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Lord Morton in his dissenting speech found it "impossible to say that the only construction which can fairly be given to the word 'sold ' in section 17(1) (a) of the Income Tax Act, 1945, is to limit it to a transaction in which the element of mutual assent is present." But the majority of the House came to A different... |
We are not concerned in these appeals with 'Compulsory acquisition ' of goods nor indeed, was the Court concerned with it in Gannon Dunkerley (supra). Ratio |
The majority in New India Sugar Mills (supra) was right in saying that the decision in Kirkness (supra) and the "observations made therein have little relevance in determining the limits of the, legislative power of the Provincial legislature under the Government of, India Act, 1935, and the interpretation of statutes ... |
" In fact, if we may say so with great respect ', the observation in Gannon Dunkerley (supra) that the decision in Kirkness (supra) concluded the question before the Court seems to us somewhat wide of the mark. Ratio |
Since Kirkness (supra) involved an altogether different point, we would have avoided referring to it put the reliance upon it 'in Gannon Dunkerley (supra) may lead to a misunderstanding regarding its true ratio which needs to be clarified. Ratio |
Besides Kirkness (supra) has been referred to in various decisions and has been considered as an authority for apparently conflicting propositions, which too made it necessary to understand the decision in a proper perspective. Ratio |
It is not the decision in Kirkness (supra) but another English decision which may with advantage be noticed. Ratio |
That is the decision of the Court of Appeal in Ridge Nominees Ltd. vs Inland Revenue Commissioners.(1) The question in that case was whether a transfer of shares executed under section 209 of the Companies Act, 1948 on behalf of a stockholder who declined to accept the offer of purchase was required to be stamped as a ... |
Under section 209, the transferee company was entitled in certain circumstances to give a notice to a dissenting shareholder that it desired to acquire his shares. Ratio |
Upon such notice being given, the transferee company became entitled to acquire the shares of the dissenting shareholder at a particular price. Ratio |
If the dissenting shareholder did not transfer the shares, then subsection (3) provided for the execution of a transfer on behalf of the shareholder by a person appointed by the transferee company. Ratio |
In the First Schedule to the Stamp Act, 1891 was included the item "Conveyance or transfer on sale of any property. . Ratio |
In the light of this entry under which stamp duty was payable, the question which the Court had to consider was whether a transfer executed on behalf of a dissenting shareholderwasa"transferonsale". Ratio |
Theanswerdepended upon whether there could be a sale even though the essential element (1) 45 8 of mutual assent was totally absent. Ratio |
Lord Evershed M.R. observed in his judgnient that what the Companies Act had done, by file machinery it had created, was that in truth it brought into being a transaction which ex facie in all its essential characteristics and effect was a transfer on sale. Ratio |
Donovan L.J. in his concurring judgment said that when the legislature by section 209 of the C Act empowered the trans feree company to appoint an agent on behalf of a dissenting shareholder 3 for thempurpose of executing a transfer of his shares against a price to be paid to the transferor company and held in trust fo... |
For the purpose of considering whether the transaction amounted to a sale, one must, according to the learned Judge, regard the dissent of the shareholder as overriden by an assent which the statute imposed upon him, fictional though it may be. Ratio |
Danckwerts L.J., also by a concurring judgment, said that a sale may not always require the consensual element and that there may, in truth, be a compulsory sale of property in which the owner is compelled to part with Ws property for a price, against his will. Ratio |
We will proceed to refer to the Other decisions of this Court bearing on the point under discussion. Ratio |
In State of Rajasthan vs M/s Karam Chand Thapper & Bros. Ltd.(1) the respondent assessee which was registered as a dealer under the Rajasthan Sales Tax Act, 1954, entered into a contract with the Equitable Cod Company under which it acquired monopoly rights to supply coal in_Rajasthan as an agent of the Coal Company. P... |
The respondent supplied coal to the State of Rajasthan under an agreement with it and that transaction was included in the respondent 's turnover by the Sales Tax Officer, Jaipur. PRE |
The High Court of Rajasthan allowed the respondents writ petition against the order of assessment on the,, ground, inter alia, that the supply of coal by the respondent to the State of Rajasthan did not constitute salt as the, supply was controlled by a statutory order, namely, the Colliery Control Order, 1945. PRE |
In appeal to this Court by the State of Rajasthan, it was held that under the Colliery Control Order, coal could be supplied under a contract and the effect of the Control Order was only to superimpose upon the agreement between the parties the rate fixed by the Control Order. PRE |
