Citation Codes

Equivalent Citations

citation codes

Case Number

A.S No. 400 of 1953 (M)

Attorney(S)

For the Appellant: , Advocates.
For the Respondent: , Advocates.

Judges

K.T Koshi, C.J
C.A Vaidialingam, J.

Acts

Central Government by sub-rule 2 of Rule 81 of the Defence of India Rules, Clause 2(1)
rule 80-B or sub-rule (2) or sub-rule (3) of rule 81 of the Defence of India Rules,
section 2 of Ordinance 18 of 1946 and section 2 of Central Act XXIV of 1946
Essential Supplies (Temporary Powers) Act, 1946 Central Act XXIV of 1946
S. 3. Section 17. Cl. (1) repealed the Essential Supplies (Temporary Powers)
section 4 of Act LII of 1950 the original section 2 of the 1946 Act,
Essential Supplies (Temporary Powers) Amendment Act, 1950, Central Act
section 2(d) of Act XXIV of 1946).44. Unless the Central Government
Central Act X of 1955 The Essential Commodities Act, 1955
Madras Acts XIV of 1946, XXIV of 1949 and XXVI of 1951
provisions of Section 3 of Central Act XXIV of 1946
Essential commodities Section 4 of Act LII of 1950
Section 5 of the Central Ordinance No. 18 of 1946,
contention.34. Section 5 of Ordinance 18 of 1946,
Essential Supplies (Temporary Powers) Act, 1946.
section 5 of the Ordinance.38. Section 17(3)(a)
1946 Act by the 1950 Act, the Order of 1944
Ss. 3 and 17 of Central Act XXIV of 1946
Section 2 of Central Act XXIV of 1946.
Sub-item 1 of clause (a) of section 2
Ordinance.21. Clause (d) of Section 2
S. 2(a) of Central Act XXIV of 1946,
(j) of sub-section 2 of Section 3
section 2 of Act XXIV of 1946,
section 3 of Act XXIV of 1946,
(1) of sub-section (a) of S. 2
section 3(1). Section 3(2)
SECTION 2 INTEREST ACT
16-8-1950; Section 2
section 17(3)(b)
Section 1(3),

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Smart Summary

Concise Analytical Summary of the Judgment (Vaidialingam, J.)

Factual and Procedural Background

The plaintiff, a merchant at Kozhikode, sued the defendant, a firm trading in oilcakes at Madras, for Rs. 9,000 as damages for breach of a contract dated 5 December 1950 for the supply of 200 tons of groundnut oilcake (100 tons for January 1951 and 100 tons for February 1951) at Rs. 190 per ton F.O.R., and for other reliefs. The plaintiff alleged the contract was concluded through a broker, that both parties accepted it and took steps towards performance (including arrangements for gunny bags), but that the defendant unilaterally cancelled the contract and failed to supply the goods when prices rose, thereby committing breach; plaintiff claimed damages at Rs.45/ton.

The defendant denied liability, asserting (i) the broker had informed them the plaintiff would not agree to the contract terms and the contract had been abandoned by the plaintiff, (ii) alternatively that the plaintiff failed to supply gunny bags in time, and (iii) that the contract was a void/inoperative "forward contract" in groundnut oilcake prohibited by the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order, 1944. The defendant also alleged the plaintiff's claimed damages were excessive.

The Subordinate Judge, Kozhikode, found that the defendant breached the contract and assessed damages at Rs. 8,500, but held that the contract was void and unenforceable because it was prohibited by the 1944 Order, and therefore dismissed the suit. The plaintiff appealed that ruling on the legality point and the correctness of the damages assessment.

Legal Issues Presented

Whether the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order, 1944 (the "1944 Order") continued in force so as to render the plaintiff's December 5, 1950 contract in oilcakes void or unenforceable — in particular whether the 1944 Order was kept alive by the Essential Supplies (Temporary Powers) Ordinance, 1946 (Ordinance No. 18 of 1946) and/or the Essential Supplies (Temporary Powers) Act, 1946 (Central Act XXIV of 1946), and by subsequent amendments (notably the Essential Supplies (Temporary Powers) Amendment Act, 1950, Central Act LII of 1950).
Whether, on the facts, the defendant committed a breach of contract and, if so, what damages the plaintiff was entitled to recover.

Arguments of the Parties

Appellant (Plaintiff) — represented by the Advocate General

Contended that the 1944 Order, so far as oilcakes are concerned, ceased to have effect on 30 September 1946 when the Defence of India Rules expired, and that none of the subsequent enactments kept that portion of the 1944 Order alive.
Argued that the 1950 amendment (Central Act LII of 1950) which added cattle fodder (including oilcakes) to the definition of essential commodities in Act XXIV of 1946 does not render prior contracts illegal unless the Central Government had made a notified order under section 3 after that amendment; absent any such notified order, the December 5, 1950 contract is not illegal.

