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PETITIONER:

DUNI CHAND RATARIA

Vs.

RESPONDENT:

BHUWALKA BROTHERS LTD.

DATE OF JUDGMENT:

03/12/1954

BENCH:

BHAGWATI, NATWARLAL H.

BENCH:

BHAGWATI, NATWARLAL H.

MAHAJAN, MEHAR CHAND (CJ)

JAGANNADHADAS, B.

AIYYAR, T.L. VENKATARAMA

CITATION:

1955 AIR 182 1955 SCR (1)1071

ACT:

West Bengal Jute Goods Future Ordinance, 1949, s. 2(1) (b)

(i) -Actual delivery of Possession-Whether includes

symbolical as well as constructive delivery of possession-

Indian Sale of Goods Act, 1930 (III of 1930), s. 2(2)-

Delivery-Meaning of.

HEADNOTE:

Delivery has been defined in s. 2 (2) of Indian Sale of

Goods Act, 1930, as meaning voluntary transfer of Possession

from one per-

1072

son to another and it includes not only actual delivery but

also symbolical or constructive delivery within the meaning

of the term.

The expression "actual delivery of possession" in s.

2(1)(b)(i) of the West Bengal Jute Goods Future Ordinance,

1949 means actual delivery as contrasted with mere dealings

in differences within the intendment of the Ordinance and

such actual delivery of possession included within its scope

symbolical as well as constructive delivery of possession.

The word "involving" in the expression "involving the actual

delivery of possession thereof" in s. 2(1)(b)(i) of the

Ordinance means in the context resulting in and this

condition would be satisfied if the chain contracts in the

present case, as entered into in the market resulted in

actual delivery of possession of goods in the ultimate

analysis.

The Ordinance came within Head 27 of List 2 of the Seventh

Schedule of the Government of India Act, 1935:-"Trade and

commerce within the Province; markets and fair; money

lending and money lenders" and the Provincial Legislature

was competent to legislate on that topic.

Nippon Yussen Kaisha v. Ramjiban ([1938] L.R. 65 I.A. 263),

referred to.

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 61 of 1953.

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Appeal from the Judgment and Decree dated the 16th day of

May, 1952 of the High Court of Judicature at Calcutta in

Appeal from Original Decree No. 124 of 1951 arising out of

the decree dated the 25th day of May, 1951 of the High Court

of Calcutta in its Ordinary Original Civil Jurisdiction in

Suit No. 3614 of 1950.

M. C. Setalvad, Attorney-General for India, (P. Mandaland

S. P. Varma, with him), for the appellant.

N. C. Chatterjee, (A. N. Sinha and P. C. Dutta, with

him), for the respondent.

1954. December 3. The Judgment of the Court was delivered

by

BHAGWATI J.-This appeal with certificate from the High Court

of Judicature at Calcutta arises out of the suit filed on

the original side of the High Court by the appellant against

the respondent to recover a sum of Rs. 1,25,962-2-0 with

interest and costs,

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The appellant entered into three contracts, two dated the