The four elements required to constitute a sale, namely, competency of parties, mutual assent of the parties, passing of property in the goods supplied to the purchaser, and lastly, payment or promise of payment of price were all present to render the turnover liable to sales tax" Shah J. who spoke for the Court relied... |
The Court distinguished the decision in New India Sugar Mills (supra) on the ground that it was founded on a different principle since the condition requiring mutual assent of the parties was lacking in that case. Ratio |
(1) [1969]. PRE |
1 S.C.R. 861. PRE |
459 In Chhitter Mal Narain Das vs Commissioner of Sales Tax(1) the appellants who were dealers in food grains supplied to the Regional Food Controller diverse quantities of wheat in compliance with the provisions of the U.P. Wheat Procurement (Levy) Order, 1959. PRE |
The High Court held in a reference made to it under the Sales Tax Act that the transaction amounted to a sale And was exigible to sales tax. PRE |
In appeal to this Court it was held by a Bench consisting of Shah and Hegde JJ that clause 3 of the U.P. Procurement (Levy) Order, 1959 sets up a machinery for compulsory acquisition by the State Government of stocks of wheat belonging to the licensed dealers, that the Order contains a bald injunction to supply wheat o... |
Delivering the judgment of the Bench, Shah J. observed that the transaction in which an obligation to supply goods is imposed, and which does not involve an obligation to enter into a contract, cannot be called a 'sale ', even if the person supplying goods is declared entitled to the value of goods which is determined ... |
It was observed that the decision in Indian Steel and Wire Products (supra) does not justify the view that even if the liberty of contract in relation to the fundamentals of the transaction is completely excluded, a transaction of supply of goods pursuant to directions issued under a Control Order may be regarded as a ... |
This decision is clearly distinguishable since the provisions of the Wheat Procurement Order were construed by the Court as being in the nature of compulsory acquisition of property obliging the dealer to supply wheat from day to day. PRE |
Cases of compulsory acquisition of property by the State stand on a different footing since there is no question in such cases of offer and acceptance nor of consent, either express or implied. Ratio |
We would, however, like to clarify that though compulsory acquisition of property would exclude the element of mutual assent which is vital to a sale, the learned Judges were, with respect, not right in holding in Chitter Mal(1) that even if in respect of the place of delivery and the place of payment of price, there c... |
The true position in law is as stated above, namely, that so long as mutual assent, express or implied, is not totally excluded the transaction will amount to a sale. Ratio |
The ultimate decision in Chitter Mal (supra) can be justified only on the view that clause 3 of the Wheat Procurement Order envisages compulsory acquisition of wheat by the State Government from the licensed dealer. Ratio |
Viewed from this angle, we cannot endorse the Court 's criticism of the Full Bench decision of the Allahabad High Court in Commissioner, Sales Tax U.P. vs Ram Bilas Ram Gopal(2) which held while construing clause 3 that so long as there was freedom to bargain in some areas the transaction could amount to a sale though ... |
Looking at the scheme of the U.P. Wheat Procurement Order, particularly clause 3 thereof this Court in Chitter Mal (supra) seems to have concluded that the transaction was, in truth and substance, in the nature of compulsory acquisition, with no real freedom to bargain in any area. PRE |
Shall J. expressed the Court 's interpretation of clause 3 in no uncertain terms by saying that "it did not envisage, any consensual arrangement." In Salar Jung Sugar Mills Ltd. vs State of Mysore, (supra) which was decided by a Bench of seven learned Judges, the appellants were subjected to levy of tax on purchase of ... |
They challenged the levy on the ground that on account of the Central and State Control Orders applicable to the transactions, there was no mutual assent between them and the growers of sugarcane in regard to supply of sugarcane by the latter and since there was no purchase and sale of sugarcane, they were not dealers ... |
After referring to the cases which we have considered above, it was held by the Court that the decisions relating to 'compulsory sales? establish that statutory orders regulating. PRE |
the supply and distribution of goods do not absolutely impinge on the freedom of contact. PRE |
In spite of the fact that under the relevant Control Orders the parties, the minimum price and the minimum quantity of supply were, determined or regulated, the Court held that the Control Orders left to the parties the option in regard to a higher quantity then was stipulated in the Orders, It higher price than the mi... |
A factory could reject goods after inspection which indicated not only freedom in the formation but also in the performance of the contract. PRE |
A combination of all these factors, according to Ray J. who spoke for a unanimous Court, indicated with unerring accuracy that the parties entered into agreement with mutual assent and with volition for transfer of ' goods in consideration of price. PRE |
The transactions were accordingly held as amounting to sales within the meaning of section 2(t) of the, Mysore Sales Tax Act. PRE |
