Madhya Pradesh Mines Ltd. (Now Madhya Pradesh Industries Ltd.) Vs. Rai Bahadur Shriram Durga Prasad Ltd. - Court Judgment

Excerpt:
- [b.p. sinha, c.j.,; j.r. mudholkar,; k. subba rao,; n. rajgopala ayyangar, jj.] the appellants were members of the east india cotton association which was an association recognised by the cen- tral government under the forward markets regulation act, 1952. prioi to december 1955, they had entered into "hedge contracts" in respect of cotton for settlements in february and may 1956 in accordance with the bye-laws of the associa- tion. towards the end of 1955 it was apprehended that the forward market in cotton was heading for a crisis and the central government issued notifications directing the asso- ciation to suspend business in hedge contracts for february and may 1955 deliveries for short periods this did not improve the situation. on january 21, 1956, the central government, acting under s. 12 of the act, made a new bye- law in substitution of bye-law 52aa of the association which empowered the forward markets commission, constituted under, the act, to issue a notification closing out all hedge contracts at rates fixed by the commission. on january 24, 1956, the commission issued a notification closing out all hedge contracts including those subsisting on that date, and fixed the rates for the settlement of such contracts. the appellants contended that the amended bye.law 52aa was invalid as the power to close out hedge contracts could not be conferred upon the commission and as the association was in law incapable of conferring such a power on the commission or on any other body and that in any cases the bye-law could not operate retrospectively so as to affect existing contracts. held, (per sinha, c. j., ayyangar, mudholkar and aiyar, jj. subba rao, j. contra), that the amended bye-law 52aa was not ultra vires the central government and validly empowered the commission to close all hedge contracts in cotton including existing contracts. clause (f) of s. 4 of the act provided that one of the functions of the commission shall be to perform such other duties and exercise such other powers as may be assigned to the commission "by or under the act, as may be prescribed". there was no limitation upon the nature of the power that may be conferred under cl. (f) except that it must be in relation to the regulation of forward trading in goods. it was not possible to place any limitation on this power by invoking the rule of ejusdem genesis as there was no common positive thread running through cls. (a) to (e) of s. 4. to judge whether legally a power could be rested in a statutory body the proper rule of interpretation was that unless the nature of the power was such as to be inconsistent with the purpose for which the body was created or unless the particular power was contra-indicated by any specific provisions of the act, any power which furthered the provisions of the act could be legally conferred. judge by this test the power conferred by the bye-law could be validly vested in the commission. the power was one conferred "under the act". the words "under the act" signified a power conferred by laws made by a subordinate law-making authority which was empowered to do so by the act. the impugned bye-law was clearly well within the bye-law making power under ss. ii and 12. the bye-law did not contravene articles 64 of the articles of association of the association as articles 64 applied only to the board and placed no restrictions on the power of the association, western india theaters ltd. v. municipal corporation of poona, [1959] supp. 2 s.c.r. 71, hubli electricity co. ltd. v. province of bombay, 76 i.a. 57 and narayanaswamy naidu v. krishnamurthi, i.l.r. 1958 mad. 513, referred to, further, upon a proper construction of the amended bye-law it applied not only to contracts to be entered into in future but also to subsisting contracts. a statute which could validly enact a law with retrospective effect could in express terms validly confer upon a rule making authority a power to make a rule or frame a bye-law having retrospective operation. in the present case the power to make bye-laws so as to operate on subsisting contracts followed as a necessary implication from the terms of s. 11. there was no contra indication in the other provisions of the act. per subba rao, j.-under s. 12 (1) of the act the central government had no power to make a bye-law with retrospective effect. the provision conferring rule making power must be strictly construed and unless it expressly conferred a power to make a bye-law with retrospective effect, it must be held that it was not conferred any such power. evey if it was permissible to inter such a power by necessary implication, it could not be inferred in the present case. it could not be said that unless retrospective operation was given to the provisions of s. 12, the object of the legis- lature would be defeated or the purposes for which the power was conferred could not be fulfilled. further, the powers conferred on the commission under the impugned bye-law could not be performed by the commission under c1. (f) of s. 4. clauses (a) to (e) of s. 4 showed that the functions of the commission were wholly supervisory and advisory in nature; the functions described in cl. (f) were analogous to these and could only be supervisory or advisory. the commission had no administrative functions or powers of management or powers of interference in the internal management of registered association which were vested in the association. the power conferred upon the commission was not conferred "under the act". the words did not include a rule or a bye-law, and applied only to an assignment made in the exercise of an express power conferred under the act. the central government had no power tinder s. 12 to make a bye,law assigning any function to the commission. union of india v. madan gopal kabra (1954) s.c.r. 541, modi food products ltd. v. commissioner of sale's tax, u.p., a. i.r. 1956 all. 35, strawboard manufacturing co. ltd. v. gupta hill workers' union, (1953) s.c.r. 439, india sugar & belineries ltd. v. state of mysore, a.i.r. 1960 mys. 326, c.w. motor service (p) ltd. v. state of kerala, a.i.r. 1959 kerala 347, howell v. falmouth boat construction co. ltd. (1951) a. c. 837; the western india theatres ltd. v. municipal crporation of the city of poona, (1959) supp. 2 s.c.r. 71 and hubli electricity co. ltd. v. province of bombay ( 1948) 76 i.a. 57, referred to.   - both the trial court as well as the high court have come to the conclusion that the sellers were responsible for the breach of the contract. after the aforementioned rejections in january and february, the sellers began to complain about the manner in which the samples were taken they expressed a doubt that there was some manipulation in drawing samples. hughes and davies as well as by m/s. williams was not reliable. hence we agree with the trial court as well as with the high court that it is the sellers who committed the breach of the contract. we are satisfied that in this case the conduct of the buyers was not above board.k.s. hegde, j. 1. these two appeals by special leave arise out of cross-suits in respect of the contract for purchase of manganese ore entered into between the appellants and the respondents on may 7, 1953 under the agreement marked as exh p. 81. the appellants are the sellers and the respondents are the buyers. there has been a breach of that contract. the parties are at issue as to who was responsible for the breach. both the trial court as well as the high court have come to the conclusion that the sellers were responsible for the breach of the contract. the buyer's suit was for the refund of the money advanced by them with interest. in the sellers' suit the claimed a sum of rs. 1,13,439/2/-after adjusting the advance of rs. 4,41,000/-as damages against the buyers' for wrongfully refusing to take delivery of the ore supplied under the contract. the sellers' suit has been dismissed and the buyers'suit has been substantially decreed.2. on may 7, 1953, the buyers entered into a contract to buy 7500 tons of high grade of manganese ore and the sellers agreed to sell the same. the ore was to be delivered at one or the other of the four points mentioned in the contract. the price agreed to be paid was rs. 140/-per ton of 2240 lbs for sitasaongi and duttapohar sidings and ramtek and goberwahi station on the basis of 48% metallic manganese; rejections below 46% mn,, maximum 9% fe., maximum 9% sio2 and maximum o. 10% p., and if any ore offered does not fulfil those conditions the buyers were entitled to refuse to take delivery of the same. clauses 4 and 5 of the contract are important for our present purpose. they read as follows :4. that the sellers undertake to deliver 7,500 tons during the period january 1954 to june 1954 in approximately equal monthly quantities of 1250 tons. however, it would be the sellers' option to complete the deliveries earlier than the period mentioned herein-above. on delivery of any parcel at any of the above named railway sidings and/or railway stations against the above deliveries, the buyers will pay to the sellers the full value based on the analysis ascertained and final settlement will be based on the railway weighbridge weights ascertained at goberwahi and itwari stations.5. that the sampling will be done jointly in the presence of the representatives of the sellers and the buyers and the samples in tins under the signatures and seals of both the parties will be sent both to m/s. hughes & davies, bombay and ms. j.s. williams, takli road, nagpur and the mean of their results will be final and binding on both the sellers and buyers. the cost of sampling and analysis as referred to hereinabove will be borne equally by the sellers and the buyers. however, in case there be any dispute in regard to sampling, the same shall be done by messrs. hughes and davies of bombay which shall be binding on both the seller and buyers.3. as per the terms of the contract the buyers paid a sum of rs. 4,41,000/-as advance, at 42% of the basic price for the purchase of 7500 tons of manganese ore. it was agreed between the parties that each time the sellers supplied ore to the buyers, 42% of the price of the ore supplied should be adjusted towards the advance and the buyers are required to pay the balance only. the remaining terms of the contract are not relevant for our present purpose.4. in january 1954, the sellers supplied 1207 tons of ore. the parties jointly took samples from out of the ore supplied. thereafter the samples were analysed by m/s. hughes and davies and m/s. j.s. williams. the quality of that ore did not come up to the specifications hence the buyers rejected the same. in february, 1954 the sellers again supplied 1295 tons of ore. on this occasion also samples were taken jointly by the sellers and the buyers and those samples were analysed by m/s. hughes and davies and m/s. j.s. williams. out of the quantity supplied only 85 tons of ore were found to be in accordance with the specifications. the buyers rejected the entire quantity of 1295 tons supplied. after the aforementioned rejections in january and february, the sellers began to complain about the manner in which the samples were taken they expressed a doubt that there was some manipulation in drawing samples. in march, the sellers supplied 1540 tons of ore. on that occasion they asked m/s. hughes and davies to draw the sample. this fact was informed by the sellers to the buyers. the buyers did not object to the same and the buyers' representative was present at the time the samples were drawn. samples so drawn were analysed by m/s. hughes and davies as well as by m/s. j.s. williams. the samples were found to be in accordance with the specifications. but yet the buyers rejected the same on two grounds viz that the quantity offered for sale was in excess of the quantity required to be supplied during that month and secondly that the sellers had improperly denied to the buyers the opportunity of drawing samples jointly. in april the sellers offered to supply 1555 tons of ore. in this month also samples were drawn by m/s. hughes and davies but those samples were analysed by m/s. hughes and davies and m/s. j.s williams. out of the said supply only 970 tons were found to be in accordance with the specifications. but the buyers rejected the entire lot. in may and june the sellers supplied 4556 and 3439 tons of ore respectively. on both those occasions the samples were drawn by