PETITIONER: <NAME> Vs. RESPONDENT: <NAME> AND <NAME>. DATE OF JUDGMENT: 10/09/1970 BENCH: <NAME>, K.S. BENCH: <NAME>, K.S. GROVER, A.N. CITATION: 1971 AIR 1295 1971 SCR (2) 118 CITATOR INFO : F 1971 SC1348 (13) R 1973 SC 157 (25) F 1973 SC 717 (14) R 1975 SC 308 (14,50) RF 1975 SC2299 (120,495) R 1979 SC 154 (36) RF 1985 SC 89 (16) D 1985 SC1133 (16,21) R 1987 SC1748 (20) ACT: Representation of the People Act , 1951, ss. 77 , 123(b) and s. 119--Expenditure in excess of prescribed limit by candidate's party or friends land others without his authority--If contravention of s. 77-If appellate court bound to grant costs to successful party. Election petitions-When <ORG> may interfere with findings of fact-Burden of proof-When inference may be drawn in absence of direct evidence. HEADNOTE: The appellant challenged the first respondent's election to <ORG> in 1967 mainly on the ground that he had committed the corrupt practice under Section 123(6) of the Representation of the People Act, 1951, in that he had incurred or authorised the incurring of expenditure in excess of the limit prescribed under Section 77 . It was alleged, interalia, that the first respondent was put up by one of the wealthiest business houses in the country which owned or controlled a large number of companies; during the election campaign vast material and human resources of these companies were drawn upon by the respondent. It was alleged that as against the limit of Rs. 25,000 prescribed for the constituency under s. 77 , several lakhs of rupees were spent by him during the election campaign on the printing of posters, pamphlets, etc., entertainment, the use of about 200 jeeps and cars, the engagement of over three thousand employees of the various companies and for their maintenance and travelling expenses, and on campaign meetings, trunk calls, etc. The appellant's election petition was dismissed by <ORG>, etc. 'I-he to this Court under Section 116A of the Act, HELD : Dismissing the appeal : The appellant had failed to establish that expenditure in excess of the prescribed limit was incurred by the first respondent or with his consent and authority or that of his election agents. (i)It is not sufficient for the petitioner to prove me- rely that the expenditure more than the prescribed limit had been incurred in connection with the election. He must further prove that the excess expenditure was incurred with the consent or under the authority of the returned candidate or his election agent. The expenditure incurred by the returned candidate's party or by his friends or supporters, or by the enemies of his rival candidates without his consent or authority cannot be taken into consideration. [127 <CITATION> .  1 S.C.R. 671; <CITATION> .  1 S.C.R. 530 and <NAME> v. <NAME>, 20 E.L.R. 176; referred to. (ii)This Court will not ordinarily go behind the finding of fact reached by the trial judge unless there is something basically wrong in the conclusions reached by him or the procedure adopted by, him. This is not a rule of law but a rule of prudence. [126 B] 119 <NAME> v. <NAME> & Ors., Civil Appeal No. 717/68 decided on 23- <CITATION> , A.I.R. 1965 S.C. 183; referred to. (iii)The burden of proving the commission of a corrupt practice which is pleaded is on the petitioner and he has to discharge that burden satisfactorily. In doing so he cannot depend on preponderance of probabilities. The evidence must be cogent and conclusive. It is true that many times corrupt practices at election may not be established by direct evidence and the commission of those corrupt practices may have to be inferred from the proved facts and circumstances but the circumstances proved must reasonably establish that the alleged corrupt practice was committed by the returned candidate or his election agent. [126 H] Dr. <NAME> v. <NAME> and Anr., Civil Appeal No. 1449/68 decided on 17-12-1968, referred to. (iv)If the court comes to the conclusion that an item of expenditure has been suppressed in the return of election expenses, the mere fact that there is no sufficient evidence about the amount that must have been spent is no ground for ignoring the matter. It is the duty of the court to assess all expenses as best it can and though the court should not enter into the region of speculation or merely try to guess the amount that must have been spent, it would generally be possible to arrive at an amount of expenditure on a conservative basis and where it is possible to arrive at any such estimate, such estimated amount should be held as not shown by the candidate in his election account. [128 H] Shivram Sawant Bhonsale v. <NAME>, 17 E.L.R. 37. referred to. (v)Although the trial court, under Section 119 of the Act is under compulsion to award cost to the successful party, there is no provision in the Act which compels the appellate court to award costs in an election appeal. [135 F] JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1094 of 1969.

Appeal under s. 116-A of the Representation of the People Act, 1951 of the judgment and order dated February 17, 1969 of <ORG> in Election Petition No. 4 of 1967.

<NAME>, <NAME>, <NAME>, <NAME> and <NAME>, for the appellant.

<NAME>, <NAME>, <NAME> and <NAME>, for respondent No. 1.

<NAME> and <NAME>, for respondent No. 2. The Judgment of the Court was delivered by <NAME>, J.-This appeal raises the question as to the validity of the election of Mr. <NAME> to <ORG>, in the General Election held in 1967, from the Jhunjhunu constituency in the State of Rajasthan. The election for that constituency was held in the month of February 1967. The notification calling upon the constituency to elect one member to <ORG> was published on January 13, 1967. The last date for filing the nomination was January 20, 1967. Several persons filed their nominations but some out of them withdrew later. Eleven persons including Mr. <NAME> (respondent No. 1) and Mr. <NAME> (Respondent No. 2) contested the election. The polling took place on February 15, 18 and 20th. Counting commenced on the 21st of that month and completed on the 23rd on which date results were declared. According to the declaration made by the returning officer, respondent No. 1 secured 1,50,546 votes and respondent No. 2, 1,04,023. It is not necessary to refer to the other candidates in the course of this judgment. Respondent No. 1 was declared elected.

The appellant who is a voter in the Jhunjhunu constituency and a supporter of Mr. <NAME> challenged the election of the repondent under s. 81 of the Representation of the People Act, 1951 (which will hereinafter be referred to as the Act) on various grounds. His petition was tried and dismissed by a single judge of <ORG>. Thereafter he has brought this appeal under S. 11  6A of the Act.

The election of respondent No. 1 was challenged on various grounds. It was alleged that he had committed corrupt practices coming under S. 123(1) (bribery), 123(4) (false statements as regards the personal character and conduct of respondent No. 2), 123(5) (hiring or procuring vehicles for the free conveyance of electors) and 123(6) (incurring or authorising the incurring of expenditure in contravention of s. 77). The respondent denied the allegations made against him. At the trial of the case most of the grounds alleged in support of the petition were not pressed. At present we are only concerned with the allegation that respondent No. 1 had incurred or authorised the expenditure in contravention of S. 77 in connection with his election. Section 77 of the Act reads :

"Amount of election expenses and maximum thereof:

(1) Every candidate at an election shall, either by himself or by his election agent, keep a separate and correct account of all expenditure in connection with the election incurred or authorised by him or by his election agent between the date of publication of the notification calling the election and the date of declaration of the result thereof, both dates inclusive.

(2) The account shall contain much particulars as may be prescribed;

(3) The total of the said expenditure shall not exceed such amount as may be prescribed."

Section 123(6) declares that incurring or authorising of ex- penditure in contravention of s. 77 is a corrupt practice. The maximum amount of expenditure prescribed for the Jhunjhunu constituency was Rs. 25,000/-. The return of, respondent No. 1 showed that his total expenditure in connection with the election was Rs. 16,380.96 P. It it is shown that the total expenditure incurred either by respondent No. 1 or his election agent or by others with their consent or under their authority exceeded Rs. 25,000/- then the election of respondent No. 1 must be held to be void.

