Jawahar Lal Burman v. Union of India

Judgment

SUPREl'lffi COURT REPJRTS JAWAHAR LAL BURMAN UNION· OF INDIA (B. P. SINHA, C. J., P. B. GAJENDRAGADKAR and RAGHUBAR DAYAL, JJ.) Arbitration-Denial of validity of contract contai1ting arbitration agreement-Petition for dedarati011 that there ia valid contract and to afffirm exiatence of arbit1ation agreement- Maintainability-&ope and effeci-Juritdictio•-Arbitration Act, 1940 (10 of 1~40) "· 28, 31, 32, 33. The appellant and.the respondent nominated their arbitrator. who heard the matter at length and. the proceedings had reached a •tage when an award might have been pronounced. It was then that the appellant chose to obstruct the further progress of the proceedings by raising the plea that there was no concluded contract. The appellant refused to apply under s. 33 and so a stalemate issued became the arbi· trators were not entitled to proceed further with the arbitration proceedings. - The respondent moved the court under s. 28 along with 1.

33, for a decision of the question about the existence and validity of the arbitration agreement, and also prayed that extension of time be granted to the arbitrators for making the award. The appellant pleaded in defence that there was no concluded contract, and there was no juri.!idiction iri the court to grant extension under $~ 28 of the Act. The High Court confirmed the finding of the trial court that there was a concluded contract which contained a valid , arbitration ag_reement. As for jurisdiction it held that since the petition had been filed as cornposit application und<r ss. 28 and 33, it was open to the court under s. 28 to enter upon the question of the existence or validity of the contract and so there was no subztance in the point of jurisdiction raised by the appellant. It is against this decision that the appellant crune up by special leave. Section 33 of the Arbitration.

Act, 1940, consists of two parts-the first part deals with a challenge to the existence or validity of an arbitration agreernent or an award and it provides that only persons who challenge the existence of the arbitration agreement that can apply under the first part of the section, The second part of the section Fefers to the application made to have the effect of either the arbitration agreement or the award determined, and under this part J awoltar Lal Btu"'311 l:nitm ~J lndi• [1962] an application can be made to have the effect or purport of 1hc agreement determined but not itl exi•tence. That means that an application to ha,·e the effect of tre agreement can be made provided the existence of the agreement i• not diJputed. The question is-whether a person affirming an arbitration agreement can apply under the latter part of s. 33 about the existence of the agreement or its validity. Jleld, that a party affirming the existence of an arhitration agreement cannot apply under s.

33 for obtainin!! a decision that the agreement in question exists. An application to have the effoct of the arbitration agreement determined can however, legitimately cover the dispute a. to the existence of the said arbitration agreement. Section 32 of the Act creates a bar against the irutitution of suits with regard to an arbitration agreement or award on any ground whatsoever. Thus if a party affirms the exiJtencc of an arbitration agreement or its validity it is not open to the party to file a sllit for the purpo.e of obtaining a decla1 ation about the existence of the said agreement or its validity. The bar to the suit thus created by s. 32. inevitably rai!ICS the question as to what remedy is open to a party to adopt in order to obtain a appropriate declaration about the existence or validity of an arbitration agreement. Hdd, that having regard to the scheme of'"· 31, 32, 33 of the Act in matters which fall within the bar created by s.

32, if a ruit cannot be filed it is nece&Sarily intended that an application can be made under the court's powers provided for by s. 31 and impliedly recognised by •. 32 of the Act. Jleld, further that in holding that s. 32 impliedly recognises the inherent jurisdiction of the court to entertain an application made by parries affirming the existence of an arbitraticn agreement the provisions of s. 32 is brought in line with the provisions of ss. 33 an<l 20 of the Act. Indeed s. 33 is a corollary of s. 32, and in a scnoe deals with the most usual trpe of cases arising in arbitration proceedings. A question arises whether an application can be made under such inherent juriidiction for declaration that the contract which includes the arbitration agreement include, cases where the arbitration agreement is rriade a part of the contract itself.

