Case: M/S. Dhanrajamal Gobindram Vs. M/S. Shamji Kalidas And Co

becomes completely functus officio.26. But the crux of the argument is that the provisions of sub-sec. (4) of S. 20 read with sub-sec. (1) , ibid., cannot apply, and the Court, after filing the agreement, will have to do nothing more with it, and this shows that S. 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-sec (4) of S. 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 S. 39 lies only against the decision on this part of sub-sec. (4). 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 Arbitration Act prevails. In our opinion, there is no impediment to action being taken under S. 20(4) of the Arbitration Act.27. 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 v. Darwins Ltd., 1942 AC 356. In 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 S. 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.28. If 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 Mullas Contract Act, Eighth Edn., p. 11, where it is observed as follows :"In ordinary circumstances the proper law of a contract (to use Mr. Diceys 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 v. Alliance Assurance Co., 1937 AC 587).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 Chittys Law of Contract and R. 148, sub-r (3), Second Presumption, in Deceys Conflict of Laws. Seventh Edn., p. 738, on which the statement of the law in Pollock and Mulla is based.29. Whether the proper law is the lex loci contractus 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, 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 eligit 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 won law to the case. See N. V. Kwik Hoo Tong Handel v. James Finlay and Co., 1927 AC 604. 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 and Co. v. Tallisker Distillery, 1894 AC 202 and Spurrier v. La Cloche, 1902 AC 446. 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.

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

Explanation:
0[ds]It is contended that S. 21 uses the word "permission", while S. 5 speaks of an exemption, and that Ss. 21(2) and 21(3) do not cover the prohibition in S.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 "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, Ss. 21(2) and (3) are likely to prove a dead letter. This could not have been intended, and the very elaborate provisions in thoseshow that those matters were contemplated which are the subject of prohibition is S. 5. In our opinion, the argument in 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 Ss. 54(2) 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.15. 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 s. 21, as already explained. In our opinion, the contract was not void for illegality.(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,(2) provides that the condition that a thing shall not be done without the permission of the Reserve Bank shall not render an agreement 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.(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 Reservesection is perfectly plain, though perhaps it might have been worded better for which a model existed inForeign 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 "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, Ss. 21(2) and (3) are likely to prove a dead letter. This could not have been intended, and the very elaborate provisions in thoseshow that those matters were contemplated which are the subject of prohibition is S. 5. In our opinion, the argument in without foundation.e 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 Ss. 54(2) 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.15. 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 s. 21, as already explained. In our opinion, the contract was not void foranalysis on 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 ofwill 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.Applying these tests to the present case and in the light of the provisions of S. 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.21. 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 mustour 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 forhave already quoted extracts from the agreement which include the clause by which theof the East India Cotton Association Ltd., Bombay, were applied to this contract, except35, which deals with arbitration on quality in case of East African cotton.1 (B) relates to East African cotton, and it says that1 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 theare statutory. The buyers were members of the Association but not the sellers; but theon arbitration, with which we are concerned, include arbitrations between a member and afollow certain provisions, which were stressed but which need not be quoted in extenso. 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 of 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 Association46 makes the provisions of any other enactment or any rules made thereunder to prevail over the Arbitration Act, if inconsistent with the latter. In view of these several provisions, it is clear that the Arbitration Act 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 S, 20, subject, however, to this that the provisions of any other enactment or rules made thereunder, if inconsistent with the Arbitration Act, are tois 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 person 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 Ss. 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 theSo 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.26. But the crux of the argument is that the provisions of(4) of S. 20 read with(1) , ibid., cannot apply, and the Court, after filing the agreement, will have to do nothing more with it, and this shows that S. 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(4) of S. 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 S. 39 lies only against the decision on this part of(4). 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, thelay down the procedure for the Chairman and the appointed arbitrator or arbitrators to follow, and that procedure, if inconsistent with the Arbitration Act prevails. In our opinion, there is no impediment to action being taken under S. 20(4) of the Arbitration Act.27. 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 v. Darwins Ltd., 1942 AC 356. In our opinion, the words of the"arising out of or in relation to contracts" are sufficiently wide to comprehend matters, which can legitimately arise under S. 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.Whether the proper law is the lex loci contractus 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, 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 eligit 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 won law to the case. See N. V. Kwik Hoo Tong Handel v. James Finlay and Co., 1927 AC 604. 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 and Co. v. Tallisker Distillery, 1894 AC 202   and Spurrier v. La Cloche, 1902 AC 446. 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.