PETITIONER: THE COMMISSIONER OF SALES-TAX,EASTERN DIVISION, NAGPUR Vs. RESPONDENT: HUSENALI ADAMJI AND CO. DATE OF JUDGMENT: 21/04/1959 BENCH: DAS, SUDHI RANJAN (CJ) BENCH: DAS, SUDHI RANJAN (CJ) BHAGWATI, NATWARLAL H. HIDAYATULLAH, M. CITATION: 1959 AIR 887 1959 SCR Supl. (2) 702 CITATOR INFO : R 1963 SC1207 (40) RF 1970 SC1756 (10) D 1976 SC 410 (13) RF 1977 SC 879 (24) E&R 1990 SC1753 (14) ACT: Sales Tax-Contract of sale-Construction-Unascertained goods- Levy of tax on goods sent by rail-Place where property in goods Passes-Place of appropriation on delivery-Indian Sale of Goods Act, 1930 (III of 1930), ss. 4, 18, 23, 33, 39- Central Provinces and Berar Sales Tax Act, 1947 (C. P. & Berar XXI of 1947), S. 2(g), Explanation II. HEADNOTE: The respondent company was a dealer in matchwood called sawar " and his place of business was situate in Chanda in the erstwhile Central Provinces. Pursuant to an agreement between the respondent and a match factory, the former loaded diverse quantities of " sawar " logs on railway wagons and despatched the same by rail from Chanda and other railway stations in the Central Provinces to Ambernath, a town in the erstwhile Province of Bombay. Under cl. 4 Of the agreement the goods to be supplied under the contract shall be despatched by the contractor from certain railway stations within the Central Provinces, while cl. 2 reserved the right of the consignee to examine the goods on arrival at. Ambernath and to reject the same if they, were found, in the opinion of the factory manager, not to conform with the specifications. Clause 6 provided that the goods shall be measured under the supervision of the factory's repre- sentative, the decision of the factory manager at Ambernath being binding on the contractor, and-by cl. 7 the prices of the goods shall be " F. O.R. Ambernath ". The course of dealings between the parties was that on arrival of the logs at Ambernath the logs were inspected and measured by the factory manager and the prices, calculated at the agreed rates, were paid to the respondent's agent at Bombay. The question was as to when and where the property in the logs passed from the respondent to the consignee and whether the respondent was liable to pay sales tax under the provisions of the Central Provinces and Berar Sales Tax Act, 1947. At the date when the agreement was entered into, the logs were unascertained goods. There was also no evidence that at that date the particular logs delivered thereunder were in the Central Provinces in the shape of logs at all. The sales tax department levied the tax on the respondent on the grounds, inter alia, that (1) the property in the logs passed from the respondent to the factory consignee under S. 23 Of the Indian Sale of Goods Act, 1930, when the logs were loaded in the wagons at railway stations within the Central Provinces and the railway 703 receipts taken in the name of the factory were forwarded to the latter, and that (2) in any case, as the logs were in the Central Provinces at the date when the contract for sale was made, the transfer in them must be deemed to have taken place there under Explanation II to S. 2(g) Of the Central Provinces and Berar Sales Tax Act, 1947. Held : (1) that on a proper construction of the contract as a whole the intention of the parties was that the respondent would send the logs by rail from the different stations in the Central Provinces to Ambernath where the factory manager would inspect, measure and accept the same if in his opinion they were of the description and quality agreed upon. Conse- quently, as the respondent sent the logs and left it to the factory to appropriate to the contract such of them as they accepted as of contract quality and description, the property in the logs did not pass to the buyer by the mere delivery to the railway for carriage but passed only at Ambernath when the logs were appropriated by the factory with the assent of the seller within the meaning of S. 23 of the Indian Sale of Goods Act, 1930. (2) that Explanation II to s. 2(g) of the Central Provinces JUDGMENT:
because under the Explanation the goods, in respect of which
the contract of sale is made, must, at the date of the
contract be in existence in the Central Provinces, that is
to say, that the goods must at the date of the contract be
there in the form in which they are agreed to be sold and
there was no evidence, in the present case, for this.
&
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 13 of 1958.
Appeal by special leave from the judgment and order dated
June 29, 1954, of the former Nagpur High Court in Misc.
Civil Case No. 219 of 1952.
