S.C.R.

SUPREME COURT REPORTS

SHIVJI NATHUBHAI

v ..

THE UNION OF INDIA & . OTHERS B. P. SINHA, c. J., P. B. GAJENDRAGADKAR,

K. N. WANCHOO, K. c. DAS GUPTA AND J. c. SHAH, JJ.

Mining Lease-Grant by the State Governmnt-:Cancell_at_ion. jn review by the Central Government-Such cancellation if a quasi-Judicial act-Mineral Concession Rules, r949. rr. J2S4 Rule 54 of the Mineral Concession Rules, r949, provided as follows:

"Review. Upon receipt of such application, the Central Government may, if it thinks fit, call for the relevant records and other information from the Provincial Government, and after considering any explanation that may be offered by the Provincial Government, cancel the order of the Provincial Government or revise it in such manner as the Central Government may deem just and proper." .

The appellant was granted mining leases in respect of five areas and possession was delivered to him. On an application for review made by one of the respondents under r. 52 of the Rules, the Central Government, without giving the appellant an opportunity of being heard, cancelled the leases with regard to two of the areas and directed the State Government to grant leases in respect thereof to the said respondent. The appellant applied to the High Court under Art. 226 of the Constitution for quashing the said order. The Single Judge who heard the application as well as the Division Bench on appeal held that the order of cancellation was an administrative order and the appellant was not entitled to a hearing. It was contended on behalf of the appellant in this Court that rr. 52-55 of the Rules showed that the proceeding before the Central Government was a quasijudicial proceeding and, consequently, the rules of natural justice must apply.

Held, that the contention must prevail and the order of cancellation be quashed.

In exercising its power of review under r. 54 of the Mineral Concessions Rules, r949, the Central Government acted judicially and not administratively. Assuming that the act of the State Government in granting a mining lease was an administrative act, it was not correct to say that no right of any kind passed to the lessee thereunder untill the review was decided by the Central Government where a review had been applied for.

Rule 52, therefore, by giving the aggrieved party the right to a review created a lis between him and the lessee and, consequently, in the absence of anything to the contrary either in r. 54 or the statute itself, there could be no 99

January r9.

doubt that the Central Government was acting quasi-judicially under r. 54.

Shivji lVathubai . .

Province of Bombay v. Kushalda.s S. Advani. [r950] S.C.R.

The Uni:: of India 621• applied.

and Others R. v. Electricity Commissioner. (r924) I. K. B. r7r, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 428 ofl959.

Appeal from the judgment and order dated February 25, 1959, of the Punjab High Court (Circuit Bench) at Delhi in Letters Patent Appeal No. 47-D of 1955, arising out of the judgment and order dated November 28, 1955 of the said High Court in \Vrit Petition No_ 306-D of 1954.

N. C. Chatterjee, J. B. Dada.chanji, S. N. Andley.

Rameshwar Nath and P. L. Vohra, for the appellant.

K. Daphtary. Solicitor-General of India, R. Gapapathy Iyer, R. H. Dhebar and T. M. Sen, for respondents Nos. 1 & 2.

G. S. Pathak, S.S. Shukla and Mrs. E. Udayaratnam, for respondent No. 3.

1960. January 19. The Judgment of the Court was delivered by

Wanchoo J.

WANCHOO J.-This appeal upon a certificate granted by the Punjab High Court raises the question whether an order ofthe Central Government under r. 54 of the Mineral Concession Rules, 1949, (hereinafter called the Rules) framed under s. 6 of the Mines and Minerals (Regulation and Development) Act, No. 53of1941, (hereinafter called the Act) is quasijudicial or administrative. The brief facts necessary for this purpose are these.

The appellant was granted a mining lease by the then Ruler of Gangpur State on December 30, 194 7, shortly before the merger of that State with the State of Orissa on January 1, 1948.

This lease was annulled on June 29, 1949. Thereafter the appellant was granted certificates of approval in respect of prospecting licences and mining leases_ Eventually, the appellant applied on December 19, 1949, for mining leases for manganese in respect of five areas in the district of Sundergarh (Orissa). He was asked on July 4, 1950, to submit a separate

...

application for each area which he did on July 27, z~'6o Ul50. . Some defects were pointed out in these appli- Shivji N at!tubai. cations and therefore the appellant submitted fresh v. applications on September 6, 1950, after removing the The Union of India defects. In the mea.ntime, the third respondent also and Others made applications for mining leases for manganese for the same area on July 10, 1950. These applications Wanchoo J. were not accompanied by the deposit required under r. 29 of the Rules. Consequently, the third respondent was asked on July .24, 1950, to deposit a sum of Rs. 500, which it did on August 3, 1950. It was then found that the third respondent's applications were defective. It was therefore asked on September 5, 1950, to send a separate application in the prescribed form for each block and thereupon it submitted fresh applications on September 6, 1950. Eventually, on December 22, 1952, the State of Orissa granted the mining leases of the five areas to the appellant taking, into account r. 32 of the Rules, which prescribed priority. It was held that the appellant's applications were prior and therefore the leases were granted to him. Thereafter on April 21, 1953, posse£sion of the areas leased was delivered to the appellant. It seems, however, that the third respondent had applied. for review to the Central Government under r. 52 of the Rules. This review application was allowed by the Central Government on January 28, 1954, and the Government of Orissa was directed to grant a mining lease to the third respondent with respect to two out of the five areas .

The appellant's complaint is that he came to know in February, 1954, that the third respondent had applied to the Central Government. under r. 52 for review. He thereupon addressed a letter to the Central Government praying that he might be given a hearing before any order was passed on the review . application. He was, however, informed on July 5, 1955, by the Goyernment of Orissa of the order passed by the Central Government on January 28, 1954, by which the lease granted to him by the State of Orissa with respect to two areas was cancelled. Consequently, .

he made an application under Art. 226 of the

1960 Constitution to the Punjab High Court praying for quashing the order of January 28, 1954, on the Shivji Nathubhai d th t •t · d" 1 d d th groun a 1 was a quasi-JU 1ma or er an e The unio:· of India rules of natural justice had not been followed inasmuch and Others as he had not been given a hearing before the review application was allowed by the Central Government, Wanchoo f. thus affecting his rights to the lease granted by the State of Orissa. The writ petition was heard by a learned Single Judge of the High Court and it was held that the order was not a quasi-judicial order but merely an administrative one and that there being no lis, the appellant was not entitled to a hearing. In the result, the writ petition failed. The appellant went up in Letters Patent Appeal to a Division Bench of the High Court, which upheld the order of the learned Single Judge. The appellant then applied for a certificate to permit him to appeal to this Court which was granted; and that is how the matter has come up before us.

Shri N. C. Chatterji appearing on behalf of the appellant contends that the Central Government was acting in a quasi-judicial capacity when it passed the order under r. 54 of the Rules and therefore it was incumbent upon it to hear the appellant before deciding the review application, and inasmuch as it did not do so it contravened the principles of natural justice which apply in such a case and the order is liable to be quashed. In support of this, learned counsel relies on Nagendra Nath Bora and another v.

The Commissioner of Hills Division and Appeals, Assam and others ('), and submits that rr. 52 to 55 of the Rules which are relevant for the purpose clearly show that the proceeding before the Central Government is a quasi-judicial proceeding in view of the following circumstances appearing from these rules: (1) Rule 52 gives a statutory right to any person aggrieved by an order of the State Government to apply for review in case of refusal of a mining lease ; (2) It also prescribes a period of limitation, namely, two months; (3) Rule 53 prescribes a fee for an application under r. 52. These circumstances taken with the circumstance that a lis is

(I) [1958] S.C.R. 1240.

• - •

.• -•

created as soon as a person aggrieved by an order is z960 given the right to go up in review against another 51 . .. N h b . person in whose favour the order has been passed by nv; i at u ai the State Government show that the proceeding before The Uni:~ of India the Central Government at any rate at the stage of and Others review is quasi-judicial to which rules of natural justice apply.

Wanchoo ], Mr. G. S. Pathak appearing for the third respondent on the other hand contends that the view taken by the High Court is correct and that the order of January 28, 1954, is a mere administrative order and therefore it was not necessary for the Central Govern-

~ ment to hear either party before passing that order.

He points out that the minerals, for 1Ilining which the lease is granted under the Rules, are the property of the State. No person applying for a mining lease of such minerals has any right to the grant of the lease.

According to him, the right will only arise after the lease has been granted by the State Government and the review application, if any, has been decided by the Central Government. He submits that even under r. 32, which deals with priority the State Government is not bound to grant the lease to the person who applies first and it can for any special reason and with the prior approval of the Central Government grant it to a person who applies later. His contention further is that as at the earlier stage when the grant is made by the State Government the order granting the lease is a mere administrative order-as it must be in these circumstances (he asserts)-, the order passed on review by the Central Government must also partake of the same nature.

In order to decide between these rival contentions it is useful to refer to rules 52 to 55 which fall for consideration ii:'i this case. These are the rules as they existed up to 1953. Since then we are told there have been amendments and even the Act has been replaced by the Mines and Minerals (Regulation and Development) Act, 1957.

