A

B

c

AGRICULTURAL MARKET COMMITTEE

v.

SHALIMAR CHEMICAL WORKS LTD.

MAY 7, 1997

(K.S. PARIPOORNAN ANDS. SAGHIR AHMAD, JJ.)

Andhra Pradesh (Agricultural Produce and Livestock) Markets Act,

1966: Sections 12(1) Expln. l, 2(i), (vi),

(x), (xi), (xii), (xvi), 3, 4( 1), 7(1),

33

and 34(1 ).

Notified Agricultural Produce-Sale or purchase-Presumption of-The

Act limited the statutory presumption to only one factor, namely, "moving" a

notified agricultural produce from within the notified market area to a place

outside the market area-Whereas the Rules and Bye-laws provided further

that such presumption would also be raised

if a notified

alJlicultura/ produce

D was weighed, measured and counted-Held: Such additional presumption is

beyond the legislative polic.ir-flence, Rule 74(2) and Bye-law 24(5) are

beyond the scope of the Act and ultra vires the Act-Andhra Pradesh (Agricul­

tural Produce and Livestock) Markets Rules, 1966, Rule 74(2) and Bye-law

24(5).

E

Sale of

Goods Act, 1930 : Sections 19 and 20.

Property in goods-1'Copra" supplied from State of Kera/a to Hyderabad

pursuant to order placed by purchaser--Dispatch of goods at the risk of

purchaser-Goods insured by purchaser-Goods weighed at Hyderabad only

F for purchaser's satisfaction----Held : While ascertaining the intention of the

parties

regard should be had to

temis of contract, conduct of parties and

circumstances

of the case provided in S. 19(2)--lf conditions for applicability

of S.

20, namely, that contract of sale is an unconditional contract and is for

specific goods

in a deliverable state, are satisfied, court has to determine

G whether any ''di ff erenl intention appears" in the contract as provided

in S.

19(3)-Property in goods passed and sale took place in State of Kera/a and

not at Hyderabad-Hence, levy of market fee on the purchase of "copra'~ an

agricultural produce, under A.P. (Agrirnltura/ Produce and Livestock)

Markets Act,

1966, invalid.

H Administrative Law :

164

..

-

AGRICULTURAL MARKET COMMilTEE v. SHAUMAR CHEMICAL 165

Legislative function/power-Delegation of-Held: legislature lays down A

:

policy and the principles for the guidance of the delegates-Delegate while

. making subsidiary rules or regulations cannot widen or constrict the scope of

-

the Act or the policy.

-.<

Legislative fu11ction/power-Delegatio11 of-Reasons for giving

B . ,

delegated power to the Government to make Rules stated .

i

The appellant-Agricultural Market Committee is a statutory body

created under the Andhra Pradesh (Agricultural Produce and Livestock)

Markets Act,

1966 while the respondent is a licenced trader dealing in

"copra" (dried coconut kernel)

which it imported from various places in c

the State of Kerala for manufacturing coconut oil. The respondent placed

an

order with a dealer in the State of Kerala in pursuance of which goods

were dispatched

by lorry to Hyderabad where the respondent after making

payment to and receiving documents from the bank, obtained delivery of

goods, after weighment.

It was one of the terms of the contract between the

D

parties that the seller would not be liable for any future loss of good and

that the goods were being dispatched

at the risk of the respondent. The

respondents had also obtained insurance of the goods and had paid the

policy premium.

d, The Assessing Authority who was also ihe Secretary of the Agricul-

E

tural Market Committee levied the market fee on the respondent who

challenged it in appeals filed under Section 12E of the Andhra Pradesh

... (Agricultural Produce and Livestock) Act, 1966 but the appeals were

dismissed on the technical ground of non-comp,iance with Section 12E(2)

of the

Act under which the whole amount of market fee had to be deposited

F before filing the appeal. The High Court allowed the appeal filed by the

respondent.

On the basis of material placed on record, the High Court

came to the conclusion that the sale of "copra" took place in the State of

Kerala and not

at Hyderabad. The High Court further held that the

provisions contained in Rule

74(2) of the Andhra Pradesh (Agricultural

Produce and Livestock) Market Rules,

1969 and Bye-law 24(5) of the

G

Bye-laws Committee relating to the 'rule of presumption' were beyond the

~

scope of the Act and, consequently, were bad in law. Hence this appeal.

Dismissing the appeal, this Court

HELD : 1.1. Market

fee can be levied under the Andhra Pradesh H

166 SUPREME COURT REPORTS (1997] SUPP. l S.C.R.

A (Agricultural Produce and Livestock) Markets Act, 1966 only on the sales

and purchase of notified agricultural produce within the notified area.

Explanation I to Section

12 of the Act creates a legal fiction and provides

that if any notified agricultural produce is taken out of a notified market

area,

it shall be presumed to have been purchased or sold within such area.

B The presumption is a rebuttable presumption and can be shown to be not

correct. The policy in enacting this provision is only to cover such trans­

actions of sale

and purchase

for which direct evidence may not be avail­

able. The legal fiction was thus limited to the "moving" of the commodity

from within the market area to a place outside the market area.