Respondent (Defendant) — represented by Mr. P. Sreenivasa Ayyengar

Contended that the 1944 Order was kept alive by Ordinance No. 18 of 1946 (via section 5) and thereafter by Central Act XXIV of 1946 (via sections 3 and 17), so that the prohibition on forward contracts in oilcakes continued in force.
Relied on the 1950 amendment to the 1946 Act (Central Act LII of 1950) which included cattle fodder (expressly including oilcakes) among essential commodities, and argued that from 16 August 1950 the 1944 Order applied to oilcakes.
Also contested the trial judge's findings on breach of contract and factual points (e.g., that the plaintiff failed to supply gunny bags or that a cancellation letter dated 18-12-1950 had been sent), and sought to challenge the damages assessment as excessive.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
State of Bombay v. Virkumar Gulabchand Shah, A.I.R. 1952 S.C. 335	The test whether an order issued under the Defence of India Rules is saved by later enactments: whether the 1944 Order "would have been a good Order" if re-promulgated after the 1946 Ordinance (thus saved by the saving clauses).	The court cited the Supreme Court's test and applied it to the oilcakes issue. It accepted the test's utility but concluded that, unlike turmeric in that case, oilcakes were not within the definition of "food stuffs" or other items covered by the 1946 enactments as originally framed; thus the test did not operate to save the 1944 Order in respect of oilcakes.
Agarwal Ayyengar and Co. Ltd. v. The State, A.I.R. 1951 Bom. 397	Principle that the powers under section 3 of the 1946 Act/Ordinance related only to commodities defined as "essential commodities" and consequently only orders concerning such commodities could be continued in force.	The court adopted the Bombay High Court's reasoning that the words in section 3 ("thereof", "therein") refer back to "essential commodity", and used this principle to hold that orders regarding commodities not defined as essential could not be continued by the Ordinance/Act; hence the 1944 Order as to oilcakes was not continued.

Court's Reasoning and Analysis

The court's legal analysis proceeded in distinct steps, applying statutory construction and precedent from higher and coordinate courts to the sequence of instruments:

Context and starting point: The 1944 Order (issued under sub-rule (2) of Rule 81 of the Defence of India Rules) prohibited forward contracts in specified vegetable oils and oilcakes. The Defence of India Rules expired on 30 September 1946, so orders made under them would normally expire then.
Ordinance No. 18 of 1946 (Essential Supplies (Temporary Powers) Ordinance) came into force on 1 October 1946. Section 2 defined "essential commodity" (including "food stuffs" and edible oilseeds and oils) but did not include oilcakes. Section 5 of the Ordinance preserved ("continued in force") orders made under the Defence of India Rules only insofar as they were "consistent with the Ordinance" and therefore only insofar as they related to matters and commodities which the Ordinance covered (i.e., essential commodities as defined in section 2).
Construction of section 5 and section 3(1) of the Ordinance: The court emphasized that the powers in section 3 refer expressly to "essential commodity" and that the subsequent reference words ("thereof", "therein") relate back to those essential commodities; consequently, only Defence of India Orders that concerned such essential commodities could be continued by the Ordinance under section 5. Because oilcakes were not within the Ordinance's definition of "essential commodity" as originally enacted, the 1944 Order could not be deemed "consistent with the Ordinance" in respect of oilcakes and thus section 5 did not keep that portion of the 1944 Order alive.
Effect of Central Act XXIV of 1946 (the Act which replaced the Ordinance): Section 17(2) of the Act continued orders made or deemed made under the Ordinance and in force immediately before the Act's commencement. But the court held that for the same reasons section 5 of the Ordinance did not apply to oilcakes, the 1944 Order as to oilcakes was not in force immediately before the Act and thus section 17 could not revive or continue it.
Examination of the 1950 amendment (Central Act LII of 1950): That amendment added "cattle fodder" (explicitly including oilcakes and other concentrates) to the definition of essential commodities in section 2 of Act XXIV of 1946 with effect from 16 August 1950. The court observed that (i) the amendment was not stated to be retrospective and therefore operates only prospectively from 16‑8‑1950, and (ii) even after the amendment a prohibition under the 1944 Order could not apply unless the Central Government had issued a fresh "notified order" under section 3 of the 1946 Act to exercise control over the newly included item. The mere inclusion of oilcakes in the definition did not automatically revive the earlier 1944 Order, and no such notified order had been shown to have been issued.
Reliance on precedent and tests: The court adopted the tests and principles from the Supreme Court decision (State of Bombay v. Virkumar Gulabchand Shah) and the Bombay High Court decision (Agarwal Ayyengar and Co. Ltd. v. The State) — namely, that only orders which would have been "good" if re-promulgated under the Ordinance/Act (i.e., those relating to essential commodities covered by the Ordinance/Act) could be saved by the saving clauses. Applying these tests, the court concluded oilcakes did not come within the items covered by the Ordinance/Act as originally enacted and thus the 1944 Order in respect of oilcakes ceased to have effect from 1 October 1946.
Consequence: Since the 1944 Order had ceased to operate for oilcakes and no notified order was produced to control oilcakes after the 1950 amendment, the court held the 1944 prohibition did not render the December 5, 1950 contract void or unenforceable.
Factual findings on breach and damages: The appellate court agreed with the learned Subordinate Judge's detailed factual findings: the broker (P.W.1) corroborated the plaintiff's account that the plaintiff had arranged for gunny bags and had not abandoned performance; evidence of the defendant's purported cancellation (Ext. B5) was not proved or was contradicted; correspondence and documentary evidence showed the defendant backed out while market prices were rising; and the trial court's assessment of market-based damages (accepting documentary price evidence, awarding Rs. 8,500) was reasonable. Therefore, the appellate court confirmed the trial court's findings on breach and damages.

Holding and Implications

Holding: The judgment of the Subordinate Judge insofar as it held the contract void under the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order, 1944 is set aside. The appellate court held that the 1944 Order had ceased to have effect with respect to oilcakes from 1 October 1946 and was not revived by subsequent enactments in the circumstances of this case. The court confirmed the trial court's factual findings that the defendant committed a breach of contract and affirmed the award of damages.

Direct consequences for the parties (as ordered by the court):

The plaintiff's suit is decreed for Rs. 8,500 as damages, with interest and proportionate costs here and in the court below.
Regarding the portion of the claim that was disallowed, the defendant is awarded proportionate costs in the suit and in the appeal.

