JUDGEMENT
Bachawat, J. -
(1.)THIS appeal is from a judgment of P. B. Mukharji, J. dismissing an application to adjudge and declare the contract dated 17-8-1954 to be illegal and invalid and to decide an award of the Bengal Chamber of Commerce. By the contract dated 17-8-1954 the appellant agreed to sell and the respondent agreed to buy raw jute. The contract contains the usual arbitration clause which is as follows:
"14. Arbitration -- All matters, questions, disputes, differences and/or claims arising out of and/ or concerning and/or in connection with and/or in consequence of or relating to this contract including matters relating to insurance and demurrage whether or not the obligations of either or both parties under this contract be subsisting at the time of such dispute and whether or not this contract has been terminated or purported to be terminated or completed shall be referred to the arbitration of the Bengal Chamber of Commerce and Industry under the rules of its Tribunal of Arbitration for the time being in force and according to such rules the arbitration shall be conducted and any Award made by the said Tribunal under this clause shall be final, binding and conclusive on the parties".
The buyer-appellant contends that the contract is prohibited by the Forward Contracts Regulation Act, 1952 and the Notifications issued thereunder. The contract provides for shipment or rail despatch within two months from the issue of the letter of authority to import the jute. Mr, Sethia concedes and in my opinion rightly that the contract is a forward contract as defined in Section 2 (c) of the Forward Contracts Regulation Act, 1952. Prima facie, the making of such a contract is prohibited under Section 17 of the Forward Contracts Regulation Act 1952 and the Notifications issued thereunder, unless it is made out that the contract is a non-transferable specific delivery contract. The contract is! a specific delivery contract as it provides for the actual delivery of specific qualities of goods during a specified future period at a price fixed thereby and as the names of both the buyer and the seller are mentioned. The question still remains whether the specific delivery contract is a non-transferable specific delivery contract as defined in Section 2(f) of the Forward Contracts Regulation Act, 1952. It is now well settled that the word "or" in Section 2(f) is used conjunctively, and not distributively, and that the contract can be said to be non-transferable only if the rights as also the liabilities under the contract as also under the documents of title relating thereto, are not transferable. THIS point was decided in Agarpara Co. Ltd., v. Sumatichand Kochar, A. F. O. No. 60 of 1956 (Cal), as also in Raymon and Co. (India) Private Ltd. v. Khardah Co. Ltd., A. F. O. O. No. 173 of 1957:.
(2.)THOUGH the liabilities under the contract are not transferable, prima facie the rights under the contract can be transferred. Thus, prima facie, the right of a buyer to obtain delivery of the goods under the contract of sale as also the right of the seller to obtain payment of the price of goods supplied under such a contract, can be transferred. It is said, however, that by reason of the special terms of the contract in this case, the rights of both the buyer and the seller under the contract are not transferable. The goods to be supplied under the contract were to be imported from Pakistan. At the relevant time no jute could be imported from Pakistan except under a licence obtained under the Imports and Exports Control Act, 1947. The contract, therefore, provides that the goods would be imported against the buyer's import quota. The import licence obtained by the uyer is a licence which, by its terms, is made non-transferable except under a letter of authority from the authority who issued the liences or from any Import Trade Controller. The condition of the licence is that the goods will be utilised only for consumption as raw materials or accessories in the licence-holder's factories and that no portion thereof will be sold to any party. The contract in question is obviously linked up with this licence. Having regard to the terms of the licence, it is practical impossibility for the buyer to transfer his rights under the contract, and it was so held in A F.O. O. No. 173 of 1957:. The question still remains whether the rights of the seller under the contract can be transferred. I am satisfied that it can be so transferred. Mr. Sethia argues that having regard to Clause 3 of the contract which provides for reimbursement, it is not possible for the seller to transfer his right to obtain payment of the goods supplied under the contract. I am unable to accept this contention. The special endorsement on the contract shows that the letter of credit is to be opened by the sellers in favour of its nominee, the shippers. The special endorsement read with Clause 3(1) of the contract shows that the sellers should open the letter of credit in favour of the shippers, present the documents to the scheduled Bank in East Pakistan with whom the letter of credit is opened, obtain a certificate from that Bank that the goods had been shipped, present the certificate to the buyer within the time specified, and on presentation of the documents in Calcutta obtain payment in cash by way of reimbursement of the price of the goods. I see no reason why the seller's right to obtain payment on fulfilment of the conditions mentioned, cannot be transferred. We are concerned with possibilities, and not with what actually might or might not have happened. In order to come within the definition of Section 2(f), the contract by its own terms must be such that the rights and liabilities under the contract are not transferable. I am satisfied that at least the rights of the seller under the contract to obtain payment of the price of the goods can be transferred. In this view of the matter, it cannot be said that the contract is a non-transferable specific delivery contract. It must follow, therefore, that the contract which is a forward contract for the purchase and sale of raw jute is prohibited by Section 17 of the Forward Contracts Regulation Act, 1952 and the Notifications issued thereunder.
The object as also the consideration of the contract is forbidden fay law and as such by Section 23 of the Indian Contract Act the contract is void. The arbitration agreement is one of the several terms of this contract. The contract itself being illegal, the arbitration clause which forms part of the contract is also illegal and void. It is true that the arbitration clause is very widely worded. But the taint of illegality attaches to every part of the contract, including the arbitration clause. It is impossible to say that the arbitration clause is a legal contract although the rest of the contract is illegal. The width of the arbitration clause does not save it from the illegality. The whole of the contract including the arbitration clause, must be pronounced to be illegal and as such void.
(3.)IF the arbitration agreement is illegal, and therefore, legally non-existent, the fountain nead of the Arbitrator's jurisdiction disappears. It must follow, therefore, that any award which the Arbitrator may have made purporting to act under the legally non-existent arbitration clause is also invalid. I am, therefore, of the opinion that the award which the Arbitration purported to make under the supposed arbitration clause under this contract is also invalid and must be set aside.