No other

factor can

give rise to such presumption nor can any additional factor be

C considered to raise such presumption. The statutory presumption is thus

of a limited character.

Since it relates to the levy of market fee and is fiscal

in nature,

it has to be strictly construed in the sense that any circumstance,

situation, factor

or condition which are not contemplated by the Act cannot

be taken into consideration to raise the presumption regarding sale or

D purchase of

th" notified agricultural produce. [173-B-C; 173-H; 174-A-C]

1.2. The Government to whom the power to make Rules was given

under Section

33 and the Committee to whom power to make Bye-laws was

given under Section 34 widened the scope of

"presumption" by providing

further that if a notified agricultural produce is weighed, measured or

E counted within the notified area, it shall be deemed to have been sold or

purchased in

that area. The creation of legal fiction is thus beyond the legis­

lative policy.

Such legal fiction could be created only by the Legislature and

not by a delegate in exercise of the rule making power. Hence, Rule 74(2) of

the Andhra Pradesh (Agricultural Produce and Livestock) Market Rules,

1969

and Bye-law 24(5) of the Bye-laws Committee are beyond the scope of

F the Act and, therefore, ultra vires. The reliance placed by the Assessing

Authority as also by the appellate and revisional authority on these

provisions was wholly misplaced

and they are not justified in holding, merely

on the basis ofweighment of

"copra" within the notified area committee that

the transaction of sale took place in that market area. [177-G-H; 178-A]

G

1.3. The power of delegation is a constituent element of the legislative

power as a whole under Article

245 of the Constitution and other relative

Articles

and when the Legislatures enact laws to meet the challenge of the

complex soc!o-economic problems, they often find it convenient and neces­

sary to delegate subsidiary or ancillary power to delegates of their choice

H for carrying out the policy laid down by the Acts as part of the Administra-

AGRICULTURAL MARKET COMMITTEE v. SHALIMAR CHEMICAL 167

tive Law. The essential legislative function consists of the determination of A

the legislative policy and the Legislature cannot abdicate essential legisla-

tive function in favour of another. Power to make subsidiary legislation may

be entrusted by the Legislature to another body of its choice but the Legis­

lature should, before delegating, enunciate either expressly or by implica­

tion, the policy and the principles for the guidance of the delegates. These B

principles also apply to Taxing Statutes. The effect of these principles is

that the delegate who has been authorised to make subsidiary Rules and

Regulations has to work within the scope of its authority and cannot widen

or constrict the scope of the Act or the policy laid down thereunder. It

cannot, in the garb of making Rules, legislate on the field covered by the

Act and has to restrict itself to the mode of implementation of the policy C

and purpose of the Act. [176-A-B; H; 177-A-C]

Vasantlal Maganbhai Sanjahwala v. State of Bombay & Ors., [1961) 1

SCR 341; Municipal Corporation of Delhi v. Bir/a Cotton Spinning and

Weaving Mills, Delhi & Anr., AIR (1968)" SC 1232 and In Re : The Delhi

Laws Act,

1912, 1951

SCR 747 and Avinder Singh v. State of Punjab, [1979) D

1 sec 137' relied on.

Salmond : "Jurisprudence" 12th Edn. p. 116, referred to.

2.1. A contract of sale, like any other contract, is a consensual

act E

inasmuch as parties are at liberty to settle, amongst themselves, any terms

they may

cho)se. Section J9 of the Sale of Goods Act, 1930 attempts to give

effect to the elementary principle of the Law of.Contract

that the parties may

fix the time when the property in the goods shall be treated to have passed. It

may be the time of

deliwry, or the time of payment of price or even the time

of the making of contrac.t.

It all depends upon the intention of the parties. It F

is, therefore, the duty of the court to ascertain the intention of the parties

and in doing so, they have to be guided

by the principles laid down in Section

19(2) which provides

that for ascertaining the intention of the parties,

regard shall

be had to the terms of the contract, the conduct of the parties

and the circumstances of the case. Both Sections

19 and

20 apply to the sale G

of"specific" or "ascertained" goods. [181-C-E; G]

2.2. Section 20, which contains the first rule for ascertaining the

intention of the pai:ties, provides that where there is an unconditional

contract for the sale of "specific goods" in a deliverable state", the property

in the goods passes to the buyer when the contract is made. This indicates

H

168 SUPREME COURT REPORTS (1997) SUPP. 1 S.C.R.

A that as soon as a contract is made in respect of specific goods, which arc

in a deliverable state, the title in the goods passes to the purchaser. The

passing of the title is not dependent upon the payment of price

or the time

of delivery of the goods.