We are, however, not concerned with the Rules as modified after January 1954 or with the Act of 1957. Rule 52 inter alia provides that any person aggrieved by an order of the

ry6o State Government refusing to grant a mining lease may

h . within two months of the date of such order apply to Sllivji Nathub ai h C

1 G f · h

I' 1 v. t e entra overnment or revrewmg t e same. :.u e The Union of India 53 prescribes a fee.

Rule 54 may be quoted in extenso, and Others namely-

Wanchoo ]. " Upon receipt of such application, the Central Government may, if it thinks fit, call for the relevant records and other information from the State Government and after considering any explanation that may be offered by the State Government, cancel the order of the State Government or revise it in such manner as the Central Government may deem just and proper. " Rule 55 then says that the order of the Central Government under r. 54, and subject only to such order, any order of the State Government under these rules shall be final.

This Court had occasion to consider the nature of the two kinds of acts, namely, judicial which includes quasi-judicial and administrative, a number of times.

In Province of Bombay v. Kushaldas S. Advani (1), it adopted the celebrated definition of a quasi-judicial body given by Atkin L. J. in R. v. Electricity Commissioners('), which is as follows:-

"Whenever any body of persons having legal authority to determine questions affecting rights of subjects, and having the duty to act judicially act in excess of their legal authority they are. subject to the controlling jurisdiction of the King's Bench Division exercised in these writs. " This definition insists on three requisites each of which must be fulfilled in order that the act of the body may be a quasi-judicial '.act, namely, that the body of persons (1) must have legal authority, (2) to determine questions affecting the rights of subjects, and (3) must have the duty to act judicially. After analysing the various cases, Das J. (as he then was) laid down the following principles as deducible therefrom in Kushaldas S. Advani's case (1) .at p. 725 :-

" (i) That, if a statute empowers an authority, not being a Court in the ordinary sense, to decide

(1) [1950] S.C.R. 621.

(z) [19z4] l K.B. 171.

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disputes arising out of a claim made by any party r960 under the statute which claim is opposed by another SI ... N. 1 bh . party and to determine the respective rights of the '"'J' "v: 1 •u ai contesting parties who are opposed to each other, The Union of Indi" there is a lis and prima facie and in the absence of and Others anything in the statute to the contrary it is the duty of the authority to act judicially and the Wancho"O 1 decision of the authority is a quasi-judicial act; and

(ii) that if a statutory authority has power to do any act which will prejudicially affect the subject, then, although there are not two parties apart from the authority and the contest is between the authority proposing to do the act and the subject opposing it, the final determination of the authority will yet be a quasi-judicial act provided the authority is required by the statute to act judicially. "

It is on these principles which are now well-settled that we have to see whether the Central Government when acting unde~ r. 54 is acting in a quasi-judicial capacity or otherwise. It is not necessary for present purposes to decide whether State Government when it grants a lease is acting merely administratively.

We shall assume that the order of the State Government granting a lease under the Rules is an administrative order. We have, however, to see what the position is after the State Government has granted a lease to one of the applicants before it and has refused the lease to others.

Mr. Pathak contends that even in such a situation there is no right in favour of the person to whom the lease has been granted by the State Government till the Central Government has passed an order on a review application if any. Rule 55, however, makes clear that the order of the State Government is final subject to any order by the Central Government under r. 54. Now when a lease is granted by the State Government, it is quite possible that there may be no application for review by those whose applications have been refused. In such a case the order of the State Government would be final. It would not therefore be in our opinion right to say that no right of any kind is created in favour of a person to whom the lease is

'960 granted by the State Government. The matter would be different if the order of the State Government were Shiv}i Nathubai v. not to be effective until confirmation by the Central The Union of India Government; for in that case no right would arise and Othm until the confirmation was received from the Central Government. But r. 54 does not provide for confirma- Wanchoo ].

C l G I tion by the entra overnment. t gives power to the Central Government to act only when there is an application for review before it under r. 54. That is why we have not accepted Mr. Pathak's argument that in substance the State Government's order becomes effective only after it is confirmed; r. 54 does not support this. We have not found any provision in the Rules or in the Act which gives any power to the Central Government to review B'!W motu the order of the State Government granting a lease. That some kind of right is created on the passing of an order granting a lease is clear from the facts of this case also. The order granting the lease was made in D'ecember 1952. In April 1953 the appellant was put in possession of the areas granted to him and actually worked them thereafter. At any rate, when the statutory rule grants a right to any party aggrieved to make a review application to the Central Government it certainly follows that the person in whose favour the order is made has also a right to represent his case before the authority to whom the review application is made. It is in the circumstances apparent that as soon as r. 52 gives a right to an aggrieved party to apply for review a lis is created between him and the party in whose favour the grant has been made.

Unless therefore there is anything in the statute to the contrary it will be the duty of the authority to act judicially and its decision would be a quasi-judicial act.

The next question is whether there is anything in the Rules which negatives the duty to act judicially by the reviewing authority. Mr. Pathak urges that r. 54 gives full power to the Central Government to act as it may deem 'just and proper ' and that it is not bound even to call for the relevant records and other information from the State Government before deciding an application for review. That is undoubtedly

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so.

But that in our opinion does not show that the Ig6o statutory Rules negative the duty to act judicially. Sh' .. N h b .

R 1 . . h h C G 1v1i at u as at the u es-require is t at t e entral overnment v. should act justly and properly; and that is wh3!t an The Union of India authority which is required t.o act judicially must do. and Others The fact that the Central Government is not bound even to call for records again does not negative the Wanchoo J. duty cast upon it to act judicially, for even courts have the power to dismiss appeals without calling for records. Thus r. 54 lays down nothing to the contrary.

We are therefore of opinion that there is prima f acie a lis in this case as between the person to whom the lease has been granted and the person who is aggrieved by the refusal and therefore prima facie it is the duty of the authority which has to review the matter to act judicially and there is nothing in r. 54 to the contrary.

It must therefore be held that on the Rules and the Act, as they stood at the relevant time, the Central Government was acting in a quasi-judicial capacity while deciding an application under r. 54. As such it was incumbent upon it before coming to a decision to give a reasonable opportunity to the appellant, who was the other party in the review application whose rights were being affected, to represent his case. Inasmuch as this was not done, the appellant is entitled to ask us to issue a writ in the nature of certiorari quashing the order of January 28, 1954, passed by the Central Government. ·

We therefore allow the appeal and setting aside the order of the High Court quash the order of the Central Government passed on January 28, 1954. It will, however, be open to the Central Government to proceed to decide the review application afresh after giving a reasonable opportunity to the appellant to represent his case. The appellant will get his costs throughout from the third respondent, who is the principal contesting party.

Appeal allCiWed.

IOO

SHIVJI NATHUBHAI

THE UNION OF INDIA & . OTHERS

P. B. GAJENDRAGADKAR

K. N. WANCHOO

K. c. DAS GUPTA

c. SHAH, JJ.

Central Government

Art. 226

Shivji lVathubai

Uni:: of India 621•

CIVIL APPELLATE JURISDICTION

N. C. Chatterjee

J. B. Dada.chanji

S. N. Andley

Rameshwar Nath

P. L. Vohra

K. Daphtary

R. Gapapathy Iyer

R. H. Dhebar

T. M. Sen

G. S. Pathak

S.S. Shukla

E. Udayaratnam

Wanchoo

WANCHOO

Mineral Concession Rules, 1949

s. 6

Gangpur State

December 30, 194 7

State of Orissa

January 1, 1948

June 29, 1949

December 19, 1949

Sundergarh

Orissa

July 4, 1950

September 6, 1950

Union of India

July 10, 1950

July .24, 1950

August 3, 1950

September 5, 1950

December 22, 1952

State of Orissa

April 21, 1953

January 28, 1954

Government of Orissa

July 5, 1955

Art. 226

Punjab High Court

Shivji Nathubhai

Central Government, Wanchoo

N. C. Chatterji

India

G. S. Pathak

Union of India

Atkin

Das

Kushaldas S. Advani

Union of Indi

Pathak

Central The Union


i9fio

January 20.

SUPREME COURT REPOR.TS [1960 (2))

JAGAN NATH SATHU

THE UNION OF INDIA (B. P. SINHA, c. J., JAFE.R IMAM, A. K. l'ARKAH,

K. N. \VANCHOO AND J. c. SHAH, JJ.)

Preventive detention--Status of Pakistan in relation to India-- If a foreign pmver-Grounds of detention-Principles of natural justice-Preventive Detention Act. I950 (4 of I9SO),-Constit1dion of India, Item 9, List I, Seventh Schedule.

The petitioner was detained by an order of the Central Government under s. 3, ofj the Preventive Detention Act, r950.

The Advisory Board which considered the petitioner's case in accordance with the provisions of the Act did not recommend that the order of detention should be withdrawn.

