INTRODUCTION

Is Article 14, the Right to Equality, an absolute right? Under the Constitution of India, Article 14 states that the state will not deny Equality before the law and Equal protection of law, but in the landmark judgement of Banarsi Das vs Cane Commissioner, Uttar Pradesh, AIR 1963. In this case Supreme Court of India didn’t directly specify whether it is an absolute right or not, but the implication of this principle reflects the shadow of Article 14 as a non-absolute right. This case is also a crucial one as it clarified how Article 14 is applied in administrative decisions and how defects in Agreements are treated in the Court.

FACTS OF THE CASE

1. This present case involves the Appellant Seth Banarsi Das and the Cane Commissioner of Uttar Pradesh, where a dispute arose due to the delivery of sugar cane by The Cane Growers’

Co-operative Society Ltd.

2. Seth Banarsi Das was the lessee of Shiva Prasad Banarsi Das Sugar Mills, which was situated in Bijnor, Uttar Pradesh. he got into an agreement with the Cane Growers’ Co-operative Society Ltd. to supply sugar canes as the Shiva Prasad Banarsi Das Sugar Mills required sugar cane to run its operations.
3. Seth Banarsi Das sued The Cane Growers’ Co-operative Society Ltd. in the High Court of Allahabad, under Article 226 of the Constitution, challenging the Constitutional validity of Rule 23 of the U.P. Sugar Factories Control Rules, 1938, and Form XII.
4. The Government had set some strict rules to regulate the conduct of both the mill and the farmer. Rule 23 of the U.P. Sugar Factories Control Rules, 1938, gives the option to the parties of the agreement to resolve the issue whether by the Cane Commissioner or by arbitration. Seth Banarsi Das argues that it gives the arbitrary power to the Cane Commissioner, which violates Article 14, Right to Equality.
5. The High Court of Allahabad dismissed the Writ petition filed by Seth Banarsi Das on the issues of Rule 23 of the U.P. Sugar Factories Control Rules, 1938, and Form XII. Further, the court decided that Rule 23 is not unconstitutional and does not violate Article 14 of the Constitution.
6. By disagreeing with the decision of the High Court of Allahabad, Banarsi Das approached the Supreme Court of India with the issues of the Constitutional validity of Rule 23 and Form XII.
7. Due to the petition raised by Seth Banarsi Das, before a bench comprising of Justice M. Hidayatullah, Justice J.C. Shah, and Justice Raghubar Dayal.

ISSUES OF THE CASE

1. When Form XII is not completed and signed by any one party, does it create a legally binding arbitration agreement?
2. Whether Rule 23 of the U.P. Sugar Factories Control Rules, 1938 violates Article 14 Right to Equality?
3. Do procedural irregularities invalidate statutory agreements?

JUDGEMENT

The Court analysed the legal principles and the actual nature of the case, and thorough examination of relevant precedents and interpretation of the provisions it had laid down following in the judgement –

1. Previously, the High Court of Allahabad dismissed the petition filed by Seth Banarsi Das, raising questions on Form XII and Rule 23, by disagreeing with the view of the Hon’ble High Court. Seth Banarsi Das filed a writ petition under Article 32 of the Constitution while raising the same issue.
2. The Supreme Court observed that, according to Rule 23, the dispute between the mill and the farmer shall be resolved by two procedures, in which firstly was to be resolved the issue by the Cane Commissioner, and secondly, by arbitration. The Court said the rule doesn’t give the discretion powers to the Cane Commissioner; further arbitration under Rule 23 can only occur when both parties give consent for the same objects. Hereby, Rule 23 is a kind of alternative dispute resolution mechanism that depends on the agreement. There are no provisions to give arbitrary power to the Cane Commissioner.
3. On the matter of Form XII, the Court decided that, however, the arbitration agreement was not signed by one party and had some blank spaces, but still it will be legally enforceable as both parties acts upon the terms mentioned in the agreement and the appellant gained profits from the agreement.
4. The Court revised the legal principle of the arbitration agreement that the agreement will have legal binding if it is written and the parties to the agreement act upon the terms and conditions of the agreement, signing the agreement is not much essential as the first one; hence the important essential is present in this case to make the arbitration agreement enforceable.
5. Article 14 provides equality before and equal protection of law, but keeping the reasonable classification, especially when it comes to the mutual agreement, it will not amount to unjust and unfair, said the Supreme Court.
6. Further, the Court ordered that there is no merit in petition of Appellant to challenge the arbitration agreement and Rule 23 under which the arbitration agreement is made.
7. Hence, on 6 December 1962, the Court dismissed the petition filed by Seth Banarsi Das and held that the arbitration agreement and Rule 23 are valid and constitutional.