In the election petition the petitioner alleged that respondent No. 1 was an independent candidate; and that he was put up by <ORG>, one of the wealthiest business houses in the country who own and/or control and/or manage several companies. It was further alleged therein that respondent No. 1 himself was a man of considerable means. According to the petitioner during the course of election compaign many top Executives of several companies owned or controlled by <ORG> were brought by respondent No. 1 to the constituency and they lived there for over a month and worked for respondent No. 1. Several leading members of the <NAME> family including Mr. Ghanashyamdas <NAME>, Mr. Madhya Prasad <NAME>, Mr. K. K. <NAME> and others stayed in the constituency and canvassed for respondent No. 1. He further alleged that vast material and human resources of several companies of <ORG> were drawn upon by the respondent No. 1 for his election compaign. Besides the Chief Executive Officers, hundreds of other Executive Officers and employees of several companies of <ORG> were also brought by respondent No. 1 from several places to the constituency for campaigning in his favour. The petitioner alleged that several lakhs of rupees were spent by respondent No. 1 in connection with his election. Proceeding to give particulars about the expenditure incurred he stated that the respondent No. 1 got printed lakhs of posters, pamphlets, leaflet-, and cartoons and got them distributed throughout the constituency and in that connection he spent about 2 lakhs of rupees; he made a film of some meetings held and exhibited that film in various parts of the constituency and in that connection spent about Rs, 30,000/- ; he employed a singing party which was taken by a motor truck from village to village for the purpose of reciting songs and performing bhajans and for that purpose spent about Rs, 3 000/-; he used about 200 jeeps and cars for his election campaign and in that connection incurred or authorised an expenditure of Rs. 6,00,000/-; for some of these jeeps (which were not hired) he incurred or authorised an expenditure of about 9--L 235 Sup CI/71 Rs. 30,000/- as drivers' salaries; he requisitioned the services of about 3,000 employees of the <NAME> concerns and for their maintenance and travelling expenses incurred more than Rs. 10 lakhs; he had 150 officers in the constituency and for their maintenance spent about Rs. 75,000/-; he set up 80 messes at different places for feeding his canvassers as well as the electors and for that purpose he spent about Rs. 2 lakhs; he organised nearly 225 meetings and for that purpose incurred an expenditure ,of Rs. 33,750/-; for trunk calls in connection with the election, he spent about Rs. 5,000/-; for the repairs of the jeeps used in connection with the election spent about Rs. 50,000/- and lastly spent about Rs. 75,000 for hiring jeeps. Some of the items of expenses mentioned above were not pressed at the hearing. We shall not refer to them in the course of this judgment. We shall ,confine our attention to only those heads of expenditure which were pressed for our acceptance. Before we proceed to consider the merits of the case, it is .necessary to Mention that in the memorandum of appeal, the appellant had urged that in <ORG> he was not given reasonable opportunity to put forward his case. He complained that his applications for examination of certain witnesses on commission were, improperly rejected; he was not given sufficient opportunity to procure the attendance of the witnesses and lastly several documents produced by him in support of his case were improperly rejected. When the hearing of the appeal was taken up we suggested to the learned Counsel for the appellant, Mr. <NAME> to first deal with the plea that the appellant was not given reasonable opportunity to prove the case pleaded by him. After taking up that plea and arguing the appeal for some- time Mr. <NAME> informed us that he would not press that part of his case as he did not want the case to be either remanded or additional evidence taken in view of the fact that the next General Election is not far off. He informed us that he would argue the appeal on the basis of the evidence on record. At this stage it may also be mentioned that no application had been made in this Court for taking additional evidence. In view of the concession made by Mr. <NAME>, we will confine our attention to the merits of the case on the basis of the evidence on record. Mr. <NAME>'s case was that Mr. <NAME> had incurred the wrath of the members of the family of Mr. Ghanshamdas <NAME> due to the fact that as Chairman of <ORG> he had dug up many skeletons from the cupboards of some of the <NAME> concerns. It may be mentioned at this stage that Mr. <NAME> was representing the Jhunjhunu constituency in <ORG> from 1962 to 1967 and earlier as well and for a considerable time he was the Chairman of <ORG>. The further case of Mr. <NAME> Was that because of the hostility of the members of the <NAME> family towards Mr. <NAME>, the members of that family sponsored the candidature of respondent No. 1 who was one of their top Executives, he being the Chairman of <ORG>, Jamnagar, a <NAME> concern and the President of a Chemical Company at Porbundar which is also a <NAME> concern. According to the appellant, respondent No. 1 was really an independent candidate but in order to facilitate him to exercise his money power as well as the money power of the <NAME> concerns, he posed as a <ORG> party candidate. It was said that a great deal of money was spent by the members of the <NAME> family and also by the companies under their control to further election prospects of respondent No. 1. Mr. <NAME> further contended that respondent No. 1 in agreement with the several members of the <NAME> family and some of the top officials of <NAME> concerns had devised a plan for spending money in connection with the election and the entire expenditure was incurred in accordance with that plan.

At the very outset, we may mention that respondent No. 1 is not a member of Mr. <NAME> family though it is established that he is one of their top Executives. It also appears from the evidence that several members of the <NAME> family as well as other industrialists were keenly interested in the success of respondent No. 1. It may also be, as contended on behalf of the appellant that they were keen on defeating Mr. <NAME>. Even according to the appellant the members of <NAME> family had both the means as well as the cause to spend for furthering the election prospects of respondent No. 1. But the real question for our decision is whether any expenditure in connection with his election was incurred by respondent No. 1 or by his election agent or by others with his consent or under his authority in excess of the amount shown in his return and if so what that amount is ? The expenditure incurred by <ORG> or other friends or supporters of respondent No. 1 or by the enemies of Mr. <NAME> without the consent or authority of respondent No. 1 cannot be taken into consideration as the law now stands.

In the election petition, the petitioner took the, stand that respondent No. 1 was an independent candidate. it was not suggested therein that he was only nominally a Swatantra candidate and that he used the Swatantra party as a shield to cover the enormous expenditure that he planned to incur during the election campaign. In fact in the election peti- tion there is no reference to <ORG>. It is now established and it is not denied that respondent No. 1 was a Swatantri party candidate. His symbol in the election was the "Star", the symbol assigned to the Swatantra party by <ORG>

sion. The plea of the petitioner that in truth and reality, respondent No. 1 was an independent candidate cannot be accepted. The charge that during the election expenditure was incurred by various persons in accordance with a preplanned design devised by respondent No. 1 and others was also not pleaded in the election petition. That ingenuous contention appears to have also been put forward only with a view to make it appear that expenditure incurred by the <ORG> party or by others in connection with repondent No. 1's election was all done with the consent or at any rate under the authority of respondent No. 1. Some support for this contention was tried to be sought from Ex. P.W. 14/5 and Ex. P.W. 42/6. PW 14/5 is a letter from respondent No. 1 to Mr. <NAME>. It is dated 30-12- 1966. In Ex. PW 14/5 (the genuineness of this letter is in dispute) respondent No. 1 is shown to have written to Mr. <NAME> as, follow:

" I have been informed that <NAME> was in Gudda constituency yesterday. He was touring with 4 jeeps. <NAME> and <NAME> have suggested that whenever I go to the constituency, I must also go at least with four jeeps, if not more, to create an impression on the public that I am in no way lacking in vehicles and publicity work against <NAME>. <NAME> also informs me that <NAME> has given 5 jeeps to <NAME>, his candidate for Jhunjhunu constituency. The same number of jeeps have been given to his Gudda constituency candidate. He has also told that each candidate can hire further 3 jeeps for which <NAME> will pay the cost. From this you will kindly find that he is all out to win the election. It is also confirmed that in Nawalgard he has given 5 jeeps to <NAME>, who is his candidate. In view of the fact that he is now using more number of vehicles than in the last election we shall also have to fall in line with him, and, therefore all our friends like <NAME>, <NAME>, <NAME> and <NAME> feel strongly that we must also arrange to give at least 5 jeeps per constituency, if not more." In reply to that, letter Mr. <NAME> is said to have written Ex. P-42/6. That letter reads as follows "I am in receipt of your letter of 30th December from Jaipur regarding, more requirements of jeeps. I have checked up With-<ORG> and it is not possible for them to arrange any jeeps. <NAME> seems to have given you wrong information. I am however negotiating with <ORG> to give a cash donation for <ORG> and the cheque to be sent through you. I will let you know about this within a week.

As regards your further requirement of jeeps, you write that 10115 jeeps can be delivered immediately by the Rajasthan agent of <ORG>. If this is so, then you please get these jeeps immediately in the account of our various officers and the finance should be arranged as per our decision in Pilani. Mr. Keshab <ORG> is out of Bombay and therefore I have not been able to contact him, but in any case, as these jeeps are available in Rajasthan for immediate use, I suppose there is no need for me to talk to Mr. Keshab <ORG>.

<ORG> is now reaching Pilani on the 8th or 9th and you please consult him also about our total requirement of jeeps. I agree with you that we should not lag behind <NAME> in our efforts. I also understand that he is going to step up his election efforts.

<NAME>, Yours sincerely, <ORG>, Sd/- MPB c.c. Sri D. P. Mandelia, Bombay."

While it is true that these letters, if they are genuine, as they are held to be by the trial court, do indicate that sometime in December respondent No. 1 was contemplating to secure large number of jeeps to match the number of vehicles used by respondent No. 2. But whether in fact he did so is a matter for proof. But from this letter we are unable to spell out that there was any settled plan for financing the election campaign. Our attention was not invited to any other evidence to show that there was any settled plan for financing the election campaign. Our taken in the petition.

It is no doubt true that it appears from the record that seven jeeps were purchased by some persons who are said to be <ORG> employees on the 18th and 19th of January, 1967 through one <NAME> of Jaipur. There is no evidence whatsoever to 'show that those jeeps were used in connection with the election. Though the surrounding circumstances do indicate that those jeeps might have been purchased through <ORG> employees for election purpose, those circumstances do 'not take the case beyond suspicion. In the absence of any proof as to their use we cannot come to any conclusion on the basis of the purchase of those jeeps.

Before proceeding to examine the evidence relating to the various items of expenditure said to have been incurred in connection with' the election, it, is necessary to bear in mind the various principles evolved by this Court to be followed while hearing an election appeal.

Taking into consideration the fact that a plea of corrupt practice is somewhat akin to a criminal charge and the further fact that the election cases are tried by experienced judges of <ORG>, this <ORG> ordinarily does not go behind the findings of fact reached by the trial judge who had the benefit of seeing the witnesses examined before him unless there is something basically wrong in the conclusions reached by him or the procedure adopted by him. This is not a rule of law but a rule of prudence. In <NAME> v. <NAME> & ors.(1) this <ORG> observed :

"We have already observed in more than one decision in the present series of election appeals that in the matter of appreciation of evidence and forming of conclusions with respect thereto, our normal approach would be to accept the findings of the trial judge and not to upset the same unless it was shown to us that the trial judge had not considered all the evidence in its proper perspective or that his inferences were not supported by the data relied on. We propose to follow the said rule in disposing of this appeal. We must also bear in mind that the charge of commission of a corrupt practice has to be proved by cogent and reliable evidence beyond any reasonable doubt and that such a charge cannot be established by any consideration of preponderance of probabilities."