In coming to this conclusion the Court relied on the statement in Benjamin on Sale, 8th ed. PRE |
page 68 that though a contract of sale requires mutual assent, "The assent need not as a general rule be express" and that, it may be implied from the language of or conduct of parties and indeed it may even be inferred from the silence on the part of parties in certain cases. PRE |
As an instance, the Court referred to the common case of a person buying rationed articles from a ration shop. "The parties, the price, the shop, the supply and the acceptance of goods in accordance with the provisions of the Ration Order ,ire all regulated. PRE |
" All the same, said the Court, when the customer presents the ration card to the shopkeeper, the shopkeeper delivers the rationed articles, the customer accepts the articles and pays their price "there is indisputably a sale". PRE |
In State of Tamil Nadu vs Cement Distributors Private Ltd.() the principal question which arose for decision was whether producers who supplied cement to the State Trading Corporation or its agents in gunny bass in pursuance of the directions given by the Government were liable to pay sales tax on the turnover relating... |
In some of the connected appeals the question also arose whether the (1) ; 461 selling agents of the, State Trading Corporation were liable to, pay sales lax in respect of the price of the gunny bags in which, they sold cement to, the consumers. PRE |
As regards the question whether the transactions between producers and the State Trading Corporation in so far as the supply of cement was concerned amounted Lo sales within the meaning of the Madras General Sales Tax Act, 1959, Hegde, J. who spoke for the three Judge Bench observed that there was "no dispute" that tho... |
On the question whether the gunny bags, in which the cement was supplied, can be considered to have been sold it was observed that there was "no dispute ' that if the price of gunny bags was held to have been wholly controlled, then the supply of gunny bags also could not be considered as sales. PRE |
This position was held to have been concluded by the decisions in New India Sugar Mills Ltd. (supra) and Chittar Mal Narain Das (supra). PRE |
The only question which the Court considered was whether, in fact, the price of the gunny bags in which cement was supplied to the State Trading Corporation was controlled by the Cement Control Order of 1958. PRE |
On that question it was held that since the Central Government had fixed the actual price of the gunny bags also, the supply of gunny bags did not amount to sales. PRE |
In the first place, the, decision proceeds on a concession in so far as the supply of cement is concerned as is shown by the statement that there was "no dispute ' that "the same cannot be considered as sales". PRE |
As regards the other question concerning gunny bags, the Court did not allow the Advocate General of Tamil Nadu to contend that since tinder clause 6(4) of the Cement Control Order the Central Government could have fixed the maximum and not the actual price of gunny bags, was scope for bargaining between the parties. P... |
That question not having been raised in the High Court or in the appeal memo filed in this Court and the Central Government not having put in its appearance in this Court, permission was declined to raise the questions Thus the decision is not an authority for the, proposition for which the appellant contends. PRE |
Besides the judgment rests partly on the decision in New India Sugar Mills (Supra) which we have dissented from and partly on Chitter Mal (supra) which, by reason of the 'compulsory acquisition ' inferred therein, was distinguishable. Ratio |
In oil and Natural Gas Commission vs State of Bihar(1) a three Judge Bench speaking through Ray CJ.held, following the judgment in Salar Jung Sugar Mills Ltd., (supra) that the supplies of crude oil by the Oil and Natural Gas Commission to a refinery of the Indian Oil Corporation amounted to sales, even though the supp... |
Law presumes assent of parties, it was observed, when there is transfer of goods from one party to the other. PRE |
This resume of cases, long as it is, may yet bear highlighting the true principle underlying the decisions of this Court which have (1) ; 462 taken the view that a transaction which is effected in compliance with the obligatory terms of a statute may nevertheless be a safe in the eye of law. PRE |
The Indian Contract Act which was passed in 1872 contained provisions in its seventh chapter comprising sections 76 to 123 relating to sale of goods which were repealed on the enactment of a comprehensive law of sale of goods in 1930. PRE |
The Contract Act drew inspiration from the English law of contract which is almost entirely the creation of English courts and whose growth is marked by features which are peculiar to the social and economic history of England. PRE |
Historically the English law of contract is largely founded upon the action on the case for assumpsit, where the essence of the matter was the undertaking. PRE |
The necessity for acceptance of the undertaking or the promise led the earlier writers on legal theories to lay particular emphasis on the consensual nature of contractual obligations. PRE |