8th August 1949 and the third dated the 17th August 1949

with the respondent agreeing to purchase 1,80,000 bags of

'B' twills at the price of Rs. 134/4/- per 100 bags,

1,80,000 bags at the rate of Rs. 135/4/- per 100 bags and

90,000 bags at the rate of Rs. 138/- per 100 bags

respectively for October, November and December 1949

deliveries in equal monthly instalments on terms and

conditions contained in the relative contract forms of the

Indian Jute Mills Association. In September 1949 the

respondent expressed its inability to deliver the goods

under the said contracts and requested the appellant to

settle the same by selling back the goods under the said

contracts to the respondent at the price of Rs. 161-8-0 per

100 bags. Three settlement contracts were accordingly

entered into between the parties on the 28th September 1949

whereby the appellant agreed to sell the goods under the

original contracts to the respondent at the rate of Rs. 161-

8-0 per 100 bags on the terms and conditions contained in

the relative contract forms of the Indian Jute Mills

Association. The appellant duly submitted to the respondent

his bills for the amounts due at the foot of the said

contracts aggregating to Rs. 1,15,650 which the respondent

accepted but failed and neglected to pay in spite of

repeated demands of the appellant. The appellant therefore

filed the suit for recovery of the said sum with interest

and costs. The respondent filed its written statement

contesting the appellant's claim on the main around that the

three settlement contracts above-mentioned were illegal and

prohibited by the West Bengal Jute Goods Future Ordinance,

1949. The respondent contended that it never dealt in the

sale and/or purchase of jute goods involving actual delivery

of possession thereof, nor did it possess or have control

over any godown and other means or equipments necessary for

the storage and supply of jute goods and that therefore the

said settlement contracts were void and not binding upon it

and that the appellant was not entitled to any relief as

prayed. The Trial Court negatived the contention of the

respon-

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dent and decreed the appellant's -claim. The learned Judges

of the Appeal Court however came to the conclusion that the

said settlement contracts were contracts relating to the

purchase of jute goods made on a forward basis by the

respondent not being a person who habitually dealt in the

sale or purchase of jute goods involving the actual delivery

of possession thereof and were therefore void and

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unenforceable. The only right which the appellant had

against the respondent was to have the said original

contracts settled on the basis of the last closing rate in a

notified market which was Rs. 146/14/- per 100 bags. No

such claim was however made by the appellant. A further

contention which was raised by the respondent, viz. that the

Ordinance was ultra vires was negatived by the Court. But

in view of its finding on the main issue the Appeal Court

dismissed the appellant's suit with costs.

The relevant provisions of the West Bengal Jute Goods Future

Ordinance, 1949 were as under:-

Section 2. In this Ordinance,- unless there is anything

repugnant in the subject or context:-

(1)'Contract relating to jute goods futures' means a

contract relating to the sale or purchase of jute goods made

on a forward basis-

(a)providing for the payment or receipt, as the case may be,

of margin in such manner and on such dates as may be

specified in the contract, or

(b) by or with any person not being a person who,

(i)habitually deals in the sale or purchase of jute goods

involving the actual delivery of possession thereof, or

(ii)possesses, or has control over, a godown and other means

and equipments necessary for the storage and supply of jute

goods:....................................

3.(1) The Provincial Government may, from time to time, if

it so thinks fit, by notification in the Official Gazette

prohibit the making of contracts, relating to jute goods

futures and may, by like notification, withdraw such

prohibition .....................................

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(2)When the making of contracts relating to jute goods

futures is prohibited by a notification

under sub-section (I),-

(a)no person shall make any such contract or pay or receive

any margin except, in the case of any such contract made

prior to the date of the notification, to the extent to

which the payment or receipt, as the case may be, of margin

is allowable on the basis of the last closing rate in a

notified market:..............

(c)notwithstanding anything contained in any other law for

the time being in force,-

(i)every such contract made, and every claim in respect of

margin, in contravention of the provisions of clause (a),

shall be void and unenforceable, and

(ii) every such contract made prior to the date of

publication of the notification shall be varied and settled

on the basis of the last closing rate in a notified market.

Explanation-In this sub-section,-

(a)"last closing rate" means the rate fixed by the Directors

of a notified market to be the closing rate of such market

immediately preceding the date of publication of the

notification under sub-section (1) prohibiting the making of

contracts relating to jute goods futures: and

(b)"notified market" means a jute goods futures market

recognised by the Provincial Government by notification in

the Official Gazette.

The Ordinance came into force on. the 22nd September 1949.

In pursuance of the power conferred under section 3(1) of

the Ordinance the Government of West Bengal issued a

notification, being notification No. 4665 Com. dated the

23rd September 1949 prohibiting the making of contracts

relating to jute goods futures on and from the date of

publication of the notification in the Official Gazette and

by another notification No. 4666 Com. of the same date

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recognised certain jute goods futures markets for the

purpose of Para. (b) of the Explanation to section 3(2) as

notified markets. These notifications were published in the

138

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Calcutta Gazette on the same day, the 23rd September 1949.