Broader implications: The court applied established tests from higher and coordinate courts to limit the saving of Defence of India Orders to matters covered by the definition of "essential commodity" in the 1946 instruments. The opinion does not announce or purport to create a new legal principle beyond its construction of the specific statutory saving provisions and their application to oilcakes; the direct effect is limited to the enforceability of the contract between these parties.

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Ahamed Koya And Another v. Murugesa Mudaliar Son & Co.

The Judgment of the Court was delivered by

Vaidialingam, J.:— This is an appeal by the plaintiff against the dismissal by the learned Subordinate Judge of Kozhikode, of his suit O.S 38 of 1951 on the ground that the suit contract is void and not legally enforceable, in view of the provisions of the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order, 1944.

2. The plaintiff, who is a merchant carrying on business at Kozhikode, filed the suit against the defendant, a firm of merchants carrying on business in Oilcakes at Madras, for recovery of a sum of Rs. 9,000/- as damages for breach of contract and for certain other reliefs. The plaintiff's case was that on 5th December, 1950, the defendant entered into a contract with the plaintiff through a broker for the supply of 200 tons of groundnut oilcake at Rs. 190/- per ton of 2240 lbs. F.O.R The delivery was to be in January and February 1951 at the rate of 100 tons each month and that the plaintiff is to supply necessary gunnies, 15 days before the despatch. The plaintiff further alleged that the contract was accepted by both parties and parties took further steps in fulfilment of the contract, but the defendant, without any justification whatsoever purported to cancel the contract by his unilateral declaration and did not supply the goods and as such, committed breach of contract. According to the plaintiff, the defendant so committed a breach of contract, in view of the fact that prices had gone up considerably after the date of the contract. The plaintiff, on these allegations, claimed damages at Rs. 45/- per ton, though the market rate on the date of the breach was much higher.

3. The suit was resisted by the defendant on several grounds. Substantially, the defence was that the broker, who brought about the contract, had informed the defendant that the plaintiff was not agreeable to the terms of the contract and as such, the contract had been given the go-by even by the plaintiff himself and in view of this, the defendant had cancelled the contract by writing to the plaintiff as early as 18-12-1950. Alternatively, the defendant pleaded that in any event, the plaintiff did not perform his part of contract namely, of supplying the gunny bags within time and as such, the plaintiff had committed a breach of contract.

4. There was another short ground of defence mentioned in paragraph 21 of the written statement to the effect that the suit contract being a “Forward Contract in groundnut oilcake” is invalid and unenforceable. No further details as to this contention were given in the written statement. The defendant also in the end, contended that the damages claimed by the plaintiff were excessive. Here again, it must be stated, the defendant did not state as to what according to him, was the market rate during the relevant period.

5. The learned Subordinate Judge considered the various contentions of both the parties and came to the conclusion that the plaintiff had not revoked the suit contract and he further held that it was the defendant who committed a breach of contract.

6. On the question of damages, the learned Judge held that in the month of January 1951, the difference in price ranged between Rs. 43 to 44 and in the month of February 1951, the price ranged at about Rs. 42 per ton over and above the contract rates. In this view, the learned Judge reduced the claim of the plaintiff which was at Rs. 45/- per ton and held that the plaintiff would be entitled only to a sum of Rs. 8,500/- as damages. In this connection, it may also be stated that the learned Judge has observed that there is no dependable counter-evidence regarding the price given by the plaintiff, on the side of the defendant.

7. On the question of the illegality or void nature of the contract, as contended by the defendant, the learned Judge, after a reference to the various statutes having a bearing on this matter, came to the conclusion, that the contract was hit by the provisions of the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order 1944. According to the learned Judge though this Order should have normally expired on 30th September, 1946, it has been kept alive by certain subsequent enactments of the Central and the State Governments. These enactments and the provisions therein will be considered in greater detail later in this Judgment.

8. In view of his finding against the plaintiff on this question of law, he dismissed the plaintiff's suit, though he had held in favour of the plaintiff on the question of breach and damages.

9. The learned Advocate General appearing for the plaintiff-appellant contended that the finding of the learned Judge on this question of law is not correct. According to the learned Advocate General, the Order of 1944, so far as oilcakes were concerned, had ceased to have effect on the 30th September, 1946, the date on which the Defence of India Rules expired. He further contended that none of the subsequent enactments has kept alive this portion of the Order of 1944.

10. He also referred to the amendments incorporated in Central Act XXIV of 1946 by Central Act LII of 1950 by which alone cattle fodder which will take in oilcakes, was specifically brought in. According to the learned Advocate General, unless the Central Government had taken further steps under the provisions of Central Act XXIV of 1946 in consequence of the amendment by the 1950 Act, the contract entered into in oilcakes on 5-12-1950 is not in any way illegal or void as being in contravention of any Statute.

11. On the other hand, Mr. P. Sreenivasa Ayyengar, learned counsel for the defendant-respondent contended that the Order of 1944 was kept alive by the Central Government Ordinance 18 of 1946 and also later on by the Central Act XXIV of 1946 which replaced the said Ordinance. The learned counsel fully supported the resoning and conclusion of the learned trial Judge on this point.

12. Mr. P. Sreenivasa Ayyengar also attacked that portion of the lower court judgment which was against him namely, the finding on the breach of contract by defendant. On the other hand, the learned Advocate General fully supported the finding of the learned Judge on this question of fact. This aspect of the matter will be considered by us after disposing of the question regarding the legality of the contract.

