Case: Koteswar Vittal Kamath Vs. K. Rangapa Baliga &amp; Co

1. This appeal by certificate has been filed by Koteswar Vittal Kamath who was defendant in Original Suit No. 12 of 1958 instituted in the Court of the Subordinate Judge, Cochin, by the respondent-plaintiff, K. Rangappa Baliga and Co., for recovery of damages for breach of contracts in respect of goods, purchased by the respondent on behalf of the appellant, of which the appellant refused to take delivery on the due dates. There is no dispute that the respondent was carrying on business as commission agents and was governed by the trade usage known as Pakka Aadat System, and the appellant under the same System was placing orders with the respondent for purchase of goods. In the course of these dealings the appellant placed three orders for purchase of 100 candies of cocoanut oil for one months vaida and, in accordance with those three orders, the respondent purchased 100 candies of coconut oil on three different dates, 14th February 1952 at the rate of Rs. 455 per candy, 16th February, 1952 at the rate of Rs. 447/8/per candy and 18th Feb. 1952 at the rate of Rs. 432/8/- per candy. The period fixed for delivery under these contracts was one month so that the due dates for performance of the contracts were 15th, 17th and 19th March, 1952 respectively. The appellant refused to take delivery of the goods on the due dates. It appears that the closing market rates on these due dates were Rs. 330, Rs. 335 and Rs. 352/8/respectively which were much lower than the prices at which these contracts had been entered into a month earlier. The respondent, therefore, institued the suit claming the difference in the two sets of prices by was of damages together with the usual commission and brokerage.2. The suit was resisted on various grounds, but we are concerned with one of those grounds which has been canvassed before us in this appeal. This plea taken on behalf of the appellant was that all these three contracts were Forward Contracts and were void and unenforceable, because they were made in contravention of the prohibition contained in the Travancore-Cochin Vegetable Oils and Oilcakes (Forward Contract Prohibition) Order, 1950 (hereinafter referred to as "the Prohibition Order of 1950"). To meet this plea raised on behalf of the appellant, it was urged on behalf of the respondent that this Prohibition Order of 1950 was void in view of the fact that the law, under which that Order was passed, was repealed in March, 1950 and its continuance by the repealing law did not save its validity, because the provision of that law, under which it was deemed to continue in force, was itself void. We shall presently explain in detail the situation as to the laws relating to this subject which prevailed in Travancore-Cochin from time to time; but it may here be mentioned that this plea of the respondent was accepted by the trial Court as well as the High Court of Kerala. As a result of this view taken by those courts, the suit for damages was held to be maintainable, so that the trial Court decreed the suit for a sum of Rs. 18,750 with interest thereon at 6 per cent per annum and that decree was upheld by the High Court.

Court's reasoning:
6. The question of validity of the contracts, in these circumstances, will clearly depend on whether future contracts in coconut oil were prohibited by any law or orders or notifications which continued in force in 1952 after the Essential Supplies (Temporary Powers) Act 24 of1946 had come into force in the State of Travancore-Cochin on 17th August, 1950.This opens the question whether any prohibitory order was validly in force on the 17th August, 1950. In turn, the answer to this question will depend on whether a valid prohibitory order was in force on 30th March, 1950 which could continue in force under Section 73 (2) of Act 5 of 1950. The only two earlier prohibitory orders were the Prohibition Order of ll19 and the Prohibition Order ofappears to us that, in the present case, we need not express anyopinion on this question.If it is held that the Government of Travancore-Cochin was competent to pass this Prohibition Order of 1950, because the power was derived under Act 8 of l122 which was validly in force in the State on 8th March, 1950, then that would be the Order which would continue in force under Section 73 (2) of Act 5 of 1950. On the other hand, if it be held that the State Government could not competently pass the Prohibition Order of 1950, because it was a piece of legislation on forward contracts, that Order would have to be treated as void and non est Thereupon, the earlier Prohibition Order of ll19 would continue in force right up to 30th March, 1950.Act 8 of l122 had continued in force the Prohibition Order of ll19 with the qualification that it was to remain in force until it was superseded or modified by the competent authority under the provisions of this Act 8 of 1l22. When the prohibition Order of 1950 was purported to be issued on 8th March, 1950, it was not laid down that it was being issued so as to supersede the earlier Prohibition Order of 1119.If it had been a valid Order, it would have covered