The allegations against the petitioner were that he \Vas carrying on propaganda .of hatred and contempt against the Government of India and the State of Jammu :lJ)d Kashmir by sending for publication in a widely published foreign Newspaper, false, one-sided and misleading infor1nation about the adn1inistration of the State and the condition of India in general and the said State in particular. 1'he petitioner's contentions, inter a1ia, ¥/ere that being a member of the Commonwealth, Pakistan, where the fic, vspaper vvas published, was not a Foreign State and could not therefore be regarded as a Foreign power, that the principles of natural justice where violated by the Advisory Board in considering the respondent's case in his absence and that n1ateria1s placed before the Advisory Board were not supplied to him.

Held, that on a correct :interpretation of the expression "foreign affairs" appearing in Item 9, List I, Seventh Schedule of the Constitution and the words "the relations of India with foreign powers" in s. 3 of the Act, Pakistan must be regarded as a foreign power although that country might be a member of the

Commonwealth like India.

Under Art. 367 (3) a country might - not be regarded as a Foreign State for the purposes of the Constitution but that country might be a foreign power for other purposes.

The Common\vcalth is an Associatjon of Nations each having a sovereign status independent of the other in its internal and foreign affairs.

The provisions of s. ro of the Act did not offend against the principles of natural justice and the procedure adopted by the Advisory Board in the present case was not in Contravention there?!·

0.RIGINAL JumsmcTION: Writ Petition No. 170 of 1959.

Petition under Article 32 of the Constitution of India for enforcement of Fundamental rights.

. ._ -

R. V. S. Mani. for the patitioner. r960 C. K. Dephtary, Solicitor-General of India, B. R. L. Jagan Nath sathu Iyengar ii.nd R. H. Dhebar, for the respondent. v. 1960, January 20. The Judgment of the Court The Union of India was delivered by IMAM J.-This petition was heard on January 4, Imam J . 1960, and we intimated that it was being dismissed and reasons for the same will follow later. We proceed to give our reasons now.

The petitioner was detained by an order dated May 4, l!J59, of the Central Government under the provisions of s. 3 of the Preventive Detention Act, 1950 (hereinafter referred to as the Act). The grounds of detention dateq May 7, 1959, were served on the petitioner. His case was considered by the Advisory Board constituted by the Central Government under s. 8 of the Act. On the report of the Advisory Board the Central Government by its order dated June 23, 1959, directed that the petitioner be detained until May, 4 1960. It is against this order of detention that the present petition under Art. 32 of the Constitution has been filed by the petitioner. _ The grounds of detention contained 5 grounds upon which the Central Government was satisfied that it was necessary to detain the petitioner as he was likely to act further in a manner prejudicial to the security of India and the relations of India with foreign powers. It was further stated in the grounds of detention that the Central Government considered it against the public interest to disclose to the petitioner any facts or particulars as to dates, persons, places, nature of activities and the assistance given by him other than those which had been mentioned in .the grounds of detention. The grounds of detention further mentioned that some of the specimen des. patches sent by the petitioner and some of the reports appearing in a newspaper published in Pakistan were annexed thereto. ]'rom the grounds of detention it would appear that the allegation against the petitioner was that he had been engaged in carrying on propaganda against the Government of India and the Government of the

I96o State of Jammu and Kashmir established by law and

Jagan ;;;;; h Sathu :igainst the administration of that State Government v. m a manner calculated to bring into hatred and The Union of India contempt the Government of the State and the Government of India; that in furtherance of his Imam J. propaganda the petitioner had been inter alia sending for publication in a foreign newspaper despatches of news and views relating to the State of Jammu and Kashmir containing false, incomplete, one-sided and misleading information about the -i1dministration of the State by the Government of that State, about the policy of the Government of India in relation to that 8tate and about the conditiohs in India in general and in the State of Jammu and Kashmir in particular; that the said despatches were published prominently by the said newspaper, having a large circulation in Pakistan and other foreign countries, in a manner prejudicial to India and her cause in relation to the 8tate of Jammu and Kashmir and also prejudicial to the relations of India with foreign powers ; that the petitioner was in regular touch and closely associated with several persons who are hostile to the cause of India in relation to the State of Jammu and Kashmir and were engaged in activities prejudicial to the security of India and that the cumulative effect of the petitioner's aforesaid activities was prejudicial to the relations of India with foreign powers in general and particularly in regard to the cause of India in respect of the State of Jammu and Kashmir and the maintenance of public order therein.

We have examined the various extracts from the despatches sent by the petitioner annexed to the grounds of detention served upon him. They disclose sufficient particulars to enable the petitioner to make a representation to the Advisory Board. Having regard to what appears in these extracts from the despatches sent to the newspaper concerned, they disclose sufficient grounds for the action taken by the Central Government in detaining the petitioner.

On behalf of the petitioner it was urged that the order of detention was confined only to two matters

(1) that it was made with a view to preventing the

petitioner from acting in a manner prejudicial to the z960 relations of India with foreign powers and (2) to the 1 N k 5 th security of India. As to the first matter, it was agan :: a u argued that Pakistan not being a Foreign State, there The Union of India could be no question of any act of the petitioner being prejudicial to the relations of India with foreign Imam J. powers. It was pointed out that under Art. 367(3) of the Constitution, for the purposes of the Constitution, Foreign State meant any State other than India.

The proviso, however, enabled the President, subject to the provisions of any law mad~ by Parliament, by order to declare any State not to be Foreign State for such purposes . as may be specified in the order.

Reference was made to the Constitution (Declaration as to Foreign State) Order, 1950 (hereinafter referred to as the Order) made by the Governor General of India under Art. 392(3) of the Constitution read with Art. 367(3). The Order directed that it shall come into force at once, that is to say, bn January 23, 1950.

Clause (2) of the Order states : "Subject to the provisions of any law made by Parliament, every country within the Commonwealth is hereby declared not to be a Foreign State for the purposes of the Constitution". On behalf of the petitioner it was urged that by the Order, Pakistan being a member of the Commonwealth, was declared not to be a Foreign State. Although the Order was subject to the provisions of any law made by Parliament no law had yet been enacted by Parliament contrary to the declaration made by the Order. Pakistan not being a Foreign State could not therefore be regarded as a foreign power and none of the acts of the petitioner referred to in the grounds of detention could therefore be regarded as acts prejudicial to the relations of India with foreign powers. The ground in this respect being an invalid ground the order of detention must be set aside because even if one ground was an invalid ground the entire order of detention must be set aside though other grounds appeared to be valid grounds, having regard to certain decisions of this Court.

It was also urged on behalf of the petitioner that none of the extracts of the despatches and the grounds

788 SUPHEME COURT REPOllTS [1960(2))

, 96o of detention disclose any word or phrase suggesting incitement to violence or subversion of the Government Jagan Nath Sathu of the State of Jammu and Kashmir or of the Govern-

The Uni;~ of India ment of India. Accori'.1gly, there could be no question _ of any act of the petit10ner being prejudicial to the Imam J. security of India.

Some other submissions were also urged on behalf of the petitioner with respect to the grounds of detention which will be dealt with in due course.

It was also urged that in violation of the principles of natural justice the respondent's case was heard by the Advisory Board prior to the case of the petitioner and in his absence and that copies of the further materials, which were placed before the Advisory Board by the respondent, were not supplied to the petitioner.

As already stated the contention on behalf of the petitioner has been that Pakistan is not a Foreign t:ltate and therefore cannot be regarded as a foreign power. It is true, that in view of the Order, for the purposes of the Constitution of India, Pakistan is not a Foreign State. There is, however, a distinction between a country not being regarded as a Foreign State for the purposes of the Constitution and that country being a foreign power for other purposes.

The Commonwealth is an Association of Nations each of which has a sovereign status independent of each other in its internal and foreign affairs. They have a sovereign status as complete as that of any nation which is not a member of the Commonwealth.

Each member of the Commonwealth can have diplomatic relations with each other and with nations outside the Commonwealth. Indeed, in the matter of sovereign status they are as independent as any nation outside the Commonwealth. It follows, therefore, that in their relations between each other and nations outside the Commonwealth they must be regarded as foreign powers and their affairs as between them are foreign affairs. In our opinion, that which is not concerned with the internal affairs of a member of the Commonwealth, is its external affair, that is to say, a foreign affair.

Under item 9 of List I of the Seventh Schedule of r96o the Constitution, Parliamen~ is empoered to enact Jagan N;,;. Sathu laws with respect to preventive detent10n for reasons v. connected with defence, foreign affairs or the security The Union of India of India and persons subjected to such detention.

Under s. 3 of the Act the Central Government or the Imam J.

