1. This is a petition under Sections 33 and 5 of the Arbitration Act, 1940, challenging the existence and, in the alternative, the validity of an arbitration agreement and, in case the existence and validity of the said arbitration agreement are established, to have the effect thereof determined, and for leave of the Court to revoke the authority of the arbitrator appointed under the said arbitration agreement.
2. The facts leading to this petition briefly stated are that on or about 4th of August 1958, the Regional Director (Food), Western Region, Bombay, Government of India, Ministry of Food, issued a tender notice on behalf of the President of India, inviting tenders for purchase of approximately 244 tons of used iron hoops (scrap released from gunny bales) lying in the Government of India godowns at Thana Street, Bombay 9 on the terms and conditions of sale set out in Appendix 'A' to the tender notice. The goods were described in Appendix 'C' to the said tender notice. On 18th August 1958 the petitioners submitted a tender offering to purchase the said goods at the rate of Rs. 607 per ton. The tender was accompanied by a letter of that date addressed to the President of India through the said Regional Director, (Food). The said letter stated that the petitioners had thoroughly read and understood the terms and conditions contained in the tender and the Appendices thereto and agreed to abide by them. The petitioners enclosed a cheque for Rs. 15,000 as earnest money along with the said tender in terms of clause 6 of the tender notice. It appears that on the same day, namely, 18th August 1958, the petitioners addressed a letter to the Iron and Steel Controller at Calcutta, stating that the Regional Director (Food), Bombay had invited tenders for about 244 tons of used iron hoops (released from gunny bales) and that the petitioners understood that the controlled maximum price chargeable for the said goods was Rs. 335 per ton. They requested the Iron and Steel Controller to confirm if the petitioners' contention was right and whether the Regional Director (Food), could charge price higher than the controlled price. The reference to controlled price appears to have been to the price fixed on 3rd August 1957 by Scrap Price Circular No. 5 of 1957, issued by the office of the Iron and Steel Controller. From the said letter of 18th August 1958 addressed to the Iron and Steel Controller and from the subsequent correspondence and events, it appears that while in the tender the petitioners offered to buy the said scrap at the price of Rs. 607 per ton, they had mental reservations about the price, and hoped to get the price reduced to the controlled price fixed under clause 27(1) of the Iron and Steel Control Order, 1956, whatever that price was at the relevant time, and there is no dispute about the fact that the said price was much less than Rs. 607 per ton. The price of Rs. 607 per ton was the highest offer pursuant to the tender notice. However, as the price of Rs. 607 per ton was in excess of the controlled price fixed under clause 27(1), the Regional Director (Food), Bombay, approached the Iron and Steel Controller with a request to fix special price for the said 244 tons of iron hoops described in Appendix 'C' to the tender notice under clause 27(2), and by an order dated 4th September 1958, addressed by the Iron and Steel Controller to the Regional Director (Food), Bombay, the Iron and Steel Controller fixed the special selling price of the said goods by the Government of India at Rs. 607 per ton, purporting to be in exercise of the power vested in the Iron and Steel Controller under sub-clause (2) of clause 27 of the Iron and Steel Control Order 1956. Thereafter by his letter of 25th September 1958 addressed to the petitioners, the Regional Director (Food), Bombay, stated that the petitioners' tender dated 18th August 1958, wherein the petitioners had offered to purchase the stock of approximately 244 tons of iron hoops lying at the Government of India godowns, Thana Street, Bombay 9 at Rs. 607 per ton had been accepted by the Government subject to the terms and conditions of the tender. In the second para of the said letter, the Regional Director (Food), Bombay, stated that a special selling price of Rs. 607 per ton for the said lot of iron hoops had been flied by the Iron and Steel Controller in his letter dated 4th September, 1958. In the subsequent paragraphs of the said letter the Regional Director (Food), Bombay, has outlined a procedure for the performance of the contract. The said procedure is the subject matter of controversy, and the petitioners contend that these are fresh terms not already contained in the terms and conditions of the tender and, therefore, the said letter contains a counter offer which the petitioners have at no time unconditionally accepted and, therefore, there is no concluded contract. This letter was replied to by the petitioners by their letter of 30th September 1958, in which they stated that they understood from paragraph 2 of the letter of the Regional Director (Food) Bombay, that the disposal of the materials in question fell under the Iron and Steel Control Order 1956, and the price was governed by 'Schedule V'. They requested the Regional Director (Food), Bombay, to furnish to them copies of correspondence exchanged with the Iron and Steel Controller in connection with the price fixation. They further stated that as regards the price, in view of the fact that the price was controlled, the controlled price applicable according to the Iron and Steel Control Order, 1956, would be applicable. In one of the paragraphs of the said letter, they said, 'We however, accept the order'. The contention of the respondents is that the letter of the Regional Director (Food), Bombay, dated 25th September, 1958, in its first paragraph contained an unconditional acceptance of the tender. The second paragraph sets out the controlled price specially fixed by the Iron and Steel Controller for the said goods and the subsequent paragraphs outline a procedure for performance of the contract which was in accordance with the contract. In the alternative, their contention is that even if it be held that the third and the subsequent paragraphs of the said letter contained new terms and, therefore, the letter of 25th September, 1958, contained a counter offer, the petitioners' letter of 30th September, 1958 contained an unconditional acceptance of the counter offer and the contract was, in any event, concluded. However, these are matters in controversy. I shall deal with them later. It appears that thereafter the petitioners failed to pay the sum of Rs. 1,33,108 demanded in the letter dated 25th September, 1958, by the Regional Director (Food), Bombay within one week of the acceptance of the tender. The Government forfeited the earnest money of the petitioners and proceeded to resell the goods and, ultimately, on 31st October 1960 they sold the said goods through Govt. auctioneers at the rate of Rs. 360 per ton and realised a sum of Rs. 87,840. The respondents then claimed from the petitioners as and by way of damages a sum of Rs. 99,064, being the difference between the contract price of Rs. 1,48,108 and the market price prevalent on the date of the breach, namely Rs. 49,044. Alternatively, the respondents claimed from the petitioners a sum of Rs. 60,268 being the difference between the contract price of Rs. 1,48,108 and the actual resale price of Rs. 87,840. As the petitioners failed to pay the amount of damages, the respondents appointed one V. Ramaswami Iyer as the sole arbitrator to decide the disputes between the petitioners and the respondents, pursuant to clause 12 of the terms and conditions of sale which contained the arbitration agreement. Before the arbitrator the petitioners appear to have taken the contention that there was no concluded contract. On 12th December 1962 the said arbitrator gave a direction that as the petitioners challenged the existence and validity of the arbitration agreement, they were directed to apply to the Court under Section 33 of the Arbitration Act, 1940, within a month. Accordingly on 18th January 1963 the petitioners filed this petition.
