Agricultural Market Committee v. Shalimar Chemical Works Ltd.(1997) 5 SCC 516 : AIR 1997 SC 2502

Case Summary

Full Case Details

S. SAGHIR AHMAD, J. – 2. Agricultural Market Committee (“the Committee”) which is the
appellant before us is a statutory body created under the Andhra Pradesh (Agricultural
Produce and Livestock) Markets Act, 1966 (“the Act”) while the respondent is a licensed
trader dealing in “copra” (dried coconut kernel) which it imports from various places in the
State of Kerala for manufacturing coconut oil.

3. “Copra” is a notified agricultural produce and, therefore, the Committee has a right to
   levy and realise the market fee on all transactions of purchase and sale provided the
   transactions take place within the notified area of the Committee.
4. By orders dated 2-3-1989 and 28-3-1989, the Assessing Authority who is also the
   Secretary of the Committee levied the market fee on the respondent who challenged those
   orders in appeals filed under Section 12-E but the appeals were dismissed on the technical
   ground of non-compliance with Section 12-E(2) under which the whole amount of market fee
   had to be deposited before filing the appeal.
5. In order to levy market fee on the transaction of sale and purchase by the respondent,
   the Assessing Authority had relied upon Rule 74(2) of the Andhra Pradesh (Agricultural
   Produce and Livestock) Market Rules, 1969 (for short “the Rules”) and Explanation to Byelaw 24(5) of the Bye-laws of the Committee which contained a statutory presumption that if a
   notified agricultural produce was weighed or measured within the notified area of the
   Committee, it shall be deemed to have been purchased or sold within that area. The appellate
   as also the revisional authorities had also relied upon this provision and had held that since
   “copra” which was imported from the State of Kerala was, admittedly, weighed at Hyderabad,
   it shall be deemed to have been sold to the respondent at Hyderabad and, consequently, the
   respondent was liable to pay market fee on all the transactions of sale/purchase of “copra”
   during the period in question.
6. Let us now consider the next question relating to the nature of transaction relating to
   sale/purchase of “copra” by the respondent from various dealers in the State of Kerala.
7. It is contended by the learned counsel for the appellant that if an order was placed
   with a dealer in Kerala in pursuance of which goods were despatched by lorry to Hyderabad
   where the respondent, after making payment to and receiving documents from the bank,
   obtained delivery of goods, and that too, after weighment, the transaction cannot but be
   treated as sale at Hyderabad and not in the State of Kerala.
8. During the pendency of the proceedings before the Appellate Authority, statement of
   Shri Somnath Bhattacharya, Director of the respondent Company was recorded. He stated that
   the “copra” was brought into the State of Andhra Pradesh from outside. It was unloaded at the
   premises of the appellant where it was crushed and coconut oil was extracted. He further
   stated as under:
   “After the material comes to Hyderabad, we will weigh the same for the purpose of
   verification regarding the quantity despatched by the Kerala dealers. We have a
   running account with the dealers in Kerala State. The account of the dealers will be
   settled sometimes monthly and sometimes within two or three months from the date
   of despatch…. Very rarely it is found on weighment at Hyderabad that the quantity

despatched by the dealer at Kerala is less than the quantity mentioned in the invoice
concerned and in such cases, the Hyderabad unit will send a report to our Head
Office and the Head Office raises a debit note against the dealer for the shortage of
copra.”

32. The above statement has been considered by the High Court which came to the
    conclusion that the weighment was done only for the satisfaction of the buyer and was not a
    condition of contract. The High Court also took into consideration the contents of the invoice
    and Form X and observed as under:
    “The appellate authority has referred to a copy of Invoice No. 357 dated 16-5-1985
    for arriving at the conclusion that the purchase was effected by the appellant in
    Hyderabad. This invoice dated 16-5-1985 shows that one Abdul Hameed despatched
    200 bags of ‘copra’ through Lorry No. MSQ 3971 from Alleppey in Kerala to
    Hyderabad and the demand draft for Rs 1,39,000 was forwarded to bank. The note to
    the invoice says that the despatch of the goods is made solely at the risk and
    responsibility of M/s Shalimar Chemical Works, the appellant herein, and that Abdul
    Hameed takes ‘no responsibility or liability as to delayed despatches, losses due to
    theft, pilferage, rain or damage, leakage, wear and tear etc.’ Column 1 of the
    accompanying Form X mentions the name of the person consigning the goods as
    Abdul Hameed. Clause 5 of Form X is in the following terms:
    ‘If the consignor is transporting goods in pursuance of a sale for the purpose
    of delivery to the buyer, the name and address of the person to whom the goods
    are sold, his registration certificate no. under the Andhra Pradesh General Sales
    Tax Act, 1957. If he is a dealer furnish bill number and date relating in the sale.’
    Against this Column No. 5, it is mentioned that the appellant herein is the person to
    whom the goods are sold. The consignor’s name is mentioned in Column No. 6 as Abdul
    Hameed of Alleppey. Column No. 7 is in the following terms:
    ‘7. If the consignor is transporting the goods from one of his shops or godowns to
    an agent for sale or from one of his shops or godowns to another for the purpose of
    storage, the address of the agent or of the shop or godown to which the transports are
    made.’
    Against this column, it was written ‘For Sale’. Because it was written in Column
    No. 7 as ‘for sale’, the appellate authority held that this evidenced that the transport
    of ‘copra’ was only to enable the appellant to purchase the same and that the same
    was not sold in Alleppey.
    The view taken by the appellate authority is totally unsustainable.”
33. The High Court further observed as under:
    “One significant aspect to be noticed in this case is that after the stocks were
    loaded into the trucks, the sellers in Kerala had absolutely no liability with regard to
    any future losses. That is the reason why the goods were insured and the insurance
    premia were paid by the appellant. Where goods have been delivered to a common
    carrier to be sent to the person, by whom they have been ordered, the carrier becomes
    the agent of the vendee and such a delivery amounts to delivery to the vendee under
    Section 23(2) of the Sale of Goods Act. There was thus completed sale in Kerala
    State and no purchase in the State of Andhra Pradesh.”

