judgement:
Appeal No. 656 of 1966.
Appeal by special leave.
from the judgment and order dated June 29/30, 1964 of the Gujarat High Court in Special Civil Application No. 589 of 1961.
A. K. Sen and N. H. Hingorani, for the appellant.
R. Gopalakrishnan, for respondent No. 3.
The Judgment of the Court was delivered by Bhargava, J.
R. section Ambwaney, respondent No. 3, was employed by the Sindhu Resettlement Corporation Ltd., the appellant.
as an Accounts Clerk at Gandhidham on 13th December, 1950 in the pay scale of Rs. 150 10 250 on a salary of Rs. 200 plus 20 per cent as site allowance.
This site allowance was discontinued in March, 1952.
In the year 1953, the Government of India decided to develop Kandla as a port and a subsidiary company was formed by the appellant under the name of Makenzies Heinrich Bulzer (India) Ltd. in which one of the principal shareholders was the appellant.
This Company later came to be known as Sindhu Hotchief (India) Ltd. For convenience, both Makenzies Heinrich, Bulzer (India) Ltd., and Sindhu Hotchief (India) Ltd. shall hereinafter be referred to as "Sindhu Hotchief".
This subsidiary Company, Sindhu Hotchief, wanted some trained employees and; amongst others the services of respondent No. 3 were placed at its disposal by the appellant.
The case of respondent No., 3 was that he was told orally by the officers of the appellant on 2nd September, 1953 that he was to work in the subsidiary company.
Respondent No. 3 was appointed in Sindhu Hotchief by its order dated 5th September,,1953 on a salary of Rs. 240 p.m. as an Accounts Clerk on the conditions of service laid down in that order.
It appears that, just about this time, the father of respondent No. 3 died and he was granted leave by the appellant for the period from 2nd September to 17th September, 1953.
With effect from 18th September 1953, his services were placed at the ' disposal of Sindhu Hotchief and an order to that effect was issued in writing on behalf of the appellant on 24th September, 1953.
Respondent No. 3 worked with Sindhu Hotchief up to 20th February, 1958 'when his ' services were terminated after payment.
of retrenchment compensation and all other dues payable to him.
On 21st February, 1958, respondent No. 3 went to the office of the, appellant, reported himself for duty and requested that he might, 517 be given posting orders in, the appellant.
Corporation.
The appellant informed respondent NO. 3 of I its inability, to re employ him on the ground that the post, which he had been occupying in 1953 had been permanently filed up.
Thereupon, respondent No. 3 demanded retrenchment compensation ', from the appellant also.
This was also refused.
His case was taken up by Mazdoor Mahajan Sangh, Gandhidham, Kutch, ' respondent No.2.
The Secretary of respondent No. 2 also, wrote a letter to the, management of the appellant, asking for payment of retrenchment com pensation to respondent No. 3 on the ground that the appellant had refused to take him back in its employment.
It seems that, thereafter, there were some conciliation proceedings and, subsequently, on the report of the Conciliation Officer, the Government of the State of Gujarat, by its notification dated 15th November, 1960, referred the dispute to the, Industrial Tribunal,, Gujarat, for adjudication.
The matter referred for adjudication was described in the notification as follows: "Demand No. 1 Shri R. section Ambwaney should be reinstated in the service of M/s. Sindhu Resettlement Corporation Ltd., and he should be paid his wages from 21st February, 1958.
" The Triunal, after hearing the parties, gave its Award on 10th August, 1961, directing reinstatement of respondent No. 3 and payment of back wages from 21st February, 1958.
The appellant challenged this award before the High Court of Gujarat by a petition under Articles 226 and 227 of the Constitution, but the petition was dismissed.
Consequently, the appellant has come up to this Court in this appeal by special leave.
In this appeal, three points have been urged on behalf of the appellant to challenge the orders of the Industrial Tribunal and the High Court.
The points are : (1) that respondent No. 3, having been given permanent appointment in Sindhu Hotchief and having obtained retrenchment compensation from that Company, could not claim that he was still holding a post in the appellant Corporation and could not, therefore, claim reinstatement, (2) that the dispute that was raised by respondent No. 3 as well as respondent No. 2 with the management of the appellant was confined to compensation for retrenchment and did not relate to the validity of the retrenchment or reinstatement, so that the Government of Gujarat had no jurisdiction to refer the dispute to the Industrial Tribunal which it did , and (3) that, in any case.
since the validity of the retrench of respondent No. 3 by the appellant was not 518 challenged, the, Tribunal committed a manifest error in directing reinstatement instead of awarding retrenchment compensation.
After hearing learned counsel for parties, we have come to the conclusion that the first two grounds urged on behalf of the appellant must be 'accepted, while the third does not arise.
The lease put forward on behalf of the respondents before ,the Industrial Tribunal was that respondent No. 3 was a permanent employee of the appellant and, when he joined the service of Sindhu Hotchief in the year 1953, he only went there on deputation or transfer, so that he continued to hold a lien on his permanent post in the appellant Corporation.
Two facts, no doubt, support this plea.
One is that Sindhu Hotchief was only a Subsidiary Company of the appellant, and the other is that, in its order dated 24th September, 1953, the appellant merely stated that, with effect from the 18th September, 1953, the services of res pondent No. 3 were placed at the disposal of Sindhu Hotchief.
No specific ;order was passed terminating his services in the appellant Corporation Though this circumstance would raise a presumption that respondent No. 3 did not cease to be an employee 0 the appellant when this order was issued on 24th September 1953, this presumption is rebutted by two circumstances.
