9911796707
TMI Blog1956 (4) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... alue basis on current domestic value less commission plus cases freight marine and war risk insurance .when goods sold or leave your branch sales offices you will credit us with consignment value and debit us with your commission separate- ly". In 1948-49 the appellants built their own factory at Worli at Bombay. Since then the company has been receiving the bulk of the supplies from this factory and although some supplies used to come directly from England, we are not concerned with such supplies in this case. The company obtained a registration certificate under the Act of 1946, and the factory at Worli also obtained such a certificate. The company has become responsible for the marketing of the whole produc- tion of the Worli factory. There was no formal agreement between the company and the appellants, but the practice is that the company intimates its likely requirements from time to time and goods are con- signed to the company under a consignment note in which no value of the goods is stated. Sales are effected by the company at list prices fixed in advance by the manufacturers. Products sold by the company bear labels in which the appellants are shown as the manufacturers a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur main fac- tory at Dagenham should also be directly responsible for supervising and controlling our manufacturing operations elsewhere. "(c) On the second point, i.e., consignment trading, you should state that we use this method primarily for its great internal con- venience but also because we do not wish to take credit in our accounts for sales of goods until, so far as our ground is concerned, these goods have in fact been sold. It will be appreciated that if the firm account method of trading were used, goods simply sent to M.B.I. would appear in the May Baker Ltd. accounts as 'sales'. In actual fact, no sale would really take place until the goods were effectively sold by May Baker (India) Ltd., perhaps six months or a year later. it follows that if the firm account method were used we should be pay- ing tax in the United Kingdom on 'profits' before they were in fact realised. "For these reasons, therefore, we greatly perfer to use the consign- ment method of trading in spite of the fact that it seems complicated and involves us in a lot of work. It must be made perfectly clear to the officials to whom you speak, that these are our sole reasons for choosing to trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the title in the goods has passed from Messrs. May Baker Ltd., to Messrs. May Baker (India) Ltd., and that point of time must be held to occur when the sale of Messrs. May Baker (India) Ltd., to the customer takes place". 4.. In the case of Kalyanji v. Tikaram(1) the plaintiff was a merchant who dealt in grain and cotton seed. The defendants were also merchants who acted as commission agents in respect of these commodities. The arrangement between them was this. The plaintiff used to send the defendants consignments of these goods from time to time. The defend- ants were to keep these goods with them and await instructions from the plaintiff about the sale. On receipt of instructions from the plaintiff, the defendants sold the goods and remitted the sale proceeds to the plaintiff in due course less their commission charges. Bose, J., held that so far as the case was concerned, the defendants were acting as agents on behalf of themselves and that the intention was that the plaintiff would sell to the commission agents, and the commission agents to per- sons to whom they sold. He made the following observations: "Com- mission agents are agents within section 182 but are not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l commission agent nor is it a fact that both the parties deal in the sale of the same kind of commo- dities. It is true that, as the Collector of Sales Tax has noticed, there is nothing in the memorandum of association of the company which precludes its acting as distributors for any other manufacturer, but the fact remains that this has not been done so far and that it has been acting as only the selling agent of the appellants. It is also particularly to be observed that in Kalyanji v. Tikaram(1) there was no right in the plaintiff to recall the goods consigned at any time prior to the sale. 6.. In the case of Kandula Radhakrishna Rao v. The Province of Madras(2), the decision given by the Nagpur High Court in Kalyanji v. Tikaram(1) has been followed. Here also one party, (plaintiffs) carried (1) A.I.R. 1938 Nag. 254. (2) [1952] 3 S.T.C. 121. on independent business of their own and also a commission business. "It was indeed common ground and amply supported by the evidence that the plaintiffs were acting as agents for several seller principals who entrusted them with goods for sale at specified prices". The evidence showed that the firm of the plaintiffs had 100 to 200 princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a second" before the sale by the company to a customer. It is difficult (1) [1950] 1 S.T.C. 245; I.L.R. (1951) Mad. 257. to concede that the "understanding" between the parties, to use the expression used by Bose, J., was that two sales should take place with an interval of "a fraction of a second" between them. It would seem that as the appellants would have the power to recall the goods even at the moment regarded as the moment of sale to the company, no such sale "a fraction of a second" before the sale to the customer, as was suggested, could actually take place. It can hardly be argued that at that moment the power in the appellants to recall vanishes or is suspended. This feature in this case eminently distinguishes it from the cases of Kalyanji v. Tikaram(1) and Radhakrishna Rao v. Province of Madras(2). 8.. Mr. Madan relied on W.T. Lamb Sons v. Coring Brick Co.(3) In that case by an agreement in writing certain manufacturers of bricks and other building materials appointed a firm of merchants as their sole selling agents of bricks and other materials manufactured at their works. While the agreement was in force the manufacturers informed the merchants that they inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent had been the principal. The company in this case has to account for the pur- chase price received to the appellants, besides accounting for all advances received and expenses incurred as well as the commission charged. The ordinary rule between an agent and the principal is that the former is bound on demand to account for such receipts (Section 231 of the Indian Contract Act); whereas, as pointed out by Jessel, M.R., in Kirkham v. Peel(1), although a commission agent is liable to the consignor for the amounts received and although he makes advances to the con- signor and charges interest, and debits himself with the amounts received when they are received, and credits himself with interest on the other side of the account "the real transaction between the parties is for the consignor to treat such consignee as creditor for his advances and interest and to regard him as a debtor for the amounts received and interest". In Blackwood Wright's Law of Principal and Agent (second edition, p. 189) this case is cited as authority for the position that a commission agent is not a fiduciary agent and that the moneys he recovers are his own; and that by the custom of trade he is only l ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