R. Ganapathy Iyer and D. Gupta, for the appellant.
M. C. Setalvad, Attorney-General for India, K. G. Chondke,
J. B. Dadachanji and K. K. Raizada, for the respondents.
I. N. Shroff, for the Intervener (State of Madhya
Pradesh).
1959. April 21. The Judgment of the Court was delivered by
DAS, C. J.-This is an appeal by special leave, against the
order of the High Court of Judicature at Nagpur dated June
29, 1954, answering against the
704
appellant certain questions referred to it by the Board of
Revenue under s. 23(1) of the Central Provinces & Berar
Sales Tax Act, 1947 (hereinafter referred to as “the Act”).
The reference arose out of an order of assessment made on
the respondent for’ payment of sales tax for the period June
1, 1947, to November 12, 1947, on a taxable turnover of Rs.
30,067-9-0.
The facts leading up to the present -appeal may shortly be
stated as follows. The respondent deals in matchwood called
” sawar ” (Bombay- Malabaricum). His place of business is
situate at Chanda in the erstwhile Central Provinces. In
January 1948 the respondent entered into an agreement with
the Western India Match Co. Ltd., which is popularly known
and will hereinafter be referred to as ” WIMCO ” for the
supply of a minimum quantity of 2,500 tons of sawar logs
during the season 1947-48. This agreement is evidenced by
WIMCO’s letter dated January 7, 1948, accepting and
confirming it. Unfortunately that letter, although a part
of the record, has not been printed in the Paper Book. It
is common ground, however, that the agreement of sale was
subject to the conditions appearing in a formal contract in
writing dated March 2, 1945, which is said to have been
renewed from year to year. It appears that prior to the
execution of the last mentioned contract there was another
contract between the respondent and WIMCO which was dated
October 18, 1940. Evidently that contract was superseded by
the later one of March 2, 1945, the terms and conditions
whereof were renewed year after year. It is, therefore, not
easily intelligible why both the contracts were filed before
the Sales Tax authorities and actually mentioned in the
first question that was referred to the Hight Court.
Both the contracts have been printed in the Paper Book and
reference has been made to some of the terms of both of them
in the course of the arguments before us. The reason for
referring to the terms of the ,earlier contract is
presumably to emphasise the variation in the language used
in the corresponding provisions of the later contract as
indicative of a definite change in the intention of the
parties. It is, therefore,
705
as well that the relevant clauses of both the contracts
should be set out here for properly following the arguments
advanced on both sides.
Reference may first be made to the earlier contract dated
October 18, 1940. Clause I sets out the specifications,
that is to say, the dimensions and quality of the logs to be
delivered under the contract which need not be reproduced
here. The other material clauses, omitting the unnecessary
portions thereof, may now be set out:-
” 2. The Contractor agrees that any logs supplied by him
which do not conform with the specification herein shall not
be accepted or paid for by the company and he the contractor
undertakes to remove all logs so rejected at his own expense
from the Company’s premises within fifteen days after date
of notice to him or his representative from the Company so
to remove such logs. Should the Contractor fail to i.e.
move such logs from the Company’s premises within the period
stipulated it is hereby mutually agreed that such failure
shall be construed as being the Contractor’s consent to
relinquish all claims whatsoever to such rejected logs, and
the Contractor agrees to such logs thereupon becoming the
property of the company and that the contractor shall have
no claim whatsoever upon the company for payment either in
respect of the supply by him of such rejected logs or
arising out of the disposal by the Company of such logs.”
” 3. The said goods shall be delivered at Ambernath in the
quantities and at the times hereinafter mentioned, i.e.,
” 4. The goods to be supplied under this Contract shall be
despatched by the Contractor from Railway Stations on the
B.N.R. and G.I.P.R. Sections between the following Stations
:
” 5. Measurements:-The goods under this contract shall be
measured under the supervision of the
89
706
Company’s Factory Manager at Ambernath on arrival of the
goods at the Factory in accordance with the
following stipulations:-
The Contractor agrees to… accept the decision of the
Company’s Factory Manager at Ambernath as final and
binding.”
The prices of the logs to be supplied are set out in cl. 6
of the contract as “F.O.R. Ambernath “.
We now pass on to the later contract of March 2, 1945.