Held, that where the challenge to the contract made in defence to the claim, is a challenge common to both the contract and the arbitration agreement, the petition in substance is a pl!lition for a declaration as to the existence of a \'alid arbitration agreement and a •uit to obtain 1ueh a declaration is cl,.rly barred bys. 32. The fact that an incidental declaration is claimed about the existene<: and validity of the main contract doeo aot affect the essential j ss.c.R. chararcter of the application. It is an application for obtaining a declaration about the existence and validity of an arbitration agreement. Held, also that the powers to enlarge time for making the award which is the subject matter of s. 28 does not include .a power to entertain a petition for declaration that there wa• a concluded contract between the partie• containing a valid arbitration agreement. HaymaJt v. Darwins. Ltd., ( 19~2) A. C. 356, referred to. Messrs. M. Gulamali Abdulhussain &! Go. v. Messti!.

VMhtcambhar!al Ruiya, I.L.R. (1950) Born. 333, approved. Bajranglal Laduram v. Agarwal Brothers, A I.R. 1950 Cal. 267 and Stau of Bombay v. Adamjee Haju Dawood &! Go. Ltd. I.L.R. (1952) 2 Cal. 39, disapproved. CIVIL APPELJ,ATE JURISDICTION: Civil Appeal No. 328 of 1961. Appeal by special leave from the judgment and order dated February 2, 1961, of the Punjab High Court (Circuit Bench), at Delhi in Civil Revision Application No. 135-D of 1957. Din Dayal Sharma and N. N. Ke.~wani, for the appellant. 0. K. Daphtary, Solicitor-General of India, V. D. Mahajan and T.M. Sen, for the respondent. 1961. September 25. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-The principal point which this appeal by special leave raises for our decision relates to the construction of ss. 32 and il3 of the Arbitration Act, 1940 (10 of 1940) (hereafter called the Act). That question arises in this way.

The respondent, Union of India, filed a petition in the Court of the First Class Sub-Judge at Delhi against the appellant M/s. J. Burman & Co., through its proprietor Jawahar Lal Burman under ss. 33 and 28 of the Act. The respondent s.Jleged that a concluded contract had been entered into between the partiee on August 31, 1949 for supply of t 70-1 /2 Cwt. of eocoanut oil by the appellant to the respondent. The respondent had advertised in the Indian Trade J oumal for the said supply and the appellant had submitted itll tender No. SM-I/104524. IHI J awahad'.,ol s ....... Unilm of Iniia JIU/ J°"'oltar I.../ B,,,,,... Uniott of l11dia [1962] This tender was accepted by the respondent which concluded a contract bctwocn tho parties. The respondent's oase was that the said contract wae governed by general conditions of contract Form W.S.B. 133. These conditions included an arbitration agreement.

Disputes arose betwceJ) the parties regarding tho~id contract, and so in pursuance of tbe arbitration agreement they were reforrcd to the two arbitrators appointed by the parties. After the a.rbitra.ti~n proceedings had gone on for a. considerable time before the arbitrators the appellant objected to their jurisdiction to deal with the disputes on the ground that thero was no concluded contract between the parties. This pica. made it necessary for the respondent to move the Court for a decision of tho question about the existence and validity of the arbitration agreement. It was on those allcgatibns that tho respondent in its petition claimed that it may be held that there was a. concluded contra.ct between tho parties containing a valid arbitration agreement. The petition having been made under s. 28 along withs. 33 the respondent prayed . that suitable extension of time be granted to the arbitrators for making the a.ward.

The appellan~ pleaded in defence that no concluded contract had been made between the parties and that thPre was no jurisdiction·in the Court to grant extension under s. 28. The o~her allegations made by the respondent in its petition wore also traversed. · On the11e pleading.~ the learned trial judge framed appropriate iBBues. He found that a concluded contract had been proved between the parties as alleged by the respondent, that there wa.s a valid arbitration agreement in the said contract and that the Court had jurisdiction to try tho petition. Incidentally it may be pointed out at this stnge ihat no specific point had been raised in tho pleadings of the appellant that the Court ha.cl no jurisdiction to ent?rtain the . petition under s. 33 or s. 32 of t4e Act. ~n faot the trial judge has observed tbnt it waa not shown to him how the ~ S.C.R. applica.tion was incompetent.