13. Before discussing the question of the legality or otherwise of the contract, we may state that in the lower court, the defendant appears also to have contended that oilcakes must be deemed to be included in “Food Stuffs” shown as one of the essential commodities under the Defence of India Rules and also included as an essential commodity in section 2 of Ordinance 18 of 1946 and section 2 of Central Act XXIV of 1946 and so, the ban imposed by the Order of 1944 must be deemed to continue, in so far as this kind of food stuff is concerned. The learned Judge has not accepted this contention of the defendant and before us no such contention has been taken and therefore, it is unnecessary for us to consider whether oilcakes can be considered to come within the term “Food-Stuffs”.

14. To appreciate the respective contentions of the learned Advocate General and Mr. P. Sreenivasa Ayyengar, it is necessary to note the enactments referred to and relied on by them.

15. There is no dispute that the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order 1944 was issued by the Central Government on 13th January, 1944 and came into effect from 25th January of that year. The said order was issued by virtue of the powers conferred on the Central Government by sub-rule 2 of Rule 81 of the Defence of India Rules, Clause 2(1) of the said Order defines an ‘article to which this Order applies’ as meaning any of the vegetable oils (whether raw, refined or solidified) or oilcakes specified in the first column of the schedule to that order. Sub-clause 3 of clause 2 again defines ‘Forward Contract’ as a contract for a delivery at some future date of any article to which that Order applied. Clause 3 states:

“No person shall, after the specified date for any article to which this Order applies, enter into any forward contract in that article.”

16. There is no dispute that the specified date for the article to which that Order applied was 12th January, 1944.

17. Clause 5 gave power to the Central Government by notification to exclude any contract or class of contracts from the provisions of that order. There is also no dispute that no such exclusion has been granted by the Central Government regarding oilcakes with which we are concerned. The schedule specified two main articles to which that Order applied. Item (1) was vegetable oils and that item had 8 sub-items dealing with 8 different types of oil. Item (2) dealt with oilcakes and that item also had 8 sub-items dealing with different types of cakes. Therefore, it is quite clear that oilcakes were brought within the prohibitions mentioned in the Order of 1944.

18. There is no dispute that the Defence of India Rules expired on 30th September, 1946 and with that the several Orders issued under the Defence of India Rules should also have normally expired. Therefore, this Vegetable Oil and Oilcakes Order of 1944 should have also normally expired on 30th September, 1946. We will have to consider whether this Order of 1944, so far as it relates to oilcakes, has been continued in force, or kept alive by the Ordinance 18 of 1946 which came into effect from 1st October, 1946.

19. The Central Government promulgated the Essential Supplies (Temporary Powers) Ordinance, 1946, Ordinance No. 18 of 1946 — and under Section 1(3), the Ordinance came into force on the 1st day of October 1946, that is the next day after the Defence of India Rules expired. The preamble to the Ordinance states that it was necessary to provide for continuation during a limited period of two years to control the production, supply and distribution of, and trade and commerce in food stuffs (including edible oilseeds and oils) and certain other commodities mentioned therein.

20. Section 2(a) defined an ‘Essential commodity’ as meaning any of the classes of commodities given therein as sub-items 1 to 8. Sub-item 1 of clause (a) of section 2 mentioned food stuffs. According to clause (c) of Section 2 ‘Food Stuffs’ shall include edible oilseeds and oils. It will be noted that oilcakes as such, have not been brought within the meaning of Essential Commodity in the Ordinance.

21. Clause (d) of Section 2 defined a ‘Notified Order’ as an Order notified in the official Gazette.

22. Section 3 of the Ordinance gave power to the Central Government by Notified Order for providing, regulating or prohibiting, etc., regarding any Essential commodity. Clause 2 of Section 3 dealt with several provisions that could be made under the Order issued under section 3(1). Section 3(2) deals with several matters and it is not necessary to go into them in any great detail. Section 5 provided for continuing in force of certain Orders. It runs as follows:

“Continuance in force of existing Orders — Until other provisions are made under this Ordinance, any order, whether notified or not, made by whatever authority under rule 80-B or sub-rule (2) or sub-rule (3) of rule 81 of the Defence of India Rules, in respect of any matter specified in section 3 which was in force immediately before the commencement of this Ordinance shall, notwithstanding the expiration of the said rules, continue in force so far as consistent with the Ordinance and be deemed to be an order made under Section 3, and all appointments, made, licences or permits granted and directions issued under any such order and in force immediately before such commencement shall likewise continue in force and be deemed to be made, granted or issued in pursuance of this Ordinance.”

23. According to the learned Advocate General, the effect of section 5 of the Ordinance is only to keep alive any such Order as mentioned in Section 3 which relates to an Essential Commodity within the meaning of section 2 of the Ordinance. If an article in respect of which any order contemplated under section 3 had been already issued, does not come within the definition of an Essential commodity under section 2 of the Ordinance, then such an Order will not come within the purview of the Ordinance and section 5 has no application to such Orders.

24. Shortly, his argument is, that articles which are outside the purview of an essential commodity as defined under the Ordinance are not dealt with under the Ordinance and all Orders issued under the Defence of India Rules in respect of those articles automatically ceased to have effect with effect from 1st October, 1946. On the other hand, Mr. Sreenivasa Ayyengar very vehemently contends that the 1944 Order dealing with vegetable oil and oilcakes is one in respect of any matter specified in section 3 and which was in force immediately before the commencement of this Ordinance, and according to him, that Order will continue to be in force notwithstanding the expiration of the Defence of India Rules.

25. A close examination of the Ordinance No. 18 of 1946 will establish that the learned Advocate General is very well founded in his argument that the Order of 1944 regarding oilcakes is not kept alive by section 5 of the Ordinance. We are not able to accept the construction placed on section 5 of the Ordinance by Mr. Sreenivasa Ayyengar.