State Government may, if satisfied with respect to any person, with a view to preventing him from acting in any manner prejudicial to the defence of India, the relations of India with foreign powers or the security of India, make an order directing that such person be detained, if it thinks it necessary so to do. The expression " Foreign Affairs " includes the relations of India with foreign powers. The question for decision is whether Pakistan is a foreign power. On a correct interpretation of the meaning of the words "the

relations of India with foreign powers" we have no doubt that Pakistan must be regarded as a foreign power, although that country may be a part of the Commonwealth as India is. It has sovereignty in matters of internal administration and external relations quite independent and disconnected with the sovereignty of India or any other member of the Commonwealth in these respects. Pakistan has its own diplomatic relations with various countries including India. Apart from its membership of the Commonwealth, the independent sovereign status of Pakistan . is the same as the sovereign status of any country outside the Commonwealth. It was, howevn, suggested that the Order made by the Govern9r General took Pakistan outside the category of a foreign power. In our opinion, this is a fallacious argument because Art. 367(3) itself states that for the purposes of the Indian Constitution Foreign State means any State other than India but the President, and before the commencement of the Constitution the Governor General of India under Art. 392(3), may by ordel' declare any State not to be a Foreign State for such purposes as may be specified in the Order. In the Order the Governor General declared that every country within the Commonwealth was not a Foreign State for the purposes of the Constitution. In the Constitution of India there are various Articles in which the expression

'96° Foreign State appears, e.g., Art. 18(2), (3), (4), Art.

Jagan ; a-; h Sathu 19(2), Art. 102(l)(d) and Art. 191(1)(d). It is clear, v. therefore, that under the Order, for the purposes of The Union of India these Articles or any other Article where the expression

"Foreign State" appears, that expression would not Imam J. cover a country within the Commonwealth unless Parliament enacted otherwise. The Order cannot be brought into aid for the purposes of construing the expression "foreign affairs" appearing in item 9 of List I of the Seventh Schedule and the expression "foreign powers" in s. 3 of the Act. These expressions must be construed in the ordinary way giving the words their ordinary meaning. We have no doubt that Pakistan is a foreign power. Under the provisions of the Act the Central Government and the State Governments could detain a person who was acting in a manner prejudicial to the relations of India with foreign powers which would include Pakistan. It is to be further remembered that neither in the order of detention nor in the grounds of detention there is any mention of Pakistan specifically. On the contrary, in the grounds of detention, it is clearly stated that the cumulative effect of the petitioner's activities was prejudicial to the relations of India with foreign powers in general (vide grounds 3 and 4).

The grounds of detention refer to the publication in a foreign newspaper of despatches of news and views relating to the State of J ammu and Kashmir containing false, incomplete, onesided and misleading information and about the policy of the Governm1mt of India in relation to that State.

The extracts of the despatches, sent by the petitioner to the foreign newspaper, annexed to the grounds of detention show that they are not only prejudicial to the Government of India vis-a-vis Pakistan but they are prejudicial to the relations of India with foreign powers in general, the subject of the affairs of the State of Jammu and Kashmir not being a matter of interest solely to Pakistan but also of interest to other foreign powers.

Coming now to objections made as to the grounds of detention: regarding ground No. 1, it was urged that this ground was outside the scope of the order of

detention. This ground mentions that the petitioner z960 is engaged in carrying on propaganda against the - Government of India and the Government 0f the State fagan Nath Sathu of Jammu and Kashmir in such a manner as to bringTheUnio:of Indicl these two Governments into hatred and contempt. In -- our opinion, it cannot be said that this ground is Imam J. beyond the scope of the order of detent.ion because the bringing of the Government of India and the Government of the State of Jammu and Kashmir into hatred and contempt does involve the security of India.

Regarding ground No. 2 it was urged that it does not disclose a single suggestion about the subversive activities of the petitioner, nor does it disclose what portions of the despatches were false, incomplete, misleading or one-sided. It was further pointed out that this ground speaks of the conditions in India in general and the policy of the Government of India in relation to the State of Jammu and Kashmir. What the policy of the Government of India is concerning that State is not stated. All these allegations were so vague tha~ they gave no real opportunity to the petitioner to make a representation. Similarly, concerning grounds 3 and 4 it was urged thia.t the grounds did not disclose what was the cause of India in relation to the State of Jammu and Kashmir. Here again, sufficient particulars were not given to enable the petitioner to make an effective representation to the Advisory Board. In our opinion, none of these contentions has any substance because with the grounds of detention were annexed extracts from the despatches sent by the petitioner to the newspaper " Dawn " published in Pakistan. These extracts gave sufficient particulars to enable the petitioner to make a representation with respect to all matters stated in the grounds of detention.

Coming now to the submission that the respondent's case was heard before the petitioner's case and in his absence and that copies of further materials placed before the Advisory Board by the respondent were not supplied to the petitioner, it is necessary to refer to the procedure to be adopted by the Advisory Board under

IOI

'960 the provisions of the Act. Under s. 9, in every case fa n-;;;; h sathu where a detention order has been made the appropriate ga v.

Government must within 30 days from the date of The Union of India detention place before the Advisory Board the grounds, on which the order has been made, and the representa-

Jmam J. tion, if any, made by the detenus and, in a case where an order has been made by an officer, also the report by such officer under sub-s. (3) of s. 3. Section 10 sets

out the procedure which the Advisory Board must - follow when reference has been made to it under s. 9.

Section 10(1) states :

"The Advisory Board shall, after considering the materials placed before it and, after calling for such further information as it may deem necessary from the appropriate Government or from any person called for the purpose through the appropriate Government or from the person concerned, and if in any particular case it considers it essential so to do or if the person concerned desires to be heard, after hearing him in person, submit its report to the appropriate Government within ten weeks from the date of detention. " It is clear from these provisions that the Advisory Board after considering the materials placed before it under s. 9 can call for further information from the appropriate Government, and that thereafter if in any particular case it considers it esse.ntial so to do or if the detenue desires to be heard, after hearing him, submit its report to the appropriate Government. In such a situation the Advisory Board must of necessity - obtain further information from the appropriate Government before it hears the detenue. In our opinion, there is nothing in s. 10 which offends against the principles of natural justice. ' Furthermore, the petition does not assert as a matter of fact that the respondent's case was heard in the absence of the petitioner. Indeed, the respondent's affidavit does not admit that any such thing happened.

As for the copies of the further materials placed by the respondent before the Advisory Board not being supplied to the petitioner, it has to be observed that in paragraph 3 of the grounds of detention it was

clearly stated that the Central Government considered z960 it against public interest to disclose to the petitioner 1 h 5 , . d l agan Nat afou any facts or particulars as to ates, persons, p aces, v. nature of activities and the assistance given by him The Union of India other than those which had already been mentioned in the grounds of detention. Under Art. 22(6) of the Imam J.

Constitution it is clearly stated that nothing in cl. (5) of that Article shall require the authority making an order of detention to disclose facts which such authority considers to be against public interest to be disclosed. In the present case the authority concerned had declined to disclose in the public interest any facts or particulars as to dates, persons, places, nature of activities and the assistance given by the petitioner other than those which had already been mentioned in the grounds of detention. In such circumstances, it would have been entirely inappropriate for the respondent to supply copies of the further materials placed before the Advisory Board although the Advisory Board may have required further information in order to satisfy itself.

The petition is accordingly dismissed.

Petition dismissed.

M/s. ALOPI PARSHAD & SONS, LTD. v.

THE UNION OF INDIA

(S. K. DAS, K. N. W ANCHOO AND J. C. SHAH, JJ.)

Arbitration-Award, setting aside of-Error on the face of the record-Reference of specific questions-Contract-Terms of payment specified-Change of circumstances-Power of arbitrator to vary terms-Quantum M eruit payment, when justified.

The appellants were appointed under an agreement in writing by the Governor-General as agents for purchasing and supplying ghee required for the Army personnel with effect from October l,

1937. After the outbreak of the World War II there was an enormous increase in the demand of ghee by the Government and the agreement was revised by mutual consent on June 20, 1942, and the original rates of payment were scaled down.

On December 6, 1943, the appellants made a representation to the Government for enhancing, the rates as conditions had become

I960

January 20.

JAGAN NATH SATHU

THE UNION OF INDIA (B. P. SINHA

JAFE.R IMAM

c. SHAH, JJ.

Seventh Schedule

s. 3

Government of India

State of Jammu :lJ)d Kashmir

Pakistan

Seventh Schedule

s. 3

Art. 367

Article 32

Constitution of India

R. V. S. Mani

C. K. Dephtary

B. R. L. Jagan Nath sathu Iyengar

R. H. Dhebar

Union of India

IMAM

May 4, l!J59

Central Government

s. 3

Preventive Detention Act, 1950

s. 8

June 23, 1959

May, 4 1960

Art. 32

Government of the

I96o State

Jammu and Kashmir

Union of India

Art. 367(3)

Parliament

Art. 392(3)

Art. 367(3)

January 23, 1950

Constitution of India

Seventh Schedule

Union of India of India

s. 3

Imam J.

State Government

Art. 367(3)

Art. 392(3)

Constitution of India

Art. 18(2)

Art. 102(l)(d)

Art. 191(1)(d)

Seventh Schedule

s. 3

s. 9

s. 3

Section 10

s. 9

Section 10(1)

s. 9

s. 10

Art. 22(6)

ALOPI PARSHAD & SONS, LTD

UNION OF INDIA

S. K. DAS

K. N. W ANCHOO

J. C. SHAH

October l,

1937

June 20, 1942

December 6, 1943


S.C.R.