Consistently with the findings recorded by him the learned trial judge declared that there was a concluded contract between the parties under which the matter was duly referred .to arbitration through an arbitration agreement .clause in the contract. Ae a result of the declaration he held th11.t there wu a valid reference to arbitration between the parties. Consequently be granted & month's time to the arbitrators to m&ke their award. This decision was challenged by the &ppellant by its revision petition preferred in the High Court of Punjab at Ch&ndigarh. The High Court has confirmed the finding of the trial court that there was a concluded contract which contaimid an arbitration agreement. The question of jurisdictiop. under s. 33 of the Act was argued before the High Court &nd iUI attention wae drawn to the conflict of judicial decieions on the point. The High Court, however, held that einee the petition has been filed as a composite &pplication under es.

28. and 33 it was open to the Court under a. 28 to enter upon the q 11estion of the existence or validity of the contract and so there was no substance in the point of jurisdiction raised by the appellant. · In the result the appellant's revision application was dismissed. It is against this deciition that the appella.nt has come to this Court by special leave ; and on his beha.lf Mr. Din Dayal ha11 raised the same two ~~ points for our decision. He contends that the High Court wa11 in error in holding that the tl'ial court ha.d jurisdiction to entertain the respondent's petition, &nd he argues that even if the point of jurisdiction raised by him fails it should be held tha.t there was no concluded contract between the parties and so there was no scop3 or room for making any reference to arbitration. . The first of ~ - these two contentione has been seriously pressed before us.

Before <lea.ling with the question of jurisdiction it is necessary to recall the ma.terial facts which J llWO!ior L•l Burm11n Union of lniia Gajendnizadkar J. 11141 Jawaiw ul B""""" Union of Inditz (1962) have led to tho present dispute. Tho appellant and the respondent 1,1ominatcd their arbitrators. The a.rbitra· tors heard the matter at lengtb and the proceedings had reached a stage 'vhen an a.ward might have been pronounced. It was then that the app9lla.nt chose to obst111ct the further progress of the proceedings by raising thi> plea. that there was no concluded contra.ct. Even then he refused to apply under s. 33 and so a stalemate issued becauso the arbitrators were not entitled to proceed further with the arbi· tration procoedings in •iew of the point raised by the appellant. 'It is necesee.ry to bear in mind thi11 backgrow1d of the dispute in considering tho pointof jurisdiction.

The question of jurisdiction raised by the appellant has to be answered in the light of tho construction which can be reasonably placed on the material provisions of as. 32 and 33 of the Act. It may be concerled at the outset that the question thus rniscd presents some difficulty. Sections 32 and 33 read thus: "32. Notwithstanding any law for the time being in force, no suit shall lie on any ground wh[l,tsoevcr for a decision upon tho existence, effect or validity of an arbitr[l,tion ngreemont or award, nor shall any arbitration agreement or award be set aside, amended, modified or in any way affected otherwiso than as provided in thie Act. 33. Any party to an arbitration agreement or any person claiming under hiJ:J?- ?-csiring to challenge the existence or validity of an -arhitration agreement or an a~ard or to b1we the eff<>ct of either detcrmmed shall apply to the Court and tho Court shall decide the question on affidavitB:

Provided that whcro the Court deems it just and oxnedient, it may set down tho application for hearing cm other evidence 3S.C.R. also, and it may pass such orders for discovery and particulars as it may do in a suit." In appreciating the effect of these two provisions it would be relevant to remember that the object of the Legislature in enacting the two sections quite clearly was to prevent the abuse of the process of the Court. Before the present Act was passed experience showed that unscrupulous and dishonest parties to the arbitration agreements frequently chose to deny the existence of the said agreements even after the arbitration proceedings had concluded and ended in awards and that tended to make all arbitration proceedings futile. More often than not these pleas ultimately failed but it meant considerable delay and waste of time and substantial expense. That is why ss.

