1961 (2) TMI 51 - SC - Companies Law

Whether the property in the goods represented by the pucca delivery orders can be said to have passed to the holders thereof, when they receive them? Whether the Government of India is also estopped from challenging that the title passed to the holders of the pucca delivery orders as soon as they got the delivery orders? Whether due notice was given to the mills under rule 75A(2)? Held that - In the present case so far as the question of title is concerned, there can be no doubt in view of section 18 of the Sale of Goods Act that title in these cases had not passed to the holders of the pucca delivery orders on September 30 1946, for the goods were not ascertained till then, whatever may be the position of the holders of the pucca delivery orders in a suit between them and the mills to enforce them. It cannot be said that the Government of India when it takes action under rule 75A (2) is claiming through anybody; it acquires the totality of the rights in the property by virtue of the power vested in it by the statute, eliminating all subsisting private rights. There can, in such a case, be no estoppel against the Government of India qua the holders of the pucca delivery orders, for the Government of India is not stepping into the shoes of the mills but is acquiring title which is paramount in nature. In consequence rule 75A(3) would apply and the property in the goods passed to the Government of India on September 30, 1946. The appeal of the Union of India therefore is allowed and a declaration is granted that the goods were validly requisitioned and acquired and that the orders of requisition and notices of acquisition were valid and binding on the respective defendants, and the goods specified therein vested in the Government of India on September 30, 1946.

Issues Involved:
1. Validity and service of requisition orders.
2. Validity and service of acquisition notices.
3. Ownership and estoppel concerning pucca delivery orders.
4. Custom of trade regarding delivery orders and transfer of property.

Detailed Analysis:

1. Validity and Service of Requisition Orders:
- Trial Court's View: The trial court held that the orders of requisition were properly and validly made but there was no proper or due service of these orders on the mills which were in possession of the hessian. Consequently, there was no valid or binding requisition.
- Appeal Court's View: The appeal court reversed the trial court's view, holding that the requisition orders were valid and intended to affect individual mills. Service on the managing agents of the mills was deemed good service on the mills, thus validating the requisition orders.
- Supreme Court's View: The Supreme Court upheld the appeal court's decision, confirming that the orders of requisition were properly and validly served on the mills through their managing agents. The orders were addressed to the managing agents with schedules indicating the specific mills, making the service effective under Rule 119 of the Defence of India Rules and Order XXIX, Rule 2 of the Code of Civil Procedure.

2. Validity and Service of Acquisition Notices:
- Trial Court's View: The trial court held that the acquisition notices were not properly served on the owners of the goods, i.e., the holders of the pucca delivery orders, and thus the acquisition was invalid.
- Appeal Court's View: The appeal court agreed that the notices of acquisition were not properly served on the owners (the mills), as strict compliance with the provisions of the rules was necessary. The court held that the mills were not served in accordance with the provisions of Order XXIX of the Code of Civil Procedure, thus invalidating the acquisition.
- Supreme Court's View: The Supreme Court disagreed with the appeal court, holding that the notices of acquisition were effectively served on the managing agents of the mills, which were the owners of the goods. The service was deemed reasonable and in compliance with Rule 75A(2) and Rule 119 of the Defence of India Rules. Consequently, the property vested in the Government on September 30, 1946, as stipulated by Rule 75A(3).

3. Ownership and Estoppel Concerning Pucca Delivery Orders:
- Trial Court's View: The trial court held that the goods were subject to pucca delivery orders, which were dealt with in the market as representing the goods. The mills were estopped from challenging the property ownership of the holders of the delivery orders. Thus, the Government, claiming ownership through the mills, was also subject to estoppel.
- Appeal Court's View: The appeal court did not agree that the Government was claiming through the mills and held that property in the goods could not pass by estoppel in the face of the Sale of Goods Act. Therefore, it was not necessary to serve the holders of the delivery orders with notices of acquisition.
- Supreme Court's View: The Supreme Court upheld the appeal court's view, stating that the Government was not claiming through the mills but acquiring the property under statutory powers, thus not subject to estoppel. The property in the goods did not pass to the holders of the pucca delivery orders due to the lack of ascertainment, as required by Section 18 of the Sale of Goods Act. Therefore, the mills were the legal owners, and the notices of acquisition served on them were valid.

4. Custom of Trade Regarding Delivery Orders and Transfer of Property:
- Trial Court's View: The trial court recognized the custom of trade that pucca delivery orders were issued against payment and represented the goods in the market, thus passing ownership to the holders.
- Appeal Court's View: The appeal court acknowledged the custom but held that legal ownership did not pass to the holders of the delivery orders due to the lack of ascertainment of goods.
- Supreme Court's View: The Supreme Court agreed with the appeal court, emphasizing that the custom of trade did not override the statutory requirement of ascertainment for the transfer of property. The mills remained the legal owners until the goods were appropriated to the delivery orders.

Conclusion:
The Supreme Court concluded that the requisition orders and acquisition notices were validly served and binding on the mills. The property vested in the Government on September 30, 1946, and the Government was not estopped from challenging the title of the holders of the pucca delivery orders. The appeals by the defendants were dismissed, and the appeal by the Union of India was allowed. Each party was ordered to bear its own costs throughout.

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