The first is that respondent No. 3 was appointed in Sindhu Hotchief under the order dated 5th September, 1953, which laid down that in that Company he would be on a probation for a period of three months in the first instance.
The probationary period may have to be further extended by any period upto three months.
The confirmation of his appointment would be considered at the end of his probationary period and would depend on the efficiency and utility of his services to the Company.
Thereafter, respondent No. 3 continued to serve in that Company until 20th February, 1958, i.e. for a, period of about 4 1/2 yars.
Clearly, he must have been confirmed in his appointment in that company.
Once he was confirmed in Sindhu Hotchief, he could obviously not continue to be an employee of the appellant corporation simultaneously.
The High Court did not attach any value to this order of appointment dated 5th September, 1953, issued by Sindhu Hotchief, on the ground that no evidence was tendered before the Tribunal to show that this order was actually served on respondent No. 3.
In proceeding on this basis, the High Court clearly fell into an error, because, in this case, when the adjudication of the industrial dispute was, taken up by the Tribunal, all the parties contented themselves with filing documentary evidence and no oral evidence was given by any party.
At no stage was it challenged that the documents filed could not be taken into account until proved formally in the manner 'required to be proved in a regular civil proceeding in accordance with the provisions of the Indian Evidence Act.
This order of Sindhu Hotchief dated 5th September, was addressed to respondent No. 3 himself and, when there 519 was no challenge on behalf of respondent No. 3 that he did not receive this order, there was no justification for the High Court to hold that this.
,order had not been served on him.
In proceedings before the Industrial Tribunal, strict proof of documents in accordance with the provisions of the Indian Evidence Act is not required.
Parties having agreed to base their case on the documents filed, this order issued to respondent No. 3 could not be ignored on the ground that no oral evidence had been tendered to prove that respondent No. 3 actually received it.
It was in accordance with the conditions of service laid down in, this order that respondent No. 3 was appointed in Sindhu Hotchief and, by joining service there and continuing in that service for 4 1/2 years, respondent No. 3 clearly agreed to work in that Company on these conditions.
As we have indicated earlier, one of the conditions was that he would be confirmed at the end of the: probationary period and, once he was confirmed, he would become a permanent employee of Sindhu Hotchief and would cease to be the employee of the appellant.
Thus,.
though respondent No. 3 did not cease to be an employee of the appellant when his services were first placed at the disposal of Sindhu Hotchief by the appellant witheffect from 18th September, 1953, he ceased to be an employee of the appellant later when he was confirmed in Sindhu Hotchief.
The other circumstance that bears out this conclusion is that, at the time of termination of the employment of respondent No. 3 in Sindhu Hotchief, he was given retrenchment compensation which he accepted.
In case he had continued to be in the service of the appellant.
he would not have been entitled to retrenchment compensation from Sindhu Hotchief and, even if Sindhu Hotchief had any legal liability to contribute towards his retrenchment compensation which might have become ultimately payable to him on his retrenchment from the appellant Corpn., that amount would have been paid by Sindhu Hotchief to the appellant and not to respondent No. 3 himself.
It appears that respondent No. 3 very well knew that he had become a permanent employee of Sindhu Hotchief and, consequently, on retrenchment, he accepted the compensation but, thereafter, he seems to have decided to assert his claim to continuance of employment under the appellant.
This claim.
was also, however, very halfhearted.
No doubt, at the first stage on 21st February, 1958, he demanded reinstatement in the appellant Corpn., but very soon thereafter, when that request was refused, he demanded retrenchment compensation and one month 's salary in lieu of notice.
This demand was put forward by him in his letter dated 7th March, 1958, wherein he stated that, if the appellant refused to recognise Sindhu Hotchief as a sister concern and did not take him back in its Organisation, where he had a genuine claim of service, the appellant should please pay off his legal claims in respect of retrenchment compensation and one month 's pay in lieu of notice.
This position taken up by respondent No. 3 himself thus shows that he was aware that his services under the appellant Corpn.
had already 520 come to an end.
Learned counsel appearing for the respondents urged that we should not hold that services of respondent No. 3 in teh appellant Corpn.
had come to an end when he was absorbed in Sindhu Hotchief, because no retrenchment compensation was given to respondent No. 3 by the appellant Corporation at the stage, when his services ended in that Corporation.
The submission ignores the, circumstances that, when respondent No.3 went to Sindhu Hotchief, be did so willingly.
There was no compulsion on him to,.
go, to that Company.
His terms of service with the appellant did not entitle The appellant to transfer his services to the Subsidiary Company and the mere office order placing his services at the disposal of Sindhu Hotchief could not have been made effective unless respondent No. 3 also voluntarily agreed to take service in Sindhu Hotchief.
At no stage was it asserted on behalf of respondent No. 3 that he did not go voluntarily or with his consent to Sindhu Hotchief.
In case he took the service in Sindhu Hotchief and accepted permanent appointment there willingly, it cannot be held that his services were retrenched by the appellant Corporation.
He was not entitled to any retrenchment compensation when he left the service of the appellant willingly.
The nonpayment of retrenchment compensation by the appellant at that stage does not, therefore, indicate that the services of respondent No. 3 with the appellant had not come to an end.
On the facts of this case, it is clear that the Tribunal committed an error in drawing the legal inference that respondent No. 3 continued to be in the service of the appellant Corporation even after he had received permanent appointment in Sindhu Hotchief.
On a correct inference, it is clear that the services of respondent No. 3 under the appellant Corporation had come to an end and, when he was retrenched by Sindhu Hotchief, he could not claim reinstatement in the appellant Corporation.