3. When the petition came up for hearing, my learned brother K. K. Desai J. thought that there was a conflict between the decision of the Bombay High Court in Vallabh Pitti v. Narsidas Govindram Kallani : AIR1963Bom157 and the decision of the Supreme Court in Khardah Co. Ltd. v. Raymon & Co., reported in and he referred the matter to a Division Bench of this Court for resolving the said conflict. On 13th February 1967 a Division Bench of this Court consisting of Patel and Thakker JJ. held that notwithstanding the contentions of the respondents taken in paragraph 17 of the affidavit dated 29th March 1963 of Mr. C. L. Rathi in reply to the petition to the effect that the arbitrator alone was competent to decide the question of existence and validity of the arbitration agreement, a Judge of this Court sitting alone was competent to decide, the question of existence and validity of the arbitration agreement. The petition was sent back to be disposed of by a single Judge of this Court in accordance with law. The matter then came up for hearing before Mr. Justice Thakker on 18th of July 1967, when the petitioners sought and were granted leave to amend the petition by addition of a plea that the contract containing the arbitration agreement was not made in accordance with Article 299 of the Constitution of India, inasmuch as the said contract was neither expressed to be made by the President of India, nor was made in the name of the President of India and was, therefore, null, void and unenforceable in law. After the said amendment was allowed and carried out, the matter again appeared before me, and during the hearing of the petition, the petitioners applied for a further amendment of the petition to the effect that, in the alternative to their contention that there was no concluded contract or that the said contract was illegal and void, they should be granted leave to revoke the authority of the arbitrator appointed under clause 12 of the contract contained in the terms and conditions of sale. I allowed the said amendment for reasons set out in my order of 27th September 1967. The matter then proceeded to hearing.
4. The contentions raised by the petitioners are fully set out in the petition and briefly summarised are that there was no concluded contract in fact between the petitioner and the respondents. In the alternative, the petitioners contend that the Regional Director (Food), Bombay, was not a person directed or authorised by the President of India to enter into contracts of the nature of Ex. B (collectively) to the petition and that in any case, the said contract was not expressed to be made by the President of India or in his name, and therefore, the contract contravened the provisions of Article 229 of the Constitution of India and was, therefore null and void and unenforceable. The petitioners have also challenged the legality and validity of the contract containing the arbitration agreement on the ground that the sale of iron hoops was at a price in excess of the price for such goods notified under clause 27 (1) of the Iron and Steel Control Order 1956. The petitioners have further challenged the validity of the order of the Iron and Steel Controller dated 4th September 1958 fixing the special selling price of the Government for these goods at Rs. 607 per ton on the grounds: (a) that such fixation cannot be made, except by a notification published in the Gazette of India, (b) that such fixation cannot be made without the approval of the Central Government, (c) that the Order of 4th September 1958 does not, as required by the proviso to sub-clause (2) of clause 27, direct that the maximum prices fixed under sub-clause (1) or (2) shall not apply to the stock in question, (d) that the said order purports to fix the price at which the said goods are permitted to be sold, and not the maximum price, and clause 27 authorised only fixation of maximum price, (e) that the said order of 4th September 1958 contravenes the provisions of Article 14 of the Constitution of India, as it denies to the petitioners equality before the law and (f) that the order of 4th September' 1958 contravenes the provisions of Article 19(1)(f) and (g) of the Constitution of India, as it takes away the petitioners' right to dispose of property or the right to carry on trade or business. With regard to the contravention of Art. 19(1)(f), the contention of the petitioners is that as the petitioners would, under the contract in question, acquire the said scrap at the price of Rs. 607 per ton, which was a special selling price of the Government, they would be compelled under the Scrap Price Circular to sell the same goods at the price of Rs. 335 per ton and thus be put to loss, and this in effect took away their right to dispose of property.
5. The petitioners also contend that the contract of sale is illegal on the further ground that under the contract they were required to pay the price of Rupees 1.48.108 for the entire lot of goods described in Appendix 'C' to the tender notice, that the contract nowhere stated that if on actual weighment the goods were found to be less than 244 tons, any part of the price would be refunded to them, and that the letter of 25th September 1958 required them to pay the said sum and on receipt of the said amount a delivery order for a quantity not exceeding 244 tons would be issued to them. Their contention is that they were required to pay the price not for 244 tons but even if the goods were found to weigh less, and as such the price being charged to them was even in excess of the price of Rs. 607 per ton. Their contention is that under sub-clause (4) of clause 27 of the Iron and Steel Control Order, no person shall sell or offer to sell or otherwise dispose of, and no person shall acquire any scrap at prices in excess of those notified or fixed by the Controller under this clause. Breach of this provision is made an offence under the provisions of the Essential Commodities Act, 1955. The object of the contract of sale was, therefore, forbidden by law or would defeat the provisions of law and was, therefore, unlawful and the contract of sale was, therefore, void under Section 23 of the Indian Contract Act. The petitioners further contend that the challenge to the existence and validity of the contract containing the arbitration agreement was outside the scope of the arbitration agreement contained in clause 12 of the terms and conditions of sale, and the arbitrator had, therefore no jurisdiction to decide such questions and, in any case, the challenge raised difficult questions of law which should be settled by a Court rather than be referred to a lay arbitrator and the Court should, therefore, not give effect to the arbitration agreement. The petitioners further contend that, in any event, because of these difficult questions of law, they should be granted leave to revoke the authority of the arbitrator appointed under clause 12 of the terms and conditions of sale. The respondents have filed an affidavit dated 29th March 1963 of Mr. C. L. Rathi, Deputy Director of Food, Bombay, in reply to the petition which sets out the contentions of the respondents in reply to the contentions of the petitioners and deny the tenability and validity of the said contentions.
