9911796707
TMI Blog1962 (3) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... der clause (1)(b) of Article 286 of the Constitution of India and as such exempt from the sales tax. The applicant, which is a private limited company, entered into a contract with the Government of India, Ministry of Food and Agriculture, New Delhi, in September, 1953, for sale of large quantities of Cuban sugar on terms and conditions mentioned in the letter dated 12th September, 1953, addressed to them by the Government of India. After the sugar had been shipped by the foreign exporters, the bill of lading was received by the applicants on the 3rd December, 1953, and thereupon a bill for full payment of the c.i.f. value was submitted by the applicants to the officer of the Government of India designated in the contract along with a complete set of bill of lading and other documents in accordance with clause (8) of the contract. On the 23rd of December, 1953, the applicants received payment from the Government in accordance with the bills submitted by them. On the 3rd of January, 1954, the consignment of sugar arrived at Bombay by s.s. Ameriki. Thereafter the goods were inspected and weighed before an authorised officer of the Government under clause (5) of the contract and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en place in the course of import. The Tribunal did not accept the above contentions of the applicants because it held that clause (8) of the agreement under which the shipping documents were alleged to have been transferred and delivered to the Government of India, did not show that the bill of lading was required to be endorsed in favour of the Government of India and that there was no evidence produced by the applicants to show that such endorsement was made on the bill of lading. An opportunity was sought by the applicants to produce evidence showing that the bill of lading had been duly endorsed in favour of the Government of India before it was passed on to the Government under clause (8) along with the other documents required under the said clause. The Tribunal, however, refused to grant an opportunity to the applicants on the ground that the applicants had made no attempt at any previous stage to prove the endorsement and, therefore, there was no reason why a further opportunity should be allowed to them at that stage. The Tribunal then concluded that as they were not satisfied that the bill of lading was endorsed to the Government of India while the goods were on the high ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial for the determination of the question before it. It, however, did not permit the applicants to substantiate the said contention by producing evidence in support thereof on the ground that such evidence had not been produced by the applicants at an earlier stage. Mr. Mistry complains that since it was only when the matter was before the Tribunal that the question as to whether the bills of lading were endorsed by the applicants in favour of the Government was put in issue, the Tribunal ought to have allowed the applicants an opportunity to produce evidence which the applicants desired to produce before it. In our opinion, there is substance in the contention urged by Mr. Mistry and in view of the said contention, we would have found it necessary to remand the case to the Tribunal to enable the applicants to produce such evidence which they desired to produce in support of the said contention of theirs and which was not allowed to be produced by the Tribunal. Mr. Palkhiwala, who appears for the State, has stated before us that in order to avoid a remand to the Tribunal, he is prepared to argue on the basis that the bill of lading was endorsed by the applicants in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal to enable the applicants to produce such evidence which they desired to produce in support of the said contention of theirs and which was not allowed to be produced by the Tribunal. Mr. Palkhiwala, who appears for the State, has stated before us that in order to avoid a remand to the Tribunal, he is prepared to argue on the basis that the bill of lading was endorsed by the applicants in favour of the Government of India as contended by them for the purpose of the present reference. He points out that the present reference arises on an application which the applicants have made under section 27 and not out of any order of assessment of sales tax. He has, therefore, no objection to the question raised on the present reference being considered and determined on the basis of the applicants' allegation that the bills of lading were delivered by them to the Government after endorsement. He only wishes to make it clear that if on that basis the questions are answered in favour of the applicants, it should be open to the Sales Tax Authorities when the question of actual assessment of sales tax arises to investigate and determine whether the said basis is factually correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It would thus be seen that the delivery after indorsement of the bill of lading will be effectual in passing the property in the goods where such is the intention of the parties. It would also be seen that unless there is evidence of a contrary intention between the parties, the transfer of the bill of lading with indorsement in favour of the buyer would amount to the sale of the goods and the passing of property in the goods from the seller to the buyer. Where, however, there is a contrary intention expressed by the terms of the contracts, the property in the goods will not pass even on the transfer of the bill of lading with indorsement in favour of the buyer. The question, therefore, which is to be determined in the present case is what, in view of the terms of the contract between the parties, the conduct of the parties and the circumstances of the case, was the intention of the parties as to the passing of property in the goods contracted to be sold? Coming now to the terms of the contract in the present case, clause (1) describes the goods, to which the contract relates, as Cuban or British refined white dry crystal sugar with polarisation not below 99.8 per cent. and moistu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were to be intimated to the applicants by the Ministry of Food and Agriculture or their representative at least three days before the arrival of the ship carrying the sugar in question. The concluding part of this clause provided that if, on the arrival in India, the imported sugar was declared by any of the International Superintending Companies to be not conforming to the weight, quality and packing standards prescribed in the contract, the Government were to be free to take over the said sugar at a rebate to be fixed by the Government and the applicants were to dispose of the said sugar in accordance with the instructions issued by the Government. The next clause, i.e., clause No. (7), stated that the price per maund ex-docks Indian ports as mentioned in paragraph 6 above inclusive of all costs and charges including costs of bags and their stacking in the docks according to the Port Trust Rules, import duty, all Port Trust and Customs and clearance charges was to be Rs. 25. Clause (8) provided for payment and ran as follows: "All payments for supplies will be made by the D.A.G. (F. R.), New Delhi, in rupees by cheque payable at any Government Treasury in India. Bill for full ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be made on the bill for the full payment of the c.i.f. value being submitted to the Government of India together with a complete set of bill of lading and other documents clearly indicated that the intention of the parties was to pass title in the goods by transfer of the shipping documents duly indorsed against price according to the usual commercial practice. The other clauses of the contract, according to him, were not inconsistent with the intention of the parties as evidenced by clause (8). Thus clause (5), which provided for the inspection and weighment of the goods before delivery ex-docks or