Leonard Stone, Kt., C.J.
1. This matter comes before us by way of reference submitted by the Superintendent of Stamps under Section 57 of the Indian Stamp Act of 1899.
2. The facts are not in dispute.... Messrs. Breul & Co., through their attorneys, for warded to the Collector of Bombay in January, 1943, an unstamped documentbear in date January 7, 1943, and applied under Section 31 of the Indian Stamp Act for theopinion of the Collector as to the duty, if any, which was chargeable thereon.
3. As will hereafter appear, the document submitted follows the form of contract set out in the Appendix to the by-laws of the East India Cotton Association, Limited and we have been told by counsel that this reference is in the nature of a test case.
4. When the document was submitted to the Collector, he entertained doubtswhether it attracted stamp duty, by reason of the fact that in February, 1942, the learned Chief Presidency Magistrate acquitted three accused persons charged withhaving failed to stamp similar contracts. The judgment of the Chief Presidency Magistrate is annexed to the reference ; and as required by Section 57 of the Indian Stamp Act the Superintendent of Stamps has expressed his own opinion which is as follows :
In my opinion the document is a memorandum sent by the broker to hisconstituent intimating the sale on his account of/the cotton bales and as such it is chargeable withstamp duty of Annas 4 under Article 43(a) of the 1st Schedule to the Indian Stamp Ad irrespective of the fact that it contains a clause which incorporates by reference by-law 81 P. of the East India Cotton Association, Ltd.
5. Accordingly there is a conflict of opinion between the Chief Presidency Magistrate and the Superintendent of Stamps as to the necessity of stamping a contract in the form of the document before us.
6. The said document, which is exhibit 'A', is headed 'Official Form of Clients' Contract Note', and. as appears from the left hand top corner it emanatesfrom 'Breul & Co.' It is addressed to ' Gajala Satyanaraiayena Murty, Esq.', and states :
We have this day sold for you in Bombay subject to the following conditions andto the by-laws of the East India Cotton Association, Limited, in force from time to time and subject also to our usual charges and terms of business as Commission Agents 'Fifty (50) Full Pressed Bales of Indian Cotton Hedge Contract (Fine M. G. Jarilla J' staple) for delivery in Bombay from 7/25 January 1943 at seller's option at Rs. 411 nett per Candy of 784 lbs. Delivery against cash. Jetha terms.
7. Then follow certain particulars with regard to weight and ' Commission and/or brokerage at J per cent, to be paid by you to us'. It further states :
A margin of Rs. 500 (or Rs. 500 per 50 bales) to be paid to and maintained by you with us until completion of this contract. Difference between the contract price and the market price arising against you owing to fluctuations of the market to be paid by you in cash to us in Bombay as and when they arise.
Cotton for tender against Forward Sales or, failing cotton, sufficient money to enable us to purchase suitable cotton for tender must be provided by you and in our hands at least five working days before the last date on which cotton is tenderable, or, in the case of open purchases, sufficient money to enable us to take delivery of the cotton when tendered must be provided by you and in our hands before the first day of the month of delivery.
8. There follows a proviso that if Mr. Murty fails to comply with any of the above terms, then Breul & Co, shall be at liberty to buy back the cotton at the market rate, and then it states :
Notwithstanding anything herein contained this contract is entered into as between principal and principal as provided in By-law 81A, but in the event of arbitration as in the next clause provided we shall be bound to produce to the arbitrators and/or umpire and/or the Beard, if required by them or any of them in relation to any dispute regarding rates or prices only, our books and/or contracts showing the business done by us under or against the contract.
In the event of any dispute arising between you and us out of this transaction the matter shall be referred to arbitration as provided by the By-laws.
9. Attached to the document is a ' Confirmation Note ', to be signed by Mr. Murty and returned to Breul & Co., and it is in the following terms :
Official Form of Clients' Contract Note.
Confirmation of Contract Note No. C 6835.
Made in Bombay on 7th January 1943r
To Messrs. Breul & Co., Bombay.
We hereby confirm having sold through you in Bombay subject to the By-laws of the East India Cotton Association, Limited, and subject also to your usual terms, charges and conditions of business Fifty (50) Full-Pressed bales of Indian Cotton Hedge Contract (Fine M. G. Jarilla staple) for delivery in Bombay from 7/25 January 1943 at Seller's option at Rs. 411 nett per candy of 784 lbs. Jetha terms.