6. Arising from the aforesaid contentions, the following issues were framed:
(1) Whether the petitioners should be granted leave to revoke the authority of the arbitrator appointed in pursuance of the arbitration clause (set out in Para 5 of the petition) as alleged in paragraph 8 of the petition?
(2) Whether the arbitration agreement being clause 12 mentioned in paragraph 5 of the petition does not apply to all the disputes and differences between the parties as alleged in paragraph 8 of the petition?
(3) Whether there is no concluded contract between the parties and therefore no valid arbitration agreement as alleged in paragraph 9 of the petition?
(4) Whether the contract and therefore the arbitration agreement is unenforceable by reason of being in contravention of Article 299 of the Constitution as alleged in paragraph 9 (dd) of the Petition ?
(5) Whether the order dated 4th September 1958 Ex. 'C' to the petition is illegal, void and without jurisdiction and therefore the contract and the arbitration agreement are also illegal and void as alleged in paragraph 10 of the petition ?
(6) Whether the contract and arbitration agreement are illegal as alleged in paragraph 12 of the petition ?
(7) To what relief or reliefs the petitioners are entitled ?
(8) Generally?
7. At the outset, Mr. Parekh, appearing for the petitioners, invited me not to decide the questions as to whether there was a concluded contract between the parties and if there was a concluded contract, whether the same was legal and valid, but in view of what he described as difficult questions of law arising from the contentions of the petitioners, to grant them leave to revoke the authority of the arbitrator appointed in pursuance of the arbitration clause on the assumption that there was a concluded contract and that the same was valid. He said that this would put an end to arbitration proceedings and would drive the respondents to a suit. in case I decided not to grant leave to revoke the authority of the arbitrator, I may go into the question whether the arbitration clause applied in respect of the disputes and differences between the parties relating to the factum and existence of the alleged contract Ex. B (collectively) to the petition or relating to the validity or legality of the order dated 4th September, 1958 of the Iron and Steel Controller Ex. C to the petition, and if I came to the conclusion that the arbitrator was not competent or had no jurisdiction to decide the said questions, I may merely so declare without deciding these questions myself and the arbitration proceedings would come to an end and the respondents would again be driven to a suit. His contention was that even if I decided the questions of existence or validity of the contract containing the arbitration agreement and, therefore, of the arbitration agreement, and incidentally the validity of the order of the Iron and Steel Controller dated 4th September, 1958, these questions would not be res judicata, and if an award was made against his clients, they would be entitled to reagitate the said questions in a petition to set aside the said order. I, however, did not accept the invitation of Mr. Parekh to proceed in the manner indicated and I have heard the parties on all the issues.
8. On the question whether there is or is not a concluded contract between the parties and, therefore, whether there is or is not a valid arbitration agreement between them (because the arbitration agreement is contained in the contract itself) the contentions of the petitioners are that the letter dated 25th September 1958 of the Regional Director (Food), Bombay did not unconditionally accept the entire offer as contained in the petitioners' tender dated 18th August 1958. The petitioners contend that in the said tender of 18th September 1958 they offered to buy the entire quantity of the said goods lying at the said godown irrespective of the fact whether the weight of the goods was more or less than 244 tons, whereas the Regional Director (Food), Bombay, by his letter of 25th September 1958, stated that the respondents would deliver a quantity of the said goods, not exceeding 244 tons. They say, this was not an unconditional acceptance of their offer of 18th August 1958, but was a counter offer which again has not been unconditionally accepted by the petitioners in their letter of 30th September 1958, because in that letter the petitioners have imposed conditions as to price being controlled price. They, therefore, say that there was no consensus ad idem between the parties with respect to all the terms of the proposed contract and there was, therefore, no concluded contract. In order to appreciate this contention, it is necessary to consider the tender notice and the terms and conditions of sale which are contained in Appendix 'A' thereto. As the terms and conditions of sale reproduce some of the paragraphs of the tender notice, it is not necessary to set out any paragraph of the tender notice. Terms 1,2, 3, 4,6 and 12 of the terms and conditions of sale are as follows:
'1. Government do not guarantee to make any definite quantity or quality of Iron Hoops available to the buyer. The quotation will be per ton as shown in Appendix 'C' on the basis of 'As is and where is' and the tenderer will be deemed to have satisfied himself fully before quoting as to the condition, quality or quantity of the stocks vide para 3 of the tender notice.
2. The Iron Hoops are sold in the same condition as they lie. They shall be removed by the buyer within fifteen working days from the date of issue of release order or such other period as may be decided by the Regional Director (Food), Bombay, with all the defects, if any, and notwithstanding any errors or misstatements of description, measurement, quantity, weight, enumeration or otherwise and without any objection on the part of the buyer and no claim shall lie against Government for compensation nor shall an allowance be made on account of any such faults, misstatements, or errors, although the same may be of a considerable nature. In particular, the description of goods may be identical or similar to the description of the goods in some previous sale by tender or auction but no reliance should be placed on any such description. The buyer should satisfy himself thoroughly as to what is offered for sale before submitting his tender and may inspect the goods prior to tendering and shall be deemed (whether or not such inspection shall have in fact taken place) to have had notice of all defects and faults and any errors and misstatements as aforesaid which he might have discovered on inspection and shall not be entitled to any compensation on account thereof. Nor shall the buyer be entitled to claim or recover from the Government any compensation by way of damages or otherwise if the goods sold are not available by reason of not being at the specified place.
3. The successful tender/tenderers after the acceptance of his/their tender will be required to deposit the balance amount within seven days from the date of issue of the acceptance letter and to remove the stocks allotted to him/them within fifteen days from the date of issue of Release/Delivery order or such other period as may be decided upon by the Regional Director (Food), Bombay.
4. The delivery of the Iron Hoops will be given by the Government after the buyer presents a Demand Draft or a deposit, at call Receipt issued by a Scheduled Bank in favour of the Regional Director (Food) Western Region, Bombay, for the cost of the Iron Hoops. In the event of the costs of the stocks sold not being deposited within a week of the acceptance of the tender, Government may at their option forfeit the Earnest Money and re-sell the stocks or part thereof to another party at the risk and costs of the original buyer, and also recover any loss suffered by the Government as a result of such failure. Any gain or any re-sale as aforesaid shall belong to the Government
6. The stocks sold shall be weighed under arrangements made by the Government and at the cost of the Government. The weighment sheets shall be prepared in triplicate and be signed by the buyer or his representative and by an officer of the Government.