Clause 1 sets out the specifications of the logs to be
supplied under the contract in exactly the same language as
in el. I of the earlier contract. The other material
clauses, again omitting the unnecessary portions, are as
follows:-
” 2. The contractor agrees that any logs supplied by him
which, on arrival at Ambernath, are found in the opinion of
the Company’s Factory Manager not to conform with the
specifications herein shall not be accepted or paid for by
the Company, notwithstanding the fact that such logs may
have been accepted by the Company’s representatives before
being railed to Ambernath.”
It may be mentioned here that Ambernath is a place situate
in the erstwhile province of Bombay and outside the Central
Provinces.
” 4. The goods to be supplied under this contract shall be
despatched by the Contractor from railway stations on the B.
N. Railway, N. S. Railway and G. 1. P. Railway sections
between the following stations.
It is unnecessary to set out the names of the stations
which, it may, however, be stated, are all in the erstwhile
Central Provinces. Clause 6 provides:
“6. Measurements:-
The goods under this contract shall be measured under the
supervision of the Company’s representative in accordance
with the following stipulations:-
707
The contractor agrees to accept the decision of the
Company’s Factory Manager at Ambernath as final and
binding.”
The prices of the logs to be supplied under the contract are
specified as ” F.O.R. Ambernath ” in cl. 7 which concludes
with the following sentence:
” The money so due and payable shall be paid by the Company
to the Contractor when the measurements of the goods have
been completed under the supervision of the Company’s
representative.”
Pursuant to the agreement between the respondent and WIMCO,
the former loaded diverse quantities of Sawar logs on
railway wagons and despatched the same by railway from
Chanda or other railway stations in the Central Provinces to
Ambernath in the erstwhile province of Bombay and outside
the Central Provinces. It is not disputed that on many
occasions the representative of WIMCO was present at the
railway station when the logs were sorted out and loaded
into the wagons. The statement of the case submitted along
with the reference under s. 23(1) of the Act is silent on
the point as to whether the railway receipts were made out
with WIMCO as the consignee; but it is abundantly clear from
the order of the Assistant Commissioner, Sales Tax, which is
part of the record -and it has not been disputed before us-
that ” the railway receipt which is a document of title
according to s. 2(4) of the Indian Sale of Goods Act is
taken in the name of the consignee.” The course of dealings
between the parties also appears to be that, on arrival of
the logs at Ambernath, the consignee buyer WIMCO, paid the
railway freight and the logs were inspected and measured by
WIMCO’s Factory Manager and the prices, calculated at the
agreed rates, were paid to the respondent’s agent at Bombay.
There is no doubt that the price of the logs supplied by the
respondent to WIMCO under the agreement and accepted by the
latter during the period in question amounted to Rs. 30,067-
9-0. The question for our
708
decision is whether the respondent is liable to pay any
sales tax under the Act.
It will be convenient at this stage to refer to the relevant
provisions of law applicable to the facts of this case.
Section 4 of that Act is the charging section. According to
this section safes tax is payable ” on all sales effected
after the commencement of the Act.” ” Sale ” is defined by
s. 2(g) of the Act. At the relevant period, that section,
omitting Explanation 1, which is not material for our
purpose, ran as follows:-
” ‘Sale’ with all its grammatical variations and cognate
expressions means any transfer of property in goods for cash
or deferred payment or other valuable consideration,
including a transfer of property in goods made in course of
the execution of a contract, but does not include a
mortgage, hypothecation, charge or pledge.
…………………………………………………
Explanation II:-Notwithstanding anything to the contrary in
the Indian Sale of Goods Act, 1930, the sale of any goods
which are actually in the Central Provinces and Berar at the
time when the contract of sale as defined in that Act in
respect thereof is made, shall, wherever the-said contract
of sale is made, be deemed for the purpose of this Act to
have taken place in the Central Provinces and Berar.”
The Act being a piece of legislation enacted by the
legislature of the erstwhile Province of Central Provinces
and Berar, its operation is limited to the territories of
that province. Therefore, the question arises: Does the sum
of Rs. 30,067-9-0 represent the prices of logs sold by the
respondent within the Central Provinces ? Sale being the
transfer of property in the goods agreed to be sold, we have
to enquire if the property in the goods which fetched the
sale proceeds on which the sales tax is sought to be levied
was transferred in the Central Provinces as contemplated in
the main definition or if those goods were actually in the
Central Provinces at the time when the contract for sale as
defined in the Sale of Goods Act in respect thereof was made
as required by Explanation II set
709
out above. This takes us to the Sale of Goods Act, 1930.