The relevant terms and conditions of the standard form of

the Indian Jute Mills Association contracts may be

conveniently set out here:-

(1)Buyers to give 7 Clear Working days' notice to place

goods alongside............................................

(3)Payment to be made in cash in exchange for Delivery

Orders on Sellers, or for Railway Receipts, or for Dock's

Receipts or for Mate's Receipts (which Dock's Receipt or

Mate's Receipts are to be handed by a Ship's or -Dock's

officers to the Sellers' representatives).

(4)The Buyers hereby acknowledge, that so long as such

Railway Receipts or Mate's or Dock's Receipts (whether in

Sellers' or Buyers' names) are in the possession of the

Sellers, the lien of the sellers, as unpaid vendors,

subsists both on such Railway Receipts Dock's or Mate's

Receipts and the goods they represent until payment is made

in full.

There were other terms and conditions appertaining to the

delivery of goods under the contracts including inspection

by the buyers, insurance, tender, etc. The settlement

contracts were also practically in the same form except that

in the body of the contracts it was mentioned that the

particular contract represented settlement of an original

contract which had been already entered into between the

parties and that the buyers in the settlement contract would

pay to the sellers the difference at the particular rate

on due date.

In respect of the goods deliverable under the contracts the

mills would, in the case of goods sent by them alongside the

vessel in accordance with the shippers' instructions in that

behalf, obtain the mate's receipts in respect of the same

and such mate's receipts would be delivered by the mills to

their immediate buyers who in their turn would pass them on

to their respective buyers in the chain of contracts resting

with the ultimate shipper. If the mills held the goods in

their godown they would issue

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delivery orders on the due date, which delivery orders would

be dealt with in the same manner as the mate's receipts

aforesaid. Both these sets of documents would represent the

goods and would be passed on from seller to buyer against

payment of cash. As a matter of fact on the evidence the

learned Trial Judge held that in the Calcutta jute trade

mills' delivery orders are ordinarily issued by the mills

against cash payment and pass from hand to hand by endorse-

ment and are used in the ordinary course of business

authorising the endorsee to receive the goods which they

represent and that they are dealt with in the market as

representing the goods.

The Appeal Court accepted this position and further found

that in the instant case "the mills who held the goods sold

them to A, A to B, B to the defendant to the plaintiff to C

and C to the shipper. This is what is known as a chain

contract. It is admitted by the plaintiff, that the mills

give the delivery order to A. A endorses it to B, B to the

defendant, defendant to the plaintiff and so on".

The question that falls to be determined on these facts and

circumstances is whether the settlement contracts mentioned

above could be called contracts between the appellant and

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the respondent involving the actual delivery of possession

of the goods. It was common ground that the contracts did

not provide for the payment or receipt of margin. It was

also common ground that the respondent did not possess or

have control over a godown and other means and equipments

necessary for the storage and supply of jute goods. The

only point at issue was whether the respondent was a person

who habitually dealt in the sale or purchase of jute goods

involving the actual delivery of possession thereof and the

contention which was vehemently urged on behalf of the

respondent in the Courts below was that the transactions

were purely speculative, that mere delivery orders passed

between the parties, which delivery orders did not represent

the goods and the transfer thereof did not involve as

between the intermediate parties actual delivery of

possession of the goods but

1078

differences in rates were only paid or received by the

parties.

The appellant on the other hand contended that the delivery

orders represented the goods, that each successive buyer

paid to his immediate seller the full price of the goods

represented by the delivery order in cash before the

relative delivery order was endorsed in his favour and thus

obtained not only the title to the goods but actual delivery

of possession thereof and that in any event when the goods

were delivered alongside the vessel or actual delivery was

taken by the ultimate buyer there was the giving and taking

of actual delivery of possession of the goods all along the

chain at the same moment.

