M.N. Gangappa (Dead) by Lrs. Vs. Atmakur Nagabhushanam Setty and Co. and anr. - Court Judgment

Excerpt:
commercial - omission - whether contracts were transferable or non-transferable - mere omission or non-mention of any words which would expressly show that contracts were not transferable would not make them transferable - high court and trial court did not attach importance to omission on part of respondent to produce books of account which would have shown that groundnut seeds which were subject matter of two contracts were being purchased for use in oil expelling business of respondent or were intended to be transferred to third parties - no infirmities in reasoning of two courts below with regard to evidence that showed that contracts were non-transferable. - [ b.p. sinha, c.j.,; a.k. sarkar,; j.c. shah,; k. subba rao and; jafer imam, jj.] these petitions by the holder of kavalappara sthanam, his wife, daughters and soil challenged the constitutional validity of the madras marumakkathayam (removal of doubts) act, 1955 passed by the madras legislature soon after the privy council had declared the properties in possession of the sthanee to be sthanam properties in which the members of the tarwad had not interest. section 2 of the act, which contained the substantive provision, was as follows:-- "2. notwithstanding any decision of court, any sthanam in respect of which:- (a) there is or had been at any time an intermingling of the properties of the sthanam and the properties of the tarwad, or (b) the members of the tarwad have been receiving main. tenance from the properties purporting to be sthanam properties as of right, or in pursuance of a custom or otherwise, or (c)there had at any time been a vacancy caused by there being, no male member of the tarwad eligible to succeed to the sthanam, shall be deemed to be and shall be deemed always to have been a marumakkathayam tarwad and the properties appertaining to such a sthanam shall be deemed to be and shall be deemed always to have been properties belonging to the tarwad to which -.he provisions of the madras marumakkathayam act, 1932 (mad. xxii of 1933), shall apply." the question for decision was whether the impugned act infringed the fundamental rights of the petitioners guaranteed by arts. 4, 19(1)(f) and 31 of the constitution. held (per sinha, c. j., subba rao and shah, jj.) that the three tests laid down by the act were contrary to the well- settled principles of marumakkathayam law with regard to which there could be no scope for doubt and as such not only not germane but extraneous to the object it sought to achieve. they were a device to deprive the sthanam of its properties and vest them in the tarwad and as such directly hit by art. 19(1)(f) and could not be saved by art. 19(5). assuming that the sthanam properties were held in janmam right and as such were estates within the meaning of art. 31a, the impugned act was immune from challenge. that article, properly construed, envisages agrarian reform and provides for the acquisition, extinguishment or modification of proprietary and various other kinds of subordinate rights in a tenure called the estate solely for that purpose and must be limited to it. although it may not be permissible to refer to the statement of objects and reasons of its amendment for purposes of construction, it can be referred to for the limited purpose of ascertaining the conditions prevailing at the time and purpose underlying the amendment. aswini kumar ghose v. arabinda bose, [19531 s.c.r. 1, con- sidered. there is no substance in the argument that since the impugned act seeks to regulate the rights of the sthanee and the junior members of the tarwad inter se it falls within by cl. (2)(b) of art. 31a. that clause has to be read with cl. (1)(a) of the article and since the impugned act does not contemplate any agrarian reform or seek to regulate the rights inter se between landlords and tenants or modify or extinguish any of the rights appertaining janmam right, leaving all its characteristics intact, it does not come within the purview of art. 31a of the constitution. sri ram ram narain v. state of bombay, [1959] supp. 1 s.c.r. 489, and atma ram v. state of punjab, [1959] supp. 1 s.c.r. 748, referred to. fundamental rights have a transcendental position in the constitution and before an article embodying a fundamental right can be construed to exclude another every attempt should be made to harmonize them and not until it is found impossible to do so, can one be made to yield to the other. barring such exceptional cases, any law that infringes any of the fundamental rights must be void. the word 'law' in art. 31(1) must mean a valid law, and such a law must satisfy two tests, (1) that the legislature must be competent to enact it and (2) that it must not infringe any fundamental rights. a law that deprives a citizen of his property must, therefore, be invalid if it infringes art. 19(1)(f) of the constitution. deep chand v. state of u. p., [1959] supp. (2) s.c.r. 8, and basheshway nath v. commissioner of income-tax, delhi, [1959] supp. 