If the time for payment of price or the time for

delivery of goods,

or both, is postponed, it would not affect the passing of

B

the title in the goods so purchased. [181-G-H; 182-A)

2.3. In order that

Section 20 is attracted, two conditions have to be

fulfilled :

(i) the contract of sale is for specific goods which are in a

deliverable state;

and (ii) the contract is an unconditional contract. If these

two conditions are satisfied,

Section 20 becomes applicable immediately c

C and it is at this stage that it has to be seen whether there is anything either

in the terms of the contract

or in the conduct of the parties or in the

circumstances of the case which indicates a contrary intention. This

exer­

cise has to be done to give effect to the opening words, namely, "Unless a

different intention appears" occurring in Section 19(3). Intention of the

1

-

parties was the decisive factor as to when the property in goods passes to

D the purchaser. If the contract is silent, intention has to be gathered from

the conduct

and circumstances of the case. [182-B-D)

E

Consolidated Coffee Ltd. & Anr. v. Coffee Board, Bangalore, AIR (1980) SC 1468, relied on.

Hoe Kim Seing v. Maung Ba Chit, AIR (1935) PC 182, referred to.

3. In the instant case, the goods, which were the subject matter of

sale, were ascertained goods. They

were also in a deliverable state.

On the

order being placed

by the respondent, the seller in the

State of Kerala,

F loaded the goods on the lorry and dispatched the same to Hyderabad. It

is at this stage that the conduct of the parties becomes extremely relevant.

It was one of the terms of the contract between the parties that the seller

would not

be liable for any future loss of goods and that the goods were

being dispatched

at the risk of the respondent. The respondent had also

obtained insurance of the goods and had paid the policy premium. He,

G therefore, intended the goods to be treated as his own so that if there was

any loss of goods in transit,

he could validly claim the insurance money.

The weighment of the goods

at Hyderabad or the collection of documents

from the bank or payment of price through the bank

at Hyderabad were

immaterial inasmuch as the property in the.goods had already passed

at

H Kerala and it was not dependent upon the payment of

prke or the delivery

AGRICULTURALMARKETCOMMnTEE v. SHALIMARCHEMICAL(S.SAGHIRAHMAD,J.( 169

of goods to the respondent. Therefore, the sale took place in the State of A

Kerala and not at Hyderabad. [182-F-H; 183-A; CJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3359 of

1997.

From the Judgment and Order dated 18.4.96 of the Andhra Pradesh B

High Court in C.M.A. No. 1217 of 1994.

K. Ram Kumar, Y.S. Rao, Asha Nair and C. Balasubramaniam for

the Appellant.

D.D. Thakur, L.N. Rao, V.V. Ramana and S. Udaya Kr. Sagar for

the Respondent.

The Judgment of the Court was delivered

by

S. SAGHIR AHMAD, J. Leave granted.

2. Agricultural Market Committee (for short, 'the Committee') which

c

D

is the appellant before us is a statutory body created under the Andhra

Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 ('the

Act') while the respondent

is a licenced trader dealing in

"Copra" (dried

coconut kernel) which it imports from various places in the State of Kerala E

for manufacturing coconut oil.

3. "Copra" is a notified agricultural produce and, therefore, the

Committee has a right to

levy and realise the market fee on all transactions

of purchase and sale provided the transactions take place within the

notified area of the Committee.

F

4. By orders dated 2.3.89 and 28.3.89, the Assessing Authority who

1s also the

Secretary of the Committee levied the market fee on the

respondent who challenged those orders

in appeals (No. 1 of 1989 and No.

2 of 1989). filed under

Section 12E but the appeals were dismissed on the G

technical ground of non-compliance with Section 12E(2) under which the

whole amount of market

fee had to be deposited before filing the appeal.

5. The respondent then approached the Andhra

Pradesh High Court

in Writ Petition 12199 of 1991 which was allowed and the appeals were

directed to be entertained provided the respondent deposited half of the

H

170 SUPREME COURT REPORTS [1997] SUPP. 1 S.C.R.

· A amount of market fee and furnished bank guarantee for the remaining half.

The appeals were consequently taken up for hearing but were dismissed

compelling the respondent to

file a revision under Section 12F of the Act

which was dismissed

by the Director of Marketing by order dated 8.11.93.

The respondent then approached the High Court

by another appeal under

B Section 12G which was allowed by judgment dated 18.4.96 and consequent­

ly the matter has come to this Court.

6. In order to levy market fee on the transaction of sale and purchase

by the respondent, the Assessing Authority had relied upon Rule 74(2) of

the Andhra

Pradesh (Agricultural Produce and Livestock) Market Rules,

C 1969 (for short, 'Rules') and Explanation to Bye-law 24(5) of the Bye-laws

of the Committee which contained a statutory presumption that if a notified

agricultural produce was weighed or measured within the notified area of

the Committee, it shall be deemed to

have been purchased or sold within

that area. The appellate

as also the revisional authorities

had also relied

D upon this provision and had held that since "Copra" which was imported

from the State of Kerala

was, admittedly, weighed at Hyderabad, it shall

be deemed to had been sold to the respondent at Hyderabad and,

conse­

quently, the respondent Was liable to pay market fee on all the transactions

of sale/purchase of "Copra" during the period in question.

E 7. The High Court held that the provisions contained in Rule 74(2)

and Bye-law 24(5) relating to the 'rule of presumption' were beyond the

scope of the Act and, consequently, were bad

in

law. It also held on the

basis of evidence and material on record that the transaction of sale/pur­

chase took place in the State of Kerala and not at Hyderabad and,

F therefore, the authorities under the Act were not justified in levying the

market fee on those transactions.