While making these observations the learned judges relied on the decision of this Court in the case of <CITATION> (2) In the present appeal we do not propose to go into the question whether the evidence adduced by a petitioner in an election case should establish the case beyond any reasonable doubt but suffice it to say that that evidence must be cogent and conclusive. It is true that as observed in Dr. <NAME> practice cannot be equated to a criminal charge in all respects. While the accused in a criminal case can refuse to plead and decline to adduce evidence on his behalf and yet ask the prosecution to prove its case beyond reasonable doubt such is not the position in an election petition. But the fact remains that burden of proving the commission of the corrupt practice pleaded is on (1). Civil Appeal No. 717/68 decided on 23-8-1968. (2). A.I.R.1956 S.C. 183., (3). Civil Appeal No. 1449/68 decided on 17-12-1968.

the petitioner and he has to discharge that burden satisfactorily. In doing so he cannot depend on preponderance of probabilities. Courts do not set at naught the verdict of the electorate except on good grounds. Now coming to the corrupt practice of incurring expenditure beyond the prescribed limit, in several decisions this Court has ruled that it is not sufficient for the petitioner to prove merely that the expenditure more than the prescribed limit had been incurred in connection with the election, he must go further and prove that the excess expenditure was incurred with the consent or under the authority of the returned candidate or his election agent. <CITATION> .(1) this Court had to consider a case where a proprietor of an estate lent the services of his Manager, Assistant Manager, 20 Ziladars and their peons for canvassing on behalf of his son. It was proved that the father was an old man and the returned candidate was helping his father in the management of his estate. The question in that case was whether because of the canvassing by those persons the returned candidate had committed the corrupt practice of engaging the services of more than the prescribed number of persons/and further whether the salary and wages paid to them should have been included in computing the expenses incurred by the returned candidate. In that case there was no evidence to show that the services of those persons were either procured by the returned candidate or his election agent nor was it proved that their services were obtained with the consent or under the authority of the returned candidate or his election agent.

This is what this Court observed in that case:

"There can be no doubt that in the eye of the law these extra persons were in the employment of the father of the appellant and paid by the father and they were neither employed nor paid by the appellant. The case, therefore, does not fall within s. 123(7) at all and if that be so it cannot come within section 124(4) . It obviously was a case where a father assisted the son in the matter of the election. These persons were the employees of the father and paid by him for working in the estate. At the request of the father they assisted son in connection with the election which strictly speaking they were not obliged to do. Was the position in law at all different from the position that the father had given these employees a holiday on full pay and they voluntarily rendered assistance to the appellant in connection with his election. We think not. It is clear to us that qua the appellant these persons were (1)  1 S.C.R. 671.

neither employed nor paid by him. So far as the appellant was concerned they were mere volunteers and the learned advocate for the respondent admits that employment of volunteers does not bring the candidate within the mischief of the definition of corrupt practices as given in section 123(7) . The learned advocate, however, contended that such a construction would be against the spirit of the election laws in that candidates who have rich friends or relations would have an unfair advantage over a poor rival. The spirit of the law may well be an elusive and unsafe guide and the supposed spirit can certainly not be given effect to in opposition to the plain language of the section of the Act and the rules made thereunder. If all that can be said of these statutory provisions is that construed according, to the ordinary, grammatical and natural meaning of their language, they work injustice by placing the poorer candidates, at a disadvantage the appeal must be to <ORG> and not to this <ORG>."

The same view was reiterated in <CITATION> .(1) Therein this Court ruled that unless it is esta- blished that expenditure was incurred in connection with the election by the candidate or his election agent or was authorised by them, it is not necessary to be included under s. 77 of the Act. Expenses incurred by any other agent or person without anything more need not be included in the account or return as such incurring of expenditure would be purely voluntary.

In <NAME> v. <NAME> ) <ORG> held that /the expenditure voluntarily incurred by the friends and supporters of the returned candidate does not come within s. 123(3) even though the returned candidate was aware of the fact at the time of the election itself that his friends and sympathiers were incurring expenditure in connection with his election. That is also the effect of the decision in <NAME> case(3). This Court as well as the High Courts have taken the view that the expenses incurred by a political party to advance the prospects of the candidates put up by it, without more do not fall within s. 77 . That position in law was not disputed before us. But it is true as observed by <ORG> in'Shivram Sawant Bhoonsale v. <NAME> (4) ; that if the court comes to the conclusion that an item of expenditure has been suppressed in the return of election expenses, the mere fact that there is no sufficient evidence about the amount that must have been spent is no ground for (1) (1970) 1, S.C.R. 530.

(3)[1955] 1 S.C.R. 671.

(2)20 E.L.R. 176.

(4)17 E.L.R. 37.

ignoring the matter. It is the duty of 'the court to assess all expenses as best it can and though the court should not enter into the region of speculation or merely try to guess the amount that must have been spent,, it would generally be possible to arrive at an amount of expenditure on a conservative basis and where it is possible to arrive at any such estimate, such estimated amount should be held as not shown by the' candidate in his election account. A somewhat similar was the view taken by this Court in <NAME> case(1).

We shall now proceed to examine the evidence adduced in this case on the basis of the principles enunciated earlier. But before going to the evidence relating to the expenditure said to have been incurred by the 1st respondent in connection with his election, it is 'necessary to refer to a curious feature in this case. In the course of the trial of the case two files (files A and B) containing numerous documents were produced on behalf of the petitioner. One of those files viz. file 'A' was produced by P.W. 14 Mr. <NAME> and the other was produced by Mr. <NAME>, a member of <ORG> through Mr. <NAME>, an Advocate. That file is file 'B'. These files are said to contain the correspondence relating to the election of respondent No. 1 exchanged between various persons, such as respondent No. 1, Mr. <NAME>, Mr. <NAME>, Mr. <NAME>, Mr. <NAME> etc. Mr. <NAME> has not appeared in the witness,box. Mr.<NAME> did not give evidence in the case. It is not known howMr. <NAME> came to possess those documents. Nowcoming to file 'A', the story put forward by <NAME> that heis a business man in Bombay; he was a friend of Mr. <NAME> and at his instance he worked for respondent No. 1 during the election; after the election respondent No. 1 fearing that there might be a raid on his residences in connection with the evasion of taxes or duties, handed over that file to him for safe keeping. The trial court has come to the conclusion that in that file there is not a single document relating to any business transaction. All the documents therein pertain to the election of respondent No. 1 and there could have been no fear of seizure of those documents. The story put forward by <NAME> on the face of it unbelievable. It is most likely that P.W. 14 worked for Mr. <NAME> during the election as suggested during his cross-examination. He seems to he a hired witness. But the fact that a document was procured by improper or even illegal means will not be a bar to its admissibility if it is relevant and its gen- uineness proved. But while examining the proof given as to its genuineness the circumstances under which if came to be pro-

(1) C.A. No. 717/68 decided on 23-8.1968.

duced into court have to be taken into consideration. Evidence has been adduced to prove some of the documents found in files 'A' and 'B' but the trial court has rejected that evidence excepting in regard to a few of the documents. It has given good reasons in support of its conclusion. The persons who tried to prove the signatures found on some of those documents are strangers to those who signed them. Their pretention as to their knowledge about the signatures of the concerned person was proved to be hollow. The principal witness 'Who sought to prove several of the documents contained in files 'A' and 'B' is P.W. 33, Mr. <NAME>. He is a thoroughly unreliable witness. He appears to be a dismissed employee of one of the <NAME> concerns. His pretention that he worked for respondent No. 1 during the election appears to be false. It is established that he was one of the counting agents of Mr. <NAME>. No application was made to this Court to admit any documents as additional evidence in the case. Therefore in this appeal we are only concerned with those documents which were admitted in evidence by the trial court. As found by the trial court voluminous false evidence has been adduced in this case both on behalf of the petitioner as well as on behalf of respondent No. 1. Several of the answers given by respondent No. 1 during his cross- examination were not found to be true by the trial court. From an over-all review of the material on record, we are left with an uneasy feeling about the evidence adduced in the case. We have no doubt in our mind that in the Jhunjhunu parliamentary constituency during the last General Election enormous expenses had been incurred in support of the candidature of respondent No. 1. We do not know whether the same was true of Mr. <NAME> though Ex. P. W. 14/5 indicates such a possibility. In the election petition, the petitioner sought not only to get set aside the election of respondent No. 1, he went further and claimed the seat for Mr. <NAME>. Mr. <NAME> in his written statement supported the pleas taken by the petitioner. Thereafter respondent No. 1 gave notice of filing recrimination against Mr. <NAME>. Immediately thereafter Mr. <NAME> withdrew his claim for the seat and contended that the petitioner could not claim the seat for him. Hence the second relief asked for by the petitioner in his petition was ordered to be dropped. This change in the front is not without significance.

