1. These three appeals are filed by the State against the decrees passed by the learned Subordinate Judge of Kozhi-kode against the State in O. S. Nos. 1, 2 and 3 of 1951 on his file.
2. The point that arises for decision in all the appeals is common and that is the liability of the plaintiffs for payment of sales tax to the State.
3. The plaintiffs and defendant are common in all the three suits. The plaintiffs are Messrs Sait Nagjee Purushotham and Company, Limited, and defendant in all the suits was the then State of Madras represented by the Collector of Malabar, Kozhikode. As the point involved is a very short one, it is unnecessary to go into the details of each of the cases. It is enough to state that the three suits relate to the assessment to sales tax of the plaintiffs for the periods ending 31st March, 1945, 31st March, 1946, and 31st March, 1947. The plaintiff disputed his liability to pay sales tax and has availed himself of all the remedies open to him under the Act. Therefore, the three suits were for a declaration that the various orders, for the several periods, passed by the Deputy Commercial Tax Officer (Kozhikode South), the Commercial Tax Officer (Malabar South), and the Board of Revenue, are unauthorised, illegal and ultra vires and not binding on the plaintiffs and for an injunction restraining the State from collecting the amounts so illegally levied.
4. According to the plaintiffs, they were indent agents for three Mills, namely, Aravind Mills, Asoka Mills and Rajpur Mills, all at Ahmedabad. Under the terms of the agreement they have to obtain offers from various dealers in Malabar for the purchase of cloth manufactured by those Mills and forward the orders to the Mills at Ahmedabad to be accepted by the Mills if they so chose, or to reject them if they were so inclined. For this work, the plaintiff was getting only a commission of 2% on the value of the goods. After the introduction of the Textile Control Order by the Government of India on 15th July, 1943, there was no necessity even for such indent agents like the plaintiffs but nevertheless, they were so allowed to continue as indent agents because of some special arrangements. The plaintiffs further alleged that the delivery of the goods to purchasers by the various Mills was at Ahmedabad itself and therefore there is no question of any sale in the State of Madras. The plaintiffs further contended that they were not themselves carrying on the business of buying or selling goods in the State of Madras. On these allegations, the plaintiffs disputed their liability for payment of any sales tax and asked for the reliefs stated above.
5. The State took several objections to the granting of the reliefs asked for by the plaintiffs. According to the State, there was a sale effected in the State of Madras and the property in the goods also passed only in the State of Madras. The plaintiffs, according to the State, were also carrying on business of purchase and sales within the State of Madras. In any event, the State contended that the plaintiffs, acting as the agent of a person residing outside the Province and carrying on a business of buying and selling goods within the State, are to be deemed a seller within the meaning of Section 2 (b) of the Madras General Sales Tax Act.
6. The learned Subordinate Judge has gone into the matter very fully and negatived the contentions of the State and decreed all the suits as prayed for.
7. The State has come up in appeal against the decision in all the three suits. The learned Government Pleader contended that the finding of the learned Judge on the question of sale is not correct and he also attacked the finding of the learned Judge regarding the position in law occupied by the plaintiffs. According to the learned Government Pleader, the sale took place only in the State of Madras and the learned Judge has misconstrued the agreement evidenced by Ex. A between the plaintiffs and the various Mills. He further contended that in any event, the plaintiffs should be considered to be a 'seller' within the definition of Section 2 (b), explanation 2, of the Madras General Sales Tax Act.
8. Mr. Rama Ayyar, learned Counsel for the plaintiffs, on the other hand, contended that the decision of the learned Judge on all the points is correct and in turn, he supported the findings of the trial court on all the points.
9. Though only one agreement has been filed, it appears to have been common ground in the trial court that the relationship between the plaintiffs and the other 2 Mills is also governed by the same terms as in Ex. A1. Therefore, the questions to be considered on an interpretation of Ex. A1 are :
(a) whether the sale took place within the State of Madras ; and
(b) whether the plaintiffs can be considered to be agents of a person resident outside the Province who carries on business of buying and selling goods in the Province of Madras.
10. Ex. A1 is dated 1st May, 1943, and there is no dispute that that is the agreement that governs the rights of parties at all material times. It is styled an agreement entered into at Ahmedabad between Aravind Mills Ltd., Ahmedabad, and the plaintiffs residing at Calicut. The preamble states that the plaintiffs are to work as agents for the purpose of securing the offers, guaranteeing sales and deliveries of the cloth manufactured by the companies.