32 and 33 have been enacted with the object of bringing the relevant disputes for decision before the specified Courts in the form of petitions. It is significant that under s.31(2) of the Act all questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, filed, and by no other Court. Indeed, s.2(c} defines a Court as meaning a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not, except for the purpose of arbitration proceedings under s. 21, include a Small Cause Court. Therefore, stated broadly, it would be correct to assume that the main object of introducing the new provisions of ss.

31, 32 and 33 was to entrust the decision of the relevant disputes to the specified Court and to require the parties to bring the said disputes for the decision of the said Court in the form of petitions. Remedy by a regular suit is intended to be excluded . Ja-i-L•/ B.,..,, UttiOIC of lUi• c.;..a..,....,. J. Jawaliar Lal B""""" Union o.f !Mia G•;1n<bagadhr J. SUPRE?im COURT REPORTS [1962) Section 32 creates a bar against the institu. tion of suits, and it provides that if the existence effect or validity of an arbitration agreement or award is in dispute on any ground whatsoever no suit shall lie for the adjudication of the said dispute. It also provides that no suit shall lie to set aside, amend or modify or in any way affect an arbitration agreement or an award.

It would be noticed that tho clause "on any ground whatsoever" is very wido and it denotes, inter alia, that if tho existence or validity of an arbitration agree· mcnt is questioned on any ·ground whatever it cannot be the subject-matter of a suit; the said dispute shall be tried as provided in this Act. Thus there can be no doubt, that if a party affirms the existence of an arbitration agreem<'nt or its validity it is not open to the party to file a suit for the purpose of obtaining a declaration abont the existence of tho said agreement or its validity. Such a suit in terms is barred by s. 32. This position is not disputed. The bar to the suit thus created bys. 32 inevitably raises the question as to what n·mcdy it is open to a party to adopt in order to obtain an appropriate declaration about the pxistence or validity of an arbitration agreement; and it is on the decision of this question that the part ics are at issue before us.

Before answering this question wr may con· vcnient ly consider the scope of s. 33 and its effect. Section 33 consists of two parts. The first deals with a challenge to the existence or validity of an arbitration agreement or an a.ward, and it provides that the persons there in specified can apply to the Court to have a decision on ita challenge to the existence or validity of an arbitration agreement or an award. In other words, there is no doubt thatit is only persons who challenge the existence of the arbitration agreement tba.t can apply under the first part of s. 33. This position is also not disputed. The second part of the section refers to applications made to have the effect of either the arbitration JJ.~reement or tho award determined. The question which we have to consider is whether a person affirming an arbitration agreement can apply under the latter part of s. 33. Even assuming that the requirement that an application can be made under the first part of s.

33 only by persons desiring to challenge the arbitration agreement does not apply to its latter part, it is difficult to hold that an application to have the effect of the arbitration agreement determined can legitimately cover the dispute as to the existence of the said arbitration agreement. It is clear that the first part of s. 33 refers to the existence or validity in 1lerms and ss. 31 and 32 also refer separately to the existence effect or validity. Therefore, the effect of an arbitration agreement is treated as distinct from the existence of the agreement, and where it was intended to refer to the existence as well as the effect of such an agreement both the words "existence and effect" have been specifically used. Thus, under the latter part of s. 33 an application can he made to have the effect or purport of the agreement determined but not its existence.