SUPREME COURT REPORTS 793

clearly stated that the Central Government considered z960 it against public interest to disclose to the petitioner 1 h 5 , . d l agan Nat afou any facts or particulars as to ates, persons, p aces, v. nature of activities and the assistance given by him The Union of India other than those which had already been mentioned in the grounds of detention. Under Art. 22(6) of the Imam J.

Constitution it is clearly stated that nothing in cl. (5) of that Article shall require the authority making an order of detention to disclose facts which such authority considers to be against public interest to be disclosed. In the present case the authority concerned had declined to disclose in the public interest any facts or particulars as to dates, persons, places, nature of activities and the assistance given by the petitioner other than those which had already been mentioned in the grounds of detention. In such circumstances, it would have been entirely inappropriate for the respondent to supply copies of the further materials placed before the Advisory Board although the Advisory Board may have required further information in order to satisfy itself.

The petition is accordingly dismissed.

Petition dismissed.

M/s. ALOPI PARSHAD & SONS, LTD. v.

THE UNION OF INDIA

(S. K. DAS, K. N. W ANCHOO AND J. C. SHAH, JJ.)

Arbitration-Award, setting aside of-Error on the face of the record-Reference of specific questions-Contract-Terms of payment specified-Change of circumstances-Power of arbitrator to vary terms-Quantum M eruit payment, when justified.

The appellants were appointed under an agreement in writing by the Governor-General as agents for purchasing and supplying ghee required for the Army personnel with effect from October l,

1937. After the outbreak of the World War II there was an enormous increase in the demand of ghee by the Government and the agreement was revised by mutual consent on June 20, 1942, and the original rates of payment were scaled down.

On December 6, 1943, the appellants made a representation to the Government for enhancing, the rates as conditions had become

I960

January 20.

r960 abnormal. According to the appellants they were given assurances that their claims would be favourably considered by the M fs. Alopi Pars!lad Government and relying on these assurances they continued to and Sons. Ltd. supply ghee in quantities demanded by the Government incurring v. heavy extra expenditure. The Government did not enhance the The Union of India rates and the matter \Vas referred to arbitration under the agreement of 1937 Before the arbitrators the appellants contended that the agreement of 1942 was not binding upon them and claimed payment on the basis of the agreement of r937; and in the alternative claimed payment on the basis of increased rates of mandi charges, additional buying remuneration and contingency charges. These claims were resisted by the Government and it was denied that any assurances were given by the Government to enhance the rates.

The arbitrators incorporated the points of contest in the form of issues.

By an award dated May 2, 1954, the arbitrators rejected the primary claim of the appellant holding that the agreement of r942 was binding. On the alternative claim they awarded a sum of money for loss suffered by the appellants on account of establishn1ent and contingencies, and another sum for mandi and fiMncing charges. The award was filled in the Court of the Commercial Sub-Judge, Delhi, and the Government applied to have it set aside. The Sub-Judge held that though there was an error on the face of the award in ordering the payment of additional remuneration and financing and overhead charges the award could not set aside as specific questions had been expressly referred for adjudication to the arbitrators and the award was binding on the parties. On appeal the High Court held that no specific questions of law had been referred to the arbitrators and that the award was vitiated by errors apparent on the face of the award.

Held, that the award was liable to be set aside because of an error apparent on the face of the award. An arbitration award may be set aside on the ground of an error on the face of it when the reasons given for the decision, either in the award or in any document incorporated with it, are based upon a legal proposition \Vhich is erroneous.

But \Vhere a specific question is referred, the award is not liable to be set aside on the ground of an error on the face of the award even if the answer to the question involves an erroneous decision on a point of law.

In the present case there was a general reference and not a specific reference on any question of law.

Champsey Bhara and Co. v. ]ivraj Balloo Spinning & Weaving Co., Ltd., L. R. 50 I. A. 324, In the matter of an arbitration between King and Du.veen. L.R. 1913 2 K.B.D. 32, and Government of Kelantan v. Duff Development Co., Ltd., L. R. 1923 A. C. 395, relied on.

The contract provided for payment of charges at rates specified therein and the arbitrators could not ignore the express covenants between the parties and award amounts not agreed to be

paid. A contract is not frustrated merely because the circum-

I96° stances in which it was made are altered. The courts have no M/ Al

. P h d • 1 f h f f l s. opi ars a general power to abso ve a party rom t e per ormance o i1s d 5 Lid part of the contract merely because its performance has become an ons. onerous on account of an unforseen turn of events.

Th u _v. 11 d' . , C H'"Ml" Ch Y e mono nia Constantine s case (1942) A. . 154, irJi. u Ji v. eong ue .

Steamship Co., Ltd., (1926) A. C. 497, British Movietonews Ltd. v.

London and District Cinemas, L. R. 1952 A. C. 166 and Parkinson & Co., Ltd. v. Commissioners of Works. (1949) 2 K. B. D. 632, referred to. -British Movietonews Ltd. v. London and District Cinemas Ltd.

(1951) l K.B.D. 190, disapproved.

The award which ignored the express terms of the contract prescribing the remuneration payable could not be justified as proceeding upon the basis of quantum meruit. Compensation quantum meruit may be awarded for work done or services rendered only when the price thereof is not fixed by a contract.

For work done or service rendered pursuant to the terms of a contract, compensation quantum meruit cannot be awarded where the contract provides for the consideration payable in that behalf.

CrvIL APPELLATE JURISDICTION: Civil Appeal No. 693 of 1957.

Appeal from the judgment and Order dated the 25th May, 1956 of the Punjab High Court in F.A.C.

No. 89/D of 55.

N. 0. Chatterjee, S. K. Kapur, N. H. Hingorani and Ganpat Rai, for the appellants.

H. J. Umrigar and T. M. Sen, for the respondent.

1960. January 20. The Judgment of the Court was delivered by

SHAH J.-On May 3, 1937, M/s. Alopi Parshad and Sons Ltd., who will herinafter be referred to as the Agents, were, under an agreement in writing, appointed by the Governor-General for India in Council, as from October 1, 1937, agents for purchasing ghee required for the use of the Army personnel. The Government of India, by cl. 12 of the agreement, undertook to pay to the Agents the actual expenses incurred for purchasing ghee, cost of empty tins, expenses incurred on clearance ; of Government tins from the railway, export ]and-customs duty levied on ghee purchased and exported from markets situated in Indian States, octroi duty, terminal tax or other local rates on ghee, and certain other charges incurred

Shah].

I960 by the Agents. The Government also agreed to pay to the Agents at rates specified in the agreement: M /s. Alopi Parshad and sons. Ltd.

(1) the financing and overhead (mandi) charges v. incurred in the buying markets.

The Union of India

(2) the cost of establishments and contingencies provided by the Agents on the Government's account for carrying out the purchase and supply of ghee, and

Shah].

(3) the buying remuneration.

In consideration of the Government paying to the Agents a sum of rupee one and anna one only per one hundred pounds nett weight of finally accepted ghee, as combined financing and overhead (mandi) charges, the Agents by cl. 13 undertook to provide the working capital and also to bear the costs, charges and expenses, including financing and overhead charges incurred by them in buying ghee in the market.

The Agents also undertook, by cl. 14, to bear the establishment and contingency charges for the due performance by them of the terms of the agreement, and the Government agreed to pay in consideration thereof annas 14 and pies 6 per every hundred pounds of ghee accepted. The Government also agreed to pay to the Agents remuneration for services rendered in purchasing ghee, at the rate of one rupee per one hundred pounds nett Weight of accepted ghee.

Pursuant to the agreement, the Agents supplied from time to time ghee to the Government of India, as required. In September, 1939, the World War II broke out, and there was an enormous increase in the demand by the Government of ghee. On June 20, 1942, the original agreement was, by mutual consent, revised, and in respect of the establishment and contingencies, the uniform rate of annas 14 and 6 pies per hundred pounds of accepted ghee, was substituted by a graded scale : for the first 5 thousand tons, the Agents were to be paid at the rate of Re. 0-14-6 per hundred pounds, for the next five thousand tons, at the rate of annas 8 per hundred pounds, and at the rate of annas 4 per hundred pounds, for supplies exceeding. ten thousand tons .. :Even in respect of

- '

...

remuneration for services, a graded scale was subsr96o tituted: for the first five thousand tons, remuneration Al-.

P h d b . 'd h t f R 1 h d d M Js . opi ars a was to e pa1 at t e ra e o e. per un re and Sons. Ltd. pounds, at the rate of annas 8 per hundred pounds, v. for the next five thousand, and annas 4 per hundred The Union of I.ndia pounds, for supplies exceeding ten thousand tons.

This modification in the rates became effective from Shah J.

September 11, 1940.