8. The findings recorded by the High Court have been challenged

before

us on the ground that the goods were imported into the State of

Andhra

Pradesh on the basis of Form-X prescribed under the Act and the

G delivery of commodity was taken by the respondent after weighment which

indicated that the transaction of sale took place at Hyderabad and not

in

the State of Kerala from where the goods were imported. It was also

contended that after weighment,

if the commodity was found to be

defi­

cient in weight, a debit note is issued to the seller which also indicated that

H the property in the goods passed only at Hyderabad where weighment was

AGRICULTURAL MARKET COMMIITEE v. SHALIMAR CHEMICAL (S. SAGHJRAHMAD,J.] 171

made by the respondent after payment of price and collection of document A

through a Bank. The findings of the High Court that Rule 74(2) and

Bye-law 24(5) were beyond the scope of the Act was also assailed and it

was contended that these provisions were made only to give effect to the

policy already laid down

by the Legislature in the principal Act.

9. We will first examine the validity of Rule 74(2) and Bye-law 24(5). B

10. Rule 74(2) reads as under :

"Rule 74(2)-Such fees shall be leviable as soon as the notified

agricultural produce, livestock and products -of livestock is pur-C

chased or sold by a licensee. The notified agricultural produce,

livestock or products of livestock shall be deemed to have been

purchased or sold after the notified commodity has been weighed

or measured or counted or when it

is taken out of the notified

market

area."

11. Bye-law 24(5) is as follows :

"The fees shall be leviable as soon as the notified agricultural

produce, livestock, or products of livestock

is purchased or sold

D

by licencee. E

EXPLANATION: The notified agricultural produce or livestock

or products of livestock shall be deemed to have been purchased

or sold after the said notified commodity has been weighed,

measured or counted or when it

is taken out of the notified market

area."

12. We may also, at this stage, notice certain provisions of the Act.

"Agricultural produce" has been defined in Section 2(i) as

under:

"2(i) "Agricultural Produce" means anything produced from land

in the course of agriculture or horticulture and includes forest

produce or any produce of like nature either processed or un­

processed and declared

by the Government by notification to be

F

G

agricultural produce for the purposes of this

Act." H

A

B

c

D

E

F

G

172 SUPREME COURT REPORTS (1997) SUPP. 1 S.C.R.

Section 2(vi) defines "market" as under :

"2(vi) 'market' means a market established under sub-section (3)

of Section 4 and includes market yard and any building therein."

"Markel Committee" has been defined in Section 2(vii) as

under:

"2(vii) 'market committee' means a committee constituted or

reconstituted under the provisions of this Act."

"Notified agricultural produce" is defined in Section 2(x) as

under:

"2(x) 'notified agricultural produce, livestock or products of live­

stock' means agricultural pr0duce, livestock or products of live­

stock specified in the notification under Section 3."

"Notification area" is defined in Section 2(xi) as under :

"2(xi) 'notified area' means any area notified under Section 3."

"Notified market area" is defined in Section 2(xii) as under :

"2(xii) 'notified market area' means any area declared to be a

market area

by notification under

Section 4."

"Trader" is defined in Section 2(xvi) as under :

"2(xvi) 'trader' means the person licensed under sub-section (1) of

Section 7 and includes the person in whose management the

collection of fees

is placed whether he is called a commission agent,

ginner, presser, warehouseman, importer exporter, stockist or

by

whatever local name he is

called."

13. Notified Area is constituted under Section 3 of the Act whereas

a Market Committee

is constituted by the Government under

Section 4(1).

Thus Market Committee

is constituted for every notified area. The Notified

Market Area

is established under

Section 4( 4) of the Act.

14. Section 7(1) provides that no person shall, within a notified area,

H set up, establish or use, or continue or allow to be continued, any place for

AG RI CULTURAL MARKET COMMITrEE v. SHALIMAR CHEMICAL [S. SAGHIR AHMAD, J.] 173

the purchase, sale, storage, weighment etc.

of any notified agricultural A

produce or products of livestock or for the purchase or sale or livestock

except under

and in accordance with the conditions of a licence granted

to him by the market committee.

15. Section 12 of the Act provides for the levy of fees by the Notified

Market Committee. The relevant portion of this Section is reproduced B

below:

"12. Levy of fees by the market committee : (1) The market

committee shall levy fees

on any. notified agricultural produce,

livestock

or products of livestock purchased or sold in the notified C

market area (at such rate, not exceeding (two rupees) as may be

specified in the bye-laws) for every hundred rupees of the ag­

gregate amount for which the notified agricultural produce, live­

stock

or products of livestock is purchased or sold, whether for

cash

or deferred payment or other valuable consideration. D

Explanation I : For the purposes of this Section, all notified

agricultural produce, livestock or products

or livestock taken out

of a notified market area shall, unless the contrary is provided, be

presumed to have been purchased or sold within such area.

Explanation II : ..................... .

(2)

····································

E

16. The market fee is liable to be paid by every trader operating in

the notified area.