This takes us to the expenses said to have been incurred by respondent No. 1 in connection with his election under the various heads.

We shall now take up the expenses said to have been incurred by respondent No. 1 under various heads (only such of them, as are pressed before us).

As seen earlier the petitioner's allegation in the petition was that respondent No. 1 incurred an expense of about six lakhs of rupees for purchasing petrol and mobil oil in connection with his election. In his election return respondent has shown an expense of only Rs. 5466-89P under that head. Though the petitioner alleged in his petition that respondent No. 1 had incurred an expense of about 6 lakhs for purchase of petrol and mobil oil, evidence was led only about three payments in that regard viz. (1) a sum of Rs. 2,000/- to the proprietor of <NAME> of <ORG> and (2) a sum of Rs. 5,0001- and, another sum of Rs. 5,700/- to M/s. <NAME> of <ORG>. No person connected with any of these pumps was examined in support of the alleged payments. The account books of those firms were also not got produced. To prove the, payment of sum of Rs. 2,000/- to <NAME> of <ORG>, one Mr. <NAME> (PW 10) was examined. His case is that he is a friend of the son of the proprietor of the firm M/s. <NAME> and he chanced to be present at the pump when one "B. S. Choudhary of <ORG>" came and paid to <NAME> Rs. 2,000/-. Later-on he was told by the proprietor of the firm that it was in connection with the supply of petrol and oil to respondent No. 1. The learned trial judge was unable to place reliance on this chance witness. His evidence is highly artificial. No satisfactory explanation is forthcoming for not examining the proprietor of the firm in question. Now coming to the payment of a sum of Rs. 5,000/- , the only witness who speaks about it is <NAME>. His evidence for good reasons have been disbelieved by the learned trial judge. He is clearly a partisan witness. For the alleged payment of Rs. 5,700/- on January 28. 1967, the witness examined is P.W. 21. The learned trial judge has disbelieved this witness as well. we see no reason to differ from the assessment of the evidence made by the learned trial judge, According to P.Ws. 19 and 21 they chanced to be present 'it the time when payments in question were made through some third parties. Here again neither anyone connected with the firm was examined nor the firm's accounts were produced.

It was alleged in the election petition that respondent No. 1 had spent about 2 lakhs of rupees on printing of posters, pamphets, leaflets and cartoons and the preparation of badges of the election symbol "Star", rubber balcons with the slogans " vote for <NAME>" and flags of silk and cotton clothes and their distribution as also on wall paintings. Before us no arguments were advanced as regards the expenditure said to have been incurred for badges of election symbol. rubber baloons and flags. It was urged before us that respondent No. 1 had paid a sum of Rs. 22,000/- to <ORG> of Bhiwani for wall painting. Several witnesses spoke to the fact that the Jhunjhunu consti-

tuency was flooded with wall paintings seeking vote for respondent No. 1. But strangely enough no-one connected with <ORG> was examined in the case. The proprietor of <ORG> was summoned to give evidence in the case but he did not appear in court. On the other hand one Mr. <NAME> appeared in court and presented a petition alleging that respondent No. 1's election agent is not allowing the proprietor of <ORG>, Mr. <NAME> to appear in court and therefore Mr. <NAME> had asked him to produce the account-books of that firm in court. Neither Mr. <NAME> was examined in the case nor the account-books otherwise proved. The allegation made by Mr. <NAME> that the election agent of respondent No. 1 did not permit Mr. <NAME> to appear in court remains unproved. The resulting position is that there is no evidence to show that any amount was paid to Mr. <NAME> either by respondent No. 1 or his election agent or someone with his consent or under his authority. Similarly there is no satisfactory evidence about any excess expenditure incurred by respondent No. 1 in publishing pamphlets, leaflets and handbills though as many as 56 different types of pamphlets appear to have been distributed during the election soliciting votes either for respondent No. 1 or for <ORG>. There is no evidence as to who issued those pamphlets. As seen earlier, respondent No. 1 had the powerful support of the members of the <NAME> family as well as of some other industrialists. Evidence was adduced to show that 76,000 copies of a cartoon-two starved out and emaciated bullocks evidently depicting that <ORG> rule has brought in nothing but poverty were got printed by one Mr. <NAME>, an Executive in a <NAME> concern at <ORG> a Delhi for which he had paid Rs. 2,300/- as charges. There is no evidence to show that these cartoons were got printed by respondent No. 1 nor 'is there any evidence to show that they were got printed by Mr. <NAME> with the consent of respondent No. 1 or under his authority. It may be that they were got printed to aid the election campaign of respondent No. 1 through those cartoons could have been used in any constituency in India. Mr. <NAME> has not been examined as a witness in the case.

The fact that this cartoon was widely published in the constituency as is clear from the evidence adduced in the case without more cannot show that the expenditure for getting those cartoons printed was incurred by respondent No. 1.

Evidence was led to show that at about the time of the elec- tion, several telephones installed in the residences of some of the members of the <NAME> family and some of their executives were extensively used and the telephone charges ran into few thousands of rupees but there is no evidence to show that either those telephones were used in connection with the election or they were used at the instance or under the authority of Evidence was also adduced to show that a large number of jeeps and cars were used in connection with the election. No evidence was adduced to show that they were either used by respondent No. 1 or that they were used with his consent or under his authority. In the circumstances of this case, the possibility of his friends using them, on their own cannot be ruled out. As seen earlier several jeeps were purchased through one of the business associates of <NAME>s at about the time of the election but here again as mentioned earlier there is no evidence to show that those jeeps were used in Jhunjhunu constituency at the time of the election.

Evidence was led to show that thousands of persons worked for respondent No. 1 but there is nothing to show that they did not work voluntarily. At any rate there is no evidence to show that they were either paid for or at least their expenses were met by respondent No. 1. It was said that respondent No. 1 ran several messes to feed his workers as well as the voters. The trial court has found that the evidence relating to that aspect of the case is unreliable. We see no reason to arrive at a different conclusion. Evidence was led to show that considerable expenses were incurred for arranging meetings. Here again there is no reliable evidence to show the amounts that were likely to have been spent for arranging the meetings or even to connect respondent No. 1 with the expenditure incurred in connection with those meetings.

Though the petitioner has failed to establish that any of the items of expenditure alleged to have been incurred by respondent No. 1 was in fact been incurred by him, there is voluminous and fairly convincing evidence to show that the constituency was flooded with election literature including posters, cartoons, painting of the walls, leaflets, handbills etc. on behalf of respondent No. 1. There is also evidence to show that large number of vehicles were used in connection with the election. It is clear from the evidence on record that money was freely and liberally spent to further the prospects of respondent No. 1. In addition to this there is also evidence to show that in about December, 1966. an account was opened in the Pilani branch of <ORG> in the name of <NAME> Mr. <NAME> who was at that time the President of <ORG>. On the very day of the opening of the account a cheque for Rs. 1,50,000/- issued by <ORG> (Cement Allocation and Co-ordination Organization) was credited. Thereafter cash .deposits of over 2 lakhs of rupees were, made in that account. These monies were drawn by P.W. 32 mostly by issuing cheques in favour of Mr. <NAME>, one of the Birla Executives. According to <NAME> the contribution made by <ORG> was made to the <ORG> party and the cash deposits made were the amounts collected by him for the benefit of the <ORG> party and that he spent the amounts received, in connection with the, election of the <ORG> party candidates in the Jhunjhunu constituency. P.W. 32 is undoubtedly an interested witness. He was a supporter of respondent No. 1. He himself contested one of the assembly constituencies in the Jhunjhunu parliamentary constituency. In the 1962 General Election, he opposed respondent No. 2 and lost the election by a narrow margin. It is clear from his cross-examination (the court permitted the Counsel for the petitioner to cross-examine him) much reliance cannot be placed on his evidence. Counsel for the appellant asked us to hold that the account in the name of <ORG> was in reality the account of respondent No. 1; <ORG> lent his name as a cover. In fact it was Mr. <NAME> who withdrew the amounts from that account and utilized the same in connection with the election ,of respondent No. 1. In support of this contention he relied on the following circumstances :-

The money was paid by <ORG>, a concern in which <ORG> were interested. In Ex. PW 42/6, Mr. <NAME> had written to respondent No. 1 to say that he would persuade <ORG> to make some contribution to <ORG> party and further the cheque could be sent through respondent No. 1 and cheques were mostly issued in favour of Mr. <NAME>. We agree with the learned judge of <ORG> that there is room to suspect that most of the amounts drawn from this account were likely ,to have been spent to further the election prospects of respondent No. 1. <ORG> is not a <NAME> concern. It is an organization formed by several cement manufacturers. <ORG> are only ,one of them. There is no evidence to show that the cheque in question was sent through respondent No. 1. It is proved that <ORG>. had contributed in connection with the election not only to the <ORG> party but also to the <ORG> party, <ORG> and several other splinter groups. It has even given contributions to individual candidates as is seen from its accounts. In fact the contribution given by <ORG> to the <ORG> party is much larger than maid by it to the <ORG> party. Mr. <NAME> was a member of the <ORG> party. From the facts proved it is not possible to come to a definite conclusion that be acted on behalf of respondent No. 1. If one looks at the way <ORG> was distributing amounts during the election as donations, one is constrained to feel that those payments were intended as investments. Possibly <ORG> did what other business concerns are doing. Such donations to political parties whether done in the crude way in which <ORG> did or in a more subtle way would undermine the very foundation of our society. No democracy can survive, however ideal is the Constitution by which it is governed, if the principles underlying the Constitution are ignored. The best democratic Constitution can go the way the Weimar Constitution went.