clause (6) which provided for delivery of the goods ex-docks, did not show an intention to postpone the passing of property in the goods until inspection and weighment or delivery of goods ex-docks. Relying on certain passages from books of well-known authors on Sale of Goods, Mr. Mistry has urged that in contracts for the sale of goods by the transfer of the shipping documents against price after indorsement, the buyer has a right to inspect the goods on their arrival at the destination and even to reject them if they are not according to the contract. Such right, reserved to the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, be intended by the parties to have the legal effect of passing the property in the goods sold at that stage. The delivery of the bill of lading may operate as a symbolical delivery of the cargo and the property in the cargo may pass by indorsement and delivery of the bill of lading wherever it is the intention of the parties that the property should pass thereby. If the intention, however, is not to pass property in the goods by such indorsement and delivery the said indorsement and delivery of the bill of lading will not have such effect. As has been pointed out in Scrutton on Charter Parties and Bill of Lading, 14th Edn., Article 58, at page 200: "The presumed intention of the parties in indorsing a bill of lading may vary widely according to the circumstances." Five different intentions have been catalogued, they being: "1. To transfer absolutely the property in the goods, subject only, if the price be unpaid, to the right of the unpaid vendor to stop the goods in their transit to the vendee, as a means of re-asserting his lien on the goods for the price unpaid. 2.. To pass property on certain conditions. 3.. To effect a mortgage of the goods as security for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conform to the specified description at the time of the delivery exdocks Indian ports and clause (5) provides for inspection of goods and weighment before delivery. These clauses indicate, in our opinion, that the parties intended that the goods were to be appropriated to the contract after their arrival at the port of delivery on the satisfaction of the buyer that they conform to the specified description as to quality, weight and packing standards. Clause (6) relating to delivery is also indicative of the same intention. This clause provides that the delivery had to be ex-docks after clearance and payment of costs and all charges referred to under price in paragraph 7. The delivery contemplated under this clause has to be after the goods are cleared beyond the customs barrier by the seller. It has been found by the Additional Collector of Sales Tax as also by the Sales Tax Tribunal that the goods after they had arrived at Bombay, had been cleared by the seller. In other words, they were taken beyond the customs barrier of the importing country by the seller before they were delivered to the buyer. Mr. Mistry has complained that the said conclusion of the Additional Collector of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... weighment had not been done at the time of shipment and it could not, therefore, be said that there was no reason for postponing the passing of property in the goods to the buyer till the goods were actually delivered in the ports. We do not know whether clause (6) in the contract in the case before their Lordships of the Supreme Court was in language similar to clause (8) of the contract before us, which we have already discussed earlier. It may be that clause (6) of the contract in the Supreme Court case might have provided for the presentation of the shipping documents after indorsement in favour of the Government of India. At page 861 of the report, their Lordships have observed: "From the facts narrated supra, it is seen that the petitioner, pursuant to the earlier contracts entered into with the Government of India, delivered the shipping documents, including the bill of lading to the Government against payment when the goods were on the high seas." Thus, whereas in the case before their Lordships of the Supreme Court, the terms of the contract did not evidence an intention contrary to the passing of the property on the transfer of the shipping documents after indorsement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the documents by the seller to the buyer. The question to be considered is whether, in view of these terms of the contract, the sellers' act in handing over the documents after indorsement had the effect of transferring the title to the goods to the buyers. If the effect of indorsement and delivery of the shipping documents was to have the said effect invariably and in all cases irrespective of the terms of the contract between the parties it might have been possible to say that since the seller had delivered the documents after indorsement and the buyer had accepted them, the title in the goods had passed to the buyer, but, as we have already pointed out earlier, the indorsement and delivery of the shipping documents may, in different set of circumstances, have different effects. It must be remembered that it is not the case of the applicants that the handing over of the documents after indorsement has been done by the applicants in variation of the original contract. As a matter of fact in the application, which they had made under section 27, they had asked the Collector of Sales Tax to determine the liability of the sales in the present case to tax in view of the terms of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery, if the goods are not in accordance with the contract. " Another passage referred to in this connection by Mr. Mistry is in Benjamin on Sale at page 987 where the learned author has observed: "There are cases where, under an implied condition subsequent, the buyer may reject the goods although they have become in the meantime his property. Such are cases where an interval elapses between the time of delivery and the time when it has to be determined whether the seller has performed his contract, and they are referable to the principle that it would be onerous to the seller, by suspending the transfer of the property, to cast upon him the ordinary risks of ownership for an indefinite time, and possibly in places where he can exercise no control. Accordingly, the presumed intention is that the property shall pass subject to the buyer's subsequent right of rejection." Now, the observations referred to by Mr. Mistry from Pollock and Mulla on Sale of Goods and from Halsbury's Laws of England relate to c.i.f. contracts. It must be remembered that the contract in the case before us is not a c.i.f. contract. It is a contract entered into by the sellers to deliver sugar of certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act expressly recognises the right of the parties to make agreements for themselves relating to the transfer of property and the application of the rules contained in the said section is subject to the said agreement between the parties. Where, we have, as in the case before us, a contract containing specific terms entered into between the parties, the intention of the parties as to the passing of property has to be gathered from the terms of the contract although in arriving at the proper construction of the terms, the said rules may have to be borne in mind. As we have already pointed out earlier, on a construction of the several terms of the contract, there does not appear to be any doubt that there was no intention of the parties to the contract in the present case that the property in the goods covered by the contract should pass at any stage before the goods were delivered by the seller to the buyer ex-docks after clearance. Before the Tribunal an argument was also advanced that the sale in the present case may be taken to be saved under Article 286 of the Constitution as being one which occasioned the import. The Tribunal rejected the said contention and rightly in our op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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