Section 4 of the Sale of Goods Act is expressed in the words
following:-
“4. Sale and agreement to sell:-(I) A contract of sale of
goods is a contract whereby the seller transfers or agrees
to transfer the property in goods to the buyer for a price.
There may be a contract of sale between one part-owner and
another.
(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property in the
goods is transferred from the seller to the buyer, the
contract is called a sale, but where the transfer of the
property in the goods is to take place at a future time or
subject to some condition thereafter to be fulfilled, the
contract is called an agreement to sell.
(4) An agreement to sell becomes a sale when the time
elapses or the conditions are fulfilled subject to which the
property in the goods is to be transferred.” There can be no
doubt that the agreement pursuant to which the logs were
supplied by the respondent to WIMCO was an agreement to sell
within the meaning of the above section. There is also no
controversy between the parties that at the date when this
agreement was entered into, the logs were unascertained
goods. The question is: When did that agreement to sell
unascertained goods become a sale and where did such sale
take place ? In other words, when and where did the property
in those goods pass from the respondent to WIMCO ?
The transfer of property in the goods as between the seller
and buyer is dealt with in Ch. III of the Sale of Goods
Act. Section 18 of the Sale of Goods Act runs
thus :
” 18. Goods must be ascertained:-Where there is a contract
for the sale of unascertained goods, no property in the
goods is transferred to the buyer unless and until the goods
are ascertained.”
Passing over ss. 19 to 22 which (except as to sub-s. (3) of
s. 19) apparently apply to contracts for the sale of
710
specific or ascertained goods, we come to s. 23 which
provides :-
” 23. Sale of unascertained goods and appropriation :-(I)
Where there is a contract for the sale of unascertained or
future goods by description and goods of that description
and in a deliverable state are unconditionally appropriated
to the contract, either by the seller with the assent of the
buyer or by the buyer with the assent of the seller, the
property in the goods thereupon passes to the buyer. Such
assent may be expressed or implied, and may be given either
before or after the appropriation is made.
(2) Delivery to carrier:-Where, in pursuance of the
contract, the seller delivers the goods to the buyer or to a
carrier or other bailee (whether named by the buyer or not)
for the purpose of transmission to the buyer, and does not
reserve the right of disposal, he is deemed to have
unconditionally appropriated the goods to the contract.”
Reference may next be made to s. 33 and s. 39(1). Section
33 says:-
” 33. Delivery :-Delivery of goods sold may be made by
doing anything which the parties agreed shall be treated as
delivery or which has the effect of putting the goods in the
possession of the buyer or of any person authorised to hold
them on his behalf”
Section 39(1) runs as follows:-
” 39. Delivery to carrier or wharfinger:-
(1) Where, in pursuance of a contract of sale, the seller
is authorised or required to send the goods to the buyer,
delivery of the goods to a carrier, whether named by the
buyer or not, for the purpose of transmission to the buyer,
or delivery of the goods to wharfinger, for safe custody, is
prima facie deemed to be delivery of the goods to the
buyer.”
Keeping the provisions of the above quoted sections of the
two Acts in view, we have to decide when and where the
property in the logs passed from the respondent to WIMCO.
The Assistant Commissioner of Sales Tax assessed the
respondent to -a tax of Rs. 939-10-0 and imposed on the
respondent a penalty of Rs. 100 under s. 25 of
711
the Act for not having submitted its return in contravention
of r. 19 of the Central Provinces and Berar Sales Tax Rules.
The Assistant Commissioner took the view that the loading of
the logs into the wagons at railway stations within the
Central Provinces and the taking out of the railway receipts
in the name of the consignee, WIMCO, and the delivery of the
same to WIMCO, had the effect of putting the latter in pos-
session of the goods as laid down in s. 39(1) of the Indian
Sale of Goods Act and he accordingly held that the sale of
the goods took place at Chanda and other railway stations in
the Central Provinces and that the assessee was,
consequently, liable to pay the sales tax under the Act.
The respondent preferred an appeal to the Sales Tax
Commissioner who upheld the Assistant Commissioner’s order
of assessment as well as of the penalty. He laid greater
emphasis on Explanation II to s. 2(g) of the Act as over-
riding the provisions of the Indian Sale of Goods Act in
respect of the transfer of property in the logs and held
that as the’ logs were in the Central Provinces at the date
when the contract for sale was made, the transfer in them
must be deemed to have taken place there under that
Explanation. He also agreed with the Assistant Commissioner
that the delivery of the logs to the railway company and the
sending of the documents of title to WIMCO had, under s.