It is true that many times corrupt practices at election may ,not be able to be established by direct evidence and the commission of those corrupt practices may have to be inferred from the proved facts and circumstances but the circumstances proved must reasonably establish that the alleged corrupt practice was committed by the returned candidate or his election agent. As, mentioned earlier preponderance of probabilities is not sufficient. For the reasons mentioned above this appeal must fail and it is hereby dismissed. But we cannot leave this appeal without expressing our uneasiness about the law relating to election expenses. Section 123(6) is by and large ineffective in controlling election expenses. There are ways to bypass that provision. From what we have seen in the various election cases that came be-fore us we are of the opinion that law controlling election expenses has been reduced to a mockery. , We can only repeat the observations of this Court in <NAME> case(1) that "the appeal in this connection must be to the parliament." Now coming to the question of costs, the trial court felt extremely unhappy in having had to award costs to respondent No. 1. But it had to because of the compulsion of the law- see s. 119 of the Act. We are not faced with any such compulsion. There is no provision in the Act which compels the appellate court to award costs to the successful party in an election appeal. This is eminently a fit case where we should not award costs to the returned candidate. The resulting position is that the appeal is dismissed but the parties are directed to bear their own costs in this appeal.

R.K.P.S.

Appeal dismissed.

(1) [1955] 1 S.C.R 671.


PETITIONER: <ORG>. Vs. RESPONDENT: <ORG>. (INDIA) <ORG>. DATE OF JUDGMENT: 04/05/1962 BENCH: <NAME>, <NAME> BENCH: <NAME>, <NAME> SINHA, BHUVNESHWAR P.(CJ) <NAME>, K. AYYANGAR, <NAME> MUDHOLKAR, J.R. CITATION: 1962 AIR 1810 1963 SCR (3) 183 CITATOR INFO : F 1963 SC 90 (17,18,24) APL 1964 SC1526 (8) R 1969 SC 9 (8) R 1974 SC1579 (6) D 1985 SC1156 (19,24,49,53) F 1989 SC 839 (18) ACT: Forward Contract-Contract for sale of goods-Government notification forbidding forward contracts other than non- transferable specific delivery contracts Validity of the contract--Clause providing for arbitration-clause, if valid even if contract were invalid-Parties appearing before arbitrator--Estoppel--Forward Contracts (Regulation) Act, 1952 (74 of 1952), ss. 2 (c) (f) (i) (m) (n), 15(1), 17, 18(1). HEADNOTE: On September 7, 1955, the appellant company entered into a contract with the respondents for the purchase of certain bales of jute cuttings to be delivered by the respondents in equal installments every month in October, November and December, 1955. Under cl. 3 of the agreement the sellers were entitled to receive the price only on their delivering to the buyers the full set of shipping documents. Clause 8 conferred on the sellers certain rights against the buyers such as the right to resell if the latter refused to accept the documents. Clause 14 provided that all disputes arising out of or concerning the contract should be referred to the arbitration of <ORG> of Commerce. As the respondents failed to deliver the goods as agreed the appellants applied to <ORG> of Commerce for arbitration. The respondents appeared before the arbitrators and contested the claim, but an award was made in. favour of the appellant. Thereupon the respondents filed an application in <ORG> under s. 33 of the Arbitration Act, 1940, 184 challenging the validity of the award on the ground that the contract dated September 7, 1955, was illegal as it was in contravention of the notification of <ORG> dated October 29, 1953, issued under s. 17 of the Forward Contracts (Regulation) Act, 1952, which declared that no person shall enter into any forward contract other than a nontransferrable specific delivery contract for the sale or purchase of raw jute in any form........... The appellant pleaded (1) that on the terms of the arbitration clause the question whether the contract dated September 7, 1955, was illegal was one for the arbitrator to decide and that it was not open to the respondents to raise the same in proceedings under s. 33 of the Arbitration Act ; (2 ) that the respondents were estopped from questioning the validity of the award by reason of their having submitted to the jurisdiction of the arbitrators ; and (3) that, in any case, the contract was a nontransferrable specific delivery contract within s. 2 (f ) of the Forward Contracts (Regulation) Act and was not hit by the notification dated October 29, 1933. Held, that : (1) the dispute as to the validity of the contract dated September 7, 1955, was not one which the arbitrators were competent to decide under cl. 14 and that in consequence the respondents were entitled to maintain the application under s. 33 of the Arbitration Act. When an agreement is invalid every part of it including the clause as to arbitration contained therein must also be invalid. <NAME> v. <ORG>,  A. C. 356, <CITATION> ,  1 S. C. R. 493, <NAME> v. <ORG>, I. L. R.  2 Cal. 17, relied on. (2)the respondents were not estopped by their conduct from questioning the validity of the award. Ex parte <NAME>, (1861) 30 Law J. Rep. (N. S.) Bank. 10, explained. (3)on the true construction of the contract dated Sep- tember 7, 1955, read with the terms of the import licence in favour of the appellant, the agreement between the parties was that the contract was not to be transferred. In construing a contract it would be legitimate to take into account surrounding circumstances and, therefore, on the whether there was an agreement between the parties 185 that the contract was to be non-transferable, the absence of a specific clause forbidding transfer was not conclusive. <ORG> v. <ORG>, A. 1. R. 1956 Mad. 11O, approved. <ORG> v. <NAME>, (1880) 5 Q. B. D. 149, dist- inguished. Accordingly, the contract in question was not hit by the notification dated October 29, 1953. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 98 and 99 of 1960.

Appeal from the judgment and order dated April 16, 1958, and April 11, 1958, of <ORG> in Appeal from Original Order and decree Nos. 173 and 151 of 1957, respectively.

<NAME>, Additional Solicitor-General of Indin, <NAME> and <NAME>, for the appellant. <NAME> and <NAME>, for the respondent. 1962. May 4. The Judgment of the Court was delivered by <NAME>, J.-These are appeals against the judgment of <ORG>, setting aside an award of the arbitrators, which directed the respondent to pay to the appellants Rs. 41,250 as compensation for breach of contract, on the ground that the said contract was in con- travention of a notification of <ORG> dated October 29, 1953, and was in consequence illegal and void. The facts are that the appellants own a Jute Mill at Calcutta and carry on the business of manufacture and sale of Jute. On September 7, 1955 they entered into a contract with the respondents who are doing business as dealers in jute, for the purchase of 750 bales of Jute cutting 'raw) of Pakistan at Rs. 80 per bale of 400 lbs. to be delivered in October, November and December at the rate of 250 belles every month. Clause 14 of the agreement provides that all disputes arising out of or concerning the contract should be referred to the arbitration of <ORG>. The respondents failed to deliver the goods as agreed whereupon the appellants applied to <ORG> for arbitration in accordance with el. 14 of the agreement. The respondents appeared before the arbitrators, and contested the claim on the merits. The arbitrators made an award in favour of the appellants for Rs. 41,250 with interest, and that was filed under s. 14(2) of the Indian Arbitration Act in <ORG> in its original side and notice was issued to the respondents. Thereupon the respondents filed an application in <ORG>, presumably under s. 33 of the arbitration Act, wherein they prayed for a declaration that the contract dated September 7, 1955, was illegal, as it was in contravention of the notification of <ORG> dated October 29, 1953, and that in consequence proceedings taken thereunder before <ORG> and the award in which they resulted were all void. The learned Judge on the original side before whom the application came up for hearing dismissed it, and passed a 'decree in terms of the award. Against both this judgment and order, the respondents preferred appeals to <ORG> of <ORG>, Appeals Nos. 154 and 173 of 1957. They were heard by <NAME>, C. J., and <NAME>, J., who hold that the contract dated September 7, 1955, was illegal as it fell within the prohibition of the notification aforesaid and accordingly allowed the appeal and set aside the award. The appellants then applied for a certificate under Art. 133 (1) of the Constitution and the same was granted. This is how the appeals come before us.

The learned Additional Solicitor-General who appeared for the appellants urged the following contentions :- (1)On the terms of the arbitration clause the questionwhether the contract dated September 7. 1955, isillegal is one for the arbitrator to decide and that it was not open to the respondents to raise the same in the present proceedings under s. 33 of the Arbitration Act, (2)The respondents are estopped from questioning the validity of the award by reason of their having submitted to the jurisdiction of the arbitrators.

(3)The agreement dated September 7. 1955, is a non- transferable specific delivery contract within s. 2(f) of the Act and it is not hit by the notification dated October 29, 1953.

We now proceed to discuss these questions seriatim : (1)Taking up the first questions, cl, 14 of the agreement which provides for arbitration is as follows :-

"All the matters, questions, disputes, differences and/ or claims arising out of and/ or concerning and/ or in connection with and/ or in consequence of or relating to this con- tract including matters relating to insurance and demurrage whether or not the obligations of either or both parties under this contract be subsisting at the time of such dispute and whether or not this contract has been termi- nated or purported to be terminated or com-

pleted shall be referred to the arbitration of <ORG> under the rules of its <ORG> for the time being in force and according to such rules the arbitration shall be conducted and any Award made by the said <ORG> under the clause. shall be final, binding and conclusive on the parties."

Now the contention of the appellants is that the clause is general in its terms and is wide enough to include dispute as to the validity of the contract that in consequence the only right of the respondents is to agitate this question before the arbitrators and if the award goes against them to move the <ORG> either to modify it under s. 15 of the Arbitration Act or to remit it under s. 16 or to set it aside under s. 30 on the grounds mentioned therein and that the present application for a declaration that the contract is illegal, and that the arbitration proceedings are without jurisdiction is therefore incompetent and misconceived. it cannot be disputed that the expression "arising out of " or "concerning" or " in connection with" or "in consequence of" or "relating to this contract" occurring in el. 14 are of sufficient amplitude to take in a dispute as to the validity of the agreement dated September 7, 1955 <CITATION> (1) But the question is not whether el. 14 is all comprehensive but whether it could be enforced when the agreement of which it forms an integral part is held to be illegal. Logically speaking, it is difficult to conceive how when an agreement found to be bad, any portion of it can held to be good. When the whole perishes, its parts also must perish. 'Ex nihilo nil fit'. On principle therefore it must be held that when an agreement is invalid every part of it including the clause as to arbitration contained therein must also be invalid. That indeed is what has been laid down in the decisions which have been cited before us. The leading case on the subject is the decision of <ORG> in <NAME> v. <ORG>). There the question was whether repudiation of a contract by a party thereto had the effect of annulling' the arbitration clause contained therein. It was held that it had not. It was in this context that the law as to the circumstances under which an arbitration clause in an agreement would become unenforceable came in for elaborate discussion. Summing up the law on the subject Viscount <NAME>, L. C. observed: "If the dispute is whether the contract which contains the clause has ever been entered into at all, that issue cannot go to arbitration under the clause, for the party who denies that he has ever entered into the contract is thereby denying that he has ever joined in the submission. Similarly, if one party to the alleged contract is contending that it is void ab initio (because, for ,example, the making of such a contract is illegal), the arbitration clause cannot operate, for on this view the clause itself also is void. But, in a situation where the parties are at one in asserting that they entered into a binding contract, but a difference has arisen between them whether there has been breach by one side or the other, or whether circumstances have arisen which have discharged one or both parties from further performance, such differences should %be regarded as differences which have arisen "in respect of" or "with regard to" or, "under" the contract, and an arbitration clause which. uses these. or similar, expressions ,should be construed accordingly." (1) (1942) A.C. 356.

Lord <NAME> with whom Lord <NAME> agreed observed: "If it appears that the dispute is whether there has ever been a binding contract between the parties, such a dispute cannot be covered by an arbitration clause in the challenged con- tract. If there has never been a contract at all, there has never been as part of it an agreement to arbitrate. The greater includes the less. Further, a claim to set aside a contract on such grounds as fraud, duress or essential error cannot be the subject matter of a reference under an arbitration clause in the contract sought to be set aside." in the speech of Lord <NAME> there are the following observations on which the appellants rely: "Hence, if the question is whether the alleged contract was void for illegality or being voidable was avoided because induced by fraud or misrepresentation, or on the ground of mistake, it depends on the terms of the submission whether the dispute falls within the arbitrator's jurisdiction." The argument is that if the arbitration clause is general and unqualified it will include a question as to the legality of a contract also. The above observation does lend support to the view that if it was a term of the contract that a dispute as to its legality could be referred to arbitration, then it is valid. If that is what was meant by Lord <NAME> it maybe difficult to reconcile it with the view expressed in the passages already cited. But it is to be noted that the noble Lord wound up with the following observation "Finally, I agree with the general conclusions on the matter summarised by the Lord Chancellor in the closing paragraphs of his opinion".

The appellants also rely on the following observations in the speech of Lord <NAME>: "If two parties purports to enter into a contract and a dispute arises whether they have done so or not, or whether the alleged contract is binding on them. I see no reason why .-hey should not submit that dispute to arbitration. Equally I see no reason why, if at the time when they purport, to make the contract they foresee the possibility of such a dispute arising, they should not provide in the contract itself for the submission to arbitration of a dispute whether the contract ever bound them or continues to do so............ It may require very clear language to effect this result, and it may be true to say that such a contract is really collateral to the agreement supposed to have been made, but I do not see why it should not be done".

But these dicta must be read with the following observations in the same speech: "Where the contract itself is repudiated in the sense that the original existence or its binding force is challenged, e. g., where it is said that the parties never were ad idem, or where it is said that the contract is voidable ab initio (e. g., in cases of fraud, misrepresentation or mistake) and that it has been avoided, the parties are not bound by any contract and escape the obligation to perform any of its terms including the arbitration clause unless the provisions of that clause are wide enough to include the question of jurisdiction" According to Lord <NAME>, then; there can be an agreement to refer a dispute as to the validity of a contract to arbitration, that where such an agreement is part of the contract which is impugned as invalid, then it can have no existence apart from it and there can be no reference based thereon, but where such an agreement is distinct and separate from the impugned contract. a reference pursuant thereto will be valid and if is possible that both these agreements might be contained in one document.

The law is thus summarised in Halsburys Laws of England, Third Edition, Vol. 2, p. 24,. par& 56: The matter in question in the legal proceedings which it is sought to stay must be within the scope of the arbitration agreement............. If, however, the point in dispute is whether the contract containing the clause was ever entered into at all, or was void ab initio, illegal, or obtained (for example) by fraud duress or undue influence, the clause does not apply and a stay will be refused."

This question arose incidentally for discussion in the <CITATION> (1) where on an examination of the authorities, including <NAME> v. <ORG> (2) this <ORG> held that an arbitration clause embodied in an agreement is an integral part thereof and that it that agreement is non est either because. it was never legally in existence or because it was void ab initio., then the arbitration clause would also perish with it. Similar decisions had been given in <NAME> v. <ORG>) and <CITATION> (4). Reference might in this connection be made to s. 33 of the Arbitration Act which enacts that a party to an arbitration agreement who desires to challenge the existence or validity of an arbitration agreement should apply to the <ORG> for determination of the question. This section represents the law on the subject as understood in England at the time of that legislation and as declared later by <ORG> in <NAME> v. <ORG> (2). The scope of s. 33 came up for consideration before this <ORG> in <CITATION> . (5). There a petition had been filed under that section praying inter alia for a declaration that the contract between the parties containing an (1)  1 S.C.R. 493. (2) I. L.R.  2 Cal. 171. (3)) A.I.R. 1945 Mad. 528. 531. (4)  1 S.C.R. 569. (5) (1861) 30 Law. J. Rep. (N.S.) Banks. 10.

arbitration clause, was void ab initio on the ground of uncertainty and that there was in fact no contract owing to mutual mistake and it was held that these were questions for decision by <ORG> and not by arbitrators. We are accordingly of the opinion that the dispute that the contract' dated September 7, 1955, is illegal and void is not one which the arbitrators are competent to decide under cl. 14 and that inconsequence the respondents are entitled to maintain the present application under s. 33 of the Arbitration Act.

(2)It is next contended for the appellants ,that even if cl. 14 should be held to be inoperative by reason of the fact that the dispute is one relating to the validity of the contract, the respondents are estopped from now challenging the award on that ground, because they appeared before the arbitrators and took part in the proceedings before them. The decision in Ex p. <NAME> (1) is relied on in support of this contention. In that case a dispute between an assignee in bankruptcy and a creditor, Mr. <NAME>, was referred to arbitration on the, basis of an agreement in writing between them. An award having been pronounced against Mr. <NAME>, he disputed its validity on the ground that the assignee had not obtained the leave of the <ORG> for entering into the arbitration. In rejecting this contention the <ORG> observed that under the law the agreement was binding on Mr. <NAME> even though the leave of the <ORG> was not obtained and that therefore he was not entitled to take this objection based on the informality of the submission as he had himself acted on it. This decision is clearly of no assistance to the appellants because there was a valid and subsisting submission on which the jurisdiction of the arbitrators to bear the dispute was complete, and that was not affected by the failure of the assignee to obtain the requisite (1) (1861) 30 Law J. Ref. (N.S.) Bankr. 10.

leave because that was a matter between him and the <ORG>. But here if the agreement dated September 7, 1955, is void then there was no submission which was alive on which the arbitrators could act and the proceedings before them would be wholly without jurisdiction. If there had been another arbitration agreement apart from and independent of cl. 14 of the contract dated September 7, 1955, it might have been possible to sustain the proceedings before the arbitrators as referable to that agreement. But none such has been set up or proved in the present case. All that is alleged is that the respondents acquiesced in the proceedings. But what confers jurisdiction on the arbitrators to hear and decide a dispute is an arbitration agreement as defined in s. 2(a) of the Arbitration Act , and where there is no such agreement, there is an initial want of jurisdiction which cannot be cured by acquiescence. It may also be mentioned that the decision in Ex. p. Wyld (1) has been understood as an authority for the position that when one of the parties to the submission is under a disability that will not be a ground on which the other party can dispute the award if he was aware of it. <NAME> on Arbitration, 16th Edn, p,