He is also under a statutory duty to submit returns F

relating to his turnover as required by Section 12A. The assessment is made

by

the Market Committee under Section 12B. The assessment made by the

Market Committee is appealable before the Regional Joint Director of

Marketing under

Sectfon 12E. A revision is provided by Section 12F against

the

judgment of the Regional Joint Director to the Director of Marketing. G

The order of Director of Marketing is appealable before the High Court

under Section 12G.

17. A perusal of Explanation I

appended to Section 12, extracted

above, would indicate that

the statutory presumption regarding purchase

and sale is raised in respect of all notified agricultural produce, livestock

H

..

174 SUPREME COURT REPORTS [1997] SUPP.1 S.C.R.

A or products of livestock if they are taken out of a notified market area. As

soon as a notified agricultural produce

is moved out of a notified market

area,

it is to be presumed that such notified agricultural produce was either

purchased or sold within the notified market area. Acting on this presump­

tion, the Committee can proceed to

levy market fee on such transaction.

B What is important to notice in this provision is that the presumption is

confined to the movement of notified agricultural produce. No other factor

can

give rise to such presumption nor can any additional factor be con­

sidered to raise such presumption. The statutory presumption

is thus of a

limited character. Since it relates to the

levy of market fee and is fiscal in

nature, it has to be strictly construed in the sense that any circumstance,

~

C situation, factor or condition which are not contemplated by the Act cannot

be taken into consideration to raise the presumption regarding sale or

purchase of the notified agricultural produce.

18. Section 33 of the Act gives power to the Government to make

D Rules. It is in exercise of this power that the Government made the Rules

~in 1969. Section 34 authorises a Market Committee to make Bye-laws.

E

F

Sub-section (1) of this Section provides as under :

"34. Bye-laws : (1) Subject to any rules made by the Government

under Section

33 and with the previous sanction of the Director

of Marketing, a market committee

may, in respect of the notified

area for which it

was constituted, make bye-laws for the regulation

of the

business·and the conditions of trading therein."

19. Bye-law 24(5) made by the Committee has already been quoted

above. Rule 74(2) as also Bye-law 24(5) also contain the deeming

provisions concerning sale or purchase of a notified agricultural produce.

They provide that a notified agricultural produce shall be deemed to

have

been purchased or sold after the Notified Commodity has been Weighed

or Measured or Counted or when it

is taken out of the Notified Market

Area. Thus while the Act limited the presumption to only one factor,

G namely, moving the notified agricultural produce out of the notified market

area, the Rule and the Bye-law have additionally provided that such

presumption would also be raised if the commodity

is weighed, measured

or counted.

"Weighed" "Measured" or "Counted" are factors which are not

mentioned

in Explanation I to Section 12 of the Act. The question which,

H therefore, arises is whether the scope of Explanation I to Section 12 can

,

•

I ,,

AGRICULTIJRAL MARKET COMMITTEE v. SHALIMAR CHEMICAL {S. SAGHIRAHMAD, J.] 175

be widened by Rule 74(2) or the Explanation appended to Bye-law 24(5). A

20. The Act was made by the State Legislature while the Rules have

been made

by the

State Government and the Bye-laws have been made by

the Committee. Both constitute delegated legislation.

21. Delegated Legislation has been defined by Salmond as "that B

which proceeds from any authority other than the sovereign power and is

therefore dependent for its continued existence and validity on some

superior or supreme authority." (See Salmond, Jurisprudence, 12th Edn.

Page 116).

22. Delegated Legislation is not a new phenomenon. Ever since the C

Statutes came to be made by Parliament, the Delegated Legislation also

came to be made

by an authority to which the power was delegated by the

Parliament.

It is no use going back into the pages of history or to look to

the

Statute of Proclamations 1539, under which Henry VIII was given

extensive powers to legislate

by proclamations, what is intended, to be D

emphasised is that there has always been, and continues to be, need for

delegated legislation. The

eicigencies of the modern State, especially the

social and economic reforms, have given rise to the making of Delegated

Legislation on a large scale

(by authorising the

Gov::rnment, almost in

every Statute passed by Parliament or the State Legislature to make Rules) E

so much so that a reasonable fear could have arisen among the people that

they were being ruled

by the Bureaucracy.

23. The reasons for giving delegated power to the Government to

make Rules are

many, but the most prominent and dominant reasons are:

(i) The area for which powers are given to

make delegated legislation

may be technically complex, so much

so, that it may not be possible and

may even be difficult to set out all the permutations in the

Statute.

F

(ii) The Executive may require time to experiment and to find out

how the origina1.legislation

was operating and thereafter to fill up an other G

details.

(iii)

It gives an advantage to the Executive, in the sense that a

Government with an onerous legislative time schedule may feel tempted to

• pass skeleton legislation with the details being provided by the making of

Rules and Regulations.