In this connection, Mr. Gopalakrishnan, learned counsel for the respondents, relied on some remarks of the House of Lords in Nokes vs Doncaster Amalgamated Collieries Ltd.(1), where it was held: "Counsel for the appellant argued that a contractual right to personal service was a personal right of the employer and was incapable of being transferred by him to anyone else, and that a duty to serve a specific master could not be part of the property or rights of that master capable of becoming, by transfer, a duty to serve some ,one else.
It is, of course indisputable that (apart from statutory provision to the contrary) the benefit of a contract entered into by A to render personal service to X cannot be transferred by X to Y without A 's consent, which is the same thing as saying that, in order to produce the desired result, the old contract between A and X would r have to be terminated by notice or by mutual consent and a. new contract of service entered into by agreement between A and Y." (1) 521 This principle laid down by teh House of Lords is not applicable to the facts of teh case before us,because we have already held that respondent No.3 joined the service of Sindhu Hotchief villingly and with his consent, and it was not a case where he was transferred to Sindhuy Hotchief by the appellant without his consent.
This case does not help ,the respondents.
The second ground urged on behalf of the appellant is that in this case No. dispute relating relating to reinstatement was ' actually raised either by respondent No. 2 or respondent No. 3 before.
the reference was made to the Industrial Tribunal by the Government of Gujarat and,.
consequently.
that reference itself was , without jurisdiction.
When Mr. A. K. Sen, counsel for the.
appellant, raised this ground, it Was urged by" Mt. Gopalakrishnan on behalf of the respondents that this ground was being taken for the first time in this Court and had not been raised at any earlier stage, so that it should not be allowed to be taken in this Court.
It, however,appears that the question of jurisdiction of the State Government to refer the demand for reinstatement for adjudication to the Tribunal was specifically urged in the High Court and the High Court actually dealt with it in its judgment, dismissing the petition filed on behalf of the appellant.
The High Court clearly mentions that the counsel for the appellant contended that the Industrial Tribunal had no jurisdiction as the question referred to it and which it was called upon to adjudicate relating to reinstatement of respondent No. 3 in the service of the Corporation would not fall within the scope of item 3 in the Second Schedule to the .
It was further urged that, since the third respondent was neither discharged nor dismissed by the appellant, the question of relief of reinstatement would not arise under that item and, there being no item under which the demand would fall, the State Government had no jurisdiction to refer such a demand for adjudication to the Tribunal.
These points urged before the High Court would cover the ground now urged by Mr. Sen before us.
It is true that the form in which it was urged before the High Court was slightly different.
There, the point raised was that a demand for reinstatement, when there had been retrenchment only and no discharge or dismissal, could not be held to constitute an industrial dispute.
On the facts of the case as they appeared from the material before the Tribunal, it is now urged that, in fact, the demand, which was being pressed with the management by both the respondents, was in respect of retrenchment compensation and not reinstatement.
The demand for reinstatement seems to have been given up, because the respondents realised that the services of respondent No. 3 had not been terminated by discharge or dismissal, but by retrenchment only, and that retrenchment not being.
the result of any unfair labour practice or victimization, respondent No. 3 could only claim retrenchment compensation.
In the evidence given before the Tribunal, there were included two letters written by the two respondents containing the demand for retrenchment compensation.
522 We have already referred to one of these letters which was sen on 7th March, 1958 by respondent.
No. 3 to the Administrative Officer of the.
appellant.
The other letter was sent on 10th July 1959 by the General Secretary of respondent No. 2 in which again it was stated that Sindhu Hotchief had paid retrenchment dues to respondent No. 3 in respect of the services he had rendered in than Company, but the appellant Corporation was responsible for his retrenchment dues for the service which had been rendered by respondent No. 3 in the, appellant Corpn.
, The prayer was that, as the appellant had refused him re employment, arrangement should be made to pay his retrenchment dues according to section 25F of the .
Thus, both the respondents, in their claims put forward before the management of the appellant, requested for payment of retrenchment compensation and did not raise any dispute for reinstatement.
Since no such dispute about reinstatement was raised by either of the respondents before the management of the appellant, it is clear that the State Government was not competent to refer a, question of rein statement as 'an industrial dispute for adjudication by the Tribunal.
The dispute that the State Government could have referred competently was the dispute relating to payment of retrenchment compensation by the appellant to respondent No. 3 which had been refused.
No doubt, the order of the State Government making the reference mentions that the Government had considered the report submitted by the Conciliation Officer under sub section (4) of section 12 of the , in respect of the dispute between the,appellant and workmen employed under it over the demand mentioned in the Schedule appended to that order; and, in the Schedule, the Government mentioned that the dispute was that of reinstatement of respondent No. 3 in the service of the appellant and payment of his wages from 21st February, 1958.
It was urged, by Mr. Gopalakrishnan on behalf of the respondents that this Court cannot examine whether the Government, in forming its opinion that an industrial dispute exists, came to its view correctly or incorrectly on the material before it.
This proposition is, no doubt, correct; but the aspect that is being examined is entirely different.
It may be that the Conciliation Officer reported to the Government that an industrial dispute did exist relating to the reinstatement of respondent No. 3 and payment of wages to him from 21st February, 1958, but when the dispute came up for adjudication before the Tribunal, the evidence produced clearly showed that no such dispute had ever been raised by either respondent with the management of the appellant.
If no dispute at all was raised by the respondents with the management, any request sent by them to the Government would only be a demand by them and not an industrial dispute between them and their employer.