It was out of the importance, which political philosophers of the eighteenth century gave to human liberty that the doctrine was evolved that every person should be free to pursue his own interest in the way he thinks best and therefore law ought to give effect to the will of the parties as expressed in their agreement... |
Adam Smith in his famous work on "The Wealth of Nations" propounded in 1776 the view that the freedom of contract must as far as possible be left unimpaired. PRE |
Gradually, as would appear from Friedman 's statement in Law in a Changing Society (1959), ch.4 freedom of contract the freedom to contract on whatever terms might seem most advantageous to the individuals become a cornerstone of nineteenth centuary laissez faire economics. PRE |
Champions of individualist social philosophy who protested against legal and social restrictions in order to advance the policies of expansion and exploitation pursued by I industry and commerce won their battle and "freedom of contract was one of the trophies of victory" (see Anson 's Law of Contract, 23rd Ed. page 3)... |
The freedom and sanctity of contract thus became "the necessary instruments of laissez faire, and it was the function of the courts to foster the one and to vindicate the other. PRE |
Where a man sowed, there he should be able to reap". PRE |
is Cheshire and Fifoot 's Law of Contract, 8th Ed. page 19). PRE |
it is significant that the maxim itself laissez faire, laissez passer which derived from eightenth century France has been commonly attributed to Gournay, at first a merchant and later one of the intendants of commerce and a friend of Turgot. PRE |
Turgot attributes the phrase laissez nous faire to another merchant, Legendre, who is said to have used it in impressing upon Colbert the desire on the part of the mercantile community for non interference by the state . Ratio |
When Colbert asked a meeting of French businessmen what the state might do to assist them, Legendre pointedly replied, "laissez nous faire" The underlying assumption of the laissez faire doctrine turns on an optimistic view of the nature of the universe and on the conception of a "natural order ' or system of economic ... |
(see International Encyclo paedia of the Social Sciences, 1968 Ed. Ratio |
edited by David L. Sills, Vol. 8, page 546 and Encyclopaedia of the Social Sciences edited by Edwin R. A. Seligman, Vol. PRE |
IX, pages 15 16). PRE |
463 Towards the close of the nineteenth century it came to be realised that private enterprises, in order to be socially just, had to ensure economic equality. PRE |
"The very freedom on contract with its corollary, the freedom to complete, was merging into the freedom to combine; and in the last resort competition and combination were, incompatible. PRE |
Individualism was yield ing to monopoly, where strange things might well be done in the name of liberty. PRE |
The twentieth century has seen its progressive erosion on the one hand by opposed theory and on the other by conflicting practice. PRE |
The background of the law, social, political and economic, has changed Laissez fare as an ideal has been supplanted by, 'social security '; and social security suggests status rather than contract. PRE |
The State may thus compel persons to make contracts, as where, by a series of Road Traffic Acts from 1930 to 1960, a motorist must insure against third party risks; it may, as by the Rent Restriction Acts, prevent one party to a contract from enforcing his right under it; or it may empower a tribunal either to reduce o... |
In many instances a statute prescribes the contents of the contract. PRE |
The Moneylenders Act 1927 dictates the terms of any loan caught by its provisions; the Carriage of Goods by Sea Act 1924, contains six pages of rules to be incorporated in every contract for 'the carriage of goods by sea from any port in Great Britain or Northern Ireland to any other port; ' the Hire Purchase Act 1965,... |
The erosion of contract by statute continues briskly; and there are no immediate signs of a reaction." (Cheshire and Fifoot 's Law of Contract, 8th Ed. PRE |
pages 21 22). Ratio |
In the words of Anson, "Freedom of contract is a reasonable social ideal only to the extent that equality of bargaining power between contracting parties can be assumed, and no injury is done to the economic interests of the community at large. Ratio |
In the more complicated social and industrial conditions of a collectivist society it has ceased to have much idealistic attraction. Ratio |
It is now realised that economic equality Often does not exist in any real sense, and that individual interests have to be made to subserve those of the cornmunity. Ratio |
Hence there has been a fundamental change both in our social outlook and in the policy of the legislature towards contract, and the law today interferes at numerous points with the freedom of the parties to make what contract they like . . 464 " This intervention is especially necessary today when most contracts entere... |
It is not possible for a private person to settle the terms of his agreement with the British Railways Board or with the local electricity authority. PRE |
The 'standard form contract is the rule. Ratio |
He must either accept the terms of this contract in toto, or go without. Ratio |
Since, however, it is not feasible to deprive oneself of such necessary services, the individual is compelled to accept on those terms. Ratio |
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