39(1) of the Sale of Goods Act, the effect of putting WIMCO
in possession of the logs.
The respondent preferred what in form appeared to be a
second appeal to the Board of Revenue. As, however, there
could be no second appeal under s. 22(4) of the Act, the
Board treated the memorandum of appeal as an application for
revision under sub-s. 5 of s. 22 of the Act read with r. 57.
Both the members of the, Board of Revenue came to the same
conclusion, namely, that the sales were liable to assessment
under the Act, but the reasonings adopted by them were
somewhat different. Shri Shrivastava, a member of the Board
of Revenue, took the view that as soon as logs answering the
description agreed upon were brought to the railhead at
Chanda and sorted out and
712
loaded in the wagons in the presence of WIMCO’s re-
presentatives, there was an implied contract of sale of
specific and ascertained goods, as evidenced by the conduct
of parties and the property in each consignment passed
immediately from the respondent to WIMCO at the railway
station in the Central Provinces where such implied
contracts were made. The Chairman of the Board of Revenue,
however, took the view that the contract of sale was made
outside the Central Provinces, namely, in Bombay and that,
under the Sale of Goods Act, the property in the logs passed
to WIMCO in Ambernath outside the province but that as the
logs were in the Central Provinces, either in the form of
logs or in the form immediately preceding, namely, trees
standing on the land which had been impliedly agreed to be
severed from the land before actual sale, Explanation II to
s. 2(g) of the Act applied and the sale must, accordingly,
-be deemed to have taken place within the Central Provinces
and, must, therefore, be liable to sales tax under the Act.
The Board rejected the application but remitted the penalty.
On the application of the respondent under s. 23(1) of the
Act, the Board of Revenue submitted to the High Court a
statement of case raising the following questions:-
” (1) Did the agreements of the kind on record the one dated
18-10-40 and the other dated 2-3-45constitute contracts of
sale-either express or implied -in respect of sawar wood
supplied by the assessee to WIMCO?
(2) If the answer to question No. I be in the affirmative,
did the contracts relate to specific or ascertained goods or
to unascertained or future goods?
(3) Did the property in the goods pass to WIMCO by
consignment simpliciter at different railway stations within
this province, or did it pass at Ambernath when the goods
were approved as provided in the contract ?
(4) Was reliance on the definition of I goods’ contained in
s. 2(7) of the Sale of Goods Act in order in applying
Explanation II to s. 2(g) of the Sales Tax
713
Act in cases, where the goods sold were in the form of trees
standing on the land in this province at the time of the
contract of sale?”
In its judgment dated June 29, 1954, the High Court took the
view that the sales in question did not take place in the
Central Provinces and Berar and consequently were not ”
sales ” within the meaning of the Act and, therefore, not
liable to tax. It gave the following answers to the above
questions:-
” Our answers to the questions referred for decision are :-
(1) The agreement in question was an express agreement to
sell sawar logs to WIMCO. There was neither an express nor
an implied contract each time goods were railed.
(2) The-contract was not for delivery of specific goods but
of unascertained or future goods by description.
(3) The property in the goods did not pass to the buyer by
the delivery to the railway for carriage. It passed at
Ambernath where the goods were appropriated by the buyer to
the contract with the assent of the seller.
(4) The word ‘ goods ‘ in the definition of I sale in the
Sales Tax Act must be interpreted according to its
definition in s. 2(d) of the Act and not according to the
definition in s. 2(7) of the Sale of Goods Act. The
standing sawar trees are not goods within the meaning of the
former Act.”
The effect of the answers being to nullify the assessment
order, the Commissioner of Sales Tax has come up on appeal
before us after obtaining special leave of this Court.