the same field as the Prohibition Order of ll19 and, consequently, would have been the effective Order under which the rights, and obligations of parties had to be governed.The first point that was urged by learned counsel or the appellant was that Section 3 of Act 5 of 1950 did not require compliance with the proviso, because it was not a piece of legislation for purposes of Clause (b) of Article304; but we are unable to see any force in this submission. It is enough to refer to Cl. (f) of Section 3 (2) which is the provision under which a Prohibition Under relating to Forward Contracts could have been passed, and the Prohibition Order of 1119 or the Prohibition Order of 1950 can be held to be continued in force, Under Section 3 (2) (f), power is conferred on the State Government to make an order which may provide for regulating or prohibiting any class of commercial or financial transactions relating to any essential article which, in the opinion of the Government, are or if unregulated are likely to be, detrimental to public interest. An Order prohibiting Forward Contracts would clearly be an Order prohibiting a class of commercial transactions relating to an essential article which, in this case, was coconut oil. The conferment of power on a State Government to prohibit such transactions cleraly permits imposition of restrictions on the freedom of trade or commerce and, therefore, falls within the scope of clause (b) of Art. 304 of the Constitution. This argument advanced on behalf of the appellant must, consequently, be rejected. However, the question that has to be further examined is whether this Act 5 of 1950 was void, because the provisions of the proviso to Article 304 were attracted and the Act was passed without complying with the requirements of the proviso.9. It appears that the Bill, which emerged ultimately as Act 5 of 1950, was first introduced in the Legislative Assembly of the State of 13th December, 1949, and was referred to a Select Committee on 14th December 1949. That was at a time when the Constitution had not come into force and there was no requirement underthe Government of India Act, 1935, which was applicable, similar to that laid down by the proviso to Article 304. The Bill was subsequently modified and redrafted by the Select Committee and was presented before the Assembly on 23rd March, 1950 after the Constitution had come into force. The Minister-in-charge moved that the Bill be taken into consideration, whereuopn discussion on the Bill proceeded and it was finally passed by the Assembly on 29th March, 1950. The Bill received the assent of the Raj Pramukh of the State and was brought into force, having been published by notification dated 30th March, 1950. Thepoint urged on behalf of the appellant was that the Bill was introduced in the State Legislature on a date prior to the date of the Constitution when Article 304 and the proviso to it had not come into force, so that no prior sanction of the President was required for introduction of the Bill.The Bill having been validly introduced remained pending in the State Legislature under Art .389 and the proceedings taken in the Legislature before the Constitution came into force were to be deemed to have been taken in the Legislature of the State which became seized of the Bill after the enforcement of the Constitution. It was further urged that no amendment was moved in the State Legislature after the Constitution came into force which could be hit by the restriction laid down in Article 304 (b) of the Constitution. The material provisions, including Section 3 were enacted in the original form in which the Bill had already been introduced in December, 1949. In these circumstances, it was submitted that no occasion arose for complying with the requirements of the proviso. The Bill was validly introduced without the previous sanction of the President and no amendment was moved subsequently to that Bill requiring the Presidents sanction after the Constitution came into force so that Act 5 of 1950 as passed by the Legislature on 29th March, 1950 and brought into force on 30th March, 1950 cannot be held to be void for non-compliance with the requirements of the proviso to ArticleCourt based its decision on the view that, if the interpretation urged before it was accepted, it would be possible to introduce a Bill which required no presidential sanction, get it amended by a Select Committee in such a way as to make it require the Presidential sanction in case it was originally introduced in the amended form and then pass it into law, and thus escape the necessity for the prior Presidential sanction provided by Article 304 of the Constitution. It was held that there can be no doubt that such a result could never have been intended by the makers of the Constitution.In our opinion, the High Court did not correctly appreciate the position. The language of the proviso cannot be interpreted in the manner accepted by the High Court without doing violence to the rules of construction. If both the words "introduced" or "moved" are held to refer to the word it must necessarily be held that both those words will also refer