12. Arbitration: All disputes and differences arising out of or in any way touching or concerning this contract whatsoever, shall be referred to the sole arbitration of any person nominated by the Secretary of the Ministry of the Government of India administratively dealing with the contract at the time of such nomination, or if there be no Secretary, the administrative head of such Ministry at the time of such nomination. It will be no objection to any such appointment that the person appointed is a Government servant, that he had to deal with his duties as such Govt. servant (and) he has expressed views on all or any of the matters in dispute or difference. The award of such Arbitration shall be final and binding on the parties to this contract. It is a term of this contract that in the event of such Arbitration to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reasons, such Secretary or administrative head as aforesaid at the time of such transfer, vacation of office or inability to act, shall appoint another person, to act as Arbitrator in accordance with the terms of this contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessors. It is also a term of this contract, that no person other than a person nominated by the Secretary or Administrative head of the Ministry as aforesaid should act as Arbitrator and if for any reason that is not possible, the matter is not to be referred to arbitration at all. Subject as aforesaid the Arbitration Act, 1940, shall apply to the Arbitration proceedings under this clause.'
9. Appendix 'C' to the tender signed by the petitioners describes the goods as 'used iron hoops' (scrap released from gunny bales) 244 tons approximately lying in the Government of India godowns at Thana Street, and the price filled in by the petitioners is Rs. 607 per ton. Term 3 of the tender notice pertaining to inspection states that stocks will be open to inspection by the intending tenderer. The quotation will be for the whole lot of Iron Hoops as shown in Appendix 'C' on the basis of 'as lying and where lying'. The tenderer will be deemed to have satisfied himself fully before quoting as to the condition, quality and quantity in the lot. In the terms and conditions of sale reproduced hereinabove, it is stated that the Govt. do not guarantee to make any definite quantity or quality of the iron hoops available to the buyer. The quotation will be for per ton on the basis of 'as is and where is' and the tenderer will be deemed to have satisfied before quoting as to condition, quality or quantity of the stocks, vide paragraph 3 of the tender notice. Term 3 provides that the successful tenderer will, after the acceptance of the tender, be required to deposit the balance amount within seven days from the date of the issue of the acceptance letter and to remove the stocks allotted to him within 15 days from the date of the delivery of the order or within such other period as may be decided by the Regional Director (Food), Bombay, with all the defects, if any, and notwithstanding any errors or misstatements of description, measurement, quantity, weight, enumeration or otherwise and without any objection on the part of the buyer and no claim shall lie against the Government for compensation, nor shall an allowance be made on account of any such faults, misstatements, or errors, although the same may be of a considerable nature. The said clause provides that the buyer should satisfy himself thoroughly as to what is offered for sale before submitting his tender and may inspect the goods prior to tendering & shall be deemed (whether or not such inspection shall have in fact taken place) to have had notice of all defects and faults and any errors and misstatements as aforesaid which he might have discovered on inspection and shall not be entitled to any compensation on account there-of. Nor shall the buyer be entitled to claim or recover from the Government any compensation by way of damages or otherwise if the goods sold are not available by reason of not being at a specified place.
10. The petitioners contend that the letter of the Regional Director (Food), Bombay, dated 25th September 1958 15 not an unconditional acceptance of their tender of 18th September 1958 is not an unconditional acceptance of their tender of 18th September 1958, because they had bought the entire lot of iron hoops lying at the Government of India godowns at Thana Street, Bombay, said to be approximately 244 tons but it may actually have been more or less. Their contention is that if on actual weighment the goods were found to weigh more than 244 tons, they would in terms of their tender be entitled as well as bound to lift the entire quantity. Correspondingly, if on actual weighment the goods were found to weigh less than 244 tons, they would still be bound to accept the smaller quantity. They contend that the tender implied that the goods should first be weighed and actual quantity ascertained. They should then be called upon to pay the balance price for the actual quantity found on weighing and or payment of the price of actual quantity, they should be given one delivery order for the entire quantity. According to them, the letter of 25th September 1958 does not contain an unconditional acceptance of the tender, because it calls upon them to pay for a fixed quantity of 244 tons without ascertaining the actual quantity and in lieu of the payment for 244 tons, the said letter offers delivery order for a quantity not exceeding 244 tons. They contend that this letter is not an acceptance in accordance with the terms of the tender, because they never offered to buy a quantity not exceeding 244 tons, but they offered to buy the entire lot, whatever the quantity. They further contend that inasmuch as what was offered to them in the said letter is a quantity not exceeding 244 tons against their offer of the entire lot which may exceed or be less than 244 tons, the letter of 25th September 1958 contains a variation which the petitioners have not accepted even in their letter of 30th September 1958, because that letter again contains a condition as to price. On this point the reply of Mr. Mukhi for the respondents is that the first paragraph of the letter of 25th September 1958 contains an unconditional acceptance of the tender of the petitioners. According to him the contract became concluded and complete by the said unconditional acceptance contained in the first paragraph of the said letter. According to him, the second paragraph merely contains information about special selling price having been fixed by the iron and Steel Controller, and the remaining paragraphs chalk out a mode of performance of the contract which according to him, is strictly in accordance with the terms and conditions of sale and the tender filled in by the petitioners, and even if it were not so this may merely raise the question whether the respondents are in breach in seeking performance in a manner other than the one provided by the contract.
11. In my opinion, the first paragraph of the letter of 25th September 1958 from the Deputy Director (Food), Bombay, to the petitioners contains an unconditional acceptance of the petitioners' tender on the terms and conditions of the tender. This results in a concluded contract and holds that there is a concluded contract between the petitioners and the respondents.