That means that an application to have the effect of the agreement can be made provided the existence of the agreement is not in dispute. Besides, if a. person affirming the existence of an agreement is held entitled to apply to the Court under the latter part of s.33 for getting a declaration about the said existing agreement then the first part of s. 33 would be wholly superfluous. Therefore, it seems to us that a party affirming the existence of an arbitration agreement cannot apply under s. 33 for obtaining a decision that the agreement in question exists. In fairness we ought to add that the learned Solicitor-General, who appeared for the respondent, did not dispute this position. If the party affirming the existence of an arbitration agreement cannot apply under s.33 what is the remedy open to him? This question takes us back to s. 32. If s. 32 has created a bar against the institution of a suit for obtaining Jawahar Lal Burman Union of Indifl Gajtrira:ridk'1' J. Jawnioa• Lal Bu~rruvt Union of India Goj,..,J•aiadka• J. (1962) a declaration a.bout the existence or an arbitration a.greoment, unless it is held that the creation of the said absolute bar itself involves the right to make an application undrr the Act it would lead to the anomalous result that a party is given no remedy to enforce the rig:ht ; and it is a.n ordinary rule of construction that such an unreasonable and unconscionable result should as far as possible be avoided because the Legislature could not have intended such a. result.

In our opinion, having regard to the scheme of ss. 31, 32 and 33 it would not be unrea.s·onable to bold that in matters which fall within the· bar created by s.32 if a suit cannot be filed it is necessarily intended that an application can be made and such an application can be made under tho Court's powers provided for by s.31 and impliedly recognised hy s. 32. On this construction s. 33 cannot be treated a.s exhaustive of a.II cases where appli<'.ations can be made. The Legislature has provid•d for the ea.id cases under s. 33 because it waH thought that they represented the usual type of caseR whieh arise under the arbitration agreements. A contrary view would lead either to a. stalemate or would in substance compel the party affirming the existence of an agreement to forego the procedure prescribed by the said agreement and sue on thfl contract itself. We are satisfied that a. fair construction of es. 31, 32 and 33 does not lead to such an anomalous position. Mr. Din Dayal contends that there is really a. lacuna. in the Act inasmuch as having created a. bar by s.

32 the Legislature ha.a failed to provide a remodyby way of an application. On reading 88. 31, 32 and 33 together we do not think the Court is driven to the conclusion that there is a. lacuna. in the Act. In this connection it is material to remember that even in de:iling with applications under the first part of s. 33 tho Court may accept the oppo: °" ncnt's plea and hold that the arbitration agreement exists if tho challenge to the said existence set out in the petition is rejected. In other words, in many cases applications made under the first part of s. 33 may end in the finding that the arbitration agreement exists. Similarly, in applications made under s.20 of the Act, if a dispute arose as to the existence of the arbitration agreement the Court may find in favour of the existence and make an order of reference as contemplated by s. 24.

Thus, it is clear that in the applications expressly provided for by these two sections a party affirming the existence of the agreement would be entitled to prove the said existence, and if he succeeds he would obtain a decision to that effect. Therefore, in holding that s, 32 impliedly recognises the inherent jurisdiction of the Court to entertain applications made by the parties affirming the existence of arbitration agr~ements we are bringing the provisions of s.32 in line with the provisions of ss. 33 and 20. Indeed, s. 33 is a corollary of s. 32 and in a sense deals by way of illustration with the most usual type of cases arising in arbitration proceedings. Section 28 of the Act has no material bearing on the decision of this point. The power to enlarge time for making the award which is the subject-matter of the provisions of s. 28 cannot be held to include a power to entertain petitions like the present.

Indeed, the learned Solicitor-General has not attempted to justify the conclusion of the High Court that s.28 confers such a power. Even if it is held that there is inherent jurisdiction in the Court to entertain an application in support of the existence of an arbitration agreement the question still remains whether an application can be 'made under such inherent jurisdiction for a declaration that the contract which includes the arbitration agreement as defined by s. 2( a) includes cases where the arbitration agreement is made a part of the contract itself. The argument is that 7 though an application may be made under the inherent jurisdiction of the Court to obtain a declaration about the existence or validity of an arbitration agreement, no such application can be jg~, J awahar Lal Burman Union of India Gajendragadka' J. Jauoiuff 1-<l Burman Uni.on of /nJia Gajtniraz12dkar ].