10. Thus the contract is subject to the by-laws of the East India Cotton Association, Limited, and is expressed to be entered into between principal and principal as provided by by-law 81A of the Association, The Association is the creature of statute, and w as brought into being by Bombay Act XIV of 1922. The by-laws of the Association are regulated by the Bombay Cotton Contracts Act, 1932, as amended by the Bombay Options in Cotton Prohibition Act, 1939, which has the result of empowering the Provincial Government at any time to make by-laws in respect of the matters specified in Section 6 of the 1932 Act and to add to, vary or rescind any by-laws made by the Boardi of Directors of this Association amongst others.
11. We have before us the 1942 edition of the by-laws of the Association, and at pages 39 to 101 of the Appendix there is set out the form of contract which the document submitted to us closely follows.
12. By by-law 49 transactions in cotton wherein delivery is not given or taken or contemplated are prohibited ; and no member of the Association shall have or acquire any interest direct or indirect in such a transaction. Violation of this by-law exposes the member to disciplinary action.
13. By by-law 81 a member acting in any transaction on behalf of two or more parties all of whom are members ' shall be either a broker or a Commission agent and if a broker he shall not be liable as a principal'.
14. By-law 81A deals with the position of a member of the Association acting in a transaction ' other than as a broker under by-law 81', In that case the member ' shall be deemed to be a commission agent and be taken to contract and be responsible as a principal'. The by-law continues as follows :
No constituent shall be entitled to enquire into the transaction between his principal and any other person with whom for the purposes of his constituent's business, the principal contracts, there shall be no privity of contract between any such person and the constituent, and the principal shall be entitled to set off, or dose down and buy or sell against such contract, or otherwise deal therewith, as he thinks fir, without reference to the constituent who shall have no concern with such dealings.
15. The result of these by-laws is that members of the Association, except when they transact business as brokers with other members, form a ring or barrier through which none may pass. No member may put the upcountry merchant or any other constituent or client into direct contact with another member or a stranger. In all these cases by-law 81A applies, and it is only when by-law 81 applies and the member actsas broker that privity or fusion can be effected between buyers and sellers through the intermediary of a member acting as broker.
16. It is now necessary to turn to the relevant provisions of the Indian Stamp Act, 1899. By Section 3, subject to the exemptions contained in Schedule I, every instrument mentioned in that Schedule, which is executed' in British India after July 1, 1899, is chargeable with the amount of duty indicated in the Schedule.
17. Article 5 of the schedule imposes duty as therein mentioned upon agreements or memoranda of agreements relating to the sale of a bill of exchange, the sale of a Government security or shares in an incorporated company or other body1 corporate, and by sub-paragraph (c) a duty of annas 8 is imposed upon an agreement or memorandum of agreement ' if not otherwise provided for. ' There then follow certain exemptions, the relevant one being lettered (a) 'agreement or memorandum of agreement for or relating to the sale of goods or merchandise exclusively, not being a note or memorandum chargeable under No. 43.'
Article 43 is as follow's :
Note or Memorandum sent by a Broker or Agent to his principal intimating the purchase or sale on account of such principal-
(a) of any goods exceeding in value twenty rupees. Annas two.
Two questions, therefore, fall to be determined : First, whether the document submitted to us is an agreement or memorandum relating exclusively to the sale of goods or merchandise ; and, secondly, whether it is a memorandum chargeable under Article 43. Both the questions must receive consideration from the angle laid down by Pollock C.B. in Gurr v. Scudds (1855) 11 Exch. 190
If there is a doubt as to the meaning of the Stamp Act, it must be construed in favourof the subject, because a tax cannot be imposed without clear and express words for that purpose... it is sufficient to say that we ought to read the language of the Act most beneficially for the subject.
18. This is concisely put in the phrase ' the benefit of the doubt is the right of the subject.' See the Irish case : In re Finance Act, 1894, and Studdert  2 I.R. 400
19. The contract relates to the sale of 50 bales of cotton, and nothing more, and, in my opinion, there can be no doubt as to the first question : It is an agreement which relates exclusively to the sale of merchandise.