12. The contract is for sale of a quantity of iron hoops weighing 244 tons approximately.' The dictionary meaning of the word 'approximately' is 'nearly' or 'nearly correct.' It is a matter of common knowledge that it is not possible to sell quantities of iron and steel, whether prime material or scrap, correct to the last ounce. Iron and Steel as well as scrap is always in big pieces and the weight can always be approximate, and not exact. According to the respondents, they held a lot of approximately 244 tons of iron hoops in their godowns at Thana Street, Bombay-9, and this is what they contracted to sell. It could be that on actual weighment the goods may weigh slightly more or slightly less, because the word 'approximately' does not permit of large variations in weight and, therefore, when the respondents stated that on payment of the price of 244 tons they would give a delivery order for a quantity not exceeding 244 tons, this was because a quantity not exceeding 244 tons had been paid for and they would not be liable to deliver goods in excess of 244 tons. But this contention still leaves unsettled the question of the excess in weight over 244 tons or shortage in weight however small the excess or shortfall may be. The contention of the petitioners that they would be entitled to the entire lot of goods, whether in excess or short is correct. The fact is that in my opinion, the contract concluded by the tender of the petitioners and the first paragraph of the letter of 25th September 1958 is silent on two points: (a) as to what would happen if after the petitioners had paid the price of 244 tons within seven days of the acceptance of the tender and the goods were weighed thereafter, and were found to weigh in excess of 244 tons, however slight that excess may be, and (b) what would happen if the goods were found to be short, however short the shortfall may be. It is a matter of common experience that no perfect contract can be made, because the parties to it may not at the stage of making it, envisage or provide for all the contingencies that may arise. Several times the parties to a contract may either through forgetfulness or through bad drafting fail to incorporate into the contract terms which, had they adverted to the situation, they would certainly have inserted to complete the contract. In such cases, in order to give efficacy to the contract, the Court will imply into a contract terms which the parties have not themselves expressly inserted. It is true that it is not the function of the Court to make contracts for the parties, but only to interpret contracts already made. Nevertheless, in certain circumstance, the Court will imply terms. In this case the contract provides for price calculated per ton. It further provides that after the acceptance the buyer is to make a deposit of the price for a quantity which is stated to be approximately 244 tons and the goods are thereafter to be weighed, and that the seller will, in the first instance, give delivery order for a quantity not exceeding 244 tons to the buyer because the payment is to be made in advance. It may reasonably be expected that in such a case if on actual weighment the goods are found to be less than 244 tons, the excess price paid would be refunded. It is also reasonable to expect that if the goods are found to be more, the seller will call upon the buyer to pay the balance of the price and to take delivery of the excess goods. I, think, these terms should be implied into this contract. Such terms are neither contrary to, nor inconsistent with the express terms of the contract contained in the terms and conditions of sale. Anson on the Principles of the English Law of Contract, 22nd Edition states at page '129, as follows:
'The doctrine is, therefore of narrow application and the requirements are stringent: Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common 'Oh, of course!''.
Anson further goes on to say that this doctrine of implied terms has frequently been applied where the circumstances demanded and particularly where the contract would fail completely, unless such terms were implied, or where, in effect, it gives substance to the whole transaction. Halsbury's Laws of England, 3rd Edition, Vol. 8, at page 121 in para 212, also lays down:
'212. Implication of terms. In construing a contract, a term or condition not expressly stated may under certain circumstances, be implied by the court, if it is clear from the nature of the transaction or from something actually found in the document that the contracting parties must have intended such a term or condition to be a part of the agreement between them. Such an implication must in all cases be founded on the presumed 'intention of the parties and upon reason, and will only be made when it is necessary in order to give the only transaction that efficacy that both parties must have intended it to have and to prevent such a failure of consideration as could not have been within the contemplation of the parties. In every case the question whether an implication ought or ought not to be made will depend on the particular facts; consequently it is neither possible nor desirable to lay down any hard and fast rules on the subject and it must be remembered that the construction of one contract will afford but little guidance for the construction of another unless the facts and surrounding circumstances are practically identical'. I must say that an implied term must always be based on the presumed intention of the parties and upon reason. In my opinion, the implied terms suggested by me are reasonable. The contract is for a particular lot of goods and for approximate, and not exact quantity and at a price calculated by weighment. It is reasonable to suppose that the parties intended that in case of excess the same would be paid for and taken delivery of later, and in case of shortfall, the excess of price paid in advance would be refunded. I have no hesitation in so holding, Mr. Parekh has invited my attention to Sections 31, 32, 37 and 38 of the Sale of Goods Act, and the provisions contained therein. I think these sections have no application to the facts of this case. The matters covered by the sections are provided for in the contract. Mr. Parekh for the petitioners stated that the contract does not provide for instalment delivery in case the goods are on weighment found to weigh more than 244 tons. I think, in this case the question of instalment delivery does not arise. Nonetheless, if on actual weighment the goods were found to be in excess of 244 tons, the excess would be paid for and taken delivery of. However, as I have stated above, these questions pertain to the performance of the contract and not to the making of it and, in my opinion, there is nothing in the third and the subsequent paragraphs of the letter of 25th September 1958 accepting the tender which contains any departure from the terms of the contract. In my opinion, the letter of 25th September 1958 does not contain any counter offer which is as contended by the respondents accepted by the letter of 30th September 1958 written by the petitioners. It is, however, significant to note that the petitioners say in the letter of 30th September 1958 that 'we however accept the order' indicating perhaps that in their opinion the contract is concluded and complete.
13. Having dealt with the question of the existence of the contract, I come to the question of its validity. The petitioners have contended that the contract Ex. B (Colly.) to the petition, which contains the arbitration agreement, is unenforceable by reason of being in contravention of Article 299 of the Constitution of India. In paragraph 9 (b) of the petition the petitioners had contended that the Deputy Director (Food), Bombay, who had purported to enter into the contract contained in the correspondence Ex. B (Colly.) to the petition, had no authority whatsoever to enter into such contract on behalf of the President of India. The respondents have pointed out in the first paragraph numbered 17 of the affidavit dated 29th day of March 1963 of Mr. C. L. Rathi in reply that under S. R. C. 3442 dated 2nd November 1955, published in the Gazette of India, dated 12th November 1955, Part II, Section 3 the Deputy Directors of the Food in India have been authorised to enter into such contract. The petitioners have not pressed the said contention at the hearing of the petition. They have argued, although not seriously, that the contract Ex. B (Colly) to the petition is neither expressed to be made by the President of India, nor is made in the name of the President of India, and is, therefore, in contravention of Article 299 of the Constitution and as such is null and void and unenforceable in law.