26. The preamble to the Ordinance clearly shows that the power taken was to control the production, supply and distribution etc., of food stuffs and certain other articles mentioned therein. Section 2 defines what an essential commodity is. It does not contain oilcakes. Section 3(1) runs as follows:—

“Powers to control production, supply, distribution etc., of essential commodity:— (1) The Central Government so far as to it appears it to be necessary or expedient for maintaining or increasing supplies of any essential commodity, or for securing their equitable distribution and availability at fair prices, may by notified order provide for regulating or prohibiting the production, supply and distribution thereof, and trade and commerce therein.”

27. It will be seen that clause 1 of Section 3 extracted above again relates only to an ‘essential commodity’ or for their equitable distribution etc. Further, the notified order is to provide for rugulating or prohibiting the production, supply and distribution thereof, and trade and commerce therein. The words ‘thereof’ and ‘therein’ again relate only to an ‘essential commodity’.

28. Therefore, the entire power to act under Section 3 is only regarding an essential commodity which in turn, has been defined under section 2 of the Ordinance. The various matters mentioned in Cls. (a) to (j) of sub-section 2 of Section 3 can only relate to an essential commodity as defined in the Ordinance. Further Section 5 in dealing with what are the orders to be deemed to be an order under Section 3, itself says:

“Notwithstanding the expiration of the said rules, continue in force so far as consistent with the Ordinance and be deemed to be an order made under Section 3”.

29. Therefore, any order to be continued must be an order relating to an essential commodity defined in Section 2. It is only such orders which relate to any of the items mentioned in Section 2 that will be consistent with the Ordinance. All other orders regarding articles not covered by Section 2 will be orders inconsistent with the Ordinance. This is quite understandable, as the Ordinance specifically provided only for controlling the essential commodities defined under Section 2.

30. Therefore, in our view, the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order 1944 is not continued or kept in force by virtue of Section 5 of the Central Ordinance No. 18 of 1946, so far as Oilcakes are concerned.

31. Then the question arises, whether the Essential Supplies (Temporary Powers) Act, 1946 — Central Act XXIV of 1946 which replaced the Ordinance, has made any difference in this matter. The Act XXIV of 1946 came into force on 19-11-1946. The preamble of the Act was exactly the same as that of the Ordinance namely, to control the production, supply etc., in food stuffs (including edible oilseeds and oils) and the other commodities mentioned therein.

32. Section 2 defines an Essential commodity in the same way as the Ordinance did, Food stuffs mentioned as item (1) of sub-section (a) of S. 2 included edible oilseeds and oils. Section 3 again gave power to the Central Government for regulating etc. by notified order the several matters stated therein. Section 7 provided for penalties for contravening an order made under S. 3. Section 17. Cl. (1) repealed the Essential Supplies (Temporary Powers) Ordinance, 1946. As Mr. Sreenivasa Ayyengar has very strongly relied upon the provisions of S. 17 of the Act it is desirable to quote the same.

“17(1) The Essential Supplies (Temporary Powers) Ordinance, 1946 is hereby repealed.

(2) Any order made or deemed to be made under the said Ordinance and in force immediately before the commencement of this Act shall continue in force and be deemed to be an order made under this Act; and all appointments made, licences or permits granted and directions issued under any such order and in force immediately before such commencement shall likewise continue in force and be deemed to be made, granted or issued in pursuance of this Act.

(3) For the removal of doubts it is hereby declared—

(a) that for the purposes of the said Ordinance and this Act an order of the nature referred to in S. 5 of the said Ordinance made before the commencement of the said Ordinance and not previously rescinded shall be deemed to be, and always to have been, an order in force immediately before such commencement, notwithstanding that such order or parts of it, may not then have been in operation, either at all or in particular areas;

(b) that for the purposes of this Act an order made or deemed to be made under the said Ordinance and not rescinded prior to the commencement of this Act shall be deemed to be an order in force immediately before the commencement of this Act, notwithstanding that such order, or parts of it, may not then be in operation, either at all or in particular areas.”

33. According to Mr. Sreenivasa Ayyengar, learned counsel for the respondents, Ss. 3 and 17 of Central Act XXIV of 1946 read together, have the effect of continuing in force the 1944 Order in as much as the said Order has not been expressly cancelled. We are not able to accept this contention.

34. Section 5 of Ordinance 18 of 1946, as already stated, kept in force certain orders issued under the Defence of India Rules, in so far as they were consistent with the Ordinance. We have fully examined the scope of S. 5 of the Ordinance earlier and also expressed our opinion as to what orders will be deemed to be an order made under S. 3 of the Ordinance. Therefore, S. 17(2) will not assist the respondent, because the 1944 Order, in so far as it relates to oilcakes, was not issued under the Ordinance or can be deemed to be one made under the Ordinance as contemplated under S. 5 of the Ordinance.

35. Further, in our view, as the order relating to oilcakes has ceased to have effect from 1st October, 1946, it was not in force immediately before the commencement of the Central Act XXIV of 1946. Mr. Sreenivasa Ayyengar further contended that though the provisions of the 1944 Order may not have been in operation regarding the oilcakes after 1-10-1946, still the order must be considered to be one which was not in operation in part on the date of Central Act XXIV of 1946. The said Order has not also been rescinded prior to the commencement of the Central Act XXIV of 1946.

