Case: Modi &amp; Co Vs. Union Of India

2. By its letter dated September 14, 1960, the appellant made an offer for sale to the respondent of 500 Bales (1,50,000 bags) B Twills on the terms and conditions mentioned in the said letter. The offer was accepted by the Director General Supplies and Disposals on behalf of the respondent by his letter No. CAL/DL-1/5750-L/II/Modi/158 dated September 18, 1960. The appellant deposited with the Reserve Bank of India the sum of Rs, 20,182.50 P. towards security deposit on September 22, 1960 as required by the acceptance letter. The date of delivery fixed under the contract was November 30, 1960 and the respondent sent the appellant despatch instructions dated November 21, 1960, through the Director of Supplies and Disposals. On November 30,1960 the appellant, however intimated to the respondent that the contract was void and illegal and requested that the security deposit should be refunded. The case of the appellant was that the contract was in violation of the provisions ofthe Forward Contracts (Regulation) Act, 1952 (Act 74 of 1952), hereinafter called the Act. By his letter dated December 1, 1960 the Director of Supplies wrote on behalf of the respondent that the contract was legal and binding and as the appellant had failed to deliver the goods as provided in the agreement the respondent would purchase the goods at the risk of the appellant. The respondent incurred extra expenditure amounting to about Rs. 76,410 and after giving credit to the appellant for the amount of Security Deposit, a sum of Rs. 56,000 still remained due to be paid by the appellant to the respondent. As the appellant failed to pay, the respondent took recourse to the arbitration Clause 21 of the contract and appointed an Arbitrator to determine the dispute between the parties regarding the agreement. Before the Arbitrator could give his award, the appellant filed an application before the High Court under Section 33 of the Arbitration Act praying for a declaration that the arbitration clause was illegal and void and for an injunction restraining the respondent from prosecuting the arbitration proceedings. By its judgment dated November 19, 1963 the High Court held that the contract was a "non-transferable specific delivery contract" and was not hit by the provisions of the Act and accordingly dismissed the application of the appellant.

Court's reasoning:
6. According to the scheme of the Act therefore contracts of sale of goods are divided into two categories, ready delivery contracts and "forward contracts." Forward contracts are classified into those which we "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 statutory provision is that all forward contracts except those which are non-transferable specific delivery contacts, can be declared illegal by a notification issued under theare unable to accept the argument put forward on behalf of the appellant as valid. The question as to whether the contract was a transferable or non-transferable specific delivery contract is a question which ultimately depends on a reasonable construction of thethe absence of such a specific clause is not conclusive as to the intention of the parties. It is true that when a contract is 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 contact between the parties. If upon 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 the contract can be expressed or there can be a necessary implication of a term from what has been expressed in the contract. The question therefore resolves in the ultimate analysis upon the construction of the terms of the contract between the parties. In this connection it is well established that in construing such a contract it is legitimate to take into account the surrounding circumstances for ascertaining the intention of thethe present case, it should be noticed that the contract cannot be sublet or assigned by the seller under condition 10 read with para 3(b) of the "Conditions of Contract contained in Form D. G. S. and D. 68 governing contracts placed by the Central Organisation of the Government of India, 1959far as the buyer is concerned, the contract itself shows that the jute bags were intended for "packing foodgrains which were arriving in bulk" at an Indian port. The last paragraph of the letter of acceptance dated September 16, 1960 states that "the gunnies are very urgently required at the destination for packing imported foodgrains which are arriving in bulk" and "it was therefore of utmost importance that shipment of the total quantity ordered shall be made in the vessels nominated by the purchaser." There is also a specific provision in the contract that the stores shall be inspected prior to shipment by the A.T. I. G. S., East India, Hastings, Calcutta, or his representative." There is also a further stipulation that after the goods are inspected arrangements should be made to ship the stores in accordance with the instructions contained in the contract and that goods which are not accepted in inspection should not be shipped. The name of the consignee is given in the contract as Asst. Director (Storage), Ministry of Food and Agriculture, Transit Shed No. 4, Visakhapatnam Port, Visakhapatnam and payment is to be made according to the procedure specified in the contract and the cost was debitable to the Pay and Accounts Officer, Ministry of Food and Agriculture, Bombay or New Delhi as the case may be under Head of Account "87 - Capital Outlay on the Schemes of Government Trading-schemes for purchases of Foodgrains A. 1. (3) (I) expenditure in India Section IV Special Purchases both for Civil and Defence requirements - other Purchases - Purchase of gunnies for imported foodgrains".In view of all these circumstances we are of opinion that it was not contemplated by the parties that the rights under the contract should be transferred either by the buyers or by the sellers.It was pointed out for the appellant that normally the Bill of Lading partakes of the nature of a negotiable instrument and by endorsing it the holder of the Bill of Lading can transfer the property in the goods to which the Bill of Lading relates and by parting with it the holder parts not only with the property in the goods but also with their possession. The proposition contended or by Counsel for the appellant is no doubt correct, but the question in this case is not the abstract question as to what the purchaser could or might have done but what was in fact contemplated by the parties who were entering into the contract.For the reasons already given, we hold that on a proper construction of the terms of the contract and having regard to the surroundings circumstances there was an implied agreement between the parties that the rights and liabilities under the contract were not to be transfered and the Bill of Lading relating to the contract was also not to be transferred. It follows therefore that the contract in question was a non-transferable specific delivery contract within the meaning of S. 2 (f) of the Act and the contract was not hit by the notification dated March 29, 1958 issued by the Central Government under S. 15 (1) of the Act.