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That is a limitation on the consumer 's right to obtain cement. Ratio |
Paragraph 4 puts a restriction on the price which a dealer (1) 45 0 may charge for the commodity by providing that no person shall sell cement at a price higher than the notified price. Ratio |
Paragraph 8 imposes on the dealer the obligation to supply cement by providing that no person or stockist who has any stock of cement in his possession and to whom a written order has been issued under paragraph 2 shall refuse to sell the same at a price not exceeding the notified price person who contravenes the provi... |
Offer and acceptance need not always be in an elementary form, nor indeed does the Law of Contract or of Sale of Goods require that consent to a contract must be express. Ratio |
It is commonplace that offer and acceptance can be spelt out from the conduct of the parties which covers not only their acts but omissions as well. Ratio |
Indeed, on occasions, silence can be more eloquent than eloquence itself. Ratio |
Just as correspondence between the parties can constitute or disclose an offer and acceptance, so can their conduct. Ratio |
This is because, law does not require offer and acceptance to conform to any set pattern formula. Ratio |
In order, therefore, to determine whether there was any agreement or consensuality between the parties, we must have regard to their conduct at or about the time when the goods changed hands. Ratio |
In the first place, it is not obligatory on a trader to deal in cement nor on any one to acquire it. Ratio |
The primary fact, therefore, is that the decision of the trader to deal in an essential commodity is volitional. Ratio |
Such volition carries with it the willingness to trade in the, commodity strictly on the terms of Control Orders. Ratio |
The consumer too, who is under no legal compulsion to acquire or possess cement, decides as a matter of ' his volition to obtain it on the terms of the permit or the order of allotment issued in his favour. Ratio |
That brings the two parties together, one of whom is willing to supply the essential commodity and the other to receive it. Ratio |
When the allottee presents his permit to the dealer, he signifies his willingness to obtain the commodity from the dealer on the terms stated in the permit. Ratio |
His conduct reflects his consent. Ratio |
And when, upon the presentation of the permit, the dealer acts upon it, he impliedly agrees to supply the commodity to the allottee on the terms by which he has voluntarily bound himself to trade in the commodity his conduct too reflects his consent. Ratio |
Thus, though both parties are bound to comply with the legal requirements governing the transaction, they agree as between themselves to enter into the transaction on statutory terms, 451 one agreeing to supply the commodity to the other on those terms and the other agreeing to accept it from him on the very terms. Rat... |
It is therefore not correct to say that the transactions between the appellant and the allottees are not consensual. Ratio |
They, with their free consent, agreed to enter into the transactions. Ratio |
We are also of the opinion that though the terms of the transaction are mostly predetermined by law, it cannot be said that there is no area at all in which there is no scope, for the parties to bargain. Ratio |
The West Bengal Cement Control Act, 1948 empowers the Government by section 3 to regulate or control the prices at which cement may be purchased or sold. Ratio |
The Cement Control Order, 1948 provides by paragraph 4 that no person shall sell cement at a "higher than notified price", leaving it open to the parties to charge and pay a price which is less than the notified price, the notified price being the maximum price which may lawfully be charged. Ratio |
Paragraph 8 of the Order points in the same direction by providing that no dealer Who has a stock of cement in his possession shall refuse to sell the same "at a price not exceeding the notified price", leaving it open to him to charge a lesser price, which the allottee would be only too agreeable to pay. Ratio |
Paragraph 8 further provides that the dealer shall deliver the cement "within a reasonable time" after the payment of price. Ratio |
Evidently, within the bounds of reasonableness, it would be open to the parties to fix the time of delivery. Ratio |
Paragraph 8A which confers on the allottee the right to ask for weighment of goods also shows that he may reject the goods on the ground that they are short in weight just as indeed, he would have the undoubted right to reject them on the ground that they are not of the requisite quality. Ratio |
The circumstance that in these areas, though minimal, the parties to the transactions have the freedom to bargain militates against the view that the transactions are not consensual. Ratio |
While on this aspect, we may usefully draw attention to two important decisions of this Court, the first of which is Indian Steel & Wire Products Ltd. vs State of Madras(1). PRE |
The appellant therein supplies certain steel products to various persons in Madras at the instance of the Steel Controller exercising powers under the Iron and Steel '(Control of Production and Distribution) Order, 1941. PRE |
