrators are competent to decide under Cl. 14 and that in consequence the respondents are entitled to maintain the present application under S. 33 of the Arbitration Act18. To analyse the scheme of the Act; it divides contracts of sale of goods into two categories, ready delivery contracts and Forward Contracts. Forward Contracts are classified into those which are specific delivery contracts and those which are not. Then again specific delivery contracts are divided into transferable specific delivery contracts and non-transferable specific delivery contracts, Section 18 (1) exempts from the operation of the Act non-transferable specific delivery contracts. The net result of these provisions is that all forward contracts except those which are non-transferable specific delivery contracts can be declared illegal by notification issued under the ActThe contract with which we are concerned in these appeals was entered into on September 7, 1955, when the notification aforesaid was in force, and so it would be hit by it, unless it is a non-transferable specific delivery contract and the point for decision is whether it is that. There is no dispute between the parties that it is a specific delivery contract. It is between named buyers and sellers, the goods are specified, as also the period during which they have to be actually delivered and their price is fixed. What is in controversy is whether it is transferable or non-transferable. There was considerable argument before us on the question as to assignability of a contract. The law on the subject is well settled and might be stated in simple terms. An assignment of a contract might result by transfer either of the rights or of the obligations thereunder. But there is a well-recognised distinction between these two classes of assignments. As a rule obligations under a contract cannot be assigned except with the consent of the promisee, and when such consent is given, it is really a novation resulting in substitution of liabilities. On the other hand rights under a contract are assignable unless the contract is personal in its nature or the rights are incapable of assignment either under the law or under an agreement between the partiesAs it is only a benefit under a contract that can be assigned, the discussion really centres round two questions, are the buyers entitled to assign their right to get the goods on payment of price? And are the sellers entitled to assign their right to receive the price on delivery of the goods ? On the question as to the rights of the buyers to assign their right to the goods, the matter is clear beyond all doubts. The licence which authorises the appellants to import the goods from East Pakistan also prohibits them expressly from assigning the same. In this connection it should be noted that, owing to the exigencies of Foreign Exchange, there have been in force, at all material times, restrictions on import of goods. The nature of these restrictions and the policy behind them were examined by this Court quite recently in Daya v. Joint Chief Controller of Imports and Exports, Civil Appeal No. 226 of 1961 D/- 16-4-1962 : (AIR 1962 SC 1796  ) and it is unnecessary to repeat them. It is sufficient for the present purpose to state that the issue of import licences by the Government was restricted to persons who had been engaged in the business of import during a specified period and there were also limitations on the extent to which they could importThere is in law a clear distinction between assignment of rights under a contract by a party who has performed his obligations thereunder, and assignment of a claim for compensation which one party has against the other for breach of contract. The latter is a mere claim for damages which cannot be assigned in law, the former is a benefit under an agreement, which is capable of assignment. The fact, therefore, that the rights under Cl. 8 are incapable of assignment does not stand in the way of the respondents assigning their rights to receive the price after they had performed their obligationsBut the question is not what could have been done by a seller in a forward contract generally, but what was in fact contemplated by the parties to this contract under cl. 3. The provisions that the shipping documents in Pakistan should be taken in the name of the buyers, that the sellers should deliver them to the buyers and receive the price, and that the goods should be delivered at the Mills of the buyers, strongly suggest that the intention of the parties was, that neither of them should assign the contract29. Contract No. 2306 referred to in this enter is the contract dated September 7,1955 involved in this dispute. It is on the strength of this letter of authority that the respondents opened a letter of credit with a Bank in East Pakistan and the goods were imported. We have not overlooked the fact that while the contract is dated September 7, 1955, the licence is dated September 22, 1955, and the letter of authority to the respondents is even later, and it might strike one as an anachronism to read the licence and the letter of authority into the contract. But it should be remembered that the licences are in standard form and are renewed from time to time except as to details concerning the imports, and the course of business followed in the jute market was throughout in conformity with the conditions laid down in the licence, and was of the same pattern. Now the agreement provides that the shipping documents in Pakistan are to be taken in the name of the buyers that the sellers are "to open letter of credit" and that the goods are to be delivered "at the buyers Mill siding". We have no doubt that these terms have been inserted with a view to give effect to the conditions on which licences are granted and that it was the understanding of both the sellers and buyers that the rights under the contract were not to be transferredWe agree 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 norm 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. It is in the ultimate analysis a question of construction of the contract. And again it is well established that in construing a contract it would be legitimate to take into account surrounding circumstances. Therefore, on the question whether there was an agreement between the parties that the contract was to be non-transferable, 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 agreement 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, there is nothing in law which prevents effect from being given to it. That was the view taken in Virjee Daya and Co. v. Ramakrishna Rice and Oil Mills AIR 1956 Mad l10, and that in our opinion is correctThe intention of the legislature as expressed in the section is, it must be admitted, clouded in obscurity and uncertainty. But in the view we have taken, that the contract is on its terms properly construed, non-transferable, it becomes unnecessary to decide between the rival contentions as to the true import of S. 2 (f).