34. On the basis of material placed on record, the High Court came to the conclusion that
    the sale of “copra” took place in the State of Kerala and not at Hyderabad.
35. We may, at this stage, consider certain provisions of the Sale of Goods Act, 1930,
    specially as the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966
    does not contain any definition of sale or purchase. [Sections 19 and 20 of the Sale of Goods
    Act were quoted by the court].
36. We may, before analysing the provisions of Sections 19 and 20, observe that the
    Indian Sale of Goods Act is based largely upon the English and American Acts. Under these
    Acts, namely, the English Sale of Goods Act, the American Uniform Sales Act and the Indian
    Sale of Goods Act, the relevant factor for determining where the sale takes place, is the
    intention of the parties. A contract of sale, like any other contract, is a consensual act
    inasmuch as parties are at liberty to settle, amongst themselves, any terms they may choose.
37. Section 19 attempts to give effect to the elementary principle of the Law of Contract
    that the parties may fix the time when the property in the goods shall be treated to have
    passed. It may be the time of delivery, or the time of payment of price or even the time of the
    making of contract. It all depends upon the intention of the parties. It is, therefore, the duty of
    the court to ascertain the intention of the parties and in doing so, they have to be guided by
    the principles laid down in Section 19(2) which provides that for ascertaining the intention of
    the parties, regard shall be had to the terms of the contract, the conduct of the parties and the
    circumstances of the case.
38. Section 20 indicates that in case of unconditional contract of sale in respect of
    specified goods in a deliverable state, the property in the goods passes to the buyer at such
    time as the parties intend it to be transferred. Section 19(3) provides that Sections 20 to 24
    contain the rules for ascertaining the intention of the parties as to the time at which the
    property in the goods shall be treated to have passed to the buyer. Both Sections 19 and 20
    apply to the sale of “specific” or “ascertained” goods.
39. Section 20, which contains the first rule for ascertaining the intention of the parties,
    provides that where there is an unconditional contract for the sale of “specific goods” in a
    “deliverable state”, the property in the goods passes to the buyer when the contract is made.
    This indicates that as soon as a contract is made in respect of specific goods which are in a
    deliverable state, the title in the goods passes to the purchaser. The passing of the title is not
    dependent upon the payment of price or the time of delivery of the goods. If the time for
    payment of price or the time for delivery of goods, or both, is postponed, it would not affect
    the passing of the title in the goods so purchased.
40. In order that Section 20 is attracted, two conditions have to be fulfilled: (i) the
    contract of sale is for specific goods which are in a deliverable state; and (ii) the contract is an
    unconditional contract. If these two conditions are satisfied, Section 20 becomes applicable
    immediately and it is at this stage that it has to be seen whether there is anything either in the
    terms of the contract or in the conduct of the parties or in the circumstances of the case which
    indicates a contrary intention. This exercise has to be done to give effect to the opening
    words, namely, “Unless a different intention appears” occurring in Section 19(3). In Hoe Kim
    Seing v. Maung Ba Chit [AIR 1935 PC 182], it was held that intention of the parties was the
    decisive factor as to when the property in goods passes to the purchaser. If the contract is
    silent, intention has to be gathered from the conduct and circumstances of the case.

41. This Court in Consolidated Coffee Ltd. v. Coffee Board [AIR 1980 SC 1468], has
    held that in an auction-sale of chattels, property passes to the purchaser on the acceptance of
    his bid. This occurs not because of Section 64(2) but because of the rule contained in Section
    42. In the instant case, the goods which were the subject-matter of sale were ascertained
        goods. They were also in a deliverable state. On the order being placed by the respondent, the
        seller in the State of Kerala, loaded the goods on the lorry and despatched the same to
        Hyderabad. It is at this stage that the conduct of the parties becomes extremely relevant. It
        was one of the terms of the contract between the parties that the seller would not be liable for
        any future loss of goods and that the goods were being despatched at the risk of the
        respondent. The respondent had also obtained insurance of the goods and had paid the policy
        premium. He, therefore, intended the goods to be treated as his own so that if there was any
        loss of goods in transit, he could validly claim the insurance money. The weighment of the
        goods at Hyderabad or the collection of documents from the bank or payment of price through
        the bank at Hyderabad were immaterial, inasmuch as the property in the goods had already
        passed at Kerala and it was not dependent upon the payment of price or the delivery of goods
        to the respondent.
42. We are in full agreement with the view expressed by the High Court and are also of
    the opinion that having regard to the evidence on record which indicated that on the order
    placed by the respondent, the stocks were loaded into the trucks for despatch to Hyderabad
    with the clear stipulation that the despatch was at the risk of the purchaser and that the seller
    had no liability with regard to any future losses and that the stock was insured and the
    insurance premium was paid by the respondent, the sale took place in the State of Kerala and
    not at Hyderabad.
43. In view of the above, the appeal has no merit and is dismissed.