m/s.hughes&davies.; at the time the samples were drawn buyerrs' representative was not present. the analysis of those samples was also made by m/s. hughes and davies. m/s. j.s. williams refused to analyse the sample drawn in may and june on the ground that the sellers in their correspondence had insinuated that the analysis made by m/s. j. s. williams was not reliable.5. so far of the rejection of the supplies made in january & february, the sellers have no complaint. now coming to the rejections of the supplies made in may and june, there can be hardly any doubt that the sellers did not comply with the terms of clause (5) of the agreement. analysis both by m/s. hughes and davies and m/s. j.s williams was an essential part of the contract. in fact at the time of the arguments, we were told that m/s. hughes and davies were the nominees of the sellers and m/s. j.s. williams were the nominees of the buyers. the condition that the samples of the ore to be supplied should be analysed both by m/s. hughes and davies and by m/s. j.s. williams is one of the essential conditions of the contract. it was not open to the sellers to ignore that term it is true that the contract does not provide tor the contingency of either m/s. hughes and davies or m/s. j. s. williams refusing or being unable to analyse the samples taken we are unable to agree with the contention of mr. m.g. chagla, learned counsel for the sellers that clause (5) of the contract is not an essential part of the contract. it is clear from the terms of the contract that the parties considered the quality of the ore to be supplied as one of the essential conditions of the contract. when m/s. j.s. williams refused to analyse the samples, the sellers did not even call upon the buyers to nominate someone else in the place of m/s. j.s. williams on the other hand the sellers intimated to the buyers that they were willing to send the samples for analysis to a particular company at calcutta and if the buyers did not accept that offer, the analysis made by m/s. hughes and davies would become final. the buyers rejected that ultimatum. under the circumstances we are of the opinion that the offers made in may and june were not in accordance with the terms of the conttact.6. according to the buyers the true impost of clause (5) of the contract is that in respect of each supply the parties must first make effort to jointly draw the samples. it is only if there is any dispute between them as regards the drawing of samples in respect of any supply, the parties can call upon m/s. hughes and davies to draw the samples. in respect of the supplies made in march and april, the sellers did not afford any opportunity to the buyers to draw the samples jointly. that being so, the samples drawn in respect of those supplies were not drawn in accordance with the contract. but according to the sellers even as far back as january, 1954 they began to entertain a doubt that when samples were drawn jointly, the representative of the buyers indulged in certain manipulations and therefore it decided once and for all that in future samples should be drawn only by m/s. hughes and davies. it is contended on behalf of the sellers that after they came to the conclusion that the buyers' representative indulged in manipulations at the time of drawing samples, jointly, there was no purpose in going through the farce of attempting to draw samples jointly before calling upon m/s. hughes and davies to draw samples the high court has accepted the construction contended for on behalf of the buyers. we have not thought it necessary to examine as to which of these contentions is the correct one because in our opinion in view of the fact that the supplies made by the sellers in january, february, may and june were not in accordance with the terms of the contract, the sellers were responsible for the breach of the contract.7. the contention of the sellers that each supply should be considered as a separate contract is untenable. the contract between the parties is one and indivisible. it is a contract to sell and purchase 7500 tons of ore of specified quality. it is true that the sellers were permitted to supply the agreed quantity in instalments but that did not convert each supply into a separate contract.8. even if we come to the conclusion that the supplies made in march and april were in accordance with the terms of the contract those supplies would amount to only 2510 tons of ore. the buyers had contracted to purchase 7500 tons. a supply of 2510 tons of ore cannot be considered as complying with the contract. hence we agree with the trial court as well as with the high court that it is the sellers who committed the breach of the contract.9. from the material on record, it is clear that the buyers were waiting for an opportunity to breach the contract. after the contract was entered into, there was a step fall in the price of manganese ore. it came down from rs. 121 per ton in january, 1954 to rs. 88/8/-in may of that year. there was slight rise in june but that was very insignificant. evidently because of that reason, the buyers were looking out for an opportunity to get out of the contract but unfortunately the sellers gave them that opportunity. the rejection by the buyers of the ore supplied in march and april appears to be quite unreasonable. we are satisfied that in this case the conduct of the buyers was not above board.10. the contract does not provide for payment of any interest on the advance made. hence the question whether interest should be given on that amount is within the discretion of the court. similarly the question of interest on that advance during the pendency of the suit is within the discretion of the court. we think under the circumstances of the case, it will be just and proper to disallow the buyers' any interest on the advance made till the date of the decree of the trial court. for the same reason we think that in this court the parties should be asked to bear their own costs.11. in the result civil appeal no. 1161 of 1966, (appeal arising out of the suit filed by the sellers) is dismissed without costs and civil appeal no. 1162 of 1966 (appeal arising out of the suit filed by the buyers) is allowed to the extent mentioned earlier. in other respects it is dismissed, no costs.