1 s.c.r. 528, referred to. article 31 of the constitution, since its amendment by the constitution (fourth amendment) act, 1955, is no longer a selfcontained article providing for a subject different from that dealt with by art. 19, but deals with two different subjects, cis. (2) and (2a) dealing with acquisition and requisition and cl. (1) with deprivation of property by authority of law, and can no longer be construed on the analogy of art. 2 1 so as to exclude the operation of art. 19. the state of west bengal v. subodh gopal bose, [1954] s.c.r. 587, a. k. gopalan v. the state of madras, [1950] s.c.r. 88, referred to. state of bombay v. bhanji munji and any., [1955] 1 s.c.r. 777, held inapplicable. nor does art. 31(1) deal with police power. although such power, as understood in america, is no arbitrary power divorced from social control and public good, there can be no need of importing such a doctrine into the indian constitution. the word 'law' used by art. 31(1) indicates its limitation and refers back to art. 19 and any law made under art. 31(1) can be sustained only if the restrictions it imposes are reasonable and in the interest of the general public. the constitution does not confer on the indian parliament the same power which the parliament of england possesses and while it does contemplate a welfare state, that has to be brought about within its frame-work of the constitution itself. the correct approach should, therefore, be first to ascertain the fundamental right and then to see whether the law infringes that right. if ex facie it does so, it has to stand the test of art. 19(5). in certain circumstances, however, deprivation of fundamental right to property may also amount to a reasonable restriction under the article. narendra kumar v. the union of india, [196o] 2 s.c.r. 375, referred to. individual proprietary rights being ordinarily inviolable unless a clear case is made out for restricting them, there must be a harmonious balancing between the fundamental rights declared by art. 19(1) and social control permitted by art. 19(5). it is implicit in the nature of restrictions that no inflexible standard can be laid down and each case must be decided on its own facts. but the restrictions must not be arbitrary and must have a reasonable relation to the object sought to be achieved and shall be in the interest of the general public. state of madras v. v. g. rao, [1952] s.c.r. 597, henry webster v. peter cooper, 14 law ed. 510, and the citizens' savings and loan association and cleaveland, ohio v. topeka city, 22 law ed. 455, referred to. although the redress of a real and genuine grievance of a section of the community may be in public interest, it is impossible to hold that the impugned legislation was either justified or in such public interest. iswari prosad v. n. r. sen, a.i.r. 1952 cal. 273, held in- applicable. marumakkathayam law is a body of customs and usages that have received judicial recognition, and is fundamentally different from hindu law, being a matriarchal system. the family, called tarwad, consists of all the descendants of one common ancestor. it consists of a mother and her male and female children and the children of those female children and so on. only the senior-most male member can attain the sthanam, which is a position of dignity with specific properties attached to it. when he does so and becomes the sthanee he ceases to have any interest in the tarwad properties. occasionally a female member also becomes the sthanee. like a hindu widow or an impartible estate-holder the sthanee has an absolute interest in the income of the sthanam properties or acquisitions therefrom. a member of the tarwad has no right to maintenance from out of the sthanam properties nor can such property be converted into tarwad property by the grant of such maintenance by custom or otherwise or intermingling of the sthanam properties with the tarwad properties by the sthanee. his position approximates to that of a member separated from a hindu family and there can be no scope for the application of the doctrine of blending. like the sthanee who ceases to have any present proprietary interest in the tarwad, the members of the tarwad also can have no present proprietary interest in the sthanam property. they continue to be blood relations with a contingent right of succession to each others' property that is no more than a spies successions. the right of a subsequently born male member of the tarwad to succeed to the sthanam and its property is judicially recognised. case-law reviewed. per imam and sarkar, jj.