36. Therefore, he contended that by virtue of Cls. (a) and (b) of sub-s. (3) of S. 17, this order must be one which is to be deemed to be and always to have been an order in force immediately before the commencement of Act XXIV of 1946. We are not able to appreciate this contention either. Sub-clause (a) of Cl. 3 of S. 17 specifically refers to an order of the nature referred to in S. 5 of the Ordinance made before the commencement of the Ordinance and not previously rescinded.

37. Sub-clause (b) of the said sub-section further specifically refers to an Order made or deemed to be made under the Ordinance and not rescinded prior to the Act as one to be deemed to be an Order in force immediately before the commencement of the Act. As discussed earlier, section 5 of the Ordinance has no application to the 1944 Order, in so far as it related to oilcakes and, therefore, cl. (a) will not apply. Similarly clause (b) will not apply because the 1944 Order is, not an order made under the Ordinance, or one deemed to be made under the said Ordinance, as contemplated under section 5 of the Ordinance.

38. Section 17(3)(a) applies only to an order in respect of an essential commodity covered by the said Ordinance and section 17(3)(b) applies only to such orders made under the Ordinance or deemed to be made under the said Ordinance and not rescinded prior to the commencement of the Act. It has not been shown by Mr. Sreenivasa Ayyengar under what item of Essential Commodity will the oilcake come under either the Ordinance or the Act of 1946, as it originally stood, prior to its amendment in 1950.

39. Therefore, in our view, section 17 of the Act will not support Mr. Sreenivasa Ayyengar's contention and the said section read with section 3 does not keep alive or continue in force the 1944 Order regarding oilcakes.

40. Then we come to the next enactment, namely. The Essential Supplies (Temporary Powers) Amendment Act, 1950, Central Act No. LII of 1950. The said Act made certain amendments to Central Act XXIV of 1946. It came into force on 16-8-1950; Section 2 provides for the omission of the preamble to Act XXIV of 1946. The important provision made in the said Act was, relating to certain amendments in respect of section 2 of Act XXIV of 1946.

41. As stated earlier, the original section 2 of Act XXIV of 1946, did not take in oilcakes as one of the Essential commodities Section 4 of Act LII of 1950 included in the original section 2 another item as 1(a) namely ‘Cattle fodder’. A sub-cl. (cc) was added to the original section 2 as ‘Cattle fodder includes oilcakes and other concentrates’. It is not necessary to refer to the other amendments provided by that Act of 1950.

42. It will be seen that by section 4 of Act LII of 1950 the original section 2 of the 1946 Act, which defined an essential commodity, included Cattle fodder also and cattle fodder was stated to include oilcakes and other concentrates. Cattle fodder, which includes oilcakes, which is the subject before us, was for the first time included as an essential article on 16-8-1950. Mr. Sreenivasa Ayyengar contended that, at any rate, as oilcakes have been included with effect from 16-8-1950, the contract entered into in this case in oilcakes on 5-12-1950 is hit by the Order of 1944.

43. It is not possible for us to accept this contention either. The amendment is not stated to be retrospective and therefore, the amendment can take effect only from 16-8-1950. In that case, if the Central Government decides to exercise control under section 3 of Act XXIV of 1946, then it can be only by a ‘notified order’ as stated therein. ‘Notified order’ means an order notified in the Official Gazette (see section 2(d) of Act XXIV of 1946).

44. Unless the Central Government has taken action as contemplated in the Act in respect of this article newly brought within the definition of Essential article, it is not affected by the provisions of that Act. Much less will it be affected by the Order of 1944, as it has ceased to have effect with effect from 1-10-1946 regarding oilcakes.

45. The learned Judge has placed very strong reliance on the amendment effected by Central Act LII of 1950 by which oilcakes and other concentrates were included in the essential commodity, cattle fodder in the original Section 2 of Central Act XXIV of 1946. According to the learned Judge, at any rate, from 16-8-1950, the Order of 1944, which was all along not in operation springs back to life from that date and therefore, the suit contract, which was executed on 5-12-1950, is affected by the 1944 Order. We are not able to accept this line of reasoning.

46. As stated earlier, the amendment is not stated to be retrospective and it is only prospective. Even here, Section 17 of the 1946 Act cannot come into play, because this item of cattle fodder including oilcakes and other concentrates has not been shown as an Essential commodity in the Ordinance of 1946. Therefore, unless a special notified order is made controlling the same by virtue of the powers conferred on the Central Government under Central Act XXIV of 1946, the suit contract is not in any way opposed to any law, because there has been really no notified order regarding those commodities.

47. Though, no doubt, at any rate, after the passing of Central Act LII of 1950 on 16-8-1950, it would have been competent for the Central Government to re-issue the Order of 1944 relating to oilcakes, they have not done so. Therefore by the mere amendment of the 1946 Act by the 1950 Act, the Order of 1944 relating to oilcakes will not spring back to life.

48. We may also refer to Central Act X of 1955 — The Essential Commodities Act, 1955 — where under Section 2, an Essential Commodity has been taken to include Cattle fodder including oilcakes and other concentrates.

49. Mr. Sreenivasa Ayyengar referred to the Madras Acts XIV of 1946, XXIV of 1949 and XXVI of 1951 and according to him, ‘manures’ mentioned in the said schedules will take in oilcakes also. It is not possible for us to accept this line of argument. When the Central Act LII of 1950 mentions Cattle fodder as including oilcakes, it is difficult for us to accept the contention that the Madras Acts when dealing with manures, intended to deal with cattle fodder including oilcakes.

50. Similarly, the reliance placed upon a notification dated 20-5-1952 issued by the Central Government directing certain amendments in the Vegetable Oil and Oilcakes (Forward Contracts Prohibition) Order 1944 do not, in our opinion, have any bearing on this point. It must be remembered that though oilcakes was not dealt with by the original Act XXIV of 1946, it dealt with food stuffs and food stuffs included edible oilseeds and oils. The first item, in the schedule of the 1944 Order dealt with Vegetable Oils.