The State of Madras assessed the turnover of the appellant to sales tax upon which, the appellant contended that the deliveries of steel products were made under compulsion of law since it was the controller who determined the persons to whom the goods were to be supplied, the price at which they were to be supplied, t... |
Since every facet of the transaction was prescribed by the controller, so it was argued, there was no agreement between the parties and therefore the transaction could not be considered as a sale. PRE |
Rejecting this contention, it was observed by Hegde J., who spoke for the Constitution Bench, that though the controller fixed the base price of the steel products and determined the (1) ; 452 buyers, the parties were stiff 'free to decide the other terms of the bargain, as for example, the time and date of delivery an... |
It was held that though the area within which it was possible for the parties to bargain was greatly relieved on account of the Iron and Steel Control Order, it was not correct to contend that because law imposes restrictions on freedom of contract, there could be no contract at all. PRE |
"So long as mutual assent is not completely excluded in any dealing, in law it is a contract. PRE |
" The second decision is reported in Andhra Sugar Ltd. vs State of Andhra Pradesh(1). PRE |
In that case, the occupier of a sugar factory had to buy sugarcane from cane growers in conformity with the directions. PRE |
of the Cane Commissioner issued under the Andhra Pradesh (Regulation of Supply and Purchase) Act, 1961. PRE |
Under section 21 of that Act, sales and purchase of sugarcane were exempt from tax under the Andhra Pradesh General Sales Tax Act, 1957, but under section 2(1), of the Act of 1961, the State Government had power by notification, to levy a tax "on the purchase of cane required for use, consumption or sale in a sugar fac... |
Various sugar factories in the State filed writ petitions under Article 32 of the Constitution challenging the validity of section 21 mainly on the ground that since they were compelled by law to buy cane from the cane growers, their purchases were not made under agreements and were not taxable under entry 54, List 11 ... |
The writ petitions were decided by a Constitution Bench of this Court which delivered its un animous judgment through Bachawat J. PRE |
It is necessary in the first place to state that though it was argued on behalf of the State Government in that case that the occupier of the factory had some option of not buying the sugarcane from the grower and had some freedom of bargaining about the terms and conditions of the agreement, that point was not pursued... |
After referring to the definition of "contract of sale of goods" in section 4(1) of the Indian , and the relevant provisions of the Contract Act relating to offer and acceptance, the Court observed that under section 10 of the Contract Act, an agreements are contracts if they are made by the free consent of the parties... |
Section 13 of the Contract Act defines "consent" and section 14 says that consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake as defined in sections 15 to 22. STA |
In the background of those provisions, the Court observed that the cane grower in the factory zone was free to make or, not to make an offer of sale of cane 'to the occupier of the factory. PRE |
But if be made an offer, the occupier of the factory was bound to accept it and the consent of the occupier not being caused by coercion, undue influence, fraud, misrepresentation or mistake was "free (1) ; 453 consent as defined in section 14 of the Contract Act, even though he was obliged by law to enter into the agr... |
"The compulsion of law is not coercion as defined in section 15 of the Act" and "in the eye of the law, the agreement is freely made. Ratio |
" Since the, parties were competent to contract, the agreement was made for a lawful consideration and with a lawful object, the agreement was not void under any provision of law and it was enforceable at law, the Court held that the purchases of sugarcane were taxable by the State legislature under Entry 54, List 11 o... |
Strong reliance was placed by the factory owners in Andhra Sugars (supra) on the majority ' judgment of Kapur and Shah JJ in New India Sugar Mills Ltd. vs Commissioner of Sales Tax (supra) to which we must refer here. Ratio |
The "admitted course of dealing" between the parties in that case was that the Governments of various consuming States used to intimate to the Sugar Controller of India, from time to time, their requirements of sugar and similarly, the factory owners used to send to the Sugar Controller of India statements of stocks of... |
On a consideration of the requests received from the State Governments and the statements of stock received from the factories, the Sugar Controller used to make allotment of sugar allotment order was addressed by the Sugar Controller to the factory owner directing him to supply sugar to the State Government in questio... |
A copy of the allotment order was simultaneously sent to the State Government concerned on receipt of which the competent authority of the State Government sent to the factory concerned detailed instructions about the destinations to which the sugar was to be despatched as also the quantities of sugar to be despatched ... |