By their communication dated December 6, 1943, the Agents demanded that the remuneration, establishment and contingencies, and mandi and financing charges, be enhanced. In respect of the buying remuneration, they proposed a 25 per cent increase ; in respect of establishment and contingencies, they proposed an increase of 20 per cent., and in respect of mandi and financing charges, an increase of 112 per cent. This revision of the rates was claimed on the plea that the existing rates, fixed in peace time, were "entirely superseded by the totally altered conditions obtaining in war time." To this letter, no immediate reply wafl given by the Government of India, and the Agents continued to supply ghee till May, 1945. On May 17, 1945, the Government of India, purporting to exercise their option under cl. 9 of the agreement, served the Agents with a notice of termination of the agreement. On May 22; 1945, the Chief Director of Purchases, on behalf of the Government of India, replied to the letter dated December 6, 1943, and informed the Agents that normally no claim for revision of rates could be entertained during the currency of the agreement an<) especially with retrospective effect, but a claim for ex-gratia compensation to meet any actual loss suffered by an agent, might be entertained, if the Agents established circumstances justifying such a claim. The Chief Director of Purchases called upon the Agents to submit the report of their auditors on the agency accounts, for the ghee supplied, as also a statement in detail, showing the actual expenditure incurred.

The notice dated May 17, 1945, was waived by mutual consent, and under an arrangement dated May It), 19461 the Agents agreed to supply five

r96o thousand tons of ghee by October 31, 1946, on which

M Al--:-P h ddate, the agreement dated May 3, 1937, was to come fs. opi ars a d and Sons. Ltd. to an en °

By their letter dated July 1, 1946, the Agents The Union of India claimed that a dispute had arisen under the contract, and app0inted one Nigam to be arbitrator on their Shah .J. behalf to adjudicate upon the dispute, pursuant to

cl. 20 of the terms of the agreement dated May 3, 1937, and called upon the Government of India to appoint their arbitrator. The Government of India, by their letter dated July 10, 1946, nominated one Rangi Lal to be arbitrator on their behalf. Before the arbitrators, the Agents made their claim under four heads :

(1) The Agents claimed that the agreement dated June 20, 1942, was not binding upon them, and they were entitled to Rs. 23,08,372-8-0 being the difference between the buying remuneration, establishment and contingency charges due under the agreement dated May 3, 1937, and the amount actually received. The details of this claim were set out in Sch. A.

(2) In the event of the arbitrators holding the agreement dated June 20, 1942, was binding, a revision of the rates for establishment and contingencies, and an additional amount of Rs. 6,91,600-4-0 at such revised rates as set out in Sch. B.

(3) Revision of the rates fixed under the agreement dated June 20, 1942, ofthemandi charges, and an additional amount of Rs. 14,47,204-6-3, at the revised rates as set out in Sch. C.

(4) Damages for wrongful termination of the agreement in the month of October, 1946, amounting to Rs. 2,41,235, as set out in Sch. D.

The arbitrators did not arrive at any agreed decision, and the dispute was referred to Lala Achru Ram who was nominated an umpire. The umpire was of the view that the agreement dated June 20, 1942, was valid, and the claim as set out in Sch. A was untenable; that the claims set out in Seh. B and Sch. C,

did not arise out of the agreement, and he had no jurisdiction to adjudicate upon the same; and that as the claim set out in Sch. D, was outside the scope of

the Reference, he was inco, mpetent to give any finding

I960

on that claim.

M/s. Alopi Parshad This Award was filed in the court of the Suborand Sans. Ltd. dinate Judge, First class, Delhi. The Agents applied v. to set aside the Award on the grounds that the The Union of India umpire was guilty of misconduct in that he failed to Shah J. give an adequate opportunity to the Agents to present and substantiate their case before him, and that in holding that the claims as described in Schedules B, C and D, either did not arise out of the agreement or were outside the scope of the Reference, the umpire erred. The learned Subordinate Judge held that the umpire was in error in leaving undetermined claims described in Sch. B and Sch. D, which were within the scope of the Referende, and that the claim described in Sch. C was properly left undecided as it was outside the scope of the Reference. He also held that the Award was vitiated on account of judicial miscondut, because the Agents were not allowed by the umpire sufficient opportunity to place their case. The learned Subordinate Judge, in that view, proceeded' to set aside the Award, but he declined to supersede the Reference, antl left it to the parties to "appoint other arbitrators in view of cl. 20 of the agreement, for settling the dispute."

Against the order of the Subordinate Judge, the Union of India appealed to the High Court of East Punjab. Khosla, J., who heard the appeal, confirmed the order passed by the court of first instance. The learned Judge agreed with the view of the Subordinate Judge that the umpire had been guilty of judicial misconduct. The learned Judge observed in his judgment that the claim of the Agents, as described iUr Schedules B and C, was not beyond the arbitration agreement. In so observing, .presumably, the learned Judge committed some error. The Subordinate tTudge had come to the conclusion that the. claim described in Sch. C, was beyond the arbitration agreement, and no reasons were given by Khosla, J., for disagreeing with that view.

Appeal 31 of 1953 under the Letters Patent, against the judgment of Khosla J., was dismissed by a

J02

,96o Division Bench of the High Court of East Punjab,

Ml Al-.

P h observing that the claim detailed in Sch. JJ arose out s. o/n a>S ad f l b t h t . t d 'd and 5 ,, Ltd o tie contract, u t a 1t was unnecessary o em e :. s. whether the claim described in Sch. C for an increase The Union of India in the financing and overhead mandi charges, was

Shah ]. properly ruled out by the umpire.

In the meantime, by letter dated August 2, l 952, the Agents called upon the Government of India to appoint their arbitrator under cl: 20 of the agreement dated May 3, 1937, for a fresh adjudication of the dispute, and intimated that they had again appointed Nigam to be their arbitrator. The Government of India informed the Agents by their letter dated August 14, 1952, that they had filed an appeal against the judgment of the Subordinate Judge, Delhi, and in the circumstances, the question of appointing an arbitrator, did not arise until the final disposal of the appeal. The Government, however, without prejudice to their rights, including the right to prosecute the appeal, again appointed Rangi Lal to be arbitrator on their behalf.

After the Appeal under the LE; tters Patent, was decided by the East Punjab High Court on December 16, 1953, the arbitrators entered upon the reference.

On March 1, 1954, the Agents submitted their claim, contending that the supplementary agreement dated June 20, 1942, was void and not binding upon them, and that, in any event, on the representations made on December 6, 1943, and from time to time thereafter, they were assured by the Chief Director of Purchases that the claim made by them would be favourably considered by the Government of India, and relying on these assurances, they continued to supply ghee in quantities demanded by the Government after incurring "heavy extra expenditure".

They also claimed that they were constantly demanding an increase in the mandi and financing charges, but the Chief Director of Purchases, who was duly authorized in that behalf by the Government, gave rRpcated verbal assurances that their demands would be satisfied, and requested them to continue supplies for the successful prosecution of the war. Contending

that the Government of India was estopped from z96u repudiating their claim set out in Schedules B and C, - · f 11 h f t d t d M/s. AlopiParshad • in view o a t e ac s an mrcums ances state in and Sons. Ltd. the petition, the Agents prayed for a declaration that v. the supplementary agreement dated June 20, 1942, The Union of India was void and not binding upon them, and for a decree for payment of Rs. 27,48,515 with interest at the rate Shah J. of 6 per cent. per annum from March 1, 1954, and, in the alternative, for a decree for Rs. 25,63,037-7-3, with interest at the rate of 6 per cent. per annum from March 1, 1954, till recovery. This claim of the Agents was resisted by the Government of India.

Inter alia, it was denied that any assurances were given by the Director of Purchases, or that the Agents continued to supply ghee relying upon such alleged assurances. It was asserted that the Agents continued to supply ghee without insisting upon any modification of the agreement, because they found, and it must be presumed that they found, it profitable to do so under the terms fixed under the supplementary contract dated June 20, 1942. The claims made for the additional buying remuneration, for mandi charges and for establishment and contingency charges, were denied. It was urged that, in any event, the claim for additional buying remuneration and for mandi charges and for reimbursement of establishment and contingencies, was not covered by cl. 20 of the agreement, under which the submission to arbitration was made, and the arbitrators had no jurisdiction to adjudicate upon those claims. .

On the claim made by the Agents, and the denial thereof, the arbitrators incorporated the points of contest in the form of certain issues. On May 2, 1954, the arbitrators made an award rejecting the primary claim on the view that the supplementary agreement dated June 20, 1942, was for consideration and the same was valid and binding upon the Agents. On the alternative claim, they awarded, under the head of establishment and contingencies, Rs. 80,994-12-6, being the actual loss which, in their view, the Agents had suffered, and Rs. 11,27,965-11-3, in addition to the amounts received by the Agents from the Government

I96o for mandi and financing charges. The arbitrators

M Al-.

P h daccordingly awarded an amount of Rs. 13,03,676-12-6

:d ;:;, Z~ a with future interest from November 15, 1949, till the

v. · date of realization, and costs.