The Trial Court accepted the contention of the appellant

that the delivery orders are dealt with in the market as

representing the goods and that they pass from hand to hand

by endorsement being received by the successive buyers

against cash payment land are used in the ordinary course of

business authorising the endorsee to receive the goods which

they represent. The learned Trial Judge further observed:

"Now visualize the long chain of contracts in which the

defendant's contract is one of the connecting links. The

defendant buys from its immediate seller and sells to its

immediate buyer. As seller it is liable to give and as

buyer it is entitled to take delivery. As seller it

receives and as buyer it shipping instructions. Similar

shipping instruction is given by each link until it

reaches the mills.The mills deliver the goods alongside

the steamer.Such delivery is in implement of the

contract betweenthe mills and their immediate buyer.

But eo instanti it is also in implement of each of the chain

contracts including the contract between the defendant and

its immediate buyer and the contract between the defendant

and its immediate seller. Not only does the mill give and

its immediate buyer take actual delivery but eo instanti

each middleman gives and takes actual delivery.

Simultaneously the defendant takes actual delivery of

possession of the jute goods from its immediate seller and

gives actual delivery of possession

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of jute goods to its immediate buyer. Prima facie at the

moment of the delivery alongside the steamer there is

appropriation and the passing of the property in the goods

and the giving and taking of actual delivery of possession

thereof all along the chain at the same moment".

The learned Trial Judge then referred to the following

observations of Lord Wright in Nippon Yusen Kaisha v.

Ramjiban(1) in regard to the standard form of the Indian

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Jute Mills Association contract:-

"This is a form under which the entire export business in

gunnies in Calcutta is conducted............ In the present

case the sale being free alongside, the property prima facie

passes when the goods are appropriated by delivery alongside

in implement of the contracts,"

and added:-

"The sale and purchases of the defendant where there is

actual shipment and delivery of possession of the goods

alongside the vessel involves actual delivery of possession

of the jute goods. The delivery of the goods alongside the

vessel is physical delivery of the goods and necessarily

changes the actual custody of the goods. It is said that

there is no actual physical delivery of the goods by the

defendant himself. The Legislature, however, does not say

that the dealer must himself give actual delivery of the

goods. I cannot read in the statute words which are not

there and say that the dealer must himself give delivery of

the goods in order to come within the definition in sub-

section 2 (1) (b) (i) of the Ordinance. The Legislature

simply insists that the sales and purchases of the dealer

involve actual delivery of possession of the jute goods. I

do not see why the sales and purchases do not involve actual

delivery if such actual delivery is given not by the dealer

but by a third party in performance of and in relation to

the sales and purchases of the dealer. Even the buyer and

the seller of jute goods over the counter rarely takes and

gives manual delivery of the goods. Very often such manual

delivery is given and taken not by the buyer and

(1) [1938] L. R. 65 1. A. 263.

1080

seller but by their respective servants and agents. I do

not see why instead of the buyers' and sellers' employees

and servants giving and taking delivery of the goods

somebody else on their behalf gives and takes delivery; such

delivery is not actual delivery of possession of the goods".

The learned Judges of the Appeal Court however did not

accept this view and misdirected themselves both in regard

to the facts and the position in law. They took it that

none of the parties in the chain contracts paid the actual

price of the goods except the shipper who took delivery of

the goods from the mills against payment. They wrongly

assumed that A endorsed the delivery order over to B and

took the difference, B in his turn endorsed the delivery

order to the defendant and took the difference and so on and

concluded that nobody was concerned to pay the actual price

or take delivery of the goods except the shipper who took

the goods and paid the price to the mills. This assumption

was absolutely unwarranted, the evidence on record being

that each of the successive buyers paid to his immediate

seller the full price of the goods represented by the

delivery order in cash against the endorsement of the

relative delivery order in his favour by the seller.