14. In this case, the contract is contained in correspondence Ex. B (Colly.) to the petition. The first letter is dated 4th August 1958 and is addressed to the petitioners. In the very opening paragraph, it states that 'On behalf of the President of India, the Regional Director of Food, Western Region, Bombay, invites tenders ........' The said tender notice is signed by the Deputy Director (Food), Bombay. The petitioners filled in the tender and submitted the same to the Regional Director (Food), Bombay, with a covering letter dated 18th August 1958. The said letter is addressed by the petitioners to the President of India. This letter contains the offer to buy the said scrap. The Deputy Director (Food) Bombay, accepted the said offer by his letter dated 25th September, 1953. The said letter is signed by the Deputy Director (Food), Bombay, 'for and on behalf of the President of India'. Article 299 of the Constitution of India nowhere requires that a contract made on behalf of the Union of India should be contained in any formal document. It is enough if the contract is contained in correspondence. All that the Article requires is that the contract shall be expressed to be made by the President of India and shall be executed on behalf of the President by a duly authorised person. It has been held by the Supreme Court in the case of Union of India v. A. L. Rallia Ram : [1964]3SCR164 , that Section 175(3) of the Government of India Act, 1935, did not require that formal contracts should be drawn up and executed and that the contracts on behalf of the Dominion of India may be contained in the correspondence, and that a tender for purchase of goods in pursuance of an invitation issued by or on behalf of the Governor-General of India and acceptance in writing which is expressed to be made in the name of the Governor-General and is executed on his behalf by a person authorised in that behalf would conform to the requirements of Section 175(3). In this case, the contract is contained in correspondence Ex. B (Colly.) to the petition. The tender and letter of acceptance of the respondents are expressed to have been issued and written respectively on behalf of the President of India and the letter of the petitioners containing the offer is addressed to the President of India. In my opinion, the provisions of Art. 299 of the Constitution of India have been sufficiently complied with and, there is no substance in the contention that the contract in this case contravenes the provisions of Article 299 of the Constitution of India.
15. The first contention of the petitioners with regard to the order of the Iron and Steel Controller dated 4th September 1958 Ex. C to the petition is that the price of scrap hoops having been fixed by the Iron and Steel Controller by the Scrap Price Circular No. 5 of 1957 in exercise of the powers conferred by clause 27(1) of the Iron and Steel Control Order, 1956, and the said Circular having been duly published in the Gazette of India, and the price thereby fixed being much lower than Rs. 607 per ton, fixing of higher price by the order dated 4th September 1958 is contrary to the provisions of the Iron and Steel Control Order, 1956, and, therefore it is contrary to the provisions of the Essential Commodities Act, 1955. One has only to look at the provisions of the proviso to sub-clause (2) of clause 27 of the Iron and Steel Control Order, 1956, to find that in case of scrap held by a Railway or a Government Department or Government Corporation, the Controller has power to fix a special price for any specified stock. There is no doubt that the Iron and Steel Controller has made the order dated 4th September 1958 in exercise of this power. There is, therefore, no substance in this contention.
16. It is next contended by the petitioners that the order dated 4th September 1958 purports on the face of it to have been made in exercise of the powers conferred on the Iron and Steel Controller by sub-clause (2) of clause 27 of the Iron and Steel Control Order, 1956 and not in exercise of the powers conferred on him by the proviso to the said sub-clause, and the said order is, therefore, illegal. It is a well-settled principle of interpretation that as long as an authority has the power to do a thing, it does not matter if he purports to do it by reference to a wrong provision of law. The order made can always be justified by reference to the correct provision of law empowering the authority making the order to make such order. There is no substance in this contention also.
17. The next contention of the petitioners is that the power of fixation of special prices is subject to the condition precedent that in the order the Controller must 'direct that the maximum prices fixed under clause (1) or (2) shall not apply to any specified stocks of scrap'. It is contended that the order dated 4th September 1958 contains no such direction and is therefore illegal. A reference to the order of 4th September, 1958 indicates that what the Iron and Steel Controller purports to fix is 'Special selling price for 244 tons of scrap iron hoops'. I think the fixing of a 'special selling price' by implication contains a direction that the general selling price contained in the Scrap Price Circular No. 5 of 1957 shall not apply to the stocks specified in the order of 4th September 1958. Such direction appears to me to be implicit in the said order and, in my opinion the fact that the order does not explicitly contain such direction makes no difference to the validity of the said Order.
18. It is then contended that under the proviso to sub-clause (2) of clause 27 of the Iron and Steel Control Order, 1956, the Controller has power to fix a maximum price, and not a price at which a specified stock may be sold. Now, sub-clause (1) of clause 27 refers to fixation of 'prices' by notification, and not to fixation of 'maximum prices'. In spite of this the Scrap Price Circular No. 5 of 1957 refers to 'maximum prices', being fixed. Sub-clause (2) also refers to fixation of price, and not to fixation of maximum price. The proviso to sub-clause (2) refers even to the 'prices' fixed under sub-clause (1) as 'maximum prices,' for it states 'provided that the Controller may direct that the maximum price fixed under sub-clause (1) or (2) shall not apply to any specified stock of scrap'. This assumes that 'prices' fixed under sub-clauses (1) & (2) are 'maximum prices'. Sub-clause (4) of clause 27 refers to all prices notified or fixed under clause 27 as 'prices'. This indicates that in entire clause 27 of the Iron and Steel Control Order, 1956, the words 'prices' and 'maximum prices' are used synonymously and have the same meaning. The order of 4th September 1958 is, therefore, not illegal even on this ground.
