LexM/S. DHANRAJAMAL GOBINDRAM versus M/S. SHAMJI KALIDAS AND CO.
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I96I February a7. 1020 SUPREME COURT REPORTS [1961] M/S. DHANRAJAMAL GOBINDRAM v. M/S. SHAMJI KALIDAS AND CO. (J. L. KAPUR, M. HIDAYATULLAH and J.C. SHAH, JJ.) Arbitration-Contract for purchase of African cotton-Provision for arbitration under statutory bye-laws on failure-Application in court for filing of arbitration agreement-Power of Court-Vali- dity of contract-Indian Arbitration Act, r940 (Io of r940), ss. zo, 46-Foreign Exchange Regulation Act, r947 (7 of r947), ss. 5, ZI- Bye-laws of East India Cotton Association Ltd., Bomba)--Bye- law 48A. The appellant entered into an agreement with the respond- ent to purchase African raw cotton. The agreement. included a clause that the contract would be subject to the "1Jsual Force Majeure clause", the Bye-laws of East India Cotton Association Ltd., Bombay, except bye-law 35, the said Bye-laws having statutory force, and to the jurisdiction of the Bombay High Court. Clause 6 of the agreement provided that the buyers were to. obtain import licence from the Government of India, failing which the seller would be entitled eithar to carry over the goods at the cost of the buyers or call upon them to take immediate deli- very on payment in British East Africa, and in default to sell the goods in British East Africa and claim the deficit, if any between the contractual price and the price obtained on re-sale. Clause 7 further provided that notwithstanding the import policy followed by the Government of India in respect of the import of the con- tracted goods, the buyers would be bound to obtain the necessary import licences and communicate the numbers thereof to the sellers on specified dates, failing which cl. 6 would operate. The buyers did not perform the contract and the sellers after notice to them re-sold the goods and thereafter claimed the deficit which the buyers refused to pay. The sellers invoked the atbitration clause and the rules contained in bye-law 38A of the Bye-laws and others following it, which conferred on the Chairman of the Board of Directors of the East India Cotton Association Ltd., the power of selecting the arbitrator or arbitrators, and applied to the High Court under s. 20 of the Indian Arbitration Act for filing the agreement and referring the dispute to arbitration. The buyers resisted and the trial Judge dismissed the application, but the Court of appeal reversed that decision. It was urged in this Court on behalf of the buyers that (r) ·els. 6 and 7 contemplated acquisition of property or Exchange in Africa and thus involved a breach of s. 5 of the Foreign Exchange Regulation Act, since no general or special exemption had been granted thereunder by the Reserve Bank, (2) that the expression "subject to the usual Force M ajet.tre clause" was vague and uncertain and rendered the agreement void, (3) that the application of bye-law 48A et seq left no powers in the Court to act under sub-ss. (r) and (4) of s. 20 • • • 3 S.C.R. SUPREME COURT REPORTS 1021 x96r of the Arbitration Act and the section was thus inapplicable and (4) that the Jaw applicable to the case was the law of British East Africa and not that of India. M/s. Dhanrajamal Held, that the contentions must fail. The provisions of sub-ss. (2) and (3) of s. 21 of the Foreign Exchange Regulation Act, properly construerl, left no manner of doubt that they contemplated matters which were within the prohibition of s. 5 of the Act and had the effect of engrafting on the agreement of p11rties a term that it would be for the decree- holder before he could enforce the decree or order of the court to obtain the permission of the Reserve Bank and were thus designed to prevent the non-performance of the contract under a cover of illegality. The contract involved no actual or contingent right to acquisition of property abroad, and even assuming it did, it was saved by s. 21 of the Act subject to its conditions. The agree- ment was thus enforceable. Nor was the contract void for uncertainty. It was clear from judicial decisions that a reference to "force majeure" means the saving of the performing party from the consequence of factors beyond his control. The condition in respect of "force majeure" did not, therefore, make the contract vague. Further, the use of the word " usual '·' made it clear that the clause could be made certain by evidence and so it was protected by s. 29 of the Contract Act. Lebeaupin v. Crispin, [1920] 2 K
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