51. Considered from this point of view, the notification does not throw any light on the point in issue so far as oilcake is concerned. We may also refer to entry 33 in List 3 of 7th schedule of the Constitution. Entry 33(b) mentions food stuffs, including edible oilseeds and oils and entry 33(c) refers to cattle fodder including oilcakes and other concentrates. Therefore, it will be seen that oilcake is being treated along with cattle fodder.

52. Mr. Sreenivasa Ayyengar relied also on the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952 — Central Act No. LII of 1952. Section 2 of the said Act stated that the goods specified in the Schedule to the Act are declared to be essential for the life of the community and in the schedule item (12) mentioned “cattle foods”. The argument of the learned counsel was that because cattle-food is treated as an essential commodity, oilcake, which is included in cattle fodder, must have been all along in the contemplation of the Legislature and therefore, the Order of 1944 must have been continued in force by the 1946 Ordinance and Act.

53. We are governed by the provisions of the Ordinance and the Act of 1946 prior to its amendment in 1950. Mr. Sreenivasa Ayyengar, as stated earlier, could not lay his hands on any particular item enumerated in the Ordinance or the Act which could take in oilcakes. The fact that in 1952, the Legislature declared cattle foods as one essential for the life of the community, will not affect a contract entered into in 1950.

54. We may also refer to the decision of the Supreme Court reported in State of Bombay v. Virkumar Gulabchand Shah, A.I.R 1952 S.C 335. Though the actual decision of their Lordships turned on the question whether turmeric is a food stuff within the meaning of S. 2(a) of Central Act XXIV of 1946, still the test laid down by their Lordships is very helpful.

55. Though Mr. Sreenivasa Ayyengar relied upon this judgment as an authority in his favour, we are not able to find in that judgment any support for the stand taken by Mr. Sreenivasa Ayyengar. As stated earlier the question related to a decision as to whether turmeric was a food stuff. Their Lordships ultimately held that it was a food stuff within the meaning of Act XXIV of 1946 and as such, the orders issued under the Defence of India Rules were continued in force by virtue of S. 5 of the Ordinance and by Section 17(2) of the Act.

56. This conclusion was arrived at by their Lordships, because of their view that the turmeric was a food stuff, though it was not specifically stated to be so. But the present case before us is entirely different. In this case Mr. Sreenivasa Ayyengar, as stated earlier, is not able to bring oilcakes within any of the items enumerated as essential commodities either in the Ordinance of 1946 or the Act of 1946 as it stood prior to the amendment in 1950.

57. If that is so, oilcake does not come within the ambit of the Ordinance or the Act. In fact in our view, the Central Government could have re-issued a notification regarding oilcakes either under the Ordinance or under the Act of 1946 prior to its amendment in 1950.

58. But their Lordships lay down a test to find out whether a particular order issued under the Defence of India Rules is continued by the Ordinance and the Act of 1946. At page 339 Mr. Justice Bose with whom Mr. Justice Fazal Ali agreed, observed as follows:

“As I see it, the test here is whether the Order of 1944 would have been a good Order, had it been re-promulgated after the Ordinance of 1946. In our opinion, it would, and it follows that it is saved by the saving clauses of the Ordinance and the Act. I have already set out S. 5 of the Ordinance. In my opinion, the order of 1944 falls within its purview and if it is saved by that, it is equally saved by S. 17(2) of the Act.”

59. To a similar effect is the decision of the Bombay High Court of Bavdekar and Chainani JJ., in Agarwal Ayyengar and Co. Ltd. v. The State, A.I.R 1951 Bom. 397. At page 403, para 12 runs as follows:

“The words used in both the sub-ss. (1) and (2) of S. 3 are also clear and unambiguous and empower the Central Government to issue orders only with regard to the commodities specified as essential commodities in the Act. The inference that the Legislature intended to confine the powers of the Central Government to essential commodities only and did not intend to authorise it to issue orders with regard to other commodities is also borne out by the fact that the Act was amended in 1949 in order to empower the Central Government to issue orders with regard to cotton.

I am, therefore, of the opinion that the Central Government was not competent to issue any order in regard to lickerin wire either under the Essential Supplies (Temporary Powers) Ordinance, 1946, or under the Essential Supplies (Temporary Powers) Act, 1946. These enactments continued in force only those orders issued under the Defence of India Rules which could be issued in exercise of the powers conferred by these enactments.

As in exercise of these powers the Central Government could not make any order in regard to lickerin wire, the Cotton Textiles (Raw Materials and Stores) Order, 1946 issued under the Defence of India Rules did not continue in force after 30-9-1946, in so far as it related to lickerin wire.”

60. At page 402 the learned Judges again have considered the effect of provisions of Section 3 of Central Act XXIV of 1946 and come to the conclusion that the words, ‘thereof and ‘therein’ have obviously referred to the words ‘essential commodity’ used in the earlier part of the sub-section. We respectfully adopt the test laid down by their Lordships of the Supreme Court and the learned Judges of the Bombay High Court.

61. Applying the test laid down by the Supreme Court and the principles laid down by the Bombay High Court, we are of opinion, that the Central Government could not have issued an order regarding oilcakes under the provisions of Central Act XXIV of 1946 till it was amended by Central Act LII of 1950. After the amendment by Central Act LII of 1950, we have already held that unless a notified order is issued by the Government, there will be no prohibition for dealing with the oilcakes.