An industrial dispute, as defined, must be a dispute between employers and employers, employers and workmen, and workmen and workmen.
A mere demand to a Government, without a dispute being raised by the workmen with 523 their employer cannot become an industrial dispute Consequently, the material before the Tribunal clearly showed that no such industrial dispute, as was purported to be referred by the State Government to the Tribunal, had ever existed between the appellant Corpn.
and the respondents and the State Government in making a reference, obviously committed an error in basing its opinion 'on material which was not relevant to the formation of opinion.
The Government had to come to an opinion that an industrial dispute did exist and that opinion could only be formed on the basis that there was a dispute between the appellant and the respondents relating to reinstatement.
Such material could not possibly exist when, as early as March and July, 1958, respondent No. 3 and respondent No. 2 respectively had confined their demands to the management to retrenchment compensation only and did not make any demand for reinstatement.
On these facts, it is clear that the reference made by the Government was not competent.
The only reference that the Government could have made had to be related to payment of retrenchment compensation which was the only subject matter of dispute between the appellant and the respondents.
So far as the third ground is concerned, it loses force and (toes not arise in view of our decision relating to the first ground.
We have already held, when dealing with the first ground, that the appellant had neither dismissed respondent No. 3, nor had it discharged him from service.
There was no question of wrongful dismissal or discharge by the appellant.
It was not even a case of retrenchment.
because respondent No. 3 had willingly gone to join the service under Sindhu Hotchief.
He obviously joined the service in Sindhu Hotchief because of the financial advantages that were to accrue to him.
In September, 1953, he was drawing a salary of Rs. 200 P.m. in the scale of Rs. 150 10 250 while serving the appellant.
The site allowance of 20 per cent, which he had been receiving earlier, had been discontinued from March, 1952 and he was not getting it at the time when he went to join Sindhu Hotchief, where he was given a start of Rs. 240 in the grade of Rs. 200 20 400.
Consequently, in addition to the immediate rise in salary of Rs. 40 P.m., he had the advantage of working in the higher grade, in which, within two years, he exceeded the maximum of the scale in which he had been working with the appellant.
He served Sindhu Hotchief for a period of ' about 4 1/2 years and became confirmed there in accordance with the terms and conditions which were offered to him by Sindhu Hotchief.
In these circumstances, the respondents cannot ' urge that the services of respondent No. 3 were retrenched by the appellant, either when he went and joined Sindhu Hotchief, or when he wanted to get back to his post with the appellant.
His appointment in the service of the appellant having terminated, no question could arise of retrenching him at the stage when he wanted to come back after serving Sindhu Hotchief.
His services, 524 were in fact retrenched by his employer Sindhu hotchief and from that Company he received retrenchment compensation.
The third ground, therefore, needs consideration The appeal succeeds and is allowed.
The award of the Tri bunal is quashed.
In the circumstances of this case there will be no order as to costs,, Y.P. Appeal allowed.

summary/full:
The services of respondent No. 3 a permanent employee of appellant corporation, were placed at the disposal of appellant 's subsidiary company.
The subsidiary company by an order appointed respondent No. 3.
on probation and stated that he would be confirmed after the end of probation period.
After respondent No. 3 had worked with the subsidiary company for more than the probationary period, his services were terminated and he was paid retrenchment compensation.
Respondent No. 3 asserted continuance of his employment under the appellant, which was declined, There upon he demanded retrenchment compensation from the appellant also, which, too, was refused.
The matter was referred for adjudication by the State Government, and the Tribunal directed reinstatement of respondent No. 3 with back wages.
In appeal to this Court,the appellant Corporation contended that (i) respondent No. 3 having been given permanent appointment in the subsidiary company, and having obtained retrenchment compensation from that company, could not claim that he was still holding a post in the appellant corporation and could not, therefore, claim reinstatement; and (ii) the dispute that was raised was confined to compensation.for retrenchment and did not relate to the validity of the retrenchment or reinstatement, so that the State Government had no jurisdiction to refer the dispute to the Industrial Tribunal.
HELD: (i) Respondent No. 3 could not claim reinstatement in the appellant corporation.
Though he did not cease to be an employee of the appellant when his services were first placed at the disposal of the subsidiary company by the appellant, he ceased to be an employee of the appellant later when he was confirmed in the subsidiary company.
He also accepted the retrenchment compensation at the time of termination of the employment in the subsidiary company.
In case he had continued to be in the service of the appellant, he would.
not have been entitled to retrenchment compensation from the subsidiary company and, even if the subsidiary company had any legal liability to contribute towards his retrenchment compen sation which might have become ultimately payable to him on his retrenchment from the appellant corporation, that amount would have been paid by the subsidiary company to the appellant and not to respondent No. 3 himself.
Further he was not entitled to any retrenchment compensation when he left the service of the appellant willingly for there was no compulsion on him to go to the subsidiary company.
[519C F] Nokes vs Doncaster Amalagamated Collieries Ltd., [1940] A.C. 1014 held inapplicable.
(ii) The respondents.
in their claims Put forward before the management of the appellant requested for payment of retrenchment compensation and did not raise any dispute for reinstatement.
516 Since no such dispute about reinstatement was raised by the respondents before the management of the appellant, the State Government was not competent to refer a question of reinstatement as an industrial dispute for adjudication by the Tribunal .
The dispute that the State Government could have referred competently was the dispute relating to payment of retrenchment compensation by the appellant to respondent No. 3 which had been refused.
A mere "demand to a Government without a dispute being raised by the workmen, with their employee cannot become an industrial dispute.
[522H 523D].


judgement:
Appeals Nos.