The answers to the first two questions have not been
questioned before us. The main arguments have centred round
the answers to questions 3 and 4. The answer to question 3
turned on the construction placed by the High Court on s. 23
of the Sale of Goods Act. After quoting s. 23, the High
Court observed as follows:-
” After sorting the logs with the assent of the buyer’s
representative, the applicant appropriated the
90
714
logs to the contract by railing them to the buyer’s
destination at Ambernath. The statement of the case is
silent on the point whether the railway receipts were made
out with the Company as the consignee. The assent of the
representative was provisional and was not binding on the
Company. Under the agreement it did not agree to
unconditionally appropriate the logs to the contract as soon
as they were delivered to the railway with the assent of its
representative for carriage to Ambernath. It had expressly
reserved its right to reject the goods on examination at
Ambernath. The agreement therefore was that the buyer
should, with the assent of the seller, appropriate the goods
to the contract at Ambernath. The appropriation under s. 23
was not complete till the goods reached Ambernath and were
appropriated by the Company to the contract. The
appropriation of the goods by the applicant at the railheads
was conditional on their acceptance by the buyer at
Ambernath. There is nothing in the statement of the case to
show that the logs were not so appropriated. Therefore, the
property in the logs passed to the buyer at Amber nath.”
The learned counsel for the department appearing in support
of this appeal contends that property in the logs passed
from the respondents to WIMCO under s. 23 when sawar logs
were brought to the railway station and loaded in the wagon
and the railway receipts taken in the name of WIMCO were
forwarded to the latter. There was an unconditional
appropriation of the goods to the contract by the
respondent. There was, according to learned counsel, assent
on the part of WIMCO to this appropriation in two ways,
namely, (a) expressly given by its representative who was
present at the railway station, and (b) impliedly given by
WIMCO by having agreed in advance that the goods should be
despatched by rail from the stations mentioned in cl. 4 of
the agreement, all of which were situate in the Central
Provinces.
There is no doubt-and indeed it has been categorically
conceded by learned counsel for the department -that the
contract was for sale of unascertained goods and
consequently the property in them could
715
not, under s. 18, pass unless and until the goods were
ascertained. His contention is that logs of the contract
quality and description having been unconditionally
appropriated by the respondent to the contract without
reserving to itself any right of disposal and WIMCO having
expressly through its representative or impliedly by the
very terms of the contract assented to such appropriation,
property in them passed under s. 23 from the respondent to
WIMCO at the railway stations within the Central Provinces
as soon as the sawar logs were loaded on the wagons and the
railway receipts were taken out in the name of WIMCO. It is
said that so far as the respondent is concerned it
unconditionally appropriated the logs to the contract.
Seeing that they were actually accepted by WIMCO on their
arrival at Ambernath it is quite clear that the logs were of
the contract quality and description. The only question,
according to learned counsel for the department therefore,
is whether there was assent of WIMCO to such appropriation.
It has been found as a fact that WIMCO’s representative was
not present on all occasions when sawar logs used to be
loaded on the railway wagons. There is no evidence that he
was actually present when these particular sawar logs, with
the sale proceeds of which we are concerned, were put into
the wagons. Nor is there an iota of evidence that the
representative of WIMCO had any authority to. bind WIMCO by
any assent. In view of these difficulties, learned counsel
for the department did not press the case of express assent
of the representative of WIMCO and concentrated on the case
of implied assent. It is quite clear from the language of
s. 23 itself, that the appropriation may be by the seller
with the assent of the buyer or by the buyer with the assent
of the seller, that assent to representation may be express
or implied and that it may be given after the appropriation
or in advance before such appropriation. Learned counsel
for the department lays strong emphasis on the provision of
cl. 4 in the contract that the sawar logs should be
despatched by rail from certain stations within the Central
Provinces and contends that delivery by the seller of sawar
logs of the contract quality and
716
description to the railways in terms of the contract without
the reservation of any right of disposal has the effect of
passing the property therein to WIMCO at the railway
stations in the Central Provinces under s. 23 as well as of
constituting delivery of them at the railway stations under
ss. 33 and 39(1). The argument is prima facie sound unless
there be some other provision in the contract to negative
this conclusion, e. g., that the logs must be carried to
Ambernath and delivered there (See The Badische Anilin and
Soda Fabrik v. The Basle Chemical Works, Bindschedler (1)).
Learned counsel for the department does not urge that if the
matter had to be decided on the terms of the earlier
contract dated October 18, 1940, he could properly say that
there was nothing in the contract negativing the idea of the
passing of property in the logs within the Central
Provinces. The cumulative effect of the provisions of el. 2
that the property in the rejected logs would’ pass to WIMCO
upon the failure of the respondent to remove the same after
rejection, of el. 3 that the goods shall be delivered at
Ambernath in the presence of WIMCO’s Factory Manager and of
el. 6 providing that the prices will be ” F.O.R. Ambernath ”
clearly militate against the theory of passing of property
immediately on the goods being loaded into the wagons.