H

176 SUPREME COURT REPORTS [1997) SUPP. 1 S.C.R.

A 24. The power of delegation is a constituent element of the legislative

power as a whole under Article

245 of the Constitution and other relative

Articles and when the Legislatures enact laws to meet the challenge of the

complex socio-economic problems, they often find it convenient and neces­

sary to delegate subsidiary or ancillary powers to delegates of their choice

B for carrying out the policy laid down by the Acts as part of the Administra­

tive Law. The Legislature has to lay down the legislative policy and prin­

ciple to afford guidance for carrying out the said policy before it delegates

its subsidiary powers in that behalf

(See: Vasantlal Maganbhai Sanjanwala

v. The State of Bombay and Others, [1961) 1SCR341. This Court in another

case, namely, Tht! Municipal Corporation of Delhi v. Bir/a Cotton, Spinning

C and Weaving Mills, Delhi and Another, AIR (1968) SC 1232 as also in an

earlier decision in

In Re : The Delhi Laws Act, 1912, The Ajmer-Merwara

(Extension of Laws) Act, 1947, and The Part C States (Laws) Act,

1950,

[1951) SCR 747 has laid down the principle that the Legislature must retain

in its own hands the essential legislative functions and what can

be

D delegated is the task of subordinate legislation necessary for implementing

the purposes and objects of the Act concerned.

E

F

G

25. In Avinder Singh v. State of Punjab, [1979) 1

SCC 137, Krishna

Iyer,

J. laid down the following tests for valid delegation of legislative

power. These

are:

"(1) the legislature cannot efface itself :

(2) it cannot delegate the plenary or the essential legislative func­

tion;

(3) even if there

be delegation, Parliamentary control over

delegated legislation should be a

living continuity as a constitution­

al

necessity."

It was further observed as under :

"While what constitutes an essential feature cannot be delineated

in detail it certainly cannot include a change of policy. The legis­

lature is the master of legislative policy and

if the delegate is free

to switch policy it may be usurpation of legislative power itself."

26. The principle which, therefore, emerges out is that the essential

H legislative function consists of the determination of the legislative policy

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...

/

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AGRICULTURAL MARKET COMMITTEE v. SHALIMAR CHEMICAL (S. SAGHIR AHMAD, J.( 177

and the Legislature cannot abdicate essential legislative function in favour A

of another. Power to make subsidiary legislation may be entrusted by the

Legislature to another body of its choice but the Legislature should, before

delegating, enunciate either expressly or

by implication, the policy and the

principles for the guidance of the delegates. These principles also apply to

Taxing Statutes. The effect of these principles

is that the delegate which B

has been authorised to make subsidiary Rules and Regulations has to work

within the scope of its authority and cannot widen or constrict the scope

of the Act or the policy laid down thereunder.

It cannot, in the garb of

making Rules, legislate on the field covered

by the Act and has to restrict

itself to the mode of implementation of the policy and purpose of the Act.

27. Applying the above principles to the instant case, it will be seen

that the market

fee can be levied under the Act only on the sales and

purchase of notified agricultural produce within the notified area. Explana-

c

tion I to

Section 12 creates a legal fiction and provides that if any notified

agricultural produce

is taken out of a notified market area, it shall be D

presumed to have been purchased or sold within such area. The presump-

tion

is a rebuttablc presumption and can be shown to be not correct. The

policy in enacting this provision

is only to cover such transactions of sale

and purchase for which direct evidence

may not be available.

Since a

notified agricultural produce can be sold only within the notified market

area, and, that too,

by a trader having a licence issued to him by the E

Committee, it is obvious that if such commodity is moved out of the notified

area, it would mean either that it has been sold or purchased.

Otherwise,

there would be no occasion to move such commodity out of the notified

market area. The legal fiction

was thus limited to the

"moving" of the

commodity from within the market area to a place outside the market area.

28. The Government to whom the power to make Rules was given

under

Section 33 and the Committee to whom power to make Bye-laws

was given under Section 34 widened the scope of "presumption" by provid-

F

ing further that if a notified agricultural produce is weighed, measured or

counted within the notified area, it shall be deemed to have been sold or

G

purchased in that area. The creation of legal fiction is thus beyond the

legislative policy.

Such legal fiction could be created only by the Legislature

and not

by a delegate in exercise of the rule making power. We are,

therefore,

in full agreement with the High Court that Rule 74(2) and

Bye-law 24(5) are beyond the scope of the Act and, therefore

ultra vires.

The reliance placed by the Assessing Authority as also by the appellate H

178 SUPREME COURT REPORTS [1997] SUPP. 1 S.C.R.

A and revisional authority on these provisions was wholly misplaced and they

are not justified

in holding, merely on the basis of weighment of "Copra"

within the notified area committee that the transaction of sale took place

in that market area.

29. Let us now consider the next question relating to the nature of

B transaction relating to sale/purchase of

"Copra" by the respondent from

various dealers

in the

State of Kerala.

30. It is contended by the learned counsel for the appellant that if an

order

was placed with a dealer at Kerala in pursuance of which goods were

C despatched by lorry to Hyderabad where the respondent, after making

payment to and receiving documents from the bank, obtained delivery of

goods, and that too, after weighment, the transaction cannot but be treated

as sale at Hyderabad and not in the

State of Kerala.