1968 1970 of 1966.
Appeals by special leave from the judgment and order dated July 16, 1962 of the Madras High Court in Tax Cases Nos. 117,118 and 119 of 1959.
section B. Banerjee and section N. Mukerjee, for the appellant (in all the appeals).
K. M. Mudaliyar, Advocate General for the State of Madras and A. V. Rangam, for the respondent (in all the appeals).
M.C. Setalvad, B. Sen, G. section Chatterjee and P. K. Bose, for the Intervener (in C. A. No. 1968 of 1966).
The Judgment of the Court was delivered by Hegde, J.
These appeals by special leave arise from the common order made by the Madras High Court in T. C. Nos.
117 to 119 (revisions Nos. 71 to 73) on its file.
The Indian Steel and Wire Products Ltd. a joint stock public limited company is the appellant in all these appeals.
At the instance of the steel controller the appellant supplied certain steel products to various persons in the Madras State during the financial years 1953 54, 1954 55) and part of 1955 56 (from April 1, 1955 to September 6, 1955).
The State of Madras assessed the turnovers of the appellant relating to those transactions to sales tax under the Madras Gen. Sales Tax Act, 1939 (Madras Act 9 of 1939) (to be hereinafter referred to as the Act), the law in force at that time.
The appellant has been assessed to tax on the basis of best judgment.
The authorities under the Act have determined appellant 's turnover during the year 1953 54 at Rs. 3129520/ and levied a tax of Rs. 16298/4 annas.
During the financial year 1954 55, its turnover was determined at Rs. 3759216/ .
and the assessment levied is Rs. 58737 12 0.
For the broken period in the financial year 1955 56, the appellant 's turnover was determined at Rs. 1453292/ and the same was assessed to tax at Rs. 22707 12 0.
Even according to the appellant, its turnovers during 1953 54 was Rs. 2912533 14 0, in 1954 55, Rs. 3971493/7/ and in 1955 56, Rs. 1725400/5/ .
Therefore, there is little room for controversy about its turnover in the relevant years.
The appellant is contesting the right of the State of Madras to levy tax on the turnovers in question.
According to the appellant, the turnovers in question could not have been considered as sales and consequently they could not have been brought to tax under the Act.
The appellant asserts that deliveries in question were made under compulsion of law and there was no agreement between the parties.
They were 481 made in pursuance of the orders of the Controller exercising powers under the Iron & Steel (Control of Production and Distribution) Order, 1941 (which will hereinafter be referred to as the order), which was issued under the Defence of India Act 1939.
It was argued on behalf of the appellant that it was the controller who determined the persons to whom the goods were to be supplied, the price at which they were to be supplied, the manner in which they were.
to be transported, and the mode in which the payment of the price was to be made.
In short, it was said that every facet of those transactions were prescribed by the controller and therefore those transactions cannot be considered as sales.
On the basis of those assertions support was sought from the decision of the House of Lords in Kirkness vs John Hudson & Co., Ltd.(1) the decision of this Court in M Is.
New India Sugar Mills Ltd. vs Commis sioner of Sales Tax.
Bihar(1), the decision of the Calcutta High Court in Calcutta Electric Supply Corporation Ltd. vs Commissioner of Income Tax, West Bengal(1) the decision of the Orissa High Court in Messrs. Cement Ltd. vs The State of Orissa(1), and a few other decisions.
It was further argued that even if those transactions are considered as sales the State before exercising its taxing power should have had in its possession material to show that the goods delivered by the appellant were delivered in that State for consumption which circumstance alone can make those transactions sales within that State; as no material was placed on record to show that the goods in question were delivered in that State for consumption it could not have brought the turnovers in respect of those transactions to tax under the Act.
These contentions of the appellant have been rejected by the authorities under the Act as well as by the High Court.
Other contentions advanced on behalf of the appellant deserve to be summarily rejected for the reasons to be mentioned hereinafter.
The principal question that falls for decision in these appeals.
is whether the transactions with which we are concerned herein are sales.
2(h) of the Act defines 'sale ' thus: " '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, and includes also transfer of property in goods involved in the execution of works contract and in the, supply or distribution of goods by a co operative society. club, firm or any association to its members for cash or for deferred payment or other valuable consideration but does not include a mortgage.
hypothecation, charge or pledge" (the explanations to that definition are not relevant for our present purpo se).
(1) (2) [1963] Suppl.
2 S.C.R. 459.
(3) (4) 12 S.T.C. 205.
482 This wide definition undoubtedly covers those transactions.
But then the power of a State to tax sales is derived from Entry 54 of List II of the VII Schedule in the Constitution.
That entry as it stood at the relevant time empowered the State to tax on the sale or purchase of goods.
The scope of the expression 'sale or purchase of goods ' found in entry 48 in List II of Schedule VII of the Government of India Act 1935 which is in pari materia with the aforementioned entry 54 came up for interpretation before this Court in State of Madras vs Gannon Dunkerley(1).
In that case, the question that fell for decision was whether the words 'sale of goods ' should be given their popular meaning or whether they should have the meaning attached to them under the Sale of Goods Act.
This Court held that the expression 'sale of goods ' was, at the time when the Government of India Act, 1935 was enacted, a term of well recognised legal import in the general law relating to sale of goods and in the legislative practice relating to that topic and must be interpreted as having the same meaning as in the sale of Goods Act 1930: In the course of the judgment, Venkatarama Aiyar, J,who ,spoke for the Court after examining the various decisions cited at the Bar, observed, as follows: "Thus, according to the law both of England and of India, in order to constitute a sale it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods which of course pre supposes capacity to contract, that it must be supported by money consideration and that as a result of the transaction property must actually pass in the goods.