11. Clause (1) appoints the plaintiffs as their agents for the purpose of securing offers, guaranteeing sales within the whole boundaries of Calicut.
12. Clause (3) gives a right to the Aravind Mills to accept orders direct from any dealers but reserves a right to the plaintiffs to get their commission in certain circumstances.
13. Clause (4) prohibits the plaintiffs from dealing on their own account in such cloth during the continuation of the agreement.
14. Under Clause (5), the plaintiffs have to deposit security.
15. Clause (6) states that the plaintiffs are to obtain offers for the purchse of cloth manufactured by the company and forward them to the company's office at Ahmedabad.
16. In our opinion, Clause (6) is an indication that the position of the plaintiffs was only of putting the would-be-purchasers of cloth in touch with the/Aravind Mills.
17. Clause (8) provides for the plaintiffs taking the offers of purchase from third parties in the indent forms supplied by the Aravind Mills.
18. Clause (9) provides for the Aravind Mills accepting the offers of third parties and forwarding their confirmations direct to the dealers. In cases where the confirmation is sent through the plaintiffs, the latter are to forward it to the dealers.
19. Clause (10) prohibits the plaintiffs from accepting on their own authority any offers and if they do so, their acceptance will not be binding on the company.
20. Clause (13) is a very important clause in that it provides the place at which delivery is to be made. It says:
that the delivery of the goods is to be made by the company at the premises of the Mills at Naroda Road, Ahmedabad.
21. Clause (15) provides for forwarding the railway receipt or the bill of lading covering despatch of goods accompanied by a suitable draft through a bank covering the value of goods.
22. Clause (16) makes the plaintiffs fully responsible for the collection of the amounts due from the parties and on failure of the parties to pay, the plaintiffs themselves are to make good the amount.
23. Clause (17) provides that if the contracting party fails or refuses to take delivery of the railway receipt by payment, the plaintiffs themselves are to honour the drafts and take delivery of the goods and also be liable to make good to the Aravind Mills the consequential losses.
24. Clause (18) gives an independent right to the Aravind Mills to proceed against the dealer notwithstanding the fact that the plaintiffs have instituted similar proceedings against the dealers.
25. Clause (19) entitles the plaintiffs to get a selling agency commission of 2% inclusive of trade discount, brokerage, etc.
26. Clause (20) again is important and it is as follows :
that for the purpose of this agreement, the value of goods sold would mean the sale value ex-mills and not value of railway freight and other charges.
27. Clause (27) fixes the courts at Ahmedabad with jurisdiction in respect of the matters covered by the agreement.
28. It is unnecessary to note the other clauses in the agreement.
29. 'Sale' before its amendment in 1948 has been defined in Section 2 (h) of the Sales Tax Act as follows :
'Sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge.
30. In the decision of the Supreme Court reported in Poppatlal v. State of Madras (1953) 1 M.L.J. 739 their Lordships of the Supreme Court in construing this definition, have held that the stress is laid in this definition on the element of transfer of property in a sale and no other. Their Lordships also observe that a contract of sale becomes a sale under the Sale of Goods Act only when the property in the goods is transferred to the buyer under the terms of the contract itself.
31. The learned Government Pleader found it very difficult to rely on any particular clause in the agreement as conclusively supporting the stand taken by the State. But nevertheless, he relied upon clauses 15, 16 and 17. We are not able to find in those clauses any support for the stand taken by the Government. According to the learned Government Pleader, Aravind Mills are forwarding the railway receipt regarding the goods accompanied by a suitable bank draft. Clause (16) speaks of the mills sending the goods to the plaintiffs to be delivered to the parties concerned and the agent remitting the amount within a particular time. Clause (17) again, is stated to refer to the dealer refusing to take delivery of the receipt, (sic.) the plaintiffs are to honour the drafts and take delivery of the goods.
32. In our opinion, the agreement should not be read piecemeal like that. The agreement makes it quite clear that even without the plaintiffs, parties are at liberty to directly enter into arrangements with the Mills at Ahmedabad. The offers are sent by the dealers either directly or through the plaintiffs to Ahmedabad. It is within the exclusive privilege of the Mills either to accept or reject those offers and it is also open to them to send confirmation direct to the dealers. In fact, the plaintiffs have no right to accept any offers on behalf of the Mills.