SUPREME cougT REPORTS [ HlG!!J made to obtain a declaration about the existence or validity of the main contract itself. In dealing with this argument it would be necessary to have regard to the substance rather than the form of the matter. In the present case the respondent claims that there is a concluded contract between tho parties and that tho said contract contained a valid arbitration agreement. Looking at the substance of the matter the prayer was first in regard to tho cxistcnco aud tho validity of tho main contract leading up to the second a·nd principal prayer that there wa8 a valid arbitration agreement.

Quite clearly the d·~cision of this question cannot depend merely on tho words used in tho petition. \Vherc the challenge to the contract made by the appellant. in defence to the claim of the respondent is a challenge common to both the contract and the arbitration agreement, the petition, like the one made by th<· respondent, must in substance be held to be a petition for a doclara.tion r.s to the existence of a. valid arbitration agreement; and a snit to obtain Huch a declaration is cloarly barred Ly s. 32. Therefore, in our opinion, the fa.ct that an incidental cloclaration is claimed about the existence and validity of the main contract docs not affect tho essential charater of the application. It is an application for obtaining a declaraction about tho existence and validity of an arbitration agreement. It iH true that an arbitration agreement included in the. contract itself is in one sense an integral part of the contract and in another sense it may be distinct from it.

As obsorved by Lord Macmillan in H£1yrruin v. Darwin.~, Ltd.I'), "the arbitration ch.usu is quite distinct from tho other clauses. Tho other clauses set out tho obligations which the parties undertake towards each other hinc inde; but the arbitration clause does not impose on ono of tho parties an obligation in favour of the other- It embodies the agreement on both the pal'ties that, if any dispute arises with regard to (0 (1942] A.C. 356, S. C. (19+2] I All. E.R. 337 at p. 347. the obligations, which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution. Moreover, there is this very material difference that whereas in any ordinary contract the obligations of the parties to each other cannot in general be specifically enforced and breach. of them results only in damages, the arbitration clause can be specifically enforced by the machinery of the Arbitration Acts".

It is, therefore, theoretically possible that a contract may come to an end and the arbitration agreement may not. It is also theorctioallypossible that the arbitration agreement may be void and yet the contract may be valid; and in that sense there is a distinction between the arbitration agreement and the contract of which it forms a part; but, as we have already pointed out, in the present case, the challenge to the contract itself involves a challenge to the arbitration agreement; if there is a concluded contract the arbitration agreement is valid. If there is not a concluded contract the arbitration agreement is invalid. In such a case a prayer for a declaration of the existence of the contract and its validity inevitably leads to the consequential prayer about the existence and validity of the arbitration agreement.

If that is so, a suit cannot lie for a declaration that the arbitration agreement is valid because the prayers that the respondent has made in the present case fall directly within the clause "on any ground whatsoever". Indeed, we apprehend that in a very large majority of oases where the arbitration agreement is a part of the main contract itself, challenge to the existence or validity of one would mean a challenge to the existence or validity of the other. ·We would accordingly hold, though for different reasons, tha.t the High Court was right in coming to the conclusion that the petition made by the respondent was competent under s. 32 of the Act and has been properly entertained by the trial Court. Jawal1<u Lal Burman Union of India Gaj1ndragadku J. - 19~1 J-"-ui Bunun U._ojlnJio Gij,..ro1.0ltsr J. [1962] This quPstion has been tht• subject-matter of some judicial deeisions to which refrrence may now be made. In Messrs. M. Gulamali Abdullmssain ,c, Co. v. Messrs. Vishwamhharlal Ruiya{') a petition had been filed for a declaration that the rospondenta had entered into the contract with the petitioners for purchase of 500 bars of silver on or about January 30, 1948 according to the rules and regulations of the Marwari Chamber of Commerce, Ltd., and that the respondents were bound to have all disputes in connection with the same contract decided by the arbitrators as provided by the said ru !es and regulations.