Unless all these elements are present, there can be no sale.
Thus, if merely title to the goods passes but not as a result of any contract between the parties, express or implied, there is no sale.
So also if the consideration for the transfer was not money but other valuable consideration, it may then be exchange or barter but not sale.
And if under the contract of sale, title to the goods has not passed, then there is an agreement to sell and not a completed sale.
" As laid down by this decision, to constitute a valid sale, there must be concurrence of the following elements viz. (1) parties competent to contract (2) mutual assent (3) a thing the absolute or general property in which is transferred from the seller to the buyer and (4) a price in money paid or promised.
Therefore we have to see whether all these elements are found in the transactions before us.
Before doing so it is necessary to refer to the 'order ' and the manner in which those transactions were effected.
During the World War IT iron and steel goods became scarce.
Therefore it became necessary for the Government to control the production and distribution of those goods.
In order to do so, the (1) ; 483 government issued the 'order ' on July 26, 1941, and the same came into force on August 1, 1941.
The provisions in that order which are material for our present purpose are set out hereinbelow: "2. Definitions In this Order, unless there is anything repugnant in the subject context: (a) 'Controller ' means the person appointed as Iron and Steel Controller by the Central Government, and includes any person exercising, upon authorisation by the Central Government, all or any of the powers of the Iron and Steel Controller; (b) 'Producer ' means a person carrying on the business of manufacturing iron or steel.
(c) 'Registered Producer ' means a producer who is registered as such by the Controller.
(d) 'Stockholder ' means a person holding stocks of Iron or Steel for sale who is registered as stockholder by the Controller.
(e) 'Controlled Stockholder ' means a stockholder appointed by the Controller to hold stocks of iron or steel under such terms and conditions as he may prescribe from time to time.
(f) 'Pressure Pipes ' include all Pipes and Tubes 1/8" nominal bore and above which will withstand or may be used for a working pressure of 25 lbs.
per square inch and above.
Application of Order (I) The provisions of this Order shall apply to all iron or steel of the categories specified in the Second Schedule to this Order.
(2) A certificate signed by the Comptroller or by any officer authorised by him in this behalf, in respect of any category of iron or steel, shall be conclusive proof that it is an article to which this Order is applicable.
Acquisition No person shall acquire or agree to acquire any iron or steel from a Producer or a Stockholder except under the authority of and in accordance with the conditions contained or incorporate d in a general or special written order of the controller.
Disposal No Producer or Stockholder shall dispose of or agree to dispose of or export or agree to export from British India any iron or steel, except in accordance with the conditions contained or incorporated in a general or special written order of the Controller.
10B. Power to direct sale The Controller may ' by a written Order require any person holding stock or iron 484 and steel, acquired by him otherwise than in accordance with the provisions of Clause 4 to sell the whole or any part of the stock to such person or class of persons and on such terms and conditions as may.
be specified in the Order.
10C. Power to prohibit removal The Controller may order any producer (including a registered producer), any stockholder (including a controlled stockholder) or any other person not to remove or permit the removal of any iron or steel, whether sold or unsold, from his stockyard or from any other part of his premises to any place outside the precincts of such stockyard or premises, except with the written permission of the Controller.
11 AA (3).
No producer, stockholder, or other person holding stocks of iron and steel shall without sufficient cause, refused to sell any iron or steel which he is autho rised to sell under this Order.
Explanation The possibility or expectation of obtaining a higher price at a later date shall not be deemed to be a sufficient cause for the purpose of this clause.
11B. Power to fix prices (1) The Controller may from time to time by notification in the Gazette of India fix the maximum prices at which any iron or steel may be sold (a) by a Producer, (b) by Stockholder including a Controlled Stockholder and (c) by any other person or class of persons.
Such price or prices may differ for iron and steel obtainable from different sources and may include allowances for contribution to and payment from equalising freight, the concession rates payable to each pro ducer or class of producer under agreements entered into by the Controller with the producers from time to time.
and any other disadvantages.
(2) For the purpose of applying the prices notified under sub clause (1) the Controller may himself classify any iron and steel and may, if no appropriate price has been so notified, fix such price as he considers appropriate.
(3)No producer or stockholder or other person shall sell, or offer to sell.
(and no person shall acquire) any iron or steel at a price exceeding the maximum prices fixed under sub clause (1) or (2).
Any Court trying a contravention of this Order may, without prejudice to any other sentence which it may pass, direct that any Iron and Steel in respect of which the Court is satisfied that this order has been contravened shall be forfeited to His Majesty.
" The appellant has set out in para 4 of the statement of the case the procedure adopted for acquiring iron and/ 485 or steel products under the order.
This is what is stated therein: "That Order was at all material times administered principally by the Iron and Steel Controller having his office in the city of Calcutta in the State of West Bengal who controlled the entire production and distribution of the iron and/or steel products.
Any party desiring to acquire any product has to apply to the Controller.
Upon processing such application or requisition entirely at his option and discretion, the Controller would pass such a requisition an to the Appellant for manufacture and/or despatch.
The appellant has, upon receipt of the said requisition from the Controller to prepare a Works Order for the manufacture of the products concerned and to advise the Controller; and later on completion of the manufacture the appellant has to make the product conform to the requisition processed by the Controller and then deliver the requisite quantity in the requisite shape to the Indian State Railways siding maintained at the appellant 's own factory site, in Indranagar.
in the suburbs of Jamshedpur, in the State of Bihar, and to advise the requisitionist as well as the Controller accordingly. " The correspondence relating to the delivery of steel goods in pursuance of an order placed by one K. Thiruvengadam Chetty & Co. has been produced by the appellant evidently to show the manner in which the transactions were effected.