62. For the reasons given above, we are not able to accept the conclusion arrived at by the learned Judge on this question. Accordingly we differ from his findings on this point and we hold that the suit contract is not in any way affected by the provisions of the Vegetable Oils and Oilcakes (Forward Contracts Prohibition) Order of 1944 which, according to us, has ceased to have effect regarding oilcakes from 1-10-1946 and as such, we hold that the suit contract is enforceable by the plaintiff, if he is otherwise entitled to do so.

63. As stated earlier, the learned Judge has held in favour of the plaintiff on the question of breach Mr. Sreenivasa Ayyengar, appearing for the respondent, has contended that the finding of the learned Judge on this point is not correct. In our opinion the learned Judge has very elaborately considered the documentary and oral evidence adduced on this point and has come to a correct conclusion that it was the defendant who has committed a breach of contract. As we are in entire agreement with the reasons and conclusions of the learned Judge on this point, we consider it unnecessary to very elaborately deal with the evidence.

64. As stated earlier, the contract was on 5-12-1950. The defendant's contention is that the broker P.W 1 informed them that the plaintiff is not willing to agree to the supply of gunny bags. The broker has been examined as P.W 1 and the learned Judge has accepted his evidence in entirety. He has stated that he never informed the defendant about the inability of the plaintiff to supply the gunny bags.

65. On the other hand, he has definitely stated that the plaintiff has informed him that they are making the necessary arrangements for performing their part of the contract. We have no hesitation in accepting the evidence of P.W 1 and holding that the case of the defendant in this respect is not true.

66. The further contention of Mr. Sreenivasa Ayyengar is that the defendant has already cancelled the contract by sending Ext. B5 as early as 18-12-1950. This letter has not been received by the plaintiff and the learned Judge has not chosen to accept the evidence of the defendant regarding Ext. B5 or the press copy marked as Ext. B38(a). A perusal of the evidence of the defendant clearly shows that there is a lot of contradiction in the matter of sending this letter and we entirely agree with the learned Judge that the evidence of the defendant regarding the sending of this letter, cannot be accepted.

67. Even if the defendant has proved the sending of the letter, Ext. B5 cancelling the contract, in our opinion, he is not entitled in law to so cancel a concluded contract unilaterally. Having entered into an agreement, it is not open to the defendant to resile from the same on untenable grounds as he pleases. Therefore, such a cancellation has no effect in law, so far as the plaintiff's rights are concerned.

68. Mr. Sreenivasa Ayyengar further contended that the plaintiff committed a default in making arrangements for the delivery of the necessary gunny bags. This contention also cannot be accepted, because as early as 18-12-1950 the plaintiff, by Ext. B2 (also A2), has already informed the defendant about the contract and also about his readiness to deliver the necessary gunny bags. In fact, the defendant by Ext. A3, on 9-12-1950 asked the plaintiff either to send gunny bags before the 15th or to send money before 30-12-1950.

69. There is further correspondence between the parties and on 28-12-1950 the plaintiff again by Ext. A5 writes to the defendant stating that they have made arrangements to supply the gunny bags at Adoni and asking for information as to whom the gunny bags are to be delivered. But to this letter, the defendant sends a reply on 30-12-1950, Ext. A6 sating that the broker has already informed him about the cancellation of the contract and further information may be obtained from the broker.

70. This is rather a very astounding position taken up by the defendant and even in Ext. A6, he does not say that he has already cancelled the contract by his letter Ext. B5 dated 18-12-1950. A reference to the correspondence Exts. A3 to A8 and B2, B5 and B6 and the oral evidence adduced in this case clearly show that it was the defendant who has committed a breach of contract. It is very clear that at all material times the plaintiff was ready and willing and even anxious to have the contract completed and fulfilled. The reasons for the defendant backing out from this contract on flimsy grounds are not far to seek.

71. The evidence clearly shows that immediately after 5-12-1950, the date of the contract the market was steadily rising and prices were shooting up. Under these circumstances, it is not likely that the plaintiff would do anything to commit a breach of contract, because he would only be anxious to get the goods for which he had already contracted for at a lesser price. Considering all these circumstances, we agree with the finding of the learned Judge that the plaintiff did not revoke the contract and that it was the defendant who has committed a breach of the contract.

72. Mr. Srinivasa Ayyengar did not very seriously attack the finding of the learned Judge on the question of damages. In fact, the documentary evidence filed on behalf of the plaintiff, Exts. A22 to A28 clearly shows that the market was rising very much and that the price in January was about Rs. 43 to 44 and in the month of February 1951 it was about Rs. 42 more than the contract rate.

73. As observed by the learned Judge, the defendant has not adduced any dependable counter evidence regarding the price during the relevant period. The learned Judge was perfectly right in accepting the evidence referred to above and awarding the sum of Rs. 8,500/- as damages to the plaintiff. We confirm the finding of the learned Judge on this point also. To conclude, we confirm the findings of the learned Judge on the question of breach and damages, but we reverse the finding of the learned Judge on the question of the legality of the contract.

74. In the result, the judgment and decree of the learned Subordinate Judge on the question of legality of the contract is set aside and the plaintiff's suit is decreed for the sum of Rs. 8,500/- with interest and proportionate costs here and in the court below. Regarding the portion disallowed, the defendant will get proportionate costs in the suit and in the appeal before us.

Ahamed Koya And Another v. Murugesa Mudaliar Son & Co.

Concise Analytical Summary of the Judgment (Vaidialingam, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant (Plaintiff) — represented by the Advocate General

Respondent (Defendant) — represented by Mr. P. Sreenivasa Ayyengar

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Ahamed Koya And Another v. Murugesa Mudaliar Son & Co.

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