MEGNA MILLS CO. LTD. versus ASHOKA MARKETING CO.

Citation: [1971] 2 S.C.R. 751 · Decided: 06-11-1970 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed
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Judgment (excerpt)

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751 
MEGNA MILLS CO. LTD. 
v. 
ASHOKA MARKETING CO. 
November 6, 1970 
[J. C. SHAH, K. S. HEGDE AND A. N. GRO'iER, JJ.] 
Forward Contracts (Regulation) Act, 1952, ss. 113 (aa), 15(3A)-
Bye-laws made under Act-Working Manual Chapter V, Bye-Laws 1, 15 
and 17-'-Contract. providing for arbitration -Not executed in prescribed 
form-Contract is not enforceable -Bye-law l(b) when read with Bye-
/aws 15 and 17 is mandatory. 
The appellant was a member of the East India Jute and Hessian Ex-
change Limited, the only association recognised under the provisions of 
the Forward Contracts (Regulation) Act 1952. The respondent was not 
a member of the association. On December 21, 1962 a transaction was 
entered into between the parties by means of a letter written by the respon-
dent to the appellant. It was agreed between the parties that apart from 
the terms mentioned in the letter all other terms and conditions of the East 
India and Hessian Exchange standard contract would be applicable to the 
contract. The standard contract forms and the rules and bye-laws of the 
Exchange inter alia, provided for· arbitratfon of the Bengal Chamber :>f 
Commerce and Indusrry .. On disputes arising between the parties the 
appellant referred its claim to the arbitration of the Bepgal Chamber of 
Commerce and Indu<try. 
When the Chamber proceeded with the arbitra-
tion pursuant to the reference the respondent filed a petition before the 
Calcutta High Court under s. 33 of the Indian Arbitration Act, 1940. The 
High Court came to the conclusion that the contracts in question violated 
bye-laws 1 (b) and 15 in Ch. V df the Working Manual, and the contra· 
vention of these bye-laws rendered the contracts illegal under the provi· 
sions of bye-law 17 of the same Chapter. In particular. the High Court 
noticed the absence of any term in the contr~ts similar to cl. (2) ln the 
prescribed form in Appendix II which read : "Buyers to give ... , .. clear 
working days notice to place goods "alongside." Appeal against the judg-
ment of the High Court was filed by special leave. 
HELD : The High Court :was right in holding. that the contracts in 
question were not in the prescribed form and thus t.liey did not comply 
with the requirement of bye-law 1 of Ch. V. 
There can be no mannei: 
of ·doubt that that bye-law is mandatory when read with bye-laws 15 and 
17. [756 G] 
Under bye-law 15 no member shall enter into any transferable specific 
delivery contract otherwise than on terms and conditions prescribed under 
the bye-laws and under bye-law 17 if there is a contravention, inter alia 
of bye-law 15 the contract shall be rendered illegal by virtue of ~be provi-
sion contained in s. 15(3A) of the Forward Contracts (Regulation) Act. 
Section 11 ( 3) ( aa) specifically empowers the Exchange to make bye-laws 
the contravention of any of which shall make a forward contract entered 
mto otherwise than in accordance with such ~ye-laws illepl. If, there-
fore the contracts in question did not comply with the reqwrement of bye-
law '1 (b) of Ch. V they would be rendered illegal and void. [756 H, 757 A] 
There was non-compliance with condition No. 2 despite the fact that in 
the letters evidencing the contracts it was mentioned that all other terms 
752 
SUPREME COURT REP.ORTS 
[1971] 2 S.C.R. 
and condition of the standard contracts of the Exchange would be appli· 
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cable. 
Even if it was not necessary to use the same language the number 
of clear working d.ys had to be specified which was not done in the con-
tracts in dispute. 
Condition No. 2 cannot be said to be inconsequential 
because it must be stipulated how many working days notice has to be 
given by the buyers 10 ·place goods alongside ··export vcsst:I in the Port of 
Calcutta." (757 C-DJ 
In the rescilt the appeal must fail. 
R:1dhakisso11 Gopikisson v. Babnukand Ran1cha11t!ra, 60 LA. 63. 
re~ 
ferred to. 
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2012 
.and 2013 of 1966. 
Appeals by special leave from the judgments and orders dated 
April 4, 1966 of the Calcutta High Court in Matters Nos. 26 and 
27 of 1966. 
A. K. Sen, 0. P. Khaitan and D. N. Gupta, for the appellant 
(in C.A. No. 2012 of 1966). 
0. P. Khaitan and D. N. Gupta, for the appellant (in C.A. 
No. 2013 of 1966). 
S. T. Desai, H. K. Puri and K. K. Jain, for th~ respondent (in 
C.A. No. 2012 of 1966). 
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H. K. Puri and K. K. Jain, for the respondent (in C.A. No. 
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.2013 of 1966). 
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