33. All the above circumstances clearly show that though the offer emanates from Malabar either from the dealers themselves or from the dealers through the plaintiffs, the acceptance or confirmation of the contract is by the Mills at Ahmedabad.
34. Clause (13) makes it very clear that the responsibilities of the Mills cease at Ahmedabad itself inasmuch as it specifically states that the delivery of the goods is to be by the company at the premises of the Mills at Naroda Road, Ahmedabad. Therefore, it. is very clear that the contract is at Ahmedabad and the delivery of the goods is also at the premises of the Mills at Ahmedabad. It is in this context that we have to see Clauses (15) to (17) on which the learned Government Pleader so strongly relied upon. Those clauses, in our opinion, only amount to the Mill authorities exercising control in the matter of collection of the amounts due to them, notwithstanding the fact that the transfer and delivery have already been effected at Ahmedabad. The delivery contemplated in those clauses is not the delivery that is spoken of in Clause (13) but the actual handing over of the goods and realising the amounts due on them. There cannot be in law two deliveries in respect of the same goods. After a delivery at the premises of the Mills in Naroda Road, in our opinion, the property in the goods has passed to the respective buyers and it should be considered that in the matter of further sending the goods to the respective destination, the Mills are only acting as the agents of those dealers.
35. This idea is again made clear by Clause (20). That clause specifically says that the value of the goods sold would mean the sale value ex-mills and not the value of railway freight etc. That is perfectly logical and reasonable because the goods have been sold and delivered at the Mill premises at Ahmedabad and the further despatch of the goods is only for and on behalf of and at the risk of the buyers.
36. In view of such specific recitals in the agreement, it is very difficult for us to hold that the property in the goods does not pass at Ahmedabad, but passes only in the Madras State on delivery of the goods. In fact, the whole sale, in our opinion, takes place only at Ahmedabad.
37. It is not necessary for us to consider in detail the effect of the Cotton Cloth and Yarn Control Order issued in June, 1943, by the Central Government and its effect upon the transactions. In fact, after the enactment of that Order, no goods could really have been sent outside Ahmedabad. The learned Judge has considered this aspect as also the nature of the dealings as disclosed by the evidence adduced on behalf of the plaintiffs and has accepted the case of the plaintiffs that the sale takes place only in Abmedabad and not in the State of Madras. We entirely agree with the findings of the learned Judge on this point and confirm the finding of the trial Court that the goods were sold and delivered only at Ahmedabad and, therefore, no sale took place within the State of Madras.
38. The learned Government Pleader further contended that the plaintiffs will come within explanation 2 to Section 2 (b) of the Madras General Sales Tax Act. We are not able to accept this contention either. To bring an agent within this explanation, he must be a person who carries on the business of buying or selling goods on behalf of a person resident outside the State. We have already extracted the relevant clauses in Ex. A1. It is absolutely impossible for us, from a perusal of Ex. A1, to hold that the plaintiffs are persons carrying on the business of buying or selling goods in the Province of Madras. The various clauses in the agreement specifically authorise them only to secure offers. In fact, Clause (4) specifically prohibits the plaintiffs from dealing on their own account in such cloth during the continuation of the agreement. Clause (6) specifically says that the plaintiffs are to obtain offers for the purchase of the cloth manufactured by the company and forward them to Ahmedabad. The agreement, as already stated, provides for dealers also sending their offers directly to the Mills and the Mills directly accepting those offers. It is very significant that in such cases the right of the plaintiffs are only to get a commission on the transactions effected directly by the Mills with the dealers. Clause (13) makes the delivery effective at Ahmedabad itself and Clause (20) entitles them to get a commission only on the value of the goods sold ex-mills Ahmedabad. There is no clause in the agreement from which we can infer that the plaintiffs carry on a business of buying or selling goods within the State of Madras. Therefore, this contention of the learned Government Pleader also fails.
39. The contention of the Government on the question of limitation is devoid of any substance.
40. In the result, the decrees and judgments of the learned Subordinate Judge are confirmed and these three appeals dismissed. The plaintiffs will get from the State the entire costs of printed papers in all the three appeals ; but the plaintiffs will get advocate s fee in this Court only in A. S. 1238 of 1953.