to the word "amendment." On the face of it, there can be no question of introducing an amendment. Amendments are moved and then, if accepted by the House, incorporated in the Bill before it is passed. There is further an indication in the Constitution itself that wherever a reference is made to a Bill the only step envisaged is introduction of the Bill. There is no reference to such a step as a Bill being moved. The articles, of which notice may be taken in this connection, are Articles 109, 114,117, 198, and 207. In all these Articles to the introduction of a Bill in the Legislature. There is no reference at any stage to a Bill being moved in a House. The language thus used in the Constitution clearly points to the interpretaion that, even in the proviso to Article 304 the word "introduced" refers to the Bill while the word "moved" refers to the amendment.12. So far as the danger of evasion of this proviso envisaged by the High Court is concerned, it appears that the High Court ignored the circumstance that, even when the Bill is before a Select Committee, it continues to be pending in the House, so that, if it is modified or redrafted, there is amendment of the Bill at that stage. If an amendment is introduced at that stage while it is under consideration of the Select Committee, the proviso may become applicable and, for a valid proposal to introduce such an amendment in the Select Committee, prior sanction of the President will beRule makes it clear that, before a Bill can be modified or redrafted by the Select Committee, amendments have to be moved by the members of the Committee and, when any amendment is moved, the procedure in the Selection Committee is to be the same as is followed in the House during the consideration stage of a Bill as far as practicable, though subject to such adaptations as the Speaker may consider necessary or convenient. This Rule, thus, envisages that the requirement of Rule 81 in respect of an amendment moved in the House will have to be complied with when a similar amendment is moved in the Select Committee.Learned Counsel appearing for the respondent urged that, in interpreting Rule 300, we should not enlarge its scope so as to include in it the applicability of inch Rules as Rule 81 which, according to him, can only be attracted when an amendment is moved in the House of the Legislature itself. Even if this submission were to be accepted by us, it appears that it will not be possible to evade the applicability of the proviso to Article 304, because, when the Bill as reported by the Select Committee comes before the House again, the Minister-anchorage or the member moving the Bill will have to move the Bill for consideration in the House. At that stage, when he moves the Bill for consideration of the House in the modified or redrafted form, the move made by him will amount to moving the original Bill with the amendments reported by the Select Committee. In such a case, obviously Rule 81 would apply at that state, so that, before the modified or amended Bill is moved in the House for consideration, the sanction of the President will have to be produced if the modification or redraft has the result of incorporating an amendment covered by the proviso to Article 304. In these circumstances, we do not think that the language of the proviso requires to be interpreted in the manner accepted by the Full Bench of High Court of TravancoreCochin in the case of Ulahannan Mathai v. State (supra). The proviso will have to be complied with at the initial stage of the introduction of the Bill if it is applicable at that stage, whereas compliance will be required either at the stage when amendments are moved in the Select Committee, or when the Bill as reported by the Select Committee is moved in the House for consideration, because of the requirement that no amendment can be moved without the previous sanction of the President.In the present case, the original introduction of the Bill was valid because, at that state, the proviso to Article 304 was not in force at all as the Constitution had not yet come into force, while, subsequently, when the Bill was pending in the State Legislature, no amendment was moved in respect of which sanction of the President was required under the proviso. Section 3 of Act of 1950 was passed by the House as it was contained originally in the validly introduced Bill and cannot, therefore, be held to be void for non-compliance with the proviso to Article 304. This section being valid, either the Prohibition Order of 119 or the Prohibition Order of 1950 must be held to have been validly continued in force by this Act 5 of 1950 and to have continued to remain in force thereafter under the proviso to Section 17 (4) of the Essential Supplies (Temporary Powers) Act 24 of 1946. Under either of those Orders, the transactions entered into between the appellant and the respondent were prohibited and, having been entered into against the provisions of law, no party can claim any rights in respect of the three contracts in suit. The claim for damages for breach of those contracts by the respondent against the appellant was therefore, not maintainable.