The competence of this petition and tho jurisdiction of the Court to enter· tain it were disputed. Both the learned trial judge and the Court of Appeal rejected the respondents' contention and held that there was an inherent jurisdiction in the Court to entertain petitions in respect of matters covered by the bar raised by s. 32. On the other hand, in Bajrangl<il Ladurmn v. AgrJrwal Brothers(') as well as in State of Bombay ". Adamjee IIajee Dawood ,c, Co., Ltd. ('), a contrary view has been accepted. In the latter case, a suit had been filed on tho Original Side of the Calcutta High Court claiming a declaration that a certain contract was not made between the parties and was not binding on the plaintiff. A further claim was also made that it should be declared that the defendant was not entitled to make any claim in respect of the said contract and that the contract be adjudged void and delivered up as canoelled.

The loamed trial judge construed the plaint as one for declaration that the arbitration agreement contained in the contract was invalid and on that view he held that under ss. 32 and 33 of the Act the suit was not maintainable. On appeal it was held that the suit was not one for challenging the validity of the arbitration agreement merely; it (II I. L. Jt. [!950] Dom. 33). (21 A. I. R. 1950 Cal. 267. (31 I. L. R. [1952] 2 Cal. t9. covered other reliefs and so bar of sa. 32 a.nd 33 could not be pleaded. We are inclined to think that the decision of the Bombay High Court is substantially correct. H61 J-lwLAI B_., Union of lm{i4 That takes us to the next question as to whec.;,..,..,-.,. J • ther there was a concluded contract between the parties or not. We have already noticed that in response to the advertisement published by the respondent in the Indian Trade Journal the appellant submitted its tender.

It is common-ground that the tender thus submitted was subject to the conditions of contract governing the Department of Supply Contracts which were set out in the Government Publication Form IV. S. B. 133. Clauses 4(a) and (b) of these conditions are relevant. They deal with the security deposit. Clause .4(a) provides that on acceptance of the tender the contractor shall at the option of the Secretary, Department of Supply and within the period specified by him, deposit with him a security deposit therein specified. Clause 4(b) provides that "if the contractor is called upon by the purchaser to deposit security and the contractor fails to provide the security within the period, such failure will constitute a breach of the contractor and the Secretary, Department of Supply, shall be entitled to make other arrangements at the risk and acceptance of the contractor".

It is thus obvious that the tender offered by the appellant submitted to these terms and that on these terms security depo2it is a condition subsequent and not a condition precedent. Clause 4(b) makes it clear that the failure to make the deposit would be a breach of the contract itself. This position is not disputed; but Mr. Din Dayal contends that this position has been substantially varied by the Form in which the appellant's tender was accepted by the respondent. His argument is that the material words used in the acceptance letter ch~nged the pre-existing position and made the security deposit a condition precedent to the acceptance itself. If this contention is right it would necessarily mean Jar»ohtJr lAl Burman u.,; .. •f 1,.,i;. tJ.;~ndN,aik•r ]. [Hl62J that there was no concluded contract. Thus tho decision of this point deponds upon the construction of tho letter of acceptance issued by tho respondent tot-ho appolla11t after receiving its tender.

In this ktter written on August 31, 1949 tho resoondent svatod as follow~ : "Dea.r Sirs, Ref :-Your tendor No. &nd date Xii. Your offer is hereby accepted for a. quantity of 1704 Cwta. and 2 qrs. (One thousand seven hundred and four hundred weights and two quarters only) of Oil Cocoa.nut conforming to specification Xo. IM. 13i0 (d) at R~. 89/6/- (Rupees eightynin'l and annas six only) per Cwt. packed in non-returnable sound, strong 45 gallon drums, delivery ex-godowna.t Calcutta by 3'l·9-49 or earlier if possible subject to your depositing 10% as security. The security monev which comes to Rs. 15,:!30/- (Ri1pees fifteen thousand two hundred a.nd thirty only) should please. be deposited · immediately into a Government Treasury in favour of tho Deputy Accountant General, I and S., Akbar Road, Now Delhi and the Treasury Receipt forwarded to this office. · This security money will be refunded to you after the completion of the contract.