The Madras Government which, under this arrangement, received its quota of sugar from the New India Sugar Mills, also laid down the ' procedure of payment. PRE |
The Patna High Court having held that the supply of sugar by the mills to the Province of Madras was liable to be taxed under the Bihar Sales Tax Act, 1947, the mills filed an, appeal to this Court which was decided by a Bench of three learned Judges. PRE |
Kapur and Shah J. held that since the mills were compelled to carry out the directions of the Controller and since they had no volition in the matter of supply of sugar to the State of Madras, there was no offer by them to the State Government and no acceptance by the latter. PRE |
Shah J., speaking for the majority observed that a contract of sale between the seller and the buyer is a prerequisite to a sale and since there was no such contract, the transaction in question which the Bihar Sales Tax authorities sought to tax was not exigible to sales tax. PRE |
Hidayatullah J. who 'delivered a dissenting opinion observed after reviewing the position both under the English and the Indian Law, that though it was true that consent makes a contract of sale, such consent "may be express or implied and it cannot be said that unless the offer and acceptance are there in an elementar... |
" Taking the view that on obtaining the necessary permit, the sugar mills on the one hand and the Government of 454 Madras on the other agreed to "sell" and "purchase" sugar could admit of no doubt, the learned Judge said that when the Province of Madras after receiving the permit, telegraphed instructions to despatch ... |
" The Controller brought the seller and the purchaser together, gave them permission to supply and receive sugar leading thereby to an implied contract of sale between the parties. PRE |
The learned Judge accepted that there was an element of compulsion in both selling and buying, perhaps more for the supplier than for the receiver, but, according to him, "a compelled sale is nevertheless a sale" and "sales often take place without volition of party. PRE |
" The learned Judge summed up the matter pithily thus : "So long as the parties trade under controls at fixed price and accept these as any other law of the realm because they must, the contract is at the fixed price both sides having or deemed to have agreed to ' such a price. PRE |
Consent under the law of contract need not be express, it can be im plied. . PRE |
The present is just another example of an implied contract with an implied offer and implied acceptance by the parties. Ratio |
" Adverting to the construction of the legislat ive entry 48 of List 11, VII Schedule to the Government of India Act, 1935, the learned Judge observed that the entry had to be interpreted in a liberal spirit and not cut down by narrow technical consideration. PRE |
"The entry in other words should not be shorn of all its content to leave a mere husk of legislative power. PRE |
For the purposes of legislation such as on sales tax it is only necessary to see whether there is a sale, express or implied. . PRE |
The entry has its meaning and within its meaning there is a plenary power. PRE |
If a sale express or implied is found to exist then the tax must follow." PRE |
We are of the opinion that the true position in law is as is set out in the dissenting judgment of Hidayatullah J., and that, the view expressed by Kapur and Shah JJ in the majority judgment, with deference, cannot be considered as good law. Ratio |
Bachawat J. in Andhra Sugar (supra) was, with respect, right in cautioning that the majority judgment of Kapur and Shah JJ in New India Sugar Mills (supra) "should not be treated as an authority for the proposition that there can be no contract of sale under compulsion of a statute. PRE |
" (pages 715 716). PRE |
Rather than saying what, in view of the growing uncertainty of the true legal position on the question, we: are constrained to say, namely, that the majority judgment in New India Sugar Mills (supra) is not good law, Bachawat J. preferred to adopt the not unfamiliar manner of confining the majority decision to "the spe... |
The majority judgment in New India Sugar Mills (supra) is based predominantly on the decision of this Court in Gannon Dunkerley (supra) to which we have referred at length in another context. Ratio |
In fact, Shah J. observes at page 459 of the report after discussing the judgment in Gannon Dunkerley (supra) that "the ratio decidendi of that decision must govern this case. PRE |
" The decision in Gannon Dunkerley (supra) really turned on a different point, the question for consideration therein being whether the value of the materials used in the execution 455 of building contracts could be included within the taxable turnover of the company. PRE |
It was contended on behalf of the company that the power of the Madras Legislature to impose a tax on sales under entry 48, List 11 of Schedule VII of the government of India Act, 1935 did not extend to unposing a tax on the value of materials used in construction works, as there was no transaction of sale in respect o... |
Venkatarama Aiyar J. posed the question thus : "The sole question for determination in this appeal is whether the provisions of the Madras General Sales Tax Act are ultra vires, in so far as they seek to impose a tax on the supply of materials in execution of works contract treating it as a sale of goods by the contrac... |