On December 20, 1952.
Thiruvengadam Chetty and Co., wrote follows to the Controller: 'From Name K. Thiruvengadam Chetty and Company.
Address Iron Merchants and Tata Scob Dealers 93, Rasappa Chetty Street.
Madras 3.
Date 20th December 1952.
To The Iron and Steel Controller, 33, Netaji Subas Road, Calcutta.
Through the Director of Controlled Commodities, Mount Road, Madras.
Dear Sir, Please place on our behalf and at our risk and account our order on Registered Producers for material as per specification given below for delivery in such period ,as you can arrange.
We confirm that this indent is placed 486 subject to the provisions of the Steel Price Schedule regarding prices, etc., and the terms and conditions of business (including payment) of the registered producers on whom the order is placed by you and that delivery or part/delivery from any such registered producer will be accepted by us.
Please direct the registered producers concerned to send us a copy of the works order in confirmation of having booked our Indent.
Ship to Madras Saltcotaurs.
Send R. R. to Messrs. K. Thiruvengadam Chetty and Company, Iron Merchants, 93, Rasappa Chetty Street, Madras 3, through your Madras Office.
Send original and duplicate invoice to Messrs. K. Thiruvengadam Chetty and Company, 93, Rasappa Chetty Street, Madras 3 through your Madras Office.
Date of shipment desired: Ex stock as early as possible.
Quantity Pieoes Section Lengths Complete description un tested of material indented (1) (2) (3) (4) CWT.
10. . 468 M.S. rounnd 1/4" 18 ' 13 B Category 5. . .493 " 3/16" 18 ' do 5. . .453 " 5/16" 18 ' do 20 (Twenty tons only) All P.T. free on rail Saltcotaurs and bundling charge account.
Yours faithfully, (signed). . . by Partner, For K. Thiruvengadam Chetty and Company.
" The Controller forwarded that letter to the appellant with the following remarks: "The above indent is forwarded to Indian Steel and Wire Products Limited, Tatanagar, for delivery in period 1/53 or subsequently in accordance with any general or special directions of the Iron and Steel Controller.
" It may be noted that the Controller merely asked the appellant to deliver to K. Thiruvengadam Chetty and company the goods ordered "in accordance with any general or special directions of the Iron and Steel Controller.
" Our attention was not invited to any general or special order issued by the controller excepting that 487 fixing the base price.
It is clear that it was left to the appellant to supply the goods ordered at his convenience.
On the basis of the, above communication a works order was issued by the appellant to the mill superintendent, a copy of which was sent to Thiruvengadam Chetty and Company.
That order reads: "Works Order: RS/MAD/RM/15/53 of 23rd February 1953.
Delivery: P.D.1/53.
Ship to: Saltcotaurs Book to self.
Freight: To pay.
To The Mill Superintendent.
Please supply the following to the Shipping Department, M.S. Rounds our usual commercial quality in bundles in stock lengths of 12/18 feet.
TONS 1/4" diameter 10 at Rs. 486 per ton free on rail 3/16" 5 at Rs.493 Saltootaurs, plus bundling.
5/16" 5 at Rs. 453 Charge of Rs. 5 per ton.
cc: South India Iron and Hardware Merchants Association, Armenian Street, Madras.
Notice to consignees.
Delivery must be taken within three days of the arrival of the train at destination, a certificate obtained for any wrongful delivery and a claim preferred against the Railway Company forthwith under advise to us.
In the case of non arrival of any consignment advise should be given us as soon as a reasonable time for the journey has elapsed. 'All orders booked are subject to our terms of business and general understanding in force at the time of booking the orders and despatch of goods. ' 'All prices mentioned in the Works Orders are subject to revision, i.e., prices ruling at the time of despatch will be charged. '".
The works order in question specifically says that 'all orders booked are subject to our terms of business and general understanding in force at the time of booking the orders and despatch of goods '.
In fact as seen from the letter of Thiruvengadam Chetty and Co., dated August 31, 1953, the buyers were willing to change by mutual agreement the specifications of the goods to be supplied.
This is what that letter says: 488 agreement the specifications of the goods to be supplied.
This is what that letter says: "If 1/4" size is not ready, please despatch 3/8" size 20 tons as requested in our previous letter.
Please treat this as very urgent.
" From the material on record it is not possible to accept the contention of Mr. S.R. Bannerjee, learned counsel for the appellant that the dealings in question were controlled at every stage, leaving no room of concensus.
From the records before us all that could be gathered is that the controller fixed the base price of the 'steel products and determined the buyers.
In other respects, the parties were free to decide their own terms by consent.
As seen from the correspondence referred to earlier, the controller allowed the appellant to supply the goods ordered either in the first quarter of the year 1953 or subsequently.
In other words, the appellant could supply the goods in question at its convenience.
It was open to the appellant to agree with its customers as to the date on which the goods were to be supplied.
From the works order dated February 23, 1953, a copy of which was sent to one of the appellant 's customers, it is clear that all orders booked were subject to appellant 's terms of business and general understanding in force at the time of 'booking the orders and despatch of goods.
It was also open to the appellant to fix the time and mode of payment of the price of the goods supplied.
Therefore it would not be correct to contend that the transactions were completely regulated and controlled by the controller leaving no room for mutual assent.