20. With regard to the second question, it is the instrument, and not the transaction, -which attracts the duty, and the instrument in this case has the sanction of the Provincial Legislature. It is a printed form, and contains various expressions such as ' sold for you, ' ' subject also to our usual charges and terms of business as Commission Agents' and ' Commission and/or brokerage at half per cent, to be paid by you to us ' : all of which point in favour of the relationship of principal and agent. But the agreement expressly provides, that : ' Notwithstanding anything herein contained this contract is entered into as between principal and principal as provided in by-law 81 A.' And when by-laws 81 and 81A are considered, the object of the difference between them becomes apparent. As was stated by Lord Justice James in Ex parte White : In re Nevill (1870) L.R. 6 Ch. App. 397 (p. 399) :.there is no magic in the word ' agency. ' It is often used in commercial matters where the relationship is that of vendor and purchaser ; and the question is, whether the dealingsbetween Mr. Nevill and Messrs. Totvle & Co., with reference to these goods resulted, in the relationship of vendor and purchaser, or in the relationship of principal and agent.
21. That is precisely the point which we have to determine in this reference.
22. Mr. Daphtary in his forceful argument has submitted that, although Messrs. Breul & Co. designated themselves as agents, they contracted as principals, and although they might say ' we accept your commission,' they would couple it with the qualification that ' we owe you no duty as your agents, ' Tothis extent the term ' Commission Agent' is used in the contract artificially, because it is clear that the patties are contracting, as is expressly provided, as principal and principal.
23. That, in my judgment, is the overriding proviso contained in this statutory form of contract. Breul & Co. are saying : ' We accept your offer,' and not ' we will execute your order. ' '
24. I agree with the teamed Chief Presidency Magistrate that, as stated in his judgment annexed to the reference, by-flaw 81A must govern this contract, and that it must be construed as between principal and principal.
25. In my judgment, the document referred to us is riot a note or memorandum sent by a broker or agent to his principal intimating the purchase or sale on account of such principal. It is an agreement for the sale of fifty bales ofcotton for Rs. 500 by Mr. Murty to Messrs. Breul & Co. The relationship between the parties is that of vendor and purchaser, and not that of principal andagent. Messrs. Breul & Co. neither promise nor impose upon themselves any of the duties or obligations of an agent. The whole tenor of the agreement, read in conjunction with the by-laws which govern it, is a contract between principal and principal. Accordingly, in my judgment, it does not attract any stamp duty since it is not chargeable with duty under Article 437. but falls within the exemption under Article 5.
26. The reference will be answered accordingly.
27. I concur. The point for decision in this reference is whether on the terms 8f the contract note in question the relationship between the parties is that of a principal and agent under Article 43 (a) in the first schedule of the Indian Stamp Act, or that of principal and principal falling under exemption (a) in Article 5. One of the conditions in the contract is that notwithstanding anything therein contained, the contract was entered into as between principal and principal as provided in by-law 81A of the East India Cotton Association, Ltd. Prima facie, therefore, the contract would lie under the exemption, but it was contended by the learned Advocate General that. the by-law itself describes one of the parties to the contract as a commission agent and the other conditions in the contract also speak of him as a commission agent doing business for his client and at his risk and charging a commission or brokerage at a certain rate. It was further urged that the relationship between the parties is that of a pakka adatia and his constituent, which, it is contended, has been held to be one between principal and agent and therefore falling under Article 43 (a). Neither in the terms of the contract nor in by-law, 81A is there any reference to pakka adatia, and in my opinion there is no reason to import that relationship into the terms of the contract in question, although there may be some common features between them. The relationship is to be governed by the terms of the contract alone. I need not therefore consider the decisions relating to pakki adat. relied on by the learned Advocate General.
28. If by-law 81A is validly imported in the contract, if it creates a relationship of principal and principal and if it dominates over the other terms of the contract, there could be no doubt that the contract does not fall under Article 43 (o) because that article would only apply to a contract note sent by a broker or an agent. It would come under the exemption as relating to the sale of goods exclusively and not covered by Article 43. The by-law is a statutory by-law framed under the power given by Section 6 of the Bombay Cotton Contracts Act of 1932 to the East, India Cotton Association which is a recognised, and as yet the only recognised, Association under Section 4(7) of the Act. Indeed Section 8 makes it imperative that every contract entered into by its member must be in accordance with the by-laws ; otherwise it would be void. The contract may be with a member or a non-member of the Association. Messrs. Breul & Co. who are one of the parties to the contract are members of the Association and they were thereforebeyond to act according to the by-laws and the other non-member party to the contract has got to accept the by-laws if the contract is to be a valid transaction.