-the impugned act is protected by art. 31a and is not open to question in the ground that it violates arts. 14, 19(1)(f) and 31(1) of the constitution. there is no basis for the contention that art. 31(1)(a) contemplates a law relating to agrarian reform only. the article makes no mention of any such reform and there can be no doubt that under it a janmam right may be acquired, extinguished or modified whether the land held in such right is agricultural or not. it is not permissible to refer to the objects and reasons stated in the bills, by which the acts amending art. 31a of the constitution were introduced, for the construction of the statute and, therefore, the word 'law' in art. 31a(1) cannot be read in relation to sub-cl. (a) only as a law intended to achieve agrarian reform on the basis of the supposed object of the legislature in enacting art. 31a. aswini kumar ghose v. arabinda bose, [1953] s.c.r. 1 referred to. it is not correct to say that the impugned act does not effect any modification of janmam rights and therefore it does not come within art. 31a. when the article speaks of modification of janmam rights, it does not speak of such rights in the abstract but contemplates the modification of such rights held by a person. it would be as much modification of janmam rights, if such rights held by one person are directed to be held by a number of persons jointly, as when the incidents of such rights are altered. sri ram ram narain medhi v. the state of bombay, [1959] supp. 1 s.c.r. 489, and atma ram v. state of punjab, [1959] supp. 1 s.c.r. 748, relied on.  it is not correct to say that the legislature in giving the provisions of the impugned act retrospective operation or in providing that they should prevail notwithstanding any decision of the court to the contrary, was acting judicially and not in a legislative capacity and that the act was on that ground invalid. the rule obtaining in america that legislative action cannot retract on past controversies and reverse decisions of courts and the relevant american decisions can have no application in india. piare dusadh's case, [1944] f.c.r. 61, referred to.   - there was similar correspondence with regard to this contract as well. (iv) there was overwhelming evidence that the contracts were genuine and true transactions intending delivery of goods and that the defendants plea that the parties intended only to pay or receive the difference in prices was clearly an after thought. (v) it was well-settled that the mere fact that there was no express mention in the contracts that they were non-transferable was not sufficient to treat them as transferable contracts. 2. the plaintiff as well as the defendants carried on the business of expelling oil from groundnut seeds.a.n. grover, j.1. this is an appeal by certificate from the judgment and decree of the mysore high court.2. a suit was filed for the recovery of rs. 22,274.4.0 as damages for breach of contract by the plaintiff (first respondent herein) against m.n. gangappa now deceased and represented by his legal representatives. the second respondent was also joined as defendant. according to the case of the plaintiff, the defendants had entered into two contracts with him for the supply of groundnut seeds. it was claimed that both the contract were for a specified quality of groundnut seeds, for specific delivery at a specified price and were not transferable. the first contract (exhibit p-20) was entered into on 1st november 1950 and the delivery was stipulated to be made by 31st january 1951. the damages relating to this contract were claimed at the difference between the contract rate and the market rate which was stated to be rs. 224/-per candy, on the date of breach i.e. 31st january, 1951. the second contract (exhibit p-29) was entered into on 21st november, 1950. the damages relating to that contract were claimed on the basis of the difference between the contract rate and the market rate, namely, rs. 218/- per candy on the date of the breach which was stated to be 28th february, 1951.3. on or about the 22nd january, 1951 the plaintiff despatched 954 empty gunny bags to bellary by rail and sent the railway receipt by registered post addressed to the defendants asking them to despatch the stipulated quantity of groundnut seeds agreed to be supplied under the first contract (ex. p-20) by rail and to send the railway receipt through the imperial bank. it was alleged that the registered letter was returned as refused. on 27-1-1951 the plaintiff sent a telegram to the defendants stating that the registered cover containing the parcel way bill relating to empty bags had been refused by them and they were called upon to take delivery of the empty gunny bags by giving an indemnity bond to the railway authorities. the defendants sent a telegram in reply saying that the transaction in question was of a 'satta forward contract and was illegal and uninforceable'. this was followed by other telegrams which need not be mentioned. on 12-2-1951, the plaintiff sent a telegram to the defendants asking them to delivery the quantity of groundnut seeds agreed to be sold by means of the second contract (ex. p-29). the defendants were informed that gunny bags wo uld be sent to them on hearing from them. there was similar correspondence with regard to this contract as well. the defendants took up the position that the contract was illegal. in the written statement also it was asserted by the defendants that the contract were void under section 30 of the contract act and the oil seeds (forward contracts prohibition) order 1943 (hereinafter called 'the order'). the material issues which arose for decision were as follows:1. did the suit contracts not intend delivery of goods but only payment of difference in prices and hence void and unenforceable ?2. do the suit contracts contravene the provisions of the oil seeds (forward contracts prohibition) order 1943, and hence void and unenforceable ?3. what is the quantum of damages to be awarded?the distt. judge, bellary, who tried the suit, held that the defendants by means of the contracts exhibit p-20 and exhibit p-29 had undertaken to supply groundnut seeds to the plaintiff and that those contracts were not transferable. they were thus not hit by the provisions of the order. after determining the damages, the suit was decreed for rs. 18, 759.8.0 with interest at 6% per annum from the date of the suit till the date of payment.4. the defendants filed an appeal to the high court. the high court gave the following findings:(i) the groundnut seeds which were agreed to be supplied by the two contracts were of 'expeller quality' which was used for extracting oil, the other variety being 'company quality' which was used for the purpose of export to foreign countries.(ii) the plaintiff carried on the business of extracting groundnut oil and sending the same. although the plaintiff did not produce his books of account, but there was no reason to disbelieve his evidence that he has entered into the suit contracts for the purpose of obtaining groundnut seeds for his oil extracting business.(iii) the fact that the plaintiff had sent empty gunny bags to the defendants asking for despatch of groundnut seeds in those bags supported the plaintiff's case that actual delivery of goods was contemplated.(iv) there was overwhelming evidence that the contracts were genuine and true transactions intending delivery of goods and that the defendants plea that the parties intended only to pay or receive the difference in prices was clearly an after thought.(v) it was well-settled that the mere fact that there was no express mention in the contracts that they were non-transferable was not sufficient to treat them as transferable contracts.(vi) the express mention in the contracts that the goods sold were 'loose' showed that it was contemplated by the parties that the groundnut seeds were to be put in the bags which were to be supplied by the plaintiff.(vii) under the contracts two obligations were imposed on the plaintiff one to supply empty bags and the other to pay the price of goods against delivery by the railway receipt.(viii) looking at the surrounding circumstances, it was established that the plaintiff required the groundnut seeds for use in his own mills and he had no intention of transferring them.5. on the above findings the view of the district judge was upheld with regard to the nature of the contracts. as regards the quantum of damages, the high court observed that no evidence had been led with regard to the rates prevailing on the dates of breach but from the admissions contained in the defendants' evidence, it was established that the rate could not be less than rs. 210/- per candy on the material dates. the damages were then assessed and the decree of the distt. judge was modified accordingly.6. in order to decide the points which have been agitated before us we may refer to the relevant provisions of the order which was promulgated in 1943 under sub-rule 2 of rule 81 of the defence of india rules then in force. by clause 2(ii), 'forward contract' was defined to mean a contract for the delivery of oil seeds at some future date. clause 3 provided 'no person shall after the specified date, for any class of oil seeds enter into any forward contract in any of those oil-seeds'. under clause 5, the central government could by notification exclude any contract or class of contracts from the provisions of the order. a notification was issued on 3lst may 1943 excluding forward contracts for groundnut etc. of specified qualities and for specific delivery at a specified price not transferable to their parties. one of the questions that has been convassed and which calls for determination is whether the two contracts exhibit p-20 and exhibit p-29 fell within the exception. in other words, if they were not transferable to third parties, the prohibition contained in the order was not applicable to them. these contracts may be reproduced : -exhibit p-20.bellary,dt. 1-11-1950.m.n. gangappa,merchants,mundlur narasemhappa gangappa,merchants, bellary.as per the contracts executed by the above addressee in favour of m.r. nandyal atmakua nagabhushanam setty and co., we have given to you business by agreeing to supply 75 (seventy five) tons of groundnut seeds at the rate of rs. 173.0.0 per candy, (rs. one hundred and seventy three) at bellary for on the 'vaida' in the month of january 1951. we shall deliver (the goods) on the above said 'vaida'. the goods referred to above are of expeller quality loose in accordance with the conditions of the company.sd/- m. gangappa,1-11-50.exhibit p-29.bellary,dt. 21-11-1960.m.n. gangappa,merchants,mundlur