The learned Judges of the Appeal Court also laid unwarranted

emphasis on the words "actual delivery of possession" and

contrasted actual delivery with symbolical or constructive

delivery and held that only actual delivery of possession

meaning thereby physical or manual delivery was within the

intendment of the Ordinance. Delivery has been defined in

section 2(2) of the Indian Sale of Goods Act as meaning

voluntary transfer of possession from one person to another

and if nothing more was said delivery would not only include

actual delivery but also symbolic or constructive delivery

within the meaning of the term. The use of the word

"actual" in section 2 (1) (b) (i) of the Ordinance was

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considered by the Appeal Court as indicative of the

intention of the Government to include within the scope of

the exemption only cases of actual delivery of possession as

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contrasted with symbolical or constructive delivery. This

construction in our opinion is too narrow.. Even if regard

be had to the mischief which was sought to be averted by the

promulgation of the Ordinance, the Government intended to

prevent persons who dealt in differences only and never

intended to take delivery under any circumstances, from

entering into the market. Provided a person habitually

dealt in the sale or purchase of jute goods involving

delivery of the goods, he-was not to be included in the ban.

This could be the only intendment of the Ordinance, because

otherwise having regard to the ordinary course of business

in jute goods would become absolutely impossible. The

manufacturer of jute goods does not come normally into

direct contact with the shipper. It is only through a chain

of contracting parties that the shipper obtains the goods

from the manufacturer and if only actual delivery of

possession as contrasted with symbolical or constructive

delivery were contemplated it would be impossible to carry

on the business. If the narrow construction which was put

by the Appeal Court on the expression "actual delivery of

possession" was accepted it would involve each one of the

intermediate parties actually taking physical or manual

delivery of the goods from their sellers and again in their

turn giving physical or manual delivery of the goods which

they had thus obtained to their immediate buyers. Such an

eventuality could never have been contemplated by the

Government and the only reasonable interpretation of the

expression "actual delivery of possession" can be that

actual delivery as contrasted with mere dealings in

differences was within the intendment of the Ordinance and

such actual delivery of possession included within its scope

symbolical as well as constructive delivery of possession.

Once this conclusion is reached it is easy to visualise the

course of events. The mate's receipts or the delivery

orders as the case may be, represented the goods. The

sellers banded over these documents to the buyers against

cash payment, and the buyers obtained these documents in

token of delivery of

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possession of the goods. They in turn passed these

documents from hand to hand until they rested with the

ultimate buyer who took physical or manual delivery of

possession of those goods. The constructive delivery of

possession which was obtained by the intermediate parties

was thus translated into a physical or manual delivery of

possession in the ultimate analysis eliminating the

unnecessary process of each of the intermediate parties

taking and in his turn giving actual delivery of possession

of the goods in the narrow sense of physical or manual

delivery thereof.

It is necessary to remember in this connection that the

words used in section 2(1) (b) (i) are "involving the actual

delivery of possession thereof". The word "involving" in

the context means resulting in and this condition would be

satisfied if the chain contracts as entered into in the

market resulted in actual delivery of possession of goods in

the ultimate analysis. The Appeal Court was therefore

clearly in error when it put a narrow construction on the

expression "actual delivery of possession" and held that the

transactions were purely speculative and the parties in no

event. contemplated actual delivery of possession of the

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goods. The learned Trial Judge was in our opinion correct

in his appreciation of the whole position on facts as well

as in law and in negativing the contention of the

respondent.

In view of this conclusion it is unnecessary to consider the

argument which was submitted before us based upon the

definition of "documents of title" in section 2(4) and the

provisions of section 30, proviso to section 36(3) and the

proviso to section 53(1) of the Indian Sale of Goods Act

that all the documents of title enumerated in section 2(4)

were assimilated to a bill of lading and a mere transfer of

the documents of title in favour of a buyer was tantamount

to a transfer of possession of the goods represented

thereby.

The contention that the Ordinance was ultra vires was not

seriously pressed before us. We may however add that the

Appeal Court rightly held that the

1083

Ordinance came within Head 27 of List 2 of the Seventh

Schedule of the Government of India Act:--"Trade and

commerce within the Province; markets and fair; money

lending and money lenders", and that the Provincial

Legislature was competent to legislate on that topic.

The result therefore is that the appeal will be allowed, the

decision of the Appeal Court will be reversed and the decree

passed by the Trial Court in favour of the Appellant will be

restored with costs throughout.

Appeal allowed.