29. Now by-law 81A can be understood by reading it along with the previous1 by-law 81. Both these by-laws contemplate a transaction in which at least three persons are interested. A member can act as a broker but only as between two or more members. In that case under by-law 81 he shall not be liable as a principal provided certain specified conditions are fulfilled. A member can also act as what is described as a commission agent in a transaction on behalf of a member or a non-member, and in that case under by-law 81A he would have the rights and liabilities of: a principal. In such a case his constituent shall not be entitled, to enquire into the transaction between him and the third person with whom, for the purpose of his constituent's business, he contracts, so that there shall be no privity between the constituent and that third person and he shall be entitled to act in the transaction as he thinks fit without reference to his constituent. The effect of the two by-laws is1 that no non-member can be a party to a transaction in which a member acts merely as a broker or an agent, but where he acts as a commission agent in a transaction on behalf of a member or a non-member, there is no privity between his constituent and another person with whom the member contracts for the purpose of his constituent's business. It would also follow from the two by-laws that where the transaction is between a member and a non-member as in the present case, the member must not be deemed to be a broker but a commission1 agent or a principal. A peculiar connotation is given to the term ' Commission Agent. ' It is contrasted with the term ' broker ' and is taken to mean a person who is other than a broker or a mere intermediary? This use of the term ' Commission Agent' for one who is not really an agent but a principal is indeed unfortunate. So also the words ' commission or brokerage' in the contract note are inappropriate when under by-law 81A the term ' Commission agent' is used as contrasted with a broker. However, the provision in the contract that it was entered into as between principal and principal ' notwithstanding anything herein contained ' completely overrides all other apparently conflicting conditions and makes it clear that the transaction is not one of agency but of a direct buyer and seller. An agent is a person who acts for or represents another in dealings with a third person and as such he makes his principal answerable to such third person. Thus the test in law is whether a person is only an intermediary or acts on his own behalf. If he is not an intermediary, he is really a principal though he may be! wrongly described as an agent. By-law 81A distinctly says that a member acting in any transaction as a commission agent and not as a broker shall be responsible as a principal. That means he is acting on his behalf. Unlike the agent, he can appropriate the contract to himself. What the member accepts from his constituent is not an order but an offer to sell or buy and what he charges is not really commission or brokerage but a percentage charge for allowing the constituent to utilise his membership of the Association! for a transaction which can only be effected by a member.
30. The reasoning of the decision in Ex parte White : In re Nevill (1870) L.R. 6 Ch. App. 397 that on the facts of that case the relationship of the parties was not what it appeared to be as principal and client but was really as principal and principal, would also apply to the facts of the present case.
31. For these reasons I hold that the contract note in question does not fall under Article 43(a) but that it falls under the exemption (a) in Article 5 of the Indian Stamp Act, with the result that the document is.' not chargeable with any stamp duty.
32. I agree. The question for consideration is whether the contract under reference is a note or memorandum by a broker or agent to his principal intimating the sale of goods on account of that principal-in other words a contract requiring a stamp by reason of Article 43 of Schedule I to the Indian Stamp Act-or an agreement or memorandum of an agreement relating to the sale of goods exclusively, not being a note or memorandum chargeable under Article 43-in other words a contract exempted from stamp duty by reason of Article 5. At first sight it has all the appearance of a contract falling within Article 43. It is headed ' Client's Contract Note ' and it intimates the sale on behalf of the client by Messrs. Breul & Co. as commission agents of fifty bales of cotton at a certain price for delivery in Bombay within eighteen days. It then goes on to provide for commission, margin money, and provision of cotton or an equivalent in money to enable Messrs. Breul & Co. to buy iti for purposes of tender. All this is suggestive of an ordinary sale by a broker on behalf of his client. But it is further provided: that notwithstanding anything contained in the contract it is a, contract entered into as between principal and principal as provided in By-law 81A of the By-laws of the East India Cotton Association, of which in fact Messrs. Breul & Co. are members, but their client is not a member. The relations between broker and client are never those between principal and principal, and the contract is therefore self-contradictory. The question is what is its real nature-a contract between broker and client or one between two principals?