31. During the pendency of the proceedings before the Appellate

D Authority, statement of Shri Somnath Bhattacharya, Director of the

respondent Company

was recorded. He stated that the ''Copra" was

brought into the

State of Andhra Pradesh from outside. It was unloaded

at the premises of the appellant where it

was crushed and coconut oil was

extracted. He further stated as under :

E

F

G

"After the material comes to Hyderabad, we will weigh the same

for the purpose of verification regarding the quantity despatched

by the Kerala dealers. We have a running account with the dealers

in Kerala

State. The account of the dealers will be settled some

times monthly and sometimes within

two or three months from the

date of despatch... very rarely it

is found on weighment at

Hyderabad that the quantity despatched

by the dealer at Kerala

is less than the quantity mentioned in the concerned invoice and

in such cases, the Hyderabad unit will send a report to our Head

Office and the Head Office raises a debit note against the dealer

for the shortage of Copra."

32. The above statement has been considered by the High Court

which came to the conclusion that the weighment

was done only for the

satisfaction of the buyer and

was not a condition of contract. The High .

Court also took into consideration the contents of the invoice and Form-X

H and observed as under :

AGRICULTURAL MARKET COMMrITEE v. SHALIMAR CHEMICAL [S. SAGHIR AHMAD, J.] 179

"The appellate authority has referred to a copy of invoice No. 357 A

dated 16.5.1985 for arriving at the conclusion that the purchase

was effected by the appellant in Hyderabad. This invoice dated

15.5.1985 show that one Abdul Hameed despatched 200 bags of

'Copra' through lorry

No.

MSO 3971 from Allepey in Kerala to

Hyderabad and the demand draft for Rs. 1,39,000 was forwarded B

to bank. The note to the invoice says that the despatch of the goods

is made solely at the risk and responsibility of M/s. Shalimar

Chemical Works, the appellant herein, and that Abdul Hameed

takes "no responsibility or liability as to delayed ·despatches, losses

due to theft, pilferage, rain or damage, leakage, wear and tear etc.

c

' Column 1 of the accompanying Form X mentions the name of the

person consigning the goods

as Abdul Hameed. Clause 5 of Form

X is the

following terms :

"If the consignor is transporting goods in pursuance of a sale

D

for purpose of delivery to the buyer, the name and address

of the person to whom the goods are sold, his registration

certificate

No. under the Andhra

Pradesh General Sales Tax

Act,

1957. If he is a dealer furnish bill number and date

relating

in the

sale."

E

Against this column No. 5, it is mentioned that the appellant herein

is the person lo whom the goods are sold . .The consignor's name

__..

is mentioned in column No. 6 as Abdul Hameed of Alleppey.

Column

No. 7 is in the following terms :

"7. If the consignor is transporting the goods from one of his

F

shops or godown to an agent for sale or from one of his shops

or godowns

to another for the purpose of storage, the address

a .

of the agent or of the shop or godown to which the transport

-

are made."

G

Against this column, it was written "For Sale". Because it was

written in Column No. 1 as "for sale", the appellate authority held

that this evidenced that the transport of 'Copra'

was only to enable

the appellant to purchase the same and that the same

was not sold

in Alleppey. H

180

A

B

SUPREME COURT REPORTS (1997) SUPP. 1 S.C.R.

The

view taken by the appellate authority is totally unsus­

tainable."

33. The High Court further observed as under :

"One significant aspect to be noticed in this case is that after the

stocks were loaded into the trucks, the sellers

in Kerala had absolutely no liability with regard to any future losses. That is the

reason

why the goods were insured and the insurance

pn;mia were ·

paid by the appellant. Where goods have been delivered to a

common carrier to be sent to the person,

by whom they have been

C ordered, the carrier becomes the agent of the vendee and such a

delivery amounts to

delivery to the vendee section 23(2) of the Sale

of Goods Act. There was thus completed sale in Kerala State and

no purchase in the State of Andhra Pradesh."

D 34. On the basis of material placed on record, the High Court came

to the conclusion that the sale of "Copra" took place in the State of Kerala

and not at Hyderabad.

35. We may, at this stage, consider certain provisions of the

Sale of

Goods Act, 1930, specially as the Andhra Pradesh (Agricultural Produce

E and Livestock) Markets Act, 1966 does not contain any definition of sale

or purchase. Sections 19 and 20 of the Sale of Goods Act are quoted

belows:

F

G

H

"19. Property passes when intended to pass-

(1) Where there is a contract for the sale of specific or ascer­

tained goods the property

in them is transferred to the buyer at

such time as the parties to the contract intend

it to be transferred.

0

(2) For the purpose of ascertaining the intention of the parties

regard shall

be had to the terms of the contract, the conduct of

the parties and the circumstances of the case.

(3)

Unless a different intention appears, the rules contained in

Sections 20 to 24 are rules for ascertaining the intention of the

parties as to the time at which the property

in the goods is to pass

to the

buyer."

->..

---

AGRICUtTIJRAL MARKET COMMITTEE v. SHALIMAR CHEMICAL [S.SAGHIRAHMAD, J.] 181

"20. Specific goods in a deliverable state -where there is an A

un-conditional contract for the sale of specific goods in a

deliverable state, the property

in the goods passes to the buyer

when the contract

is made and it is immaterial whether the time

of payment of the price or the time of delivery of goods, or both,

is

postponed."