19. It is then contended that the special selling price fixed under the proviso to sub-clause (2) of clause 27 of the Iron and Steel Control Order, 1956, should be for a specified stock of scrap, and should not be the special selling price of a or Government Department or Corporation. In other words, the price should be attached to specified goods and not to a specified seller. It is contended that the effect of fixation of a special price for sale by a Railway, Government Department or Corporation would be that the buyer from the Railway or Government Department or Corporation who buys the material at Rs. 607 per ton will have to sell the same material at a loss at the lower price fixed by the Scrap Price Circular No. 5 of 1957. The special selling price should, therefore, attach to the specified stocks of scrap, and not to a particular Government seller. This contention loses sight of the fact that under the proviso, the special selling price has to be fixed for a specified stock of scrap held by Railways or Government Departments and Corporations. The proviso clearly indicates that a special selling price has to be fixed for a stock held by a Government Department or Corporation, and not by any other person. The moment such goods pass to a buyer, they ceased to be held by a Railway or Government Department or Corporation. It may be that the effect of such interpretation would be that the buyer from a Government Department or Corporation would have to sell the goods at a loss. But this need not be so, for it is open to such buyer to approach the Iron and Steel Controller to classify the scrap bought by him under sub-clause (2) of clause 27 and to fix for such scrap such price as he considers appropriate. Such price so fixed may even provide for a margin of profit. In any event, whether sub-clause (2) of clause 27 is or is not available to the buyer from a Government Department or Corporation and whether the Iron and Steel Controller obliges such buyer or not, it must be borne in mind that in cases like the present one, the buyer has offered to buy the goods from the Government Department or Corporation with open eyes at a price much higher than the general selling price fixed by the Scrap Price Circular No. 5 of 1957. The petitioners were not compelled to fill in a tender for these goods and have done so with full knowledge of the situation and their legal obligations. They have even in their letter to the Iron and Steel Controller of 18th August 1958 pointed out this position to him. If they filled in the tender with a mental reservation that they would be able to bring down the price to the general controlled price and have not succeeded in doing so, they have to bear the arising from their own act. There is no substance in the contention that the price must be attached to a specific stock without reference to who holds such stock or that it must attach to subsequent sales of the said specific stock. This does not appear to me to the intention of the proviso to sub-clause (2).
20. It is further contended that the power conferred on the Iron and Steel Controller under sub-clause (2) or in any case under the proviso to sub-clause (2) of clause 27 of the Iron and Steel Control Order is coupled with a duty and is for the benefit of the citizen and the Iron and Steel Controller before fixing the selling price should have fixed an economic price on the cost of production or acquisition of the said goods by the Government and after notice to the petitioners. It is not contended that the Iron and Steel Controller in fixing prices under clause 27 exercises any judicial or quasi judicial functions. I think, therefore, there is no substance in the contention that notice should have been given to the petitioners before fixing the special selling price of Rs. 607 per ton. In any case, as the petitioners had themselves offered to buy the said goods for that price, no useful purpose would have been served by hearing them even if there were a duty cast on the Iron and Steel Controller to hear them before fixing the selling price. I am also not able to agree with the contention of the petitioners that the price should have been an economic price based on cost of production or acquisition of the scrap by the Government. There is no warrant for such conclusion.
21. It is then contended that the order of 4th September 1958 contravenes the provisions of Arts. 14 and 19(1)(f) and (g) of the Constitution of India. Now, it is not contended that clause 27 of the Iron and Steel Control Order, 1956 contravenes the said provisions of the Constitution of India. The said clause, therefore. remains unimpugned. What is contended is that the order of 4th September 1958 contravenes these provisions. I do not see how, if clause 27 is allowed to stand, an order made pursuant to the powers conferred by the said clause can be challenged. However, a plain reading of these provisions of the Constitution shows that these provisions have not been contravened. Article 14 Provides that the State shall not deny to any person equality before the law or the equal protection of the laws within the territories of India. If it is suggested that the provision authorising the Iron and Steel Controller to fix a selling price for a Government Department or Corporation denies equality, before the law, I think it is that provision itself which should have been impugned. But I think had it been contended that the proviso to sub-clause (2) of clause 27 is itself in-valid, the respondents may have come forward with a contention of reasonable classification. The contention of reason-able classification would apply equally to the order of 4th September 1958. Article 19(1)(f) provides that all citizens shall have the right to acquire, hold and dispose of property. It is contended on behalf of the petitioners that inasmuch as the order of 4th September 1958 fixes a price higher than at which the petitioners can sell the goods under Scrap Price Circular No. 5 of 1957, it compels them to dispose of property at a loss and as such It is a restriction on their right to disposal of property. I think, there is no substance in this contention because the right of disposal of property has not been taken away from the petitioners. If the petitioners had not succeeded in getting a special selling price fixed for themselves, it may be that they would have had to re-sell the said scrap at a loss, had they paid for and taken delivery of the same. But this was a calculated risk and in any case did not restrict their right to disposal of property. There is also the further consideration that there can be no restriction on the petitioners' right to dispose of property which they have not even acquired by paying for and taking delivery of the goods.
22. Article 19(l)(g) provides that all citizens shall have the right to practise any profession or to carry on any occupation, trade or business. The petitioners contend that by being compelled to sell scrap at a price lower than that for which they agreed to buy, their right to carry on trade or business is being interfered with, I do not agree with this contention also. This single transaction does not constitute the trade or business of the petitioners which must inevitably consist of series of other transactions. There is also no imaginable restriction on their trade or business. The possibility of sale at a loss was a calculated risk. In any case, they have not paid for and obtained delivery of the goods and the question of re-sale has not even arisen. For these reasons, I reject the contention of the petitioners that the order of 4th September 1958 contravenes the provisions of either Article 14 or Article 19 of the Constitution of India even assuming that the protection of Article 19 was available to the petitioners.