The Union of India The award was filed in the court of the Commer-

Shah J. cial Subordinate Judge, Delhi, on June 2, 1954. The Government of India applied under ss. 30 and 33 of the Indian Arbitration Act, to set aside the award on the grounds that it was invalid, that it had been improperly procured, and that it was vitiated on account of judicial misconduct of the arbitrators.

The Commercial Subordinate Judge held that the arbitrators had committed an error apparent on the face of the award in ordering the Union to pay to the Agents additional remuneration and financing and overhead charges, but, in his view, specific questions having been expressly referred for adjudication to the arbitrators, the award was binding upon the parties and could not be set aside on the ground of an error apparent on the face thereof. The learned Judge, accordingly, rejected the application for setting aside the award.

Against the order made by the Subordinate J udgc, an appeal was preferred by the Union of India to the High Court of East Punjab at Chandigarh. At the hearing of the appeal, counsel for the Agents sought to support the award on the plea that certain questions had been specifically referred to the arbitrators, and it was open to the arbitrators to make the award which they. made, on the basis of quantum meruit.

The High Court held that there was no specific reference of any questions of law to the arbitrators, and the decision of the arbitrators was not conclusive and was open to challenge, because it was vitiated by errors apparent on the face of the award. The High Court reversed the order passed by the Subordinate Judge, and set aside the award of the arbitrators, holding that there was no "legal basis for awarding any compensation" to the Agents for any loss which they might have sustained. This appeal has been filed with leave of the High Court under cl. 133 (l)(a) of the Constitution.

The extent of the jurisdiction of the court to set .r96o aside an award on the ground of an error in making M/ Al-p P , a ' ll d fi d Th d f b' s. 0 i arsiia ' the award is we - e ne . . ea war o an ar itrator and sons. Ltd. may be set aside on the ground of an error on the v. face thereof only when in the award or in any docu- The Union of India ment incorporated with it, as for instance, a note appended by the arbitrators, stating the reasons for his decision, there is found some legal proposition which is the basis of the award and which is erroneous-Champsey Bhara and Company v. Jivaraj Balloo Spinning and Weaving Company, Limited (1 ).

If, however, a specific question is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law, does not make the award bad on its face so as to permit of its being set aside-Jn the matter of an arbitration between King and Duveen and Others (2) and Government of Kelantan v. Duff Development Company Limited (3).

Was the reference made by the parties to the arbitrators a specific reference, that is, a reference inviting the arbitrators to decide certain questions of law submitted to them? If the reference is of a specific question of law, even if the award is erroneous, the decision being of arbitrators selected by the parties to adjudicate upon those questions, the award will bind the parties. In the reference originally made to the arbitrators by the letter of the Agents on July 1, 1946, and the reply of the Government dated July 10,

1946, a general reference of the dispute was made in terms of cl. 20 of the agreement. Even though the award made on that reference, was set aside by the Subordinate Judge, the arbitration was not superseded, and the reference was expressly kept alive, reserving an opportunity to the parties to appoint fresh arbitrators pursuant to the agreement, for settling the dispute; and by letters respectively dated August 2, 1952, and August 14, 1952, a general reference was again made to the arbitrators. Paragraph 14 of the letter written by the Agents on August 2, 1952, evidences an intention to serve the notice under cl. 2U

(I) L.R. 50 I.A. 324.

(2) L.R. (1913) 2 K.B.D. 32.

(3) L.R. 1923 A.C. 395

Shah].

z96o of the agreement. Issues were undoubtedly raised -.

P h dby the arbitrators, but that was persumably to focus Mjs. Alop• ars a th t t• f h h t · £ and Sons. Ltd. e at en ion o t e parties on t e porn s ansmg or v. adjudication. The Agents had made their claim The Union of India before the arbitrators, and the claim and the jurisdiction of the arbitrators to adjudicate upon the claim, Shah f. were denied. The arbitrators were by the terms of reference only authorized to adjudicate upon the disputes raised.

There is no foundation for the view that a specific reference, submitting a question of law for the adjudication of the arbitrators, was made.

We agree, therefore, with the view of the High Court that the reference made, was a general reference and not a specific reference on any question of law.

The award may, therefore, be set aside if it be demonstrated to be erroneous on the fac.e of it.

The original agreement dated May 3, 1937, was modified by the supplementary agreement dated June 20, 1942, and the arbitrators have held that the modified agreement was binding upon the Agents.

By the agreement as modified, a graded scale was fixed for the establishment and the contingencies to be paid to the Agents, and also for the mandi charges and overhead expenses. The arbitrators still proceeded to award an additional amount for establishment and contingencies and an additional amount for mandi charges. By cl. 14(a), read with cl. 12(b) (2) of the agreement, the rate at which establishment and contingency charges were to be paid, was expressly stipulated, and there is no dispute that the Government of India have paid to the Agents those charges at the stipulated rate for ghee actually purchased.

The award of the arbitrators shows that the amount actually received from the Government, totalled Rs. 6,04, 700-9-0, whereas, according to the accounts maintained by the Agents, they had spent Rs. 6,77,542-0-3. Granting that the Agents had incurred this additional expenditure under the head 'establishment and contingencies', when the contract expressly stipulated for payment of charges at rates specified therein, we fail to appreciate on what ground the arbitrators could ignore the express

covenants between the parties, and award to the

I960 Agents amounts which the Union of India had not u Az-p P h d ..1.n s. o i ars a agreed to pay to the Agents. The award of the and Sons. Ltd. arbitrators, awarding additional expenses under the ~. head of establishment and •contingencies, together The Union of India with interest thereon, is on the face of it erroneous.

Before the arbitrators, a number of arhatias, who supplied ghee to the Agents, appeared and produced extracts from their books, showing the amounts actually due to them from the latter. Detailed charts, showing the total amount due under each head of expenditure to each arhatia, were produced. The arbitrators were satisfied that the statements produced, reflected a general rise in prices and cost of labour.

Taking into consideration the fact that the other persons were buying ghee at rates considerably in excess of the stipulated rates, the arbitrators held that the Agents were entitled to be reimbursed to the extent of Rs. 11,27,965-11-3. But the terms of the contract, stipulating the rate at which the financing and overhead charges were to be paid under cl. 13(a) read with cl. 12(b ), remained binding so long as the contract was not abandoned or altered by mutual agreement, and the arbitrators had no authority to award any amount in excess of the amount expressly stipulated to be paid. Mr. Chatterjee, on behalf of the Agents, submitted that the circumstances existing at the time when the terms of the contract were settled, were "entirely displaced" by reason of the commencement of hostilities in the Second World War, and the terms of the contract agreed upon in the light of circumstances existing in May, 1937, could not, in view of the turn of events which were never in the contemplation of the parties, rymain binding upon the Agents.

This argument is untrue in fact and unsupportable in law.

The contract was modified on June 20, 1942, by mutual consent, and the modification was made nearly three years after the commencement of the hostilities. The Agents were fully aware of the altered circumstances at the date when the modified schedule for payment of overhead charges, contingencies and buying remuneration, was agreed

Shah ].

upon.

Again, a contract is not frustrated merely because the circumstances in which the contract was M /s. Aiopi Panhad made, are altered. and Sos. Ltd. . .

Ig6o

Section 56 of the Indian Contract Act provides The Union of India that: '

Shah]. " A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful."

Performance of the contract had not become impossible or unlawful; the contract was in fact performed by the Agents, and they have received remuneration expressly stipulated to be paid therein.

The Indian Contract Act does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the contract at rates different from the stipulated rates, on some vague plea of equity. "The parties to an executory contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate-a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. Yet this does not in itself affect the bargain they have made. If, on the other hand, a consideration of the terms of the contract, in the light of the circumstances existing when it was made, shows that they never agreed to be bound in a fundamentally different situation which has now unexpectedly emerged, the contract ceases to bind at that point-not because the court in its discretion thinks it just and reasonable to qualify the terms of the contract, but because on its true construction it does not apply in that situation.

When it is said that in such circumstances the court reaches a conclusion which is 'just and reasonable' (Lord Wright in Constantine's case (1 ) or one' which justice derriands' (Lord Sumner in H irji M ulji v.

Cheong Yue Steamship Co. Ltd. (2), this result is arrived at by putting a just construction upon the contract in accordance with an 'implication ............ from the

(1) (1942) A.C. 154 186.

(2) (1926) A.C. 497, 510,

presumed common intention of the parties'-speech 1v6o of Lord Simon in British Movietonews Ltd. v. London and District Cinemas Ltd. (1 ).