33. The opinion of the Superintendent of Stamps is that it is primarily a contract between broker and client. In support of this opinion the Advocate General admits that for the purposes of sale to the third party, Messrs. Breul & Co. would be a principal party even though acting as broker for their client, since under the rules the client is not entitled to know the name of the third party ; but he says that it is only for this reason that the client must look to Messrs. Breul & Co. as principal. He contends (probably correctly), that for the purposes of both the client and the third party Messrs. Breul & Co. occupy the position of a pakka adatiya employed for reward by his client but nevertheless by custom entitled to take over the contract for his own profit and yet hold his client liable as a principal for the client's part of the bargain. But this, he argues, is merely the position at the completion of the transaction ; in its inception it is a matter between broker and client, and the judicially recognised incidents of a pakki adat contract do not destroy the initial relationship of agent and principal, which for stamp purposes must be taken to be the basis of the contract.
34. We were referred to a number of decided cases dealing with the customary relationship between the principals to a pakki adat contract and with the incidents of such a contract : see for example Bhaguiandas v. Kanji I.L.R. (1905) 30 Bom. 205 Bhagwandas Parmram v. Burjorji Ruttonji Bomanji (1917) L.R. 45 I. A. 29 and Harakchand v. Sumatilal (1929) 33 Bom. L.R. 1200. But I do not propose to discuss these authorities, because in my view what matters is the legal relationship recognizable, by the Courts in the event of a dispute, and I think that the specific reference in the contract to by-law &1A of the East India Cotton Association would make it obligatory on the Courts to treat the relationship between Messrs. Breul & Co. and their client as one of principal and principal. The Advocate General argues that the wording of the contract may bind the parties as principal and principal but would not be binding on outsiders1 or on the Crown for fiscal purposes if, notwithstanding the reference to byi~law 81A, the real nature of the transaction were one of principal and agent and the reference to principal and principal a mere matter of words. But in my view it is more than a matter of words.
35. Messrs. Breul & Co. are members of the East India Cotton Association and their client is not; and the by-laws draw a clear distinction between transactions- of members inter se and transactions between a member and an outsider. By-law 81A provides that a member acting on behalf of two or more members shall act either as broker or as a commission agent and, if a broker, shall not be liable as a principal. But if Tie acts on behalf of a non-member, he is deemed by by-law 81A to contract and be responsible as a principal and all privity of contract between the non-member and the third party is expressly excluded. This is not a mere matter of words. The rule is evidently designed to ensure that the members of the Association shall be members of a ring from which outsiders are rigorously excluded ; this is made clear by the further provision in by-law 81A that the client shall have no right to enquire into the transaction with the third party. The position of the various parties to the transactions dealt with and arising out of the contract under reference is much the same as the position of the parties, in Ex parte White : In re Neville (1870-71) L.R. 6 Ch. App. 397 even if both Messrs. Breul & Co. and their client chose to look upon the transaction as one of agency. Messrs. Breul & Co. by the rules of the Association were compelled to sell the goods not as agent for their client but on their own account, so that a relationship of purchaser and vendor arose between Messrs, Breul & Co. and their client and again a relationship of vendor and purchaser between Messrs. sBreul & Co and the third party to whom the goods were finally sold. As stated by Mellish L.J.,, a person may be an agent to the point of selling the goods ; but if he sells them on his own account after purchasing them on his own credit (which in effect is the system of dealing under the class of contract under reference), then in law he is a principal and not an agent, since he pays his client at a fixed price and at a fixed time but is not bound to sell to third parties at that price or receive payment from them at that time. That seems to me to be the position here, whatever be the actual words of the contract and how-ever the parties to it may have chosen to regard themselves.,
36. To such a contract Article 43 cannot apply, since Article 43 applies only when one of the parties is in law a broker or agent. In my view the contract is one relating to the sale of goods exclusively and, not coming within the provisions of Article 43, is exempt from duty by reason of Article 5.