The contra.ct is concluded by this acceptance and formal acceptance of Tender will fol\ow immcdiatt-ly on receipt of Tr\'asury R_eceipt. Kindly acknowledge receipt. Yours etc. etc." · The whole argmncnt is founded on the_ use of the cla.uso "subject to your depositing 10% a11. security." PrirTUJ facie this clause may justify.the argu,- ment that it is· intended to make the security deposit a condition precedent; but in· construing the true effect of this clause we must look at the whole of the letter bearing in mind the fact that it has been written not by a lawyer or in consultation with 11 lawyer but by a Government officer in the ordinary course of the discharge of his duties. The fir~t sentence in the first paragraph clearly shows that the offer was accepted for the quantity therein specified. The second paragraph calls upon the appellant to see that the specified amount is deposited immediately into the Government Treasury.

This paragraph is more consistent with clause 4(a) of the general conditions. It reads as if having accepted the tender the appellant is reminded that it has to deposit the amount under the relevant condition, and the letter ends with the categorical statement that the contract is concluded by this acceptance. Mr. Din Dayal is right when he contends that s. 7 of the Conttact Act requires that the acceptance of the offer must be absolute aµd unqualified, it cannot be conditional; but reading the letter as a whole we do not think that the Courts below have erred in coming to the conclusion that this letter amounts to an absolute and unqualified acceptance of the tender or offer made by the appellant. While dealing with this question it may be pertinent to recall that the general conditions of the contract prescribed by Form W.S.B. 133 are made a part of the tender, and the contract itself was intended to be executed expeditiously.

The tendel,' shows that the ·appellant represented that the earliest date by which delivery could be effected would be within twenty days from the date of the receipt of the order and it also said that full quantity of cocoanut oil required was held by it. Therefore, to begin with the tender treated the security deposit as a subsequent condition, the contract was for the immediate supply of goods and the acceptance purports to be in accordanr.e with the relevant government rules and uses the expression that the contract was concluded by the said acceptance. . Therefore, in our opinion, reading the letter as a whole it would not be possible to J96i Jawahar ul Burma11 Union pf /ndi5 Gajendr«zadkar J. Jowohar Z..I B""""" UniM of India 8t1l1f'lt011 2S. i86 SL"PREME COURT REPORTS [I !162] accep~ tho appellant's argument that tho letter was intended to make a substantial variation in the contract by making the deposit. of security a. condition precedent instead of a. condition subsequent.

In the result the appeal fails and is dismissed ll 01th costs. 4. Appeal dismused. THE COLLECTOR OF CUSTOMS, MADRAS NATHELLA SAMPATHU CHETTY AND ANOTHER (And connected cases) (B.P. SINHA, c. J., A. K. SARKAR, M. HIDAYATULLA.H, N. RAJAGOPALA AYYANGA.R and J. R. lllUDilOLKAR, JJ.) Smuggl•d Gooda-Re&trictiona on imporration of gold- S•izurt of gold on muonable bPlz°p/ that it UllU amuggl•~BarclM of proof that it uaa not amuggled °" peraon in ~ Conatitutional va/iJlity of enaclmeRt-Rfer..,.ce of statute in a atconcl statute without incorporatiorr-Effut of modification. of the firat •tatutP.-1'oreign Exchange Regulation Act, 1947 (7 of 1947), sa. 2(/), 8(1), 23A-See Cuatoma Act, 1878 (8 of 1878), u. 19, 167(8), 178A, 182-Conalitutio,.of Ind4a, Arta. 1', 19(1), (/) and (g). Un1er the powers conferred bys. 8( I) of the Foreign Exchange Re~'\llation Act, 1947, the Central Government issued a notification on August.

25, 1948, placing a ban on the imp1>rtation of gold except with the permission of the Reserve Bank. Section 23A of the Act, which was introduced by an amendment in 1952, provided that " .. the restrictions imposed by s. 8( I) .. shall be deemed to have been imposed under s. 19 of the Sea Customs Act, 1878, and all the provi1ions of the Act shall have effect accordi~gly .. " Section 19 of the Sea Custom• Act, 1878, enabled the Central Government, by notification, to prohibit or restrict the bringing goods of any specified description into