Seth Banarsi Das vs The Cane Commissioner and Another on 6 December, 1962

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 226 of 1960

Decision Date: 06 December 1962

Coram: Hidayatullah J., Raghubar Dayal J., Das J., Kapur J., Sarkar J.

In this case the matter involved Seth Banarsi Das as petitioner against the Cane Commissioner and another respondent; the judgment was delivered on 6 December 1962 by a Bench of the Supreme Court of India. The dispute was framed under the Uttar  Pradesh Sugar Factories Control Act, 1938 and the Uttar  Pradesh Sugar Factories Control Rules, 1938, specifically sections 18(2) and 30 and Rule 23. The questions for resolution were whether the agreement between the parties was binding, whether the provisions of section 18(2) were mandatory or merely directory, whether Rule 23 contravened Article 14 of the Constitution, and whether Rule 23(6), which permitted an appeal, exceeded the rule‑making authority of the Provincial Government under section 30 of the Act. The factual background recorded that disagreements had arisen between the petitioner and the Cane  Marketing Society Ltd., Bijnor. The petitioner claimed compensation from the Cane Commissioner for a short supply of sugar‑cane, while the Society applied to the Cane Commissioner for arbitration of the same dispute. The Commissioner issued an order requiring both parties to appear before him for a decision. In response, the petitioner filed a petition under Article 226 of the Constitution seeking a writ of certiorari to set aside the proceeding before the Commissioner, a writ of prohibition to restrain the Commissioner from continuing the enquiry, and a declaration that the Commissioner had no authority to act as arbitrator in the matter. The petitioner argued that arbitration could not proceed because the claim was defective: the Society had failed to complete the prescribed Form XII, leaving the schedule, the area of cultivation and the estimated yield blank, and the agreements had not been signed by the mills, which had refused to accept the incomplete documents. Alternatively, the petitioner contended that Rule 23 was violative of Article 14, and that Rule 23(6), which provided for an appeal, was beyond the legislative competence of the Provincial Government under section 30 of the Act. The High Court dismissed the writ petition, and the subsequent Letters Patent appeal was also dismissed. The petitioner obtained a certificate of fitness and appealed to this Court. The Court held that the agreement was a binding contract. It observed that the prescribed form set out many conditions, all of which were incorporated into the agreement executed by the Society, with only minor omissions. Although failure to execute the 761 agreement in the exact form constituted an offence, the statute prescribed no consequence other than a monetary penalty. The Court explained that a contract might fail only if the form used contained conditions inconsistent with those prescribed; however, in the present case the terms of the executed form were identical to those required by the prescribed form. Consequently, no legal effect attached to the failure to strictly observe the form except the imposition of a fine, and section 18(2) could be read as directory.

In this case the Court observed that the provision could be read as merely directory, and even if it were read as mandatory the appellant’s failure to sign the form could not be taken to his advantage because such neglect was attributable to his own conduct. The Court further held that the presence of blanks in the form was immaterial since Form 10 supplied the information that had been accidentally omitted from the agreement. Regarding the arbitration clause, the Court noted that it was enforceable if the parties had agreed to it, even though the appellant had not signed the form, because settled law required only that an arbitration agreement be in writing; a signature by the parties was not essential provided the terms were reduced to writing and the parties’ agreement was established. The Court also remarked that even if Section 18(2) were considered mandatory to the extent that the prescribed terms must appear in writing, the requirement was satisfied in the present case. In a dissenting opinion, Justice Raghubar Dayal held that Section 30(2) of the Act conferred a general power on the Province to make rules for the resolution of disputes either by the Cane Commissioner or, if directed by him, by arbitration, and that giving effect to the latter part of that provision by allowing an appeal from the arbitrator’s decision would give effect to the provisions as a whole. Accordingly, Rule 23(6), which provided for an appeal against an arbitrator’s decision, was regarded as a rule effectuating the provisions of Section 30(2)(u) that dealt with dispute resolution by arbitration and was therefore within the rule‑making authority of the Provincial Government. The Court further explained that Sections 8, 9 and 10 of the Arbitration Act did not apply because they were inconsistent with Rule 23. The decision of the Cane Commissioner was identified as the normal mode for disposing of disputes concerning the supply of sugar cane. Although the Commissioner possessed the power to refer a dispute to arbitration, the rules indicated that arbitration could not proceed unless the parties themselves consented. If the parties chose a sole arbitrator, that arbitrator had to be acceptable to both sides; if they could not agree on a sole arbitrator, the arbitration would be conducted by a Board of Arbitrators consisting of one representative from each party and an umpire acceptable to both representatives. The Rule, however, did not specify what should happen if a party failed to appoint his representative, and the Arbitration Act offered no answer because it was inconsistent with the Rule. Consequently, the Court concluded that arbitration must be based on the parties’ consent, which they could express either by selecting an agreed sole arbitrator or by appointing their own representative to the Board. This choice was entirely at the parties’ discretion. If the parties could not reach an agreement, arbitration could not occur and the matter would be decided by the Cane Commissioner himself. Thus, where two procedures existed—one applicable to all parties and another applicable only if the disputants voluntarily agreed to follow—it followed that there could be no discrimination in the application of the rules.

In the matter before the Court, it was observed that discrimination cannot arise where the selection is not made by another person capable of exercising arbitrary will. Consequently, the Court concluded that Rule 23, taken as a whole, does not contravene Article 14 of the Constitution. The judgment, delivered by Justice Raghubar Dayal, noted that although the provisions of section 30(2)(u) pertain to the settlement of disputes between the parties, this fact alone does not authorize the State Government to provide for appeals against the orders of an arbitrator or a panel of arbitrators. The statutory language, according to the Court, makes no express statement that the rule may create a mechanism for appealing an arbitrator’s award. Moreover, the provisions contain no reference to any appeal procedure, to the workings of an Appellate Tribunal, or to the enforcement of that Tribunal’s order. The absence of such a reference, the Court held, demonstrates that clause (u) neither contemplated nor empowered the State Government to enact rules that would permit an appeal against an arbitrator’s award. The Court further observed that the Commissioner’s order is not characterised as an award; this distinction is affirmed by the wording of Rule 23(8), which links the decision of the Cane Commissioner with the award of the arbitrator or arbitrators and with the Commissioner’s order on appeal. Accordingly, the appeal provision in Rule 23(6) cannot be viewed as merely ancillary to the dispute‑settlement power vested in the Cane Commissioner, a power that clause (u) authorised the State Government to regulate in certain respects. The Court stressed that a right of appeal is a substantive entitlement that must be conferred on a party either directly by the Act or through a clear legislative provision allowing the rules to create such appeals. In the absence of any express statutory authority permitting appeals, the rules lack the power to provide for them, rendering Rule 23(6) void. The Court further explained that Rule 23 delineates two distinct procedural pathways: one for disputes decided by the Cane Commissioner and another for disputes adjudicated by a sole arbitrator or a Board of Arbitration. In the former pathway, the decision of the Cane Commissioner is final and enforceable by the civil court specified in Rule 23(8). In the latter pathway, the award of the sole arbitrator or the Board of Arbitration may be appealed to the Commissioner of the division where the factory is located, and the Commissioner’s order thereafter is final and enforceable by the civil court. This dual scheme, the Court observed, allows parties in identical circumstances to have their disputes resolved by different authorities and through different procedures, depending solely on the discretion of the Cane Commissioner, which is not guided by any principled standard. As a result, the Court held that the rule offends Article 14 of the Constitution and.