While not contesting this, learned counsel for the
department urges that there is no such contrary intention
indicated in the later contract of March 2, 1945, which
really governs the case. We are unable-to accept this
distinction as of any substance. It is true that in this
later contract cl. 2 is differently worded and there is no
express provision that the goods should be delivered at
Ambernath. There are, nevertheless, several other
provisions in the later contract indicating that property in
the logs loaded in the wagon will not pass to WIMCO until
after the goods arrive at Ambernath and are inspected,
measured and accepted by WIMCO’s Factory Manager. Clause 2
of the later contract quite clearly reserves the right of
WIMCO to examine the goods on arrival and to reject the same
if they are found, in the opinion of its Factory Manager,
not to
(1) [1898] A.C. 200,
717
conform with the specifications. This reservation, which is
made notwithstanding the fact that the logs may have been
accepted by its representative before they were railed to
Ambernath, clearly indicates that the so called acceptance
by the representative was not final but was entirely
tentative and subject to approval of the logs by WIMCO’s
Factory Manager at Ambernath after their arrival. This
circumstance certainly militates against the property in
them having already ‘passed to WIMCO at the railway stations
in the Central Provinces. The provisions of cl. 6 that the
goods shall be measured under the supervision of WIMCO’s
representative, the decision of its Factory Manager at
Ambernath being binding on the respondent and of el. 7 that
the prices shall be ” F.O.R. Ambernath ” and shall be
payable after such measurement of the logs by WIMCO’s
representative further reinforce the conclusion that the
intention of the parties was that property in the goods
shall not pass until the logs arrive at Ambernath and are
there inspected, measured and accepted by WIMCO. In our
judgment the prima facie case of what might have been the
appropriation of the logs by the respondent by loading on
the wagons logs of the contract quality and description with
the assent of WIMCO given in .advance by the terms of el. 4
is effectively displaced by the provisions of cls. 2, 6 and
7 of the later contract which clearly indicate a contrary
intention. On a proper construction of the contract as a
whole the intention of the parties clearly was that the
respondent would send the logs by rail from the different
stations in the Central Provinces to Ambernath where WIMCO’s
Factory Manager would inspect, measure and accept the same
if in his opinion they were of the description and quality
agreed upon. In other words the respondent sent the logs
and left it to WIMCO to appropriate to the contract such of
them as they accepted as of contract quality and
description. The respondent, therefore, gave in advance its
assent to WIMCO’s appropriation of the goods at Ambernath.
Therefore, the decision of the High Court cannot be assailed
but must be accepted as well-founded in fact and in law.
Learned counsel for the department then falls back
718
upon the Argument founded on Explanation- II to s. 2(g) and
‘argues, somewhat halfheartedly, that notwithstanding the
provisions of the Sale of Goods Act regarding the passing of
property in the goods the sale under consideration must be
deemed, in the light of that Explanation, to have taken
place within the Central Provinces. The question of the
constitutional validity of that Explanation was not raised
in the High Court and indeed, in view of the decision of
this Court in Poppatlal Shah v. State of Madras (1) and
other’ cases, cannot now be raised and we must proceed on
the footing that Explanation 11 did not transgress the
legislative competency of the Legislature which enacted the
same. It will be noticed that Explanation II can apply only
if the goods ” in respect of ” which the contract of sale is
entered into are, at the date of such contract, actually in
the Central Provinces. Learned counsel for the department
urges that the logs delivered must have been in existence in
the Central Provinces either in the shape of ‘;logs or in
the shape of standing timber. There is no evidence that at
the date when the agreement for sale was made, the
particular logs delivered thereunder were in the Central
Provinces in the shape of logs at all. Learned counsel says
that, at any rate, they must have been in existence there in
the shape of standing timber. Apart from anything else,,
the agreement here was riot ” in respect of ” any standing
timber and there was no provision in the agreement as
between the respondent and WIMCO for severance of the
standing timber before sale under that agreement. In order
to attract Explanation II the goods, in respect of which the
contract of sale is made, must, at the date of the contract
be in existence in the Central Provinces, that is to say,
that the goods must at the date of the contract be there in
the form in which they are agreed to be sold. There is not
an iota of evidence on that point. In our judgment, there
is no force in this alternative argument.
The result, therefore, is that this appeal is dismissed with
costs.
Appeal dismissed.
(1) [1953] S.C.R. 677.
719