The Court accepted that building materials were 'goods ' and limited the inquiry to whether there was "a sale of those materials within the meaning of that word in entry 48". PRE |
Reference was then made to Benjamin on Sale in which it is said that in order to constitute a 'sale, four elements must concur "(1) Parties competent to contract; (2) mutual assent, (3) a thing, the absolute or general property in which is transferred from the seller to the buyer; and (c) a price in money paid or promi... |
On the strength of this statement and on a consideration of the provisions of the Contract Act and the it was concluded that "according to the law both of England and of India, in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to go... |
The Court then proceeded to examine the true nature of a building contract and held "It has been already stated that, both tinder the common law and the statute law relating to sale of goods in England and in India, to constitute A transaction of sale there should be an agreement, express or implied, relating to goods ... |
It is of the essence of this concept that both the agreement and the sale, should relate to the same subject matter. PRE |
Where the goods delivered under the contract are not the goods contracted for,, the purchaser has got a right to reject them, or to accept them and claim damages for breach of warranty. PRE |
Under the law, therefore, there cannot be an agreement relating to one kind of property and a sale as regards another. PRE |
We are accordingly of opinion that on the true interpretation of the expression`sale of goods ' there must be an agreement between the parties for the sale of the very goods in which eventually property passes. PRE |
In a building contract, the agreement between the parties is that the contractor should construct a building according to the specifications contained in the agreement, and in consideration therefor receive payment as provided therein, and as will presently be shown there is in such An agreement neither a contract to s... |
It is therefore impossible to maintain that there 456 is implicit in a building contract a sale of materials as understood in law." (pages 413 414) PRE |
The final conclusion on the point involved in the appeal was expressed thus "To sum up, the expression 'sale of goods ' in Entry 48 is a nomen juris, its essential ingredients being an agreement to sell movables for a price and property passing therein pursuant to that agreement. Ratio |
In a building contract which is, as in the present case, one entire and indivisible and that is its norm, there is no sale of goods, and it is not within the competence of the Provincial Legislature under Entry 48 to impose a tax on the supply of the materials used in such a contract treating it as a sale." (pages 425 ... |
In New India Sugar Mills (supra) the commodity with which Court was concerned was sugar and was delivered as sugar just as in the instant case the commodity with which we are concerned is cement which was delivered as cement. Ratio |
That meets the first reason in Gannon Dunkerley (supra). Ratio |
As regards the second, it is quite clear that the tax was demanded after the commodity had changed hands or putting it in the words of the Sale of Goods law, after property in it had passed. Ratio |
With great respect therefore, the majority in New India Sugar Mills (supra) was in error in saying that "the ratio decidendi of that decision (Gannon Dunkerley) must govern this case '. Ratio |
The question before us which was the very question involved in New India Sugar Mills (supra) viz., whether a transaction effected in accordance with the obligatory terms of a statute can amount to a 'sale did not arise in Gannon Dunkerley. Ratio |
Just as the, majority Judges in New India Sugar Mills (supra) applied to the case before them the ratio of Gannon Dunkerley, (supra) the Court in the latter case applied the ratio of the House of Lords decision in Kirkness vs John Hudson and Co. Ltd.(1) observing categorically that "the derision in Kirkness must be hol... |
We think it necessary to lay particular emphasis on this aspect because it shows how the question for decision in Gannon Dunkerley (supra) was basically different from the question in New India Sugar Mills (supra) or in, the appeals before us. Ratio |
In Kirkness (supra), railway wagons belonging to the respondent company were taken over by the Transport Commission compulsorily it) exercise of the powers conferred by section 29 of the Transport Act, 1947, and compensation was paid therefor. Ratio |
The question was whether this amount was liable to income tax on the footing of sale of the wagons by the company. Ratio |
The contention on behalf of the revenue if was that compulsory acquisition being treated as sale under the English law, the taking over of the wagons and payment of compensation (1) 457 therefor must also be regarded as sale for purpose of income tax and therefore, the company was liable to a balancing charge under sec... |
The case turned on the meaning of the word sale ' for the purposes of the Excess Profits Tax legislation and the income tax Act, 1945 (8 & 9 Geo. 6, c. 3). Ratio |
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