36. W c may, before analysing the provisions of Sections 19 and 20,

observe that the Indian Sale of Goods Act is based largely upon the English

and American Acts. Under these Acts, namely, the English Sale of Goods

Act, the American Uniform Sales Act and the Indian Sale of Goods Act,

B

the relevant factor for determining where the sale takes place, is the C

intention of parties. A contract of sale, like any other contract, is a

consensual act inasmuch

as parties are at liberty to settle, amongst them­

selves,

any terms they may choose.

37. Section 19 attempts to give effect to the elementary principle of

the Law of Contract that the parties

may fix the time when the property in D

the goods shall be treated to have passed. It may be the time of delivery,

or the time of payment of price or even the time of the making of contract.

It

all depends upon the intention of the parties. It is, therefore, the duty of

the Court to ascertain the intention of the parties and

in doing so, they

have to be guided by the principles laid down in Section 19(2) which E

provides that for ascertaining the intention of the parties, regard shall be

had lo the terms of the contract, the conduct of the parties and the

circumstances of the case.

38. Section 19 indicates that in case of unconditional contract to sale

in respect of specified goods in a deliverable state, the property in the F

goods passes to the buyer at such time as the parties intend

it to be

transferred . Section 19(3) provides that Section

20 to 24 contain the rules

for ascertaining the intention of the parties as to the time at which the

property in the goods shall be treated to have passed to the buyer. Both

Sections

19 and

20 apply to the sale of "specific" or "ascertained" goods. G

39. Section 20, which contains the first rule for ascertaining the

intention of the parties, provides that where there

is an unconditional

contract for the sale of

"specific goods" in a "deliverable state", the property

in the goods passes to the buyer when the contract is made. This indicates

that as soon

as a contract is made in respect of specific goods which are H

182 SUPREME COURT REPORTS (1997] SUPP. 1 S.C.R.

A in a deliverable state, the title in the goods passes to the purchaser. The

passing of the title

is not dependent upon the payment of price or the time.

of delivery of the goods.

If the time for payment of price or the time for

delivery of goods, or both,

is postponed, it would not affect the passing of

the title in the goods so purchased.

B

40. In order that Section 20 is attracted, two conditions have to be

fulfilled : (i) the contract of sale

is for specific goods which are in a

deliverable state; and (ii) the contract

is an unconditional contract. If these

two conditions are satisfied, section

20 becomes applicable immediately

and it

is at this stage that it has to be seen whether there is anything either

C in the terms of the contract or in the conduct of the parties or in the

circumstances of the case which indicates a contrary intention. This exer­

cise has to be done to

give effect to the opening words, namely,

"Unless a

different intention appears" occuring the Section 19(3). In Hoe Kim Seing

v. Maung Ba Chit, AIR (1935) PC 182, it was held that intention of the

D parties was th1;: decisive factor as to when the property in goods passes to

the purchaser.

If the contract is silent, intention has to be gathered from

the conduct and circumstances of the case.

41. This Court in Consolidated Coffee Ltd. & Anr. v. Coffee Board,

Bangalore,

AIR

(1980) SC 1468 = (1980] 3 SCC 358 has held that in an

E auction sale of chattels, property passes to the purchaser on the acceptance

of his bid. This occurs not because of Section 64(2) but because of the rule

contained

in Section

20.

42. In the instant case, the goods which were the subject matter of

F sale were ascertained goods. They were also in a deliverable state. On the

order being placed

by the respondent, the seller in the State of Kerala,

loaded the goods on the lorry and despatched the same to Hyderabad. It

is at this stage that the conduct of the parties becomes extremely relevant.

It was one of the terms of the contract between the parties that the seller

would not be liable for

any future loss of goods and that the goods were

G being despatched at the risk of the respondent. The respondent had also

obtained insurance of the goods and had paid the policy premium. He,

therefore, intended the goods to be treated

as his own so that if there was

any loss of goods in transit, he could validly claim the insurance money.

The weighment of the goods at Hyderabad or the collection of documents

H from the bank or payment of price through the bank at Hyderabad were

AGRICULTURALMARKETCOMMfITEE v. SHAL!MARCHEMICAL[5.SAGHIRAHMAD,J.] 183

immaterial inasmuch as the property in the goods had already passed at A

Kerala and it was not dependent upon the payment of price or the delivery

of goods to the respondent.

43. We are in full agreement with the view expressed by the High

Court and are

also of the opinion that having regard to the evidence on

record which indicated that on the order placed

by respondent, the stocks B

were loaded into the trucks for despatch to Hyderabad with the clear

stipulation that the despatch

was at the risk of the purchaser and that the

seller had

no

liability with regard to any future losses and that the stock

was insured and the insurance premium was paid by the respondent, the

sale took place in the State of Kerala and not at Hyderabad. C

44. In view of the above, the appeal has no merit and is dismissed.

There

will be no order as to costs.

v.s.s. Appeal dismissed.

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