320. We are therefore Unable to accept the contention of Mr. <NAME>, that the respondents are estopped by their conduct from questioning the validity of the award. (3)We may now proceed to consider the question whether the contract dated September 7, 1955, is illegal as falling within the prohibition enacted in the notification of <ORG> dated October 29, 1953. It will be convenient to set out the relevant statutory provisions bearing on this question. Section 2(i) of the Forward Contracts (Regulation) Act, 1952, (Act 74 of 1952) hereinafter referred to as 'the Act' (1) (1861) 30 Law J. Ref. (N.S.) Bank. 10 .

defines ready delivery contract' as meaning "a contract which provides for the delivery of goods and the payment of a price therefore, either immediately or within such period not exceeding eleven days after the date of the contract". 'Forward contract' is defined in s. 2(c) as meaning "a contract for the delivery of goods at a future date and 'which is not a ready delivery contract". Section 2(m) defines specific delivery contract' as meaning "a forward contract which provides for the actual delivery of specific qualities or types of goods during a specified future period at a price fixed thereby or to be fixed in the manner thereby agreed and in which the names of both the buyer and the seller are mentioned". Section 2(f) defines 'nontransferrable specific delivery contract' as meaning "a specific delivery contract the rights or liabilities under which or under any delivery order, railway receipt, bill of lading, warehouse receipt or any other document of title relating thereto are not transferable" and finally s. 2(n) defines transferable specific delivery contract as meaning "a specific delivery contract which is not a non- transferable specific delivery contract". Chapter IV of the Act contains provisions conferring authority on <ORG> to prohibit certain classes of forward contracts. , Section 15(1) of the Act enacts:

"15(1) The Central Government may by notification in the Official Gazette, declare this section to apply to such goods or class of goods and in such areas as may be specified in the notification, and thereupon, subject to the provisions contained in section 18 , every forward contract for the sale or purchase of any goods specified in the notification which is entered into in the area specified therein otherwise than between members of a recognised association or through or with any such member shall be illegal."

Where a notification has been issued under 15(1) it is provided in s. 16 that all forward contracts falling within the notification shall be deemed to be closed out and that the seller shall not be bound to give and the buyer shall not be bound to take delivery of the goods". Then comes s. 17 which is as follows:-

"1711). The Central Government may, by notification in the Official Gazette, declare that no person shall, save with the permission of <ORG>, enter into any forward contract for the sale or purchase of any goods or class of goods specified in the notification and to which the provisions of section 15 have not been made applicable, except to the extent and in the manner, if any, as may be specified in the notification. (2)All forward contracts in contravention of the provisions of subsection (1) entered into after the date of publication of the notification thereunder shall be illegal. (3)Where a notification has been issued under subsection (1), the provisions of sec- tion 16 shall, in the absence of anything to the contrary in the notification, apply to all forward contracts for the sale or purchase of any goods specified in the notification entered into on or before the date of the notification and remaining to be performed after the said date as they apply to all for- ward contracts for the sale or purchase of any goods specified in the notification under sec- tion 15."

Section 18(1) provides that these provisions shall not apply to non-transferable specific delivery contracts for the sale or purchase of any goods.

To analyse the scheme of the Act; it divides Contracts of sale of goods into two categories, 'ready delivery contracts, and 'Forward Contracts'. Forward Contracts are classified into those which are Specific delivery contracts' and those which are not., Then again "specific delivery contracts' are divided into transferable specific delivery contracts' and non-transferable specific delivery contracts.' Section 18(1) exempts from the operation of the Act "non-transferable specific delivery contracts'. The net result of these provisions is that all forward contracts except those which are non-transferable specific delivery contracts can be declared illegal by notification issued under the Act.

Such a notification was issued by <ORG> in exercise of the powers conferred by s. 17 of the Act, on October 29, 1953. It is as follows :-

"No. 2(24) Jute/53-In exercise of the powers conferred by section 17 of the Forward Contracts (Regulation) Act, 1952 (LXXIV of 1952), <ORG> hereby declares that no person shall enter into any forward contract other than a nontransferable specific delivery contract for the sale or purchase of raw jute in any form, except to the extent and in the manner specified below, that is to say: (1)all forward contracts, other than non- transferable specific delivery contracts for the sale or purchase of raw jute entered into before the date of this notification and repaining to be Performed after the said date shall be deemed to be closed out at the rate prevailing at the time at which the Forward Market closed on the said date:

(2)all differences arising out of any contracts so deemed to be closed out shall be payable on the basis of the rate specified in clause (1) of this notification and the seller shall not be bound to give and the buyer shall not be bound to take delivery of raw jute."

The contract with which we are concerned in these appeals was entered into on September 7, 1955, when the notification aforesaid was in force, and so it would be hit by it, unless it is a non-transferable specific delivery contract and the point for decision is whether it is that. There is no dispute between the parties that it is a specific delivery contract. It is between named buyers and sellers the goods are specified, as also the period during which they have to be actually delivered and their price is fixed. What is in controversy is whether it is transferable or non- transferable. There was considerable argument before us on the question as to assignability of a contract. The law of the subject is well settled and might be stated in simple terms. An assignment of a contract might result by transfer either of the rights or of the obligations thereunder. But there is a well-recognised distinction between these two classes of assignments. As a rule obligations under a contract cannot be assigned except with the consent of the promisee, and when such consent is given, it is really a novation resulting in substitution of liabilities. On the other hand rights under a contract are assignable unless the contract is personal in its nature the rights are incapable of assignment either under the law or under an agreement between the parties.

In the light of the principles stated above, we shall now consider whether the contract dated September, 7, 1955, is or is not transferable. As it is only a benefit under a contract that can be assigned, the discussion really centres round two questions, are the buyers entitled to assign their right to got the goods on payment of price ? And are the sellers entitled to assign their right to receive the price on delivery of the goods ? On the question as to the rights of the buyers to assign their right to the goods, the matter is clear beyond all doubts, The licence which authorises the appellants to import the goods from East Pakistan also prohibits them expressly from assigning the same. In this connection it should be noted that, owing to the exigencies of Foreign Exchange, there have been in force, at all material times, restrictions on import of goods. The nature of these restrictions and the policy behind them were examined by this Court quite recently in <CITATION> of imports and Exports (1) and it is unnecessary to repeat them. It is sufficient for the present purpose to state that the issue of import licences by the Government was restricted to persons who had been engaged in the business of import during a specified period and there were also limitations on the extent to which they could import. Manufacture of jute occupies the pride of place among the industries of West Bengal. Raw jute required for the business is largely imported from East Pakistan, and for that purpose import licences were being granted from time to time, to manufactures of jute. During the period of the contract with which we are concerned the appellants held two import licences from the Government of India (1) No. A 062290/52 and (2) A 063733/52. The licence No. A 062291)/52 which is in the standard.

(1) (1963) 2 S.C.R. 73.

form is. so far as it is material for the present dis- cussion, as follows:-

"Import Trade Control.

<ORG>, Calcutta. Licence No. A 062290152/A.U./C.C.I/C. For Exchange Control purposes only.

Class of Importer.

Actual User or Contract.

(Valid at any Indian Port).

(Not transferable except under a letter of authority from the authority who issued the licences or from any Import Trade Controller). Messrs. <ORG> of 7. Wel- lesley Place, Calcutta are hereby authorised to import the goods of which particulars are given below :-

1. Country from which consigned ....

Pakistan 2. Country of origin .... " 3. Description of goodsRaw Jute .... Raw Jute 4. Serial No. and part of the I.T.C. Schedule ... 174-IV 5, Quantity .... 50,000 Mds. ..(Fifty thou- ....sant ma- ... unds only).

This licence is issued subject to the condition that the goods will be utilised only for consumption as raw material or accessories in the licence bolder's factory and that no portion thereof will be hold to any party."

It will be noticed that the licence is non-transferable and that further the goods to be imported are not to be sold to any party but to be utilised for manufacture in the factory of the licencee. In view of the terms of the licence there can be no question of assignment of the contract by the buyers. That is not disputed.

Turning next to the sellers, can they assign their right to the price on delivery of the goods ? The learned Judges in the Court below held that they could, because there was noting personal in the contract, and nothing in its terms which barred the right to assign a benefit which a party had under the general law. The appellants assail the correctness of this decision. They contend the terms of the contract must be construed in the light of the surrounding circumstances, and especially of the import licence, and that if that is done, the pro.per conclusion to come to is that the agreement is not transferable. This contention must now be examined.

The appellants sought, in the first instance, to establish on the basis of clauses 12 and 14 that the agreement is personal in its character, and is therefore not assignable. Now the contract in question is one for the sale of goods, and ordinary there can be nothing personal about it. It is of no consequence to the buyer as to who delivers the goods. What matters to him is that the goods delivered should be in accordance with the specifications. But it is argued that the status of the parties was a determinative factor in the making of the agreement, and that is sought to be deduced from el. 12 of the contract. That clause provides that if either or both the parties to the contract are members of <ORG> and if either of them is placed in the disapproved list of <ORG> then the contract shall be deemed to have been broken by that party. That shows, it is said, that the contract was entered into on the faith of the status of the parties as members of the Jute Mills <ORG>. But it is clear from the wording of the clause that the parties to the contract need not necessarily be members of the <ORG> and that being so, the element of status does not enter into it. Clause 14, Which is the arbitration clause, is also relied on as an indication that the contract is personal in its character and incapable of assignment on that ground. But it is settled law that an arbitration clause does not take away the right of a party to a contract to assign it if it is otherwise assignable. <NAME> v. <NAME> (1) and <ORG>, 16th Edition, p. 65.

It is also argued that the rights conferred on the 'sellers under el. 8 are incapable of assignment in law, and that is an indication that the rights under the agreement are not transferable. Clause 8 confers on the sellers certain rights against buyers, such as the rights to resell and so forth, when the latter refuse to accept the documents. What is said is that these rights cannot be assigned in law as they are really claims founded on breach of contract by the buyers. That undoubtedly is so, but that does not conclude the question. There is in law a clear distinction between assignment of rights under a contract by a party who has performed his obligations thereunder, and assignment of a claim for compensation which one party has against the other for breach of contract. The letter is a mere claim for damages which cannot be assigned in law, the former is a benefit under an agreement, which is capable of assignment. The fact therefore that the rights under el. 8 are incapable of assignment does not stand in the way of the respondents assigning their rights to receive the ice after they had performed their obligations. Pr (1) [1946] 2 All. E. R. 54.

That brings us on to cl. 3 on which the appellants mainly. Under that clause the sellers are entitled to receive the price only on their delivering to the buyers the full set of shipping documents. Now the argument is that as the delivery of documents and payment of cash are to be simul- taneous, it is a case of benefit under a contract being burdened with a liability, and that such a benefit is incapable of assignment under the law. The learned Judges in the <ORG> below took the view that there was nothing in this clause which prevented the seller from transferring the documents to a third party authorising him to deliver them to the buyers, and then to receive the price from them, and they further observed. "Although in presenting the shipping documents the transferee from the seller may act as his agent, he will not be an agent in receiving payment from the buyer, because the right to receive the payment has been transferred to him and has become his own right". The respondents maintain that that is the correct view to take of the rights of the parties under this clause and rely on the statements of law in Halsbury's Laws of England, and the decision <ORG> v. <NAME> (1). In Halsbury's Laws of England, 3rd Edn., Vol. 8, p. 258, para 451, the law is thus stated : "There is, however, no objection to the substituted performance by a third person of the duties of a party to the contract where the duties are disconnected from the skill, character, or other personal qualifications of the party to the contract. ID such a circumstance, however, the liability of the original contracting party is not discharged, and the only effect is that the other party may be able to look to the third party for the performance of the contractual obligations in addition to the original contracting party". In <ORG> v. leg(1) the facts (1) (1880) 5 Q.B.D. 149, 154.

were that a company called <ORG> had hired waggons to the defendant on the terms that he should pay rent for their use, and that the Company should execute the necessary, repairs for them. The company then assigned its rights under the contract to another company called <ORG>, subject to the obligation to execute the repairs. In accordance with his agreement the assignee did execute the repairs. Thereafter <ORG>, demanded rent from the defendant, who resisted the claim on the ground that the Company had disabled itself from performing the contract, by reason of assignment to which he had not consented. In overruling this contention the <ORG> observed that as the work to be done under the contract did not require personal skill Or confidence, <ORG> could get it done by any person, and that would be sufficient performance. This decision would be in point if the respondents had arranged to deliver the jute to the appellants through another person, and then claimed the price, and that claim was disputed. But it is not an authority on the question which we have to decide, whether the assignment of the benefit under the contract burdened as it is with an obligation would itself be valid. It is true that the <ORG> observed in passing "That a debt accruing due under a contract can, since the passing of the Judicature Acts, be assigned at law as well as equity, cannot since the decision in <NAME> v. <NAME>) be disputed". But it should be noted that both the companies figured is plaintiffs, and therefore it is not possible to read chose observation as a decision that an assignment of a benefit burdened with an obligation is valid.

It was argued for the respondents that it would have been open to them to first obtain the requisite certificate from the Dank in East Pakistan (1) (1878) 3 Q.B.D. 560.

then deliver it to the appellants, and then assign their right to the price. But the question is not what could have been done by a seller in a forward contract generally, but what was in fact contemplated by the parties to this contract under el. 3, The provisions that the shipping documents in Pakistan should be taken in the name of' the buyer that the sellers should deliver them to the buyers and receive the price, and that the goods should be delivered at the Mills of the buyers, strongly suggest that the intention of the parties was, that neither of them should assign the contract.

Whatever doubts one might have as to the true import of cl, 3-it may be conceded, that it lends itself to the construction put on it by the learned Judges in the Court below, the position becomes unmistakably clear when it is construed in the light of the import licence in favour of the appellants. It has been already mentioned that it is this which authorises the appellants to import raw jute from East Pakistan. It is statedly not transferable, and further the goods imported thereunder are to be used only for consumption in the <ORG> of the appellants. It is contended for the respondents that they are not parties to this licence and that their rights under the general law to assign benefits under the contract remain unaffected by it. This is to take too narrow a view of the true position. Far from being strangers to the licence, the evidence clearly establishes that they are very intimately associated with it. On September 26, 1955, acting under licence No, A 062290/52 the appellants wrote to the Joint Chief Controller of Imports and Exports, <ORG>, to "issue a letter of authority in favour of sellers Messrs. <NAME> & <ORG>, for 2,500 maunds jute cuttings to be imported from Narayanganj, (East Pakistan), against the above (licence)."

The letter of authority was received by the appellants on September 29, 1956, and they sent it on to the respondents with the following letter "Dear Sirs, Contract No. 2306 We are sending. here with the Exchange Control Copy of Letter of Authority for 1250 Mds. Jute cuttings against the above."

Contract No. 2306 referred to in this letter is the contract dated September 7, 1955, involved in this dispute. It is on the strength of this letter of authority that the respondents opened a letter of credit with a Bank in East Pakistan and the goods were imported. We have not overlooked the fact that while the contract is dated September 7, 1955, the licence is dated September 22, 1955, and the letter of authority to the respondents is even later, and it might strike one as an anachronism to read the licence and the letter of authority into the contract. But it should be remembered that the licences are in standard form and are renewed from time to time except as to details concerning the imports, and the course of business followed in the jute market was throughout in conformity with the conditions laid down. in the licence and was of the same pattern. Now the agreement provides that the shipping documents in Pakistan are to be taken in the name of the buyers that the sellers are "to open letter of credit" and that the goods are to be delivered ,at the buyer's Mill siding". We have no doubt that these terms have been inserted with a view to give effect to the conditions on which licences are granted and that it was the understanding of both the sellers and buyers that the rights under the contract were not to be transferred.

But it is argued for the respondents that unless there is in the contract itself a specific clause prohibiting transfer, the plea that it is not transferable is not open to the appellants and that evidence aliunde is not admissible to establish it and the decision in <CITATION> (1), <NAME> v. Thimanthiah(2) and <CITATION> . Asson. (3) are relied on in support of this position. We agree that when a contract has been reduced to writing we must look only to that writing for ascertaining the terms of the agreement between the parties but it does not follow from this that it is only what is set out expressly and in so many words in the document that can constitute a term of the contract between the parties. If on a reading of the document as a whole, it can fairly be deduced from the words actually used therein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term. The terms of a contract can be expressed or implied from what has been expressed. It is in the ultimate analysis a question of construction of the contract. And again it is well established that in construing a contract it would be legitimate to take into account surrounding circumstances. Therefore on the question whether there was an agreement between the parties that the contract was to be non-transferable, the absence of a specific clause forbidding transfer is not conclusive. What has to be seen is whether it could be held on a reasonable interpretation of the contract, aided by such considerations as can legitimately be taken into account that the agreement of the parties was that it was not to be transferred. When once a conclusion is reached that such was the understanding of the parties, there is nothing in law which prevents effect from being given to it. That was the view (1)  1 M.L.J. 147. (2) A.I.R. 1954 Mod. 87. (3) A.I.R. 1958 Mad. 528, 531.

taken in <ORG> v. <ORG>), and that in our opinion is correct. It remains to deal with one other question on which the parties have been at issue. It turns on a consideration of s. 2(f) of the Act. A non-transferable specific delivery contract is defined in s. 2(f) , omitting what is not material, as a specific delivery contract the rights or liabilities under which are not transferable. Now the contention of the appellants is that as admittedly the liabilities under the contract are not transferable it is a non-transferable contract within s. 2(f) . But the res- pondents argue that on that construction no forward contract will be hit by the notification because liabilities under the contract can never be transferred and so the notification would become futile. They accordingly contend that word or' should be read as an& and that on that construction unless both the rights and liabilities under the contract are non-transferable it is not a non- transferable contract as defined in a. 2(f). The appellants urge that on this construction no contract would be non- transferable as rights under a contract can always be transferred unless it is personal in its character and the section would become practically useless. The intention of the legislature as expressed in the section is, it must be admitted, clouded in obscurity and uncertainty. But in the view we have taken, that the contract is on its terms properly construed, non-transferable, it becomes unnecessary to decide between the arrival contentions as to the true import of s. 2(f) .

In the result the appeals are allowed with costs one set throughout and one hearing fee.

Appeals allowed.

(1) A.I.R. 1956 Mod. 110.