M /s. Alopi Parskad There is no general liberty reserved to the curts and Sons Ltd. to absolve a party from liability to perform his part The Uni;;, of India of the contract, merely because on account of an -- ;... uncontemplated turn of events, the performance of the Shah f. contract may become onerous. That is the law both

in India and in England, and there is, in our opinion, no general rule to which recourse may be had, as

ontended by Mr. Chatterjee, relying upon which a party may ignore the express covenants on account of an uncontemplated turn of evel).ts since the date of the contract. Mr. Chatterjee strenuously contended that in England, a rule has in recent years been evolved which did not attach to contracts the same sanctity which the earlier decisions had attached, and in support of his contention, he relied upon the observations made in British M ovietonews Ld. v. London and District Cinemas Ld. ( 2 In that case, Denning, L, J., is reported to have observed:

" ............ no matter that a contract is framed in words which taken literally or absolutely, cover what has happened, nevertheless, if the ensuing turn of events _was so completely outside the contemplation of the parties that the court is satisfied that the parties, as reasonable people, cannot have intended that the contract should apply to the new situation, then the court will read the words of the. contract in a qualified sense ; it will restrict them to the circumstances contemplated by the parties; it will not apply them to the uncontemplated turn of events, but will do therein what is just and reasonable. " - But the observations made by Denning, L.J., upon which reliance has been placed, proceeded substantially upon misapprehension of what was decided in Parkinson &: Go. Ld. v. Commissioner.$ of Works (3), on which the learned Lord Justice placed considerable reliance.

The view taken by him, was negatived in

(1) L.R. 1952 A.C. '66 at pp. 185 & 186.

(2) (1951) I KB.D. 190, 201,

\3) (1.~49) 2 I\, B, D, 6~2,

r96o appeal to the House of Lords in the British Movie- -- tonew's case-(1952) A.C. 166-already referred to. In M/o Afopi PanhadI d" . th d"fi d 1 f t t th . th" a 5 ltd n ra, m eco 1 e aw o con rac s, ere1s no. mg an °;' · which justifies the view that a change of circum-

The Union of Tndia stances, " completely outside the contemplation of

parties" at the time when the contract was entered Shah I into, will justify a court, while hol.ding the parties bound by the contract, in departing from the express terms thereof. Parkinson and Co. Ld. v. Commissioners of Works (1) was a case in which on the true interpretation of a contract, it was held, though it was not SQ expressly provided, that the profits of a private contractor, who had entered into a contract with the Commissioners of Works to make certain building constructions and such other additional constructions as may be demanded by the latter, were restricted to a fixed amount only if the additional quantity of work did not substantially exceed in value a specified sum.

The Court in that case held that a term must be implied in the contract that the Commissioners should not be entitled to require work materially in excess of the specified sum. In that case, the Court did not proceed upon any such general principle as was assumed by Denning, L.J., in the BritishMovietonews Ld. v. London and District Cinemas Ld. (2).

We are, therefore, unable to agree with the contention of Mr. Chatterjee that the arbitrators were justified in ignoring the express terms of the contract prescribing remuneration payable to the Agents, and in proceeding upon the basis of quantum meruit.

Relying upon s. 222 of the Indian Contract Act, by which duty to indemnify the agent against the consequences of all lawful acts done in exercise of the authority conferred, is imposed upon the employer, the arbitrators could not award compensation to the agents in excess of the expressly stipulated consideration. The claim made by the Agents was not for indemnity for consequences of acts lawfully done by them on behalf of the Government of India; it was a claim for charges incurred by them in excess of those stipulated. Such a claim was not a claim for

(') ('949) 2 KP.D. 632.

(2) (19.!)I) I ICB.D. 190, 201,

~ ...... -

• -

S.C.R.

SUPREME COUH, T REPORTS 809

indemnity, but a claim for enhancement of the rate of z96o the agreed consideration .. Assuming that the Agents M/ Al-. P h ,

reied upon assurances alleged . to be given by the

:a ;:s. ";,;/"' Director in-charge of Purcha.ses, m the absence of an v. express covenant modifying the contract which The Union of India governed the relations of the Agents with the Government of India, vague assurances could not Shah J. modify the contract. Ghee having been supplied by the Agents under the terms of the contract, the right of the Agents was to receive remuneration uner the terms of that contract. It is. difficult to appreciate the argument advanced by Mr. Chatterjee that the Agents were entitled to claim remuneration at rates substantially different from the terms stipulated, on the basis of quantum meruit. Compensation quantum meruit is awarded for work done or services rendered,. when the price thereof is not fixed by a contract. For work done or services rendered pursuant to the terms of a contract, compensation quantum meruit cannot be awarded where the contract provides for the consideration payable in that behalf. Quantum meruit is but reasonable compensation awarded on implication of a contract to remunerate, and an express stipulation governing the relations between the parties under a contract, cannot be displaced by assuming that the stipulation is not reasonable. It is, therefore, unnecessary to consider the argument advanced by Mr.

Chatterjee that a claim for compensation on the basis of quantum meruit, is one which arises out of the agreement within the meaning of cl. 20. Granting that a claim for compensation on the basis of quantum meruit, may be adjudicated upon by the arbitrators in a reference made under cl. 20 of the agreement, in the circumstances of the case before us, compensation on that basis could not be claimed.

The plea that there was a bar of res judicata by reason of the decision in the Letters Patent Appeal No. 31of1953, has, in our judgment, no force.

The Subordinate Judge set aside the award on the ground that there had been judicial misconduct committed by the umpire and also on the view that the claims made, as described in Schedules B and D, were not outside

r96o the competence of the arbitrators. The High Court ., Ai-r , din appeal under the Letters Patent, did confirm the

""/S. opi arsna d , 'd h d b t th a?td sans. Ltd. or er, setting as1 e t e awar ; u ere was no v. binding decision between the parties that the claim The Union of Iudia described in Sch. B, that is, the claim for establish-

Shah J.

January 2I

ment and contingency charges, was within the competence of the arbitrators in reference under cl. 20.

It may be observed that according to the High Court

of East Punjab in the Appeal No. 31 of 1953, under the Letters Patent, it was not necessary to express any opinion whether the claim in Sch. U was within the competence of the arbitrators, and the claims described in Sch.]) does not appear to have been agitated in the second arbitration proceeding.

We, accordingly, agree with the view of the High .Court that the Award of the arbitrators was liable to be set aside because of an error apparent on the face of the award. In this view, the appeal fails and

i~ dismissed with costs.

Appeal dismissed,.

CHAMPALAL

MST. SAMARATH BAI

(JAFER IMAM, J. L. KAPUR AND K. SUBBA RAO, JJ.)

Arbitration-Award, Registration of-Power of court to extend time for filing-The Arbitration Act, 1940 (X of 1940), s. 14(2)- Jndian Ncgistration Act, (XV I of 1908), ss. 17, 49-Indian Limitation Act, (J X of 1908), Art. 178-Jndian Succession Act, 1925 (XXXIX of 1925), s. 192.

By means of a will the respondent's husband authorised her to adopt the appellant, and the will was duly registered after the death of the testator. The relevant portion of the will ran thus:-

"Under this will, I am authorising the said Champalal Ishv,:ardas to execute the same.

I have appointed him the executor of this will.

Under the said will the said Champalal alone shall be the full O\vner of my entire rnovable and immoveable property and the executor of. the will after my

Central Government

him The Union of India

Art. 22(6)

s. ALOPI PARSHAD & SONS, LTD

S. K. DAS

C. SHAH, JJ.

June 20, 1942

December 6, 1943

Union of India

May 2, 1954

Commercial Sub-Judge, Delhi

L. R. 50 I. A. 324

N. 0. Chatterjee

S. K. Kapur

N. H. Hingorani

Ganpat Rai

H. J. Umrigar

T. M. Sen

SHAH

Alopi Parshad and Sons Ltd.

India

October 1, 1937

Government of India

cl. 12

Indian

cl. 13

cl. 14

September 11, 1940

May 17, 1945

cl. 9

May 22; 1945

October 31, 1946

Union of India

Nigam

cl. 20

Rangi Lal

May 3, 1937

Lala Achru Ram

Alopi Parshad

Shah

cl. 20

High Court of East Punjab

Khosla

August 2, l 952

August 14, 1952

Subordinate Judge, Delhi

East Punjab High Court

December 16, 1953

March 1, 1954

AlopiParshad

cl. 20

Shah J. cial

Government of India

ss. 30 and 33

High Court of East Punjab at Chandigarh

cl. 133

s. 0

King

Duveen

July 1, 1946

July 10,

1946

cl. 20

August 2, 1952

cl. 2U

L.R. 50 I.A. 324

Shah

cl. 14(a)

cl. 12(b)

cl. 13(a)

cl. 12(b )

Chatterjee

Section 56

Indian Contract Act

Indian Contract Act

Wright

Constantine

Sumner

Simon

Alopi Parskad

England

Denning

Parkinson

Union of Tndia

s. 222

Indian Contract Act

cl. 20

cl. 20

cl. 20

High Court

of East Punjab

CHAMPALAL

SAMARATH BAI

JAFER IMAM

L. KAPUR

K. SUBBA RAO

s. 14(2)

Jndian Ncgistration Act

ss. 17, 49

Indian Limitation Act

Art. 178

Jndian Succession Act, 1925

s. 192

Champalal Ishv,:ardas