narasemhappa gangappa,merchants, bellary.the contract form executed by the above addressee this day in favour of m.r. nandyal atmakur nagabhusanam setty and co., is as follows:we shall deliver to you 50 (fifty) tons of groundnuts seeds of expeller quality, loose of the 1951 january february vaida at the rate of rs. 190/- (one hundred and ninety) per candy in accordance with the practice of the company (after getting) rly. pass.sd/- m. gangappa,21-11-50.7. in hemraj keshavji v. shah garidas jethabhai : [1964]2scr686 a question arose whether certain contracts which were described as ready delivery contracts and were subject to the rules and regulations of the veraval merchants association were prohibited by the saurashtra groundnut and groundnut products (forward contracts prohibition) order 1949. it was laid down that a contract for delivery of goods at a future date, even though for a specified price and specific quality could be excluded from the definition of forward contracts only if the contracts were non transferable. but from the mere absence of an express stipulation as to non transferability in the contract it could not be deemed to be transferable and the surrounding circumstances were taken into consideration in that case and it was held that the contracts were not transferable to third parties and could not be regarded as forward contracts with in the meaning of the saurashtra order. it is thus apparent that the mere omission or non-mention of any words which would expressly show that the contracts were not transferable would not make them transferable. the main criticism of the learned counsel for the appellant before us is that the high court as also the trial court did not attach sufficient importance to the omission on the part of the plaintiff to produce the books of account which were the subject-matter of the two contracts were being purchased for use in oil expelling business of the plaintiff or whether they were intended to be transferred to third parties. it has also been suggested that the high court acted on mere conjecture in considering that the statement in the contracts that the goods sold were 'loose' showed that the bags were to be supplied by the plaintiff. it is next pointed out that the payment of price of goods against delivery of the railway receipt could not be regarded as an obligation of a nature contemplated by law which would make it necessary to obtain the consent of the defendants if the contracts were to be assigned to third parties. on behalf of the plaintiff it has been pointed out that the courts below have not only looked at the terms of the contracts but have also taken into consideration the following material circumstances :1. the contracts and transactions were for actual delivery of groundnut seeds and were not for payment of differences.2. the plaintiff as well as the defendants carried on the business of expelling oil from groundnut seeds. it was, therefore, more natural and probable that the contracts which they were entering into were meant for the purpose of the business of the plaintiffs and not for being transferred to third parties.3. the use of the word 'loose' in the contract was significant and when read with the evidence produced by the plaintiff led to the conclusion that the obligation to supply the bags was on the plaintiff.4. the goods which were the subject-matter of the contracts were of expeller quality which reinforced the view that they were intended for the oil expelling business of the plaintiff.8. after a careful consideration of the contentions of both sides and the findings of the courts below, we do not consider that any interference is called for with the concurrent conclusion of two courts that the suit contracts were non-transferable. the question whether a particular contract was of one category or the other, namely, transferable, can only be decided on the facts of case and we are unable to find any such infirmities in the reasoning of the two courts particularly with regard to the surrounding circumstances and other evidence which showed that the contracts were non-transferable.9. the only other question which has been agitated relates to the quantum of damages. it is common ground that no evidence was produced with regard to the actual rates prevailing on the date of breach but it was fully established by exhibit p-46, the validity and genuineness of which has not been disputed, that on 13-1-1951 the rate was rs. 210/- per candy. again on 3-2-1951 the rate was rs. 224/- per candy vide exhibits p-1 and p-2. it was admitted by the defendant in his evidence that the price was rising from the month of november 1950 to march 1951, the rate finally going up to rs. 220/-per candy. the high court, therefore, took the lowest rate, namely, rs. 210/-per candy which prevailed on 31-1-'51 as the rate for computing the damages. we do not find anything illegal for unreasonable about the process by which the damages were computed.10. in the result the appeal fails and it is dismissed but we leave the parties to bear their own costs in this court.