The Court held that rule 23 was void in its entirety. The rule was struck down because, in its present form, it operated in a discriminatory manner and because sub‑rule (6) was itself void. Sub‑rule (6) was void because the State Government lacked the authority to enact it, and the provision could not be separated from the remainder of the rule. The Court referred to a number of earlier authorities to support this conclusion, including Ruf (T. A.) and Co. v. Pauwels, [1919] 1 K. B. 660; State of U. P. v. Manbodhan Lal Srivastava, [1958] S. C. R. 533; Bhikraj v. Union of India, A. I. R. 1962 S. C. 113; Thomas v. Kelly, 888 13 App. Cas. 506; Jagan Nath v. Jaswant Singh, [1954] S. C. R. 892; Kamaraja Nadar v. Kunju Thevar, [1959] S. C. R. 583; Hari Vishnu Kamath v. Syed Ahmed Ishaque, [1955] 1 S. C. R. 1104; Radhakinsson Gopikisan v. Balmukund Ramchandra, (1932) L. R. 60 I. A. 63; and Jugal Kishore Rameshwardas v. Mrs. Goolbai Hormusji, [1955] 2 S. C. R. 857.

The judgment concerned a civil appeal, numbered 226 of 1960, filed in the Civil Appellate Jurisdiction. The appeal challenged a judgment and decree dated 2 February 1956, which had been issued by the Allahabad High Court in Special Appeal No. 158 of 1954. Counsel appearing for the appellant included the Attorney‑General for India and several other advocates. Counsel for the first respondent comprised a team of three advocates, while counsel for the second respondent included the Solicitor‑General for India together with two additional advocates. The appeal was decided on 6 December 1962.

The reported judgment was authored by Justices Das, Kapur, Sarkar and Hidayatullah, with Justice Hidayatullah delivering a separate opinion. In his opinion, Justice Hidayatullah noted that the present appeal arose from a certificate issued by the Allahabad High Court under Article 133(1)(c) of the Constitution, which allowed the High Court’s judgment and order of 2 February 1956 to be examined. That higher‑court judgment, rendered in a Letters Patent Appeal, had affirmed the order of a learned single judge who had dismissed the appellant’s petition filed under Article 226 of the Constitution.

The appellant, Seth Banarsi Das, had been the petitioner before the High Court, while the two respondents were the Cane Commissioner of Uttar Pradesh, Lucknow, and the Cane Marketing Society Ltd., Bijnor. The petitioner’s writ petition sought, in the alternative, a number of remedies, chiefly to restrain the two respondents from proceeding with certain actions that were pending before the Cane Commissioner under rule 23 of the United Provinces Sugar Factories Control Rules, 1938. Rule 23 provided for arbitration of disputes relating to agreements between sugar‑cane factories and cane growers, as established by the United Provinces Sugar Factories Control Act, 1938.

For factual background, the appellant was, at the relevant time, the lessee and occupier of Shiva Prasad Banarsi Das Sugar Mills, Bijnor, for five years covering the crushing seasons from 1946‑47 through 1950‑51. The second respondent, the Cane Marketing Society Ltd., Bijnor, was a society incorporated under the Uttar Pradesh Co‑operative Societies Act and whose purpose included the procurement of sugar cane from its members for supply to sugar mills.

The second respondent, the Cane Marketing Society Ltd., Bijnor, was a society registered under the Uttar Pradesh Co‑operative Societies Act and its objects included the supply of sugar cane grown by its members to sugar mills. Prior to the enactment of the provisions governing sugar‑cane control, cane growers—whether they belonged to a co‑operative society or not—sold their cane directly to factories and were free to make supplies from any area that suited them. The United Provinces Sugar Factories Control Act had been enacted to license sugar factories, to regulate the supply of sugar cane intended for use in those factories, to fix the price at which the cane could be purchased, and to address other matters incidental to those objectives. In broad terms, the Act placed the control of sugar cane grown in the State in the hands of an officer known as the Cane Commissioner. Advisory Committees and a Sugar Control Board were to be appointed to advise upon and to implement the control of sugar and sugar cane. Although the Act also contained a scheme for licensing factories, that scheme was not relevant to the present dispute. Chapter IV of the Act dealt specifically with the regulation of cane purchase. Under section 14, the State Government could require the “Occupier” of any factory to submit, in a prescribed form and manner, an estimate of the quantity of cane that would be required in the factory during a crushing season. The Cane Commissioner examined this estimate, consulted the Advisory Committee for the relevant area, and then published the estimate after making any modifications he considered appropriate. Under section 15, the Cane Commissioner, after consulting the Advisory Committee (if any) and the factory’s Occupier, could issue an order declaring a specified area to be a “reserved area” for the supply of sugar cane to a particular factory. Section 18 then provided as follows: “18. Purchase of cane in reserved area.—(1) A cane‑grower or a Cane‑growers’ Co‑operative Society in a reserved area may offer, in the form and by the date prescribed, to supply to the occupier of the factory for which the area is reserved cane grown by the cane‑grower or by the members of such Cane‑growers’ Co‑operative Society as the case may be, not exceeding the quantity, if any, prescribed for such grower or Cane‑growers’ Co‑operative Society. (2) The Occupier or manager of a factory for which an area is reserved shall enter into an agreement, in such form, by such date and on such terms and conditions as may be prescribed, to purchase the cane offered in accordance with sub‑section (1): Provided that, he shall not enter into an agreement to purchase cane from a person who is a member of a Cane‑growers’ co‑operative Society. (3) Except with the permission of the Provincial Government, cane grown in a reserved area shall not be purchased in such area by a purchasing agent, or by any person other than the occupier of the factory for which such area has been reserved.”

The judgment explained that under subsection (4) the law prohibited any person other than a cane‑grower or a cane‑growers’ Co‑operative Society from selling cane that had been cultivated in a reserved area. The provision allowed, however, that a cane‑grower or a Co‑operative Society could cause the cane destined for a factory to be delivered by another cane‑grower or by a carrier. Subsection (5) authorised the Provincial Government, during the crushing season, to issue a direction when it was satisfied that the reserved area for a particular factory contained more cane than the quantity the occupier was required to purchase under the agreements stipulated in the Act. In such a case the Government could order that no cane be bought from outside the reserved area until the occupier entered into agreements to purchase all of the cane that had been offered to him within the reserved area. The direction did not apply to any cane for which written agreements had already been executed before the direction was issued. The judgment then noted that, besides the concept of a reserved area, section 19 of the Act created a category called an assigned area, from which a factory was also permitted to obtain its supplies of sugar cane. The key distinction between the two categories was that in a reserved area the factory was obliged to conclude agreements with the individual cane‑growers or their Co‑operative Societies for a quantity of cane that the statute prescribed, whereas in an assigned area the factory could negotiate an agreement for any quantity of cane that it desired, subject only to the requirement that an agreement be executed for that purpose. In other words, when cane of the prescribed quality was offered by a grower or a Co‑operative Society in a reserved area, the factory was bound to purchase the cane up to the quantity set by the statute; by contrast, in an assigned area the factory retained the freedom to purchase as much cane as it needed, provided it entered into an appropriate agreement. The judgment further explained that, in addition to reserved and assigned areas, the Act recognised a third class of lands that were neither reserved nor assigned; the Court stated that it would not deal with the provisions relating to purchases from such lands. Section 27 of the Act dealt with penalties, and subsection 3(b) provided that any occupier or manager of a factory who deliberately failed to enter into the agreements required by subsection 2 of section 18 would be liable to a fine of up to two thousand rupees. Finally, the Court referred to section 30, which empowers the Provincial Government to formulate rules for the implementation of the Act. The relevant portion of section 30, as quoted, reads: “30 Power to make rules—(1) The Provincial Government may make rules to carry out the provisions of this Act. (2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for … (u) the reference to the Cane Commissioner of disputes relating to the supply of cane for decision.”

The rule stipulated that when the Cane Commissioner chose to refer a matter to arbitration, it must also prescribe the method for appointing one or more arbitrators, the procedure to be observed in proceedings before either the Commissioner or the appointed arbitrator(s), and the manner in which the Commissioner’s decisions or the arbitrators’ awards would be enforced. Exercising the authority conferred by that provision, the Government framed a series of regulations, among which Rule 15 dealt specifically with the purchase of sugarcane cultivated in a reserved area. Under sub‑rule (1), the occupier or manager of a factory was required to estimate, or cause to be estimated by 30 September each year, the quantity of sugarcane associated with every grower listed in the Growers’ Register, and to forward those estimates to the Collector. The Collector, after conducting any inquiries he deemed necessary, could modify the estimates and order their publication in a manner of his choosing; in preparing the estimates, the regulator could exclude sugarcane grown on more than one‑third of the land that was suitable for sugarcane cultivation on each grower’s holding. Sub‑rule (2) authorized a cane‑grower or the grower’s cooperative society situated in a reserved area to submit, in Form 10 (Appendix III) and by 15 October each year, an offer to supply cane during the crushing season to the occupier or manager of the factory for which the area was reserved, provided that the amount offered did not exceed, for an individual grower, the quantity estimated under sub‑rule (1). Sub‑rule (3) mandated that the occupier or manager of the relevant factory enter into an agreement with the cane‑grower or, as the case might be, the cooperative society, using Forms 15 and 18 respectively or any other form approved by the Cane Commissioner, and that such agreement be executed within one month of the offer referred to in sub‑rule (2). Sub‑rule (4) required the factory occupier or manager to allocate purchases made in the reserved area equitably and to purchase cane from a grower in that area only after issuing requisition slips. To comply, the occupier or manager had to cause identification cards to be distributed to all growers in the reserved area who had received requisition slips, to keep a record of the cards distributed, and also to maintain a register of the requisition slips issued, distributed, and returned by the growers. Sub‑rule (5) prohibited any person, without the prior permission of the Cane Commissioner, from purchasing cane grown in a reserved area unless the required requisition slips and identification cards had first been issued at convenient centres in the reserved area by the occupier or manager of the factory for which the area was reserved. Sub‑rule (6) specified that requisition slips and identification cards for members of a cane‑growers’ cooperative society could be issued only by that society itself. Finally, sub‑rule (7) provided that if a dispute arose concerning whether a particular system adopted for purchasing cane from a reserved area was equitable, that dispute could be referred to the Cane Commissioner, whose decision would be binding.

In this case, the Court explained that any dispute arising under an agreement mentioned in section 18(2) or section 19(2) of the Act must first be referred to the Cane Commissioner for a decision, and the Commissioner may also order that the dispute be sent to arbitration. The Court emphasized that once such a referral is made, the parties are not permitted to file a suit in any civil or revenue court concerning the same matter. If the Commissioner decides that the dispute should be arbitrated, the parties are required to select a single arbitrator who is acceptable to both sides. Should the parties be unable to agree on a sole arbitrator, the dispute is to be placed before a Board of Arbitration composed of one representative of each party and an umpire who must be acceptable to both representatives. In the event that the parties or their representatives cannot agree on an umpire within fourteen days, the Commissioner is empowered either to act as the umpire himself or to appoint an umpire. The appointed umpire becomes the President of the Board of Arbitration and is granted a voting right in any situation where the two party representatives disagree. The Court further clarified that the sole arbitrator or the President of the Board possesses the full authority of a court to summon the parties, witnesses, and to procure any required records. The decision rendered by the sole arbitrator or the Board is final, binding on both parties, and cannot be questioned in any civil or revenue court. The arbitrator or the Board must deliver its award within the period fixed by the Commissioner; if they fail to do so, the Commissioner may either resolve the dispute himself or appoint another arbitrator or a panel of arbitrators for that purpose. Any party who feels aggrieved by the award may appeal to the Commissioner of the Division in which the factory is located, provided the appeal is filed within one month of the date on which the award was communicated. The Commissioner, acting as appellate authority, may issue any order he deems appropriate, and the Court held that the Commissioner’s order on appeal is final and conclusive. Finally, the Court stated that upon application to the civil court that has jurisdiction over the subject matter, the decision of the Cane Commissioner, the award of the arbitrator or arbitrators, or the Commissioner’s order on appeal shall be enforced by that court as if it were a decree issued by the court itself.

The Court also dealt with the matter of penalties, observing that any person who violates any of the provisions of the rules for which the Act does not prescribe a penalty, or who fails to obey a lawful order or direction that has been sent to him in writing by the Cane Commissioner, a Collector, or an Inspector, shall be liable to a fine which may extend up to Rs 750. (The proviso to this provision was omitted from the judgment.) The Court then turned to the factual background concerning the crushing seasons of 1949‑50 and 1950‑51. It noted that during those two years the Cane Marketing Society offered sugar cane using Form 10. According to the appellant, the Society was required to offer eighty‑five percent of its net estimated crop, but the Society made an offer in each of the two years that was less than the required eighty‑five percent. The Court recorded this observation without adding any further calculation or conclusion, and it formed part of the factual matrix that the Court considered in reaching its ultimate decision.

The appellant asserted that the Cane Marketing Society was required to offer eighty‑five percent of its net estimated crop, yet the Society offered a lower percentage and ultimately delivered an even smaller quantity. According to the appellant, the relevant figures for the two crushing seasons were as follows. For the 1949‑50 season the net estimated crop was forty‑five point eight two lakh maunds. A fifteen percent reduction amounted to six point eight two lakh maunds, leaving eighty‑five percent, that is, thirty‑nine lakh maunds, which should have been offered. The Society finally offered to sell thirty‑two lakh maunds, creating a shortage of seven lakh maunds in the offer, and actually supplied twenty‑three point eleven one three one two nine‑7954 maunds, resulting in an actual shortage of fifteen point eight eight eight six nine one seven point one two four six maunds. For the 1950‑51 season the net estimated crop was fifty‑five point two zero lakh maunds. Fifteen percent of this amounted to eight point two eight lakh maunds, so the amount that should have been offered was forty‑six point nine two lakh maunds. Again the Society offered only thirty‑two lakh maunds, producing a shortage of fourteen point ninety‑two lakh maunds in the offer. The appellant therefore preferred a claim to the Cane Commissioner for compensation for the short supply, calculated at one anna per maund of sugar cane, by an application dated thirty‑first October, nineteen fifty. This claim was preceded by an extended correspondence that began in June nineteen fifty. A few of the letters from that exchange were printed in the record. The first letter, addressed to the Cane Marketing Society Ltd., Bijnor, demanded Rs. 1,02,116‑13‑0 as compensation for the short supplies in the 1949‑50 season. A subsequent letter in August nineteen fifty indicated that the Society claimed Rs. 1,64,094‑4‑6 as commission for the years 1948‑49 and 1949‑50, while the appellant set up a counter‑claim for Rs. 1,04,890‑2‑9 as compensation for the short supply. On the fourth of November, nineteen fifty, the appellant sent a final letter setting out the accounts and forwarding a cheque for Rs. 22,628‑13‑0 in full satisfaction of the claim; the Society accepted the cheque but under protest. The real dispute centered on the compensation for short supplies, which the Society did not admit. The Society asserted a claim for Rs. 2,63,624‑2‑6 and moved the Cane Commissioner, under Rule twenty‑three (1) of the U.P. Sugar Control Act and Rules, 1938, for arbitration. The Cane Commissioner, having not acted on the appellant’s letter, issued an order on twenty‑six July, nineteen fifty‑one, directing both parties to appear before him on eighteen August, nineteen fifty‑one, for determination of the dispute. On the third of September, nineteen fifty‑one, the appellant filed a petition under Article two hundred twenty‑six of the Constitution seeking a writ of certiorari to quash the proceedings before the Cane Commissioner, a writ of prohibition to restrain the Commissioner from continuing the proceedings, and a writ of quo warranto for a declaration that the Commissioner had no authority to assume the role of arbitrator in the dispute. In support of the petition the appellant contended that arbitration could not proceed because the agreement was not a proper agreement; the Society had left the Schedule, the area of cultivation, and the estimated yield blank in the prescribed Form XII, and the agreements were unsigned by the mills, which did not accept them in their incomplete state. Alternatively, the appellant argued that Rule twenty‑three violated Article fourteen of the Constitution because it provided two different methods of dispute resolution—one by the Commissioner and the other by arbitration—leaving to the arbitrary discretion of the Commissioner which method to apply in a particular case, and it provided an appeal in one case but not in the other. Further, the appellant maintained that sub‑rule six of Rule twenty‑three, which authorised an appeal, exceeded the rule‑making power of the Provincial Government, as no such power was conferred by section thirty of the Act; because sub‑rule six was inseverable, the entire Rule twenty‑three must fail, thereby precluding any action by the Cane Commissioner.

The petition argued that Rule 23 allowed the Cane Commissioner to decide arbitrarily whether a dispute should be resolved by arbitration or by a different method, and that the rule provided an appeal in one circumstance but not in the other. The petition further contended that sub‑Rule (6) of Rule 23, which created a right of appeal, exceeded the rule‑making authority of the Provincial Government because Section 30 of the Act did not empower the Government to confer such an appellate right. The petitioners maintained that sub‑Rule (6) could not be separated from the rest of Rule 23; consequently the entire rule should be held invalid and the Cane Commissioner would have no authority to act. The initial petition was heard by Justice Chaturvedi, who dismissed it. A special appeal under the Letters Patent was then taken before Chief Justice Mootham and Justice C. B. Agarwala. Both judges agreed to dismiss the appeal, but they differed on the validity of sub‑Rule (6). Chief Justice Mootham concluded that the Provincial Government had overstepped its powers in creating sub‑Rule (6), rendering that sub‑rule invalid, yet he considered the sub‑rule severable so that the remainder of Rule 23 remained valid. In contrast, Justice Agarwala held that sub‑Rule (6) was properly framed and that a right of appeal existed both against the order of the Cane Commissioner and against the arbitrators’ award to the Commissioner of the Division. Despite their disagreement on sub‑Rule (6), both judges found that Rule 23 was not discriminatory and therefore was not void under Article 14 of the Constitution. The present appeal raises precisely the same arguments that were presented before the High Court.

The Supreme Court noted that the Act and its accompanying rules regulated the purchase of sugar cane through a system of reserved, assigned, and other areas, with supplies from reserved areas earmarked for specific factories and prescribed forms governing offers and agreements so that parties could not circumvent the scheme. The Court clarified that it was not tasked with deciding issues relating to alleged short supply of cane or unpaid commissions; those matters were for adjudication elsewhere. The Court’s focus was solely on the legality of the proceedings before the Cane Commissioner. The dispute had been referred to the Commissioner under Rule 23 both by the Sugar Cane Growers’ Society and earlier by the appellant himself. The appellant now asserted that he had erred and sought to avoid a decision by either the Commissioner or an arbitrator, presenting two main contentions. The first contention claimed that three defects in the 1949‑50 agreement and two defects in the 1950‑51 agreement prevented the formation of a binding contract as contemplated by Section 18(2), thereby depriving the Commissioner of authority under Rule 23. The identified defects were (a) the absence of the mills’ signatures in both agreements, (b) the schedule left blank in both agreements, and (c) two blanks left

The appellant advanced a second contention that Rule 23, which mandates arbitration, was void because it violated Articles 13 and 14 of the Constitution by ostensibly permitting discrimination. The appellant further argued that sub‑rule (6) of Rule 23, which provided for an appeal, exceeded the rule‑making authority granted by section 30 of the Act and that, since this sub‑rule could not be severed, the entire Rule 23 should fail. The Court indicated that it would consider the first contention separately and would treat the two points raised in the second contention together.

The first issue for determination was whether a binding contract existed between the parties. Clause 10 of the agreement, which was drafted in the prescribed format, stated that “all disputes touching the agreement shall be decided by arbitration as provided for in the rules and no suit shall lie in a civil or revenue court in respect of any such dispute.” This exclusion of the jurisdiction of the courts was also reflected in Rule 23(1). Consequently, if the agreement were deemed binding, any dispute would have to be referred to arbitration in accordance with Rule 23.

The agreement had been challenged in a petition filed under Article 226 on four grounds. Three of those grounds concerned factual disputes, which the Court declared it would not examine. The fourth ground asserted that “no agreement was entered into at all between the parties as contemplated under section 18(2) of the U.P. Sugar Factories Control Act and in the form No. 12 as prescribed under the Rules made thereunder.” The appellant claimed that the identified defects demonstrated that no agreement existed.

In rebuttal, the Court observed that the agreement had been accepted by both parties and had been acted upon. The appellant himself had approached the Cane Commissioner on 31 October 1950 seeking enforcement of the agreement. Although the appellant later contended that he had proceeded under the mistaken belief that Rule 23 applied even without a written agreement, the record showed that during the proceedings before the Cane Commissioner the appellant caused an appearance to be made, requested additional time, and faced no objection on the basis that the agreement was invalid.

Furthermore, in correspondence with the Society the appellant relied on the agreements to compute his compensation and the Society’s commission. He issued requisitions for sugar‑cane supplies in accordance with Rule 15(5) and (6) and the terms of the agreement, accepted the corresponding bills, and made payment. The appellant possessed the signed Form 10 and Form 12. While he could have completed the blank sections and signed the agreement, he deliberately chose not to do so. By his conduct, the appellant appeared prima facie to have accepted the agreement, despite now seeking to rely on his own omissions and minor defaults.

The Court emphasized that the prescribed form existed to ensure that the scheme of the Act and its Rules operated smoothly, and that the purchase and sale of sugar‑cane would proceed in an orderly manner. The use of the form in this case, with all essential terms included and unaltered, demonstrated compliance with the statutory requirements, even though certain blanks remained unfilled and a signature from the opposing party was absent.

The Court observed that the scheme required the use of a prescribed form and that failure to use that form was made an offence to force factories to adhere to the scheme. In the present case the prescribed form had in fact been used. All of the stipulated terms were present, none had been altered, and no new terms had been inserted. Moreover, the agreement had been acted upon by the parties. The issue before the Court was whether the lack of a signature by the complainant and the presence of blank spaces rendered the contract void and non‑existent. The Court noted that in the agreement for the 1949‑50 season the fields indicating the area of the crop in one column and the approximate yield in another column had been left unfilled. However, the form for the 1950‑51 season contained no such blanks. The agreement for the latter season was preceded by Form No 10, which set out the relevant particulars. That form was in the appellant’s possession and it supplied the two missing details – namely the area under cultivation and the estimated yield. The Court further observed that between the two forms all the particulars required to be entered in the body of the agreement were indeed present. With respect to the schedule annexed to the agreement, the headings listed village, area under sugar‑cane, approximate yield in maunds, and remarks. If the appellant required the information, it could have been supplied. The schedule merely recorded village‑by‑village details of the area under cultivation that had already been mentioned in Form No 10 and the main agreement, and it also indicated the quality of cane grown in each village. This arrangement was intended to facilitate the sending of requisitions, and any complaint by the appellant could be raised in the proceedings. The blanks appearing in the body of the 1949‑50 agreement were therefore insignificant, because the same details had already been set out in Form No 10. The omissions did not affect the substantive terms of the agreement. Consequently, the Court held that the form for the 1949‑50 season was not invalid merely because of the unfilled blanks, and that the schedule, although intended to record crop details, was not an integral part of the agreement or its essential terms. The agreements for both the 1949‑50 and 1950‑51 seasons were therefore not invalid for this reason.

The Court then turned to the issue of the missing signature of the party who had been in possession of the document and who was now raising the objection. It observed that it was somewhat odd for that party to complain about the lack of his own signature, characterising the complaint as an attempt to make a virtue of his own omission. The argument advanced on behalf of the complainant was that section 18(2) of the governing Act used mandatory language, prescribed penal consequences for non‑compliance, and that any material departure from the prescribed form – in particular the failure of one of the contracting parties to sign – would automatically render the agreement null and void. The Court examined this contention in the context of the purpose of the legislation, which was to ensure that cane growers and factories, in accordance with the scheme, adhered to certain predetermined terms and conditions so that the rationalisation process would not fail. Although the statute required that the contract be reduced to writing in the prescribed form and that signatures be placed as a token of acceptance, the Court noted that the law did not necessarily demand the signatures of both parties for the agreement to be valid. The Court further pointed out that the essential provisions of the agreement had been complied with, the parties had acted upon the contract, and the necessary particulars had been supplied through the accompanying forms. Accordingly, the Court concluded that the absence of the complainant’s signature, by itself, did not invalidate the agreement or make it void.

In this matter, the Court noted that the cane‑growers’ rationalisation scheme required the parties to conform to certain predetermined terms and conditions so that the scheme would not fail. To give effect to that requirement, the legislation prescribed a specific form which indicated the exact place where each party must sign as evidence of their acceptance. Although the parties could in principle accept the terms orally, the statutory provision expressly demanded that the contract be executed in the prescribed form and therefore be reduced to writing. The Court referred to the decision of Duke L.J. in Ruf (T. A.) and Co. v. Pauwels, reported at [1919] 1 K.B. 660, 670. The judgment observed that the expression ‘contract in writing’ does not automatically demand signatures of both parties. It held that a document presented as an agreement can meet the statutory requirement even when only one party verifies it with a signature, as illustrated in Re Jones (1895) 2 Ch. 719. The learned Attorney General, however, argued that the provisions of section 18(2) were mandatory and therefore had to be complied with to the letter. He emphasized that because the Act and the accompanying rules prescribe a penalty for breach, the entire section must be regarded as mandatory in every respect. Consequently, the Attorney General assumed that the appellant might be guilty of a punishable breach, but maintained that failure to follow the mandatory provision exactly would render the contract invalid. In support of this position, a large number of authorities dealing with the distinction between mandatory and directory provisions were cited before the Court. Additional cases were referenced to demonstrate the proposition that when a form is prescribed, the prescribed form must be used, otherwise no contract can arise. The Court indicated that it would confine its discussion of those authorities to a brief overview.

The Court quoted Maxwell on the Interpretation of Statutes, page 364, and indicated that the treatise contained an important observation. It states: “It has been said that no rule can be laid) down for determining whether the command (of the statute) is to be considered as a mere direction or instruction involving no invalidating consequence in its disregard, or as imperative, with an implied nullification for dig-) obedience, beyond the fundamental one that it depends on the scope and object of the enactment.” The passage further observed that while nullification is the usual result of disobedience, the question is chiefly governed by considerations of convenience and justice. This principle was illustrated in the decision of R. v. Ingall (2) 2 Q.B.D. 208, per Lush, J. It warned that if enforcing nullification would cause general inconvenience or injustice to innocent persons, such an outcome should not be presumed to reflect legislative intent. Similarly, if nullification would advantage those responsible for the neglect without advancing the statute’s purpose, the legislature cannot be said to have intended such consequence. The passage concluded that the whole scope and purpose of the enactment must be considered when deciding whether a provision is mandatory or merely directory.

The Court explained that, when interpreting a statute, the first step is to determine whether the provision operates as an absolute rule that must be obeyed exactly, or as a directory rule that may be satisfied by substantial compliance. The general principle is that an absolute enactment requires exact performance, whereas a directory enactment requires only substantial performance. This principle has been applied in numerous decisions in both India and England. In State of U. P. v. Manbodhan Lal Srivastava (1) the Court held that no single rule can be laid down for all statutes; instead, the object of the enactment must be examined. The Court further observed that even if a provision is worded in mandatory terms, it should be treated as directory where non‑compliance would cause serious general inconvenience or injustice to persons who have no control over the officials charged with the duty, and where such non‑compliance would not advance the principal purpose of the legislature. In such circumstances, the neglect of the provision, although punishable, does not invalidate the acts performed under it. The same line of reasoning was followed in later cases, and most recently in Bhikraj v. Union of India (2) the Court noted that when a statute requires a particular manner or form of doing something but does not specify the consequences of non‑compliance, the question of whether the requirement is mandatory or merely directory must be resolved by looking at the statute’s object, purpose, and scope. If the statute is found to be directory, a penalty may be imposed for non‑compliance, but the act itself remains valid. The Court remarked that it is unnecessary to repeat the numerous authorities that are based on the statement in Maxwell, which is frequently quoted in these discussions.

In the present matter, the statutory prescription required that the cane growers and the factory enter into an agreement using a form that had been prescribed by law. That prescribed form was indeed used; however, the completed document contained certain blank spaces, and the appellant had not signed in the places where his signature was required. The appellant relied on the House of Lords decision in Thomas v. Kelly (1), especially the observations of Lord Macnaghten, who distinguished between the expressions “in accordance with the form” and “in the form”. The appellant argued that the Act and the rules applicable to the present case demand that the agreement be in the form expressly prescribed, not merely in accordance with that form. It was submitted that where the statute uses the words “in accordance with the form”, substantial compliance may be permissible, but where the statute uses the words “in the form”, strict compliance is necessary. The Court noted that the form discussed in Thomas v. Kelly (1) belonged to a different category than the form required in the present case. The statutory provision at issue required that a bill of sale given as security be void unless it was made “in accordance with the form”. In the Thomas case, the document was held to be not in accordance with the required form and therefore void, illustrating the distinction between the two expressions and underscoring the importance of assessing the purpose and character of the prescribed form when determining whether strict or substantial compliance is required.

In the earlier authority the instrument was declared void, yet the observations show that if the statutory penalty had not been attached, a departure from the prescribed form in a matter that was not a characteristic of that form would not have been fatal; the bill of sale in that case lacked a description of the things intended to be assigned and that omission was regarded as a characteristic defect of the prescribed form. The Court noted several decisions of this Court that have examined prescribed forms. In two cases under the Representation of the People Act, 1950, the form for making a security deposit was not strictly followed, but the Court held that the requirement was merely a matter of form and that substantial compliance avoided the penal consequences, as seen in Jagan Nath v. Jaswant Singh (1) and Kamaraja Nadar v. Kunju Thevar (2). By contrast, in Hari Vishnu Kama v. Syed Ahmed Ishaque (3) votes not cast in the prescribed form were held invalid because the form was considered essential and any intention expressed otherwise was treated as no intention at all. The Court also referred to Radhakisson Gopikisson v. Balmukund Ramchandra (4), where a by‑law required contracts between agents and constituents to be in the prescribed form; the Privy Council held that literal compliance was not essential provided the contract contained all the terms and conditions set out in the form, but it was essential if any term was missing. Applying these principles to the present case, the Court observed that the prescribed form enumerated several conditions and that all of those conditions have been incorporated in the agreement executed by the Society, meaning that the form has effectively been used. The only deviations identified are the three defects previously mentioned. The Court emphasized that the statute makes the failure to execute the agreement in the prescribed form an offence, yet no other consequence is prescribed for non‑compliance with the form. The maximum implication is that if the form used had included conditions that varied from those in the prescribed form, a contract might not have arisen; however, the Court found no need to express an opinion on that because the terms of the prescribed form are exactly the terms present in the used form. Moreover, the Court pointed out that the only sanction for failing to observe the form is a fine, and that section 18(2) can be read as directory; even if it were read as mandatory, the Court had already shown that the appellant’s failure to sign the form does not constitute a matter for which any additional penalty can be imposed.

In this case the Court observed that any advantage the appellant might claim based on his own conduct was irrelevant. The presence of blank spaces in the agreement was also held to be immaterial because Form No 10 supplied the information that had been inadvertently omitted from the original agreement. The Court noted that the agreement was properly identified by the signature of the Society appearing on the form, and that the form had been acted upon not only by the Society but also by the appellant, who nonetheless complained of the lack of his own signature. Accordingly, the Court concluded that the agreement was binding. The Court further pointed out that the arbitration clause contained in the agreement was enforceable even if the appellant had not signed it, relying on settled law that an arbitration agreement need not be signed by the parties; it is sufficient that the terms are reduced to writing and that the parties’ agreement to those terms is established, as stated in Jugal Kishore Rameshwardas v. Mrs. Goolbai Hormusji. The Court added that even if the relevant statutory provision were interpreted as mandatory requiring the prescribed terms to appear in writing, that requirement had been satisfied in the present case. Consequently, a binding contract existed between the parties and the dispute was required to be resolved pursuant to Rule 23. The appellant raised an alternative argument challenging the validity of Rule 23 itself. He argued that Rule 23 allowed the Cane Commissioner two distinct methods for adjudicating disputes: either the Commissioner could hear and decide the case himself, or he could direct the parties to refer the dispute to arbitration. The appellant contended that this dual option gave the Commissioner an arbitrary power to treat similar cases differently because there was no guiding principle governing which method should be used. He further asserted that the arbitration route provided a right of appeal from the arbitrators’ award to the Commissioner of the Division, whereas the Commissioner’s own decision did not permit any appeal, creating discrimination between parties whose cases were decided by the Commissioner and those whose cases were decided by arbitration. The appellant maintained that this discretionary power violated the equal protection clause of Article 14 of the Constitution, citing earlier cases where the Court had declared such laws void. He also argued that Rule 23 contained an appeal provision in sub‑rule (6) that exceeded the authority granted by Section 30, which only empowers the Provincial Government to make rules, and therefore the appeal provision should be struck down as ultra vires.

It was submitted that sub‑rule (6) could not be separated from the remainder of Rule 23 because the Provincial Government would not have enacted a rule on arbitration in its present shape if it were not also capable of prescribing a right of appeal for a party aggrieved by an arbitral award. Consequently, the petitioners argued that sub‑rule (6), which creates the right of appeal, must be struck down as beyond the authority of the Provincial Government and that, because it is inseparable from the rest of the rule, the entire rule should be declared ultra vires. The submissions on this point were not uniform. If sub‑rule (6) were found to be beyond the Provincial Government’s power and therefore invalid, the allegation of discrimination would lose one of its foundations, provided that sub‑rule (6) could be severed; in that scenario the decision of either the Commissioner or the arbitrator would become final and no appeal would be available. Only where sub‑rule (6) is deemed inseparable would other implications arise. Accordingly, the Court examined whether section 30 of the Cane Acts confers the authority to provide an appeal from an arbitrator’s award. An appeal, the Court noted, is a creature of statute and does not arise by operation of ordinary arbitration law, which ordinarily permits no appeal against an award. Hence, any rule that creates an appeal must be grounded in the power granted by section 30. Section 30 first confers a broad power to make rules and then lists, by way of illustration, particular subjects on which rules may be made. The general power is expressed in the opening subsection, which states: “The Provincial Government may make rules to carry out the provisions of this Act.” The petitioner contended that this language does not employ the usual phrase “carry out the purposes of this Act,” and therefore the Provincial Government could legislate an appeal only if the Act itself contained an express provision authorising such an appeal, a provision which was not found. The opposite side relied on subsection (2), which authorises rules to provide for: “(u) the reference to the Cane Commissioner of disputes relating to the supply of cane for decision or, if he so directs, to arbitration; the mode of appointing an arbitrator or arbitrators; the procedure to be followed in proceedings before the Cane Commissioner or such arbitrator or arbitrators; and the enforcement of the decisions of the Cane Commissioner or the awards of arbitrators.” It was argued that this clause gives the rule‑making authority the power to frame rules concerning disputes over cane supply that may be resolved by arbitration, and that such power is itself a provision of the Act, permitting rules to be made to implement it. The petitioner, however, pointed out that clause (u) enumerates only four matters and does not expressly include a provision for an appeal. In the Court’s view, clause (u) confers a general power to make rules for the settlement of disputes either by the Cane Commissioner or, if directed, by arbitration, and therefore the authority to include an appeal provision falls within that general power.

When the Cane Commissioner directs a dispute to be resolved by arbitration, the legislation intends that an appeal from the arbitrator’s decision also be permissible in order to give effect to the entire provision. Consequently, sub‑rule (6), which authorises an appeal against an arbitrator’s award, must be regarded as a rule that implements section 30(2)(u)’s power to resolve disputes through arbitration. Because sub‑rule (6) falls within the rule‑making authority of the Provincial Government, it was unnecessary to examine whether that sub‑rule could be severed from the remainder of the rule. The Court then turned to the principal issue, namely whether Rule 23 presents two distinct procedural options that the Cane Commissioner may select at his discretion. If it could be shown that the rule enables the Commissioner to treat one litigant differently from another, the rule would contravene Article 14 of the Constitution. Accordingly, the Court examined whether any possibility of discrimination existed in the exercise of the Commissioner’s powers. A preliminary question was whether the Commissioner could force a party to submit to arbitration against that party’s will. Rule 23 states that any dispute relating to an agreement shall be referred either to the Cane Commissioner for decision or, if he so directs, to arbitration. The rule further provides that no civil or revenue suit may be instituted concerning such a dispute. At first glance the language appears to allow the Commissioner to retain one dispute for himself while referring another of similar nature to an arbitrator or arbitration board. However, the first sub‑rule’s purpose is to make arbitration possible only with the Commissioner’s permission, and parties are not authorised to proceed to arbitration without that permission. Subsequent wording in the rule makes clear that arbitration also requires the consent of the parties involved. If arbitration is available solely on a voluntary basis, there can be no grievance that two different mechanisms are provided for resolving the same class of disputes. When parties refuse arbitration, the Commissioner is obligated to resolve the dispute himself, because he cannot compel arbitration against their will. Thus, the only genuine method of dispute resolution is the Commissioner’s decision, with a secondary, optional method of arbitration only when both the Commissioner and the parties agree. Therefore, the arbitration provisions cannot be directly compared with the Commissioner’s adjudicatory procedure because they operate under different conditions. Consequently, the presence of an appeal right in the arbitration track does not create inconsistency with the lack of an appeal in the Commissioner’s track. The appeal mechanism in arbitration becomes effective only when both parties willingly accept the arbitration process together with its appeal provision. To ascertain whether the arbitration process operates on a voluntary basis, the Court must examine Rule 23 in detail.

The Court observed that a detailed examination of Rule 23 required reference to section 46 and to three other provisions of the Arbitration Act. Section 46 states that, except for subsection (1) of section 6 and for sections 7, 12, 36 and 37, the Act’s provisions apply to every arbitration under any other enactment as if the arbitration were based on an arbitration agreement, unless the Act conflicts with that other enactment or its rules. The counsel for the appellant conceded that the first part of section 46 was not applicable, yet argued that sections 8, 9 and 10 of the Arbitration Act must be considered to determine whether the arbitration contemplated by Rule 23 is purely voluntary. Consequently, the Court needed to compare the text of Rule 23 with the language of those sections to decide whether the rule overrides the statutory provisions. Rule 23(2) provides that, when the Cane Commissioner orders a dispute to be referred to arbitration, the matter shall be referred to a sole arbitrator acceptable to the parties concerned, thereby making the appointment of a sole arbitrator dependent on the parties’ consent. By contrast, under section 8 of the Arbitration Act any party may serve written notice on the opposite party to concur in the appointment, and if after a fortnight the appointment is not made, the court may be approached to appoint an arbitrator; this mechanism is clearly inconsistent with the procedure prescribed by Rule 23. Furthermore, Rule 23 stipulates that if the parties cannot agree on a sole arbitrator, the dispute shall be referred to a Board of Arbitration composed of one representative of each party and an umpire acceptable to both representatives, forming a three‑member board and thereby rendering section 8 inapplicable. The rule also excludes the operation of section 9, which deals with a two‑arbitrator situation where, if one party fails to appoint his arbitrator, the other party may give notice and the appointed arbitrator becomes the sole arbitrator; such a scenario cannot arise under Rule 23 because the rule mandates a three‑member board as a condition precedent. Rule 23 further requires each party to appoint his own arbitrator, after which the two appointed representatives jointly select an umpire; the Cane Commissioner intervenes only when the representatives cannot agree on the umpire. Nonetheless, at an earlier stage any party may defeat the arbitration process by refusing to nominate his own arbitrator, indicating that the arbitration contemplated by Rule 23 can proceed only with the mutual agreement of the parties.

If a party fails to appoint his arbitrator, the arbitration process cannot commence. The discussion must also turn to section 10 of the Arbitration Act. Section 10 does not concern the appointment of arbitrators; rather it governs the role of a third arbitrator who is selected by the two arbitrators appointed by the parties. That stage never arises when one party has not appointed his arbitrator. Consequently, sections 8, 9 and 10 of the Arbitration Act are inapplicable because they conflict with Rule 23 of the Uttar Pradesh Sugar Factories Control Rules, 1938. It is equally evident that the usual method for resolving disputes involving the supply of sugar‑cane is a decision by the Cane Commissioner. Although the Commissioner possesses the authority to refer a dispute to arbitration, the rules indicate that arbitration can only proceed where the parties themselves consent. When the parties agree to a sole arbitrator, that arbitrator must be acceptable to both parties. If the parties cannot agree on a sole arbitrator, the dispute must be referred to a Board of arbitrators composed of one representative from each party and an umpire who is acceptable to both representatives. Rule 23, however, does not specify what happens if a party fails to appoint his own representative, and the Arbitration Act offers no guidance because its provisions are inconsistent with the Rule. Accordingly, it follows that arbitration may occur only with the explicit consent of the parties, either by selecting a mutually agreed sole arbitrator or by appointing their respective representatives to the Board. The parties have the sole discretion to make this choice. If the parties are unable to reach such an agreement, arbitration cannot be instituted and the dispute must be resolved directly by the Cane Commissioner. Because there are two possible procedures—one statutory default and one that depends on the parties’ voluntary agreement—no discrimination can be said to arise, since discrimination would require an arbitrary exercise of power by an external authority. An argument presented at the close of the hearing, though not raised by the learned Attorney General, was advanced by counsel for the petitioner. The argument contended that discrimination might exist because the Cane Commissioner could refer some disputes to arbitration while retaining others for his own decision, even though the parties in all cases desire arbitration. In other words, the alleged discrimination was not about the existence of two procedural options, but about the possibility that parties could be denied their chosen path to arbitration. As previously explained, the normal course is a decision by the Cane Commissioner, with the optional recourse to arbitration only when the parties agree. It is highly unlikely that the Commissioner would refuse to refer a dispute to arbitration when the parties have expressly requested such a referral. Where the Cane Commissioner declines to make

The Court considered whether the Cane Commissioner could be compelled to refer a dispute to arbitration and whether a decision made by the Commissioner contrary to the parties’ wishes would nevertheless bind the parties. It held that the provision did not offend Article 14 because the Commissioner retained the authority to decide a dispute that the parties preferred to submit to arbitration. In the Court’s view, the contract between the parties was a binding agreement and Rule 23(6) of the Uttar Pradesh Sugar Factories Control Rules 1938 was within the competence of the Provincial Government; consequently the rule as a whole did not transgress Article 14 of the Constitution. For that reason the appeal was dismissed with costs. Justice Raghuvar Dayal, having examined the judgment of his colleague, agreed that a binding contract existed and that clause 10 rendered the dispute capable of referral to arbitration. However, he dissented on the contention that Rule 23 of the Uttar Pradesh Sugar Factories Control Rules 1938 was nondiscriminatory. He explained that sub‑rule (1) of Rule 23 provides that a dispute may be referred to the Cane Commissioner for decision or, if he so directs, for arbitration, thereby conferring discretionary power on the Commissioner to order arbitration. The provision contains no guidance on how that discretion should be exercised. The procedure, as he described, appears to be that when a party approaches the Commissioner for settlement, the Commissioner may either resolve the matter himself or direct the parties to arbitration. Nothing in the sub‑rule suggests that the Commissioner may refer the dispute to arbitration only when the parties have mutually agreed to that mode. In the absence of any such limitation, the Commissioner’s discretion cannot be restricted. Justice Dayal found no justification for interpreting the phrase “if he so directs” as being conditional upon the parties’ agreement to arbitration. He further observed that clause 10 of the agreement in Form 12, together with the Commissioner’s direction, constitutes the arbitration agreement. Once the Commissioner issues the necessary direction, the dispute must be presented to a sole arbitrator acceptable to both parties, as provided by sub‑rule (2). If the parties cannot agree on a sole arbitrator, the dispute is to be referred to a Board of Arbitration. The parties may avoid the sole‑arbitrator route by refusing to agree on any particular individual. In such a circumstance each party must appoint a representative to the Board, and the two representatives must then select an umpire acceptable to both. Justice Dayal suggested to the respondent that if a party does not wish the matter to be referred to the Board of Arbitration, …

In the situation where a party does not wish the dispute to be referred to the Board of Arbitration, that party may simply refrain from appointing a representative, and consequently the Cane Commissioner would be required to decide the dispute himself. When both parties consent to appoint representatives, the matter is referred to the Board of Arbitration with the parties’ consent, and therefore no allegation of discrimination can be made, even though the outcomes reached by the Cane Commissioner acting alone and by the Board of Arbitration may differ. Neither sub‑rule (2) nor any other sub‑rule of rule 23 contains a provision that describes the procedure to follow when either party fails to appoint a representative. The lack of such a provision does not automatically imply that the dispute must revert to the Cane Commissioner for decision, nor does it give the Cane Commissioner authority to withdraw his earlier direction to refer the dispute to arbitration. Rule 23 does not contain an explicit clause on this point, although sub‑rule (5) does expressly empower the Cane Commissioner to take fresh charge of the dispute in a different circumstance. Once the Cane Commissioner has issued a direction to refer the dispute to arbitration, the absence of any rule‑based authority permitting him to retract that direction means that he cannot withdraw it and assume the decision‑making role himself. The omission of a rule dealing with a party’s failure to nominate a representative suggests that the rule was not intended to contemplate such a contingency; this interpretation is more reasonable than the view that the reference would revert to the same Commissioner who had already declined to decide the matter personally. Moreover, the act of a party naming a representative does not transform the arbitration reference into a voluntary act, because the parties were compelled to enter into the agreement in Form 12, and their assent to clause 10 of that agreement was driven by a statutory requirement rather than free choice. Likewise, their agreement to nominate representatives to the Board of Arbitration was unavoidable, since sub‑rule (1) bars them from approaching a civil court for a decision. Nothing in rule 23 indicates that the Cane Commissioner’s decision is the ordinary or default procedure contemplated by the rule. The Cane Commissioner may, however, act as an umpire if he wishes, in the event that the two representatives appointed by the parties fail to agree on an umpire within fourteen days of their appointment. If the Board of Arbitration does not render an award within a time limit fixed by the Cane Commissioner, the dispute is deemed to have been newly referred to the Cane Commissioner, because sub‑rule (5) in those circumstances authorises the Commissioner either to decide the dispute himself or to appoint another arbitrator or arbitrators for that purpose. From the various provisions of rule 23 it is evident that the procedure applicable when the dispute is decided by the Cane Commissioner differs from the procedure applicable when the dispute is decided by a sole arbitrator or by the Board of Arbitration.

In the situation where a dispute is decided directly by the Cane Commissioner, the decision rendered by the Commissioner is regarded as final and may be enforced by the Civil Court in accordance with sub‑rule (8). Conversely, when the dispute is resolved by either a sole arbitrator or the Board of Arbitration, the award issued by that arbitrator or by the Board is subject to appeal before the Commissioner of the Division in which the affected factory is located; the Commissioner’s order on such an appeal is likewise final and may be enforced by the Civil Court. From these two alternatives the Court observed that rule 23 establishes a procedure for deciding disputes that touch upon the parties’ agreement, but the procedure permits parties who are similarly situated to have their disputes decided by different persons and by differing processes, depending entirely on the personal inclination of the Cane Commissioner. The Court noted that the Commissioner’s discretion in this respect is not guided by any established principles, and consequently the rule permits arbitrary variation in the method of dispute resolution. Because of this unfettered discretion, the Court held that the rule violates the equality clause embodied in Article 14 of the Constitution and must therefore be declared void. The Court also considered the contention that sub‑rule (6), which provides for an appeal to the Commissioner against an order of the arbitrator or the Board of Arbitration, is itself void on the ground that the State Government lacked authority to make a provision for such an appeal. The Court referred to subsection (1) of section 30 of the Uttar Pradesh Sugar Factories (Control) Act, which authorises the State Government to formulate rules for the implementation of the provisions of that Act. However, the Court pointed out that the Act contains no provision allowing for an appeal against an award made by an arbitrator or arbitrators. Consequently, a rule that creates a right of appeal against an arbitrator’s order does not fall within the scope of rules intended to give effect to any provision of the Act. The Court then examined clause (u) of subsection (2) of section 30, which permits the State Government to make rules concerning the reference of cane‑supply disputes to the Cane Commissioner for decision, or, if the Commissioner directs, to arbitration; the clause also authorises rules regarding the mode of appointment of arbitrators, the procedural conduct of proceedings before the Commissioner and the arbitrators, and the enforcement of decisions made by the Commissioner or awards made by the arbitrators. While acknowledging that these provisions relate to the settlement of disputes between the parties, the Court stressed that they do not, by themselves, empower the State Government to provide for appeals against the orders of arbitrators or the Board. The Court observed that clause (u) contains no express language authorising a rule that would allow an appeal against an arbitrator’s award, nor does it refer to any procedure for an appellate tribunal or to the enforcement of such a tribunal’s order. The absence of any such reference, the Court concluded, demonstrates that clause (u) neither contemplated nor conferred the power on the State Government to enact rules providing for an appeal against an arbitrator’s award. Finally, the Court noted that the Commissioner’s order is not characterized as an award, a distinction reflected in the wording of sub‑rule (8) of rule 23, which differentiates between the decision of the Cane Commissioner and the award of an arbitrator or Board of Arbitration.

The Court observed that a distinction must be drawn between the decision issued by the Cane Commissioner and an award rendered by an arbitrator or a panel of arbitrators, as well as between the Commissioner’s order and any order made on appeal. It held that the provision for an appeal contained in sub‑rule (6) could not be regarded merely as an ancillary measure attached to the mechanism for settling disputes by the Cane Commissioner, a mechanism that clause (u) authorised the State Government to regulate through rules on certain matters. According to the Court, the right to appeal is a substantive entitlement that must be granted to a party either expressly by the Act itself or by a provision within the Act that authorises the framing of rules allowing appeals against particular orders or decisions. In the absence of any such enabling provision in the Act, the Court concluded that the rules could not validly create a right of appeal. Consequently, the Court expressed the opinion that sub‑rule (6) was void because it attempted to confer a power that the Act did not provide.

The Court further noted that even if sub‑rule (6) were declared void, the procedural steps to be followed by either the Cane Commissioner or the arbitrator or the board of arbitrators in resolving a dispute would not differ substantially. However, the Court rejected the argument that the remainder of rule 23, after the removal of sub‑rule (6) and related incidental provisions, could remain valid. It found it difficult to treat sub‑rule (6) as a severable provision, pointing out that the existence of sub‑rule (6) together with other consequential provisions demonstrated that the State Government, when drafting rule 23, intended the dispute to be decided by an arbitrator or arbitrators subject to a right of appeal against the award. The Court cautioned against speculating that the State Government would have omitted the appeal provision had it known that it lacked authority to provide for such an appeal. Accordingly, the Court held that the entire rule 23 must be struck down, both because, in its present form, it was discriminatory and because sub‑rule (6) was void for lack of legislative power and could not be separated from the remainder of the rule. The Court therefore allowed the appeal, awarded costs, and ordered the issuance of a writ quashing the proceedings pending before the Cane Commissioner and prohibiting the Commissioner from continuing those proceedings. In line with the majority opinion, the Court dismissed the appeal with costs.