REASONING

The court was called upon to decide the merit of the writ petition, which was filed by Seth Banarsi Das. On the questions raised by the appellant, the Court found no merit in the said petition and ordered a judgement along with the principles of contract law, arbitration law, and constitutional interpretations.

1. In the following case, the court mainly analysed two pain provisions, which were Rule 23 of the

U.P. Sugar Factories Control Rules, 1938, and provisions of a defective arbitration agreement. In this case, it was clear that the arbitration agreement was not signed by the appellant, and the

co-society still brought the case into the arbitration.

2. One of the rigid arguments by the appellant was that, agreement was defective as it was unsigned and had blank spaces, so how can it be legally enforceable? In the reply, the Supreme Court analysed the principle of arbitration law, which clearly specifies that if an agreement is written and the conduct of both parties reflects the terms written in the agreement, then that agreement would have a legally binding effect on both parties even in the absence of the signature of either party.
3. As both parties had acted upon the terms of the agreement and the appellant had taken the profit from this agreement so neither party can deny accepting the agreement thereafter. It was the reasoning of the Supreme Court behind the validation of the arbitration agreement.
4. In this case, the Court found that the arbitration clause was valid and enforceable as there was sufficient evidence of intention.
5. Secondly, the core argument of the appellant was Rule 23, which gives two options to resolve issues: firstly, the Cane Commissioner would decide the case, and secondly, they can resolve the matter through arbitration if both parties agree. The appellant argues that the decision of the arbitration could be challenged in higher courts if both parties resolve the issue with arbitration, but if any matter is handled by the Cane Commissioner, then the decision of its cannot be challenged in higher courts. So, it is hereby a violation of Article 14 equality before the law. But the court revised the legal principle that Article 14 only forbids those classifications and procedural variations which are arbitrary, unreasonable, or not based on intelligible differentia, but in this case, the agreement is a mutual agreement.
6. Hence, Rule 23 is not a violation of Article 14 as the Cane Commissioner is obliged under the law, and it does not lead to unequal treatment of similar parties to the agreement. Rule 23 of the

U.P. Sugar Factories Control Rules, 1938 constitutional and does not amount to a violation of Fundamental rights.

7. Justice Raghubar Dayal, one of the judges of the case, had views that Rule 23 is a violation of Article 14 of the Constitution.
8. Thus, the Court found both the arbitration agreement and Rule 23 are constitutional and valid, leading to the dismissal of the petition of appellant.

CONCLUSION

The decision taken in the case Seth Banarsi Das vs Cane Commissioner, U.P. plays a key role in the interpretation of principles of contract law, arbitration law and constitutional law. The Supreme Court stands with the balanced approach to the interpretation of the arbitration agreement and the scope of Article 14 of the Constitution, in which the court clearly specifies the validity of the arbitration clause with procedural defects, but is practically accepted by both parties. On the constitutional validity, the court revised the constitutional principle that Article 14, Right to equality, only forbids unreasonable classifications instead of all kinds of classifications and procedural variations. The Cane Commissioner

doesn’t have discretion powers, and Rule 23 gives the options to parties the option to resolve issues, so it is a kind of a way to resolve issues.

This decision of the Supreme Court remains one of the precedents which helps lower courts to ensure fairness and justice in commercial agreements.

REFERENCES

1. https://indiankanoon.org/doc/1116381/
2. https://www.casemine.com/judgement/in/5608e94fe4b0149711113667

Written by Fardeen Khan an Intern under Legal Vidhiya.

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