23. The next Contention of the petitioners in challenging the legality and validity of the order of 4th September 1958 is that as sub-clause (1) of clause 27 of the Iron and Steel Control Order l956, provides two conditions requisite for fixation of prices by the Iron and Steel Controller namely, (a) approval of the Central Government and (b) publication by notification in the Gazette of India, and these conditions not having been satisfied in making the order of 4th September 1958, the said order is illegal and invalid. Now, a reading of clause 27 indicates that prices may be fixed by the Iron and Steel Controller in two ways. One of the ways which is prescribed by sub-clause (1) is that the fixation must be with approval of the Central Government, and secondly, the fixation must be published by a notification in the Gazette of India. Sub-clause (2) of clause 27 does not require either the approval of the Central Government or publication in the Gazette of India of the prices fixed thereunder. The prices fixed under sub-clause (1) being general prices, it is reasonable to expect that public should be given notice thereof by publication in the Gazette o the Government of India. Prices fixed sub-clause (2) are only either in respect of a particular class of scrap or in respect of specified stock held by a Railway or Govt. Department or Corporation and no notice to the public appears to be necessary. In any case, sub-clause (2) does not provide either for the approval of the Central Government or for publication in the Gazette of India. It is also significant to note that sub-clause (4) of clause 27 contemplates two modes of fixation of prices, namely, prices notified and prices fixed - obviously otherwise than by notification. Sub-clause (4) states that no person shall sell or offer to sell or otherwise dispose of, and no person shall acquire any scrap at prices in excess of those notified or fixed by the Controller under this clause. It is obvious that two modes of fixation are contemplated; one by notification under sub-clause (1) and the other without a notification under sub-clause (2) and its proviso. It is further contended that prices under sub-clause (1) of clause 27 having been fixed with the approval of the Central Government and by publication in Government Gazette any amendment, variation or rescission of such prices must also be with the approval of the Central Government and by publication in the Gazette of India. It is contended that the order of 4th September 1958 amends or varies or rescinds in any case with regard to a specified stock the prices fixed under sub-clause (1) of Clause 27. Reliance has been placed on S.21 of the General Clauses Act which provides as under:
'21. Where, by any Central Act or Regulation, a power to issue notifications, order, rules or bye-laws is conferred then that power includes a power exercisable in the like manner and subject to the like sanction and condition (if any), to add to, amend, vary or rescind any notifications, orders, rules or bye-laws so issued.'
In my opinion, S.21 of the General Clauses Act has no application. What Section 21 contemplates is such addition, amendment, variation or rescission of a notification such as Scrap Price Circular No. 5 of 1957 which brings about a textual addition to or amendment, or variation in or rescission of such notification. It applies only if the said notification is thereafter to be read with and subject to such addition, variation, amendment and rescission. In this case, the order of 4th September 1958 merely excepts from the operation of the said notification a specified stock pursuant to power conferred on the Iron and Steel Controller under clause 27 of the order. The Scrap Price Circular No. 5 of 1957 is not so amended, varied or rescinded that after the order of 4th September 1958, it is to be read subject to the amendment, variation or rescission. The Scrap Price Circular No. 5 of 1957 continues even after 4th September 1958 to be and to read the same as before. Section 21 of the General Clauses Act, has therefore no application.
24. I have dealt with all the contentions of the petitioners in support of their challenge to the legality and validity of the order of 4th September 1958, Ex. C to the petition and I hold that the said order is not illegal or void or without jurisdiction. Consequently, I also reject the contention of the petitioners that on account of the said order being illegal, void and without jurisdiction, the contract Ex. B (Colly.) to the petition containing the arbitration clause is illegal and void. I hold that the said contract is neither illegal nor void and the arbitration agreement is valid and enforceable.
25. I now come to the question that the arbitration clause, namely clause 12 of the terms and conditions of sale, part of Ex. B (Colly.) does not apply in respect of disputes between the parties relating to the existence and validity of the contract Ex. B (Colly.) to the petition or the order dated 4th September 1958, Ex. C to the petition, and that the arbitrator has no jurisdiction to determine these questions pursuant to the said clause. It appears to me that the arbitration clause is wide enough to cover such questions. However in view of the fact that these questions have been determined by me in this judgment, they do not survive for determination by the arbitrator and it is not necessary for me to deal with this contention.
26. It has finally been contended by the petitioners that having regard to the nature of the disputes between the parties as set out in the petition and having regard to the said arbitration clause, it is in the interests of justice that the claims and disputes between the parties be adjudicated upon in ordinary course of law, and not by the arbitrator, and that they should be granted leave to revoke the authority of the arbitrator appointed pursuant to the said arbitration clause. In support of this contention, the petitioners have cited before me several judgments of various courts in support of the proposition that when difficult questions of law more particularly those arising from interpretation of the Constitution of India arise, the Court should not stay a suit under Section 34 of the Arbitration Act, and compel parties to go to arbitration on those questions. It has been contended by the petitioners that principles applicable to stay applications under Section 34 of the Arbitration Act apply equally to giving effect to arbitration agreements under S. 20 or 33 of the Arbitration Act. The petitioners have not cited any authority in support of this latter proposition. I think, there is considerable difference between stay tinder Section 34 of the Arbitration Act and giving effect to arbitration agreement under Section 20 or Section 33 of the Arbitration Act. In the first case, there are two proceedings to choose from, namely, a suit and an arbitration proceeding, whereas under Section 20 or Section 33, there is no suit pending, and such suit is to come into existence only if acting in exercise of the powers contained in these sections the Courts do not give effect to the arbitration agreement for the reason that difficult questions of law or interpretation of the Constitution are involved. However, in view of the fact that these questions of law which Mr. Parekh on behalf of the petitioners has called difficult questions of law, and questions of interpretation of Articles 14 and 19 of the Constitution of India have already been determined by me, the question of the determination of these questions by the arbitrator does not survive. It is not necessary for me to say whether I would or would not have granted leave to the petitioners to revoke the authority of the arbitrator, if these questions of law had not been determined in this judgment But in view of the fact that these questions have already been determined, I do not propose to grant leave to the petitioners to revoke the authority of the arbitrator appointed pursuant to clause 12 of the terms and conditions of sale, part of Ex. B (Colly.) to the petition.
27. My answers to the issues framed In this petition are:
1. No.
2. Not necessary.
3. There is a concluded contract between the parties containing a valid arbitration agreement.
4. The contract contained in the correspondence Ex. B (Colly.) to the petition and the arbitration agreement contained in the said contract do not contravene the provisions of Article 299 of the Constitution of India and both the contract and the arbitration agreement are valid and binding on the petitioners.
5. The Order dated 4th September 1958 of the Iron and Steel Controller, Ex. C to the petition is valid and binding on the petitioners, and so is the arbitration agreement.
6. The contract contained in the correspondence Ex. B (Colly.) to the petition and the agreement contained in para 12 if the terms and conditions being part of Ex. B (Colly.) to the petition are not illegal as alleged in para 12 of the petition.
7. Petitioners are not entitled to any relief.
8. and the petition must be dismissed with costs. I accordingly dismiss the petition with costs.
28. Petition dismissed.