In his revision petition dealing with the question of transport of the goods supplied the appellant stated that "the transport of goods was if at all by virtue of an independent arrangement between the petitioner and the persons to whom the goods were supplied. .
This admission clearly shows that the supplies in question were made partly on the basis of mutual assent.
It was Mr. Bannerjee 's contention that for finding out the nature of the transaction we have only to look to the order and not to the documents produced in the case.
According to him, the documents produced in this case do not fully disclose the nature of the transactions; the transactions in question had to be effected under the terms of the order; the order left no room for negotiation between the supplier and its customers and therefore we should conclude that the transactions in question are not sales.
According to Mr. Bannerjee all supplies of iron and steel products could be made only in accordance with the directions given by the controller under cl.
10B of the order.
That being so, he asserted there was no room for mutual assent.
We do not think that this contention of Mr. Bannerjee is well founded.
We are unable to agree with him that the iron and steel products could not have been supplied to any person except in pursuance of an order made by the controller under cl.
10B. We think that supplies by producers can be made in pursuance of an order of the controller under cl.5.
We are not pursuaded 489 by Mr. Bannerjee 's contention that clauses 4 and 5 merely prohibit the prospective buyer and the intending seller from buying or selling without the sanction of the controller and that those provisions do not confer power on the controller to authorise a person to acquire and to permit a producer to sell.
Those provisions, in our judgment, by implication confer power on the controller to issue the necessary authority to the buyer and the seller.
This conclusion of ours is strengthened from the circumstance that cl.10B was not a part of the order till 1946.
That provision was inserted in the order by notification No. 1(1) 1(530) A dated May 26, 1946, It is nobody 's case that the provisions of the order were incapable of being implemented till that date.
The contention of Mr. Bannerjee that the controller derives his power to authorise the buyer to buy and the seller to sell exclusively under cl.
10B, suffers from another infirmity.
Under cl.
10B, the controller gets power to require any person holding stock of iron and steel acquired by him otherwise than in accordance with the provisions of cl. 4 to sell the whole or part of the stock to such person or class of persons and on such terms and conditions as may be specified in the order.
This clause does not empower the controller to issue the authority required under cl. 4.
Our attention has not been invited to any provision in the order if we exclude from consideration cl. 4, under which the controller could have the power to authorise the buyer to buy iron and steel products.
Therefore, it is obvious that he gets that power from cl. 4, itself.
The language employed in clauses 4 and 5 is simi lar.
If the controller gets power to authorise a buyer to buy iron and steel products under cl. 4, there is no reason why he should be held to have no power under cl. 5 to authorise a producer or stock holder to dispose of his stock of iron and steel products.
Further, under cl.
10B, the controller can only require any person holding stock 'of iron and steel to sell the whole or part of his stock to such person or class of persons and on such terms and conditions as may be specified in the order.
That clause does not empower him to direct any manufacturer to manufacture any steel or iron product and to dispose of the same to any person.
In other words, a direction under cl.
10B can only be given to a person holding stock of iron and steel But under cl.5 he can authorise a producer or a stockholder to dispose of any iron or steel whether the same is in stock or not in accordance with the conditions contained or incorporated in a special or general written order issued by him.
the instant case, as can be gathered from the correspondence already referred to, the order issued by the controller could be complied with only after manufacturing the required material.
Hence, the order issued by the controller could not have been issued under cl.
10B. In this view of the matter it is not necessary for us to find out the true scope of cl.
10B. So far as cl.5 is concerned.
admittedly, it does not require the controller to regulate or control every facet of a transaction between a producer and the person to whom he supplies iron and steel products.
490 It is true that in view of the order, the area within which there can be bargaining between a prospective buyer and an intending seller of steel products, is greatly reduced.
Both of them have to conform to the requirements of the order and to comply with the terms and conditions contained in the order of the controller.
Therefore they could negotiate only in respect of matters not controlled by the order or prescribed by the controller.
It is true, in these circumstances, the doctrine of laisser faire can have only a limited ap.
plication.
That is naturally so.
In certain quarters the validity of that doctrine is, seriously challenged.
Under the existing economic compulsions all essential goods being in short supply in a welfare State like ours, social control of many of our economic activities is inevitable.
That does not mean that there is no freedom to contract.
The concept of freedom of contract has undergone a great deal of change even in those countries where it was considered as one of the basic economic requirements of a democratic life.
Full freedom to contract was never there at any time.
Law invariably imposed some restrictions on freedom to contract.
But due to change in political outlook and as a result of economic compulsions, the freedom to contract is now being confined gradually to narrower and narrower limits.
This aspect is vividly brought out in the 'Law of Contract ' by Cheshire and Fifoot (6th ed.) at p. 22.
Dealing with the question of freedom to contract, the learned author observes.
"As the nineteenth century waned it became ever clearer that private enterprise predicated some degree of economic equality if it was to operate without injustice.
The very freedom to contract with its corollary, the freedom to compete, was merging into the freedom to combine; and in the last resort competition and combination were incompatible.
Individualism was yielding to monopoly, where strange things might well be done in the name of liberty.
The twentieth century has seen its progressive erosion on the one hand by opposed theory and on the other by conflicting practice.
The background of the law, social, political and economic, has changed.
Laisser faire as an ideal has been supplanted by 'social security '; and social security suggest status rather than contract.
The State may thus compel persons to make contracts, as where, by a series of Road Traffic Acts from 1930 to 1960, a motorist must insure against third party risks , it may, as by the Rent Restriction Acts, prevent one party to a con tract from enforcing his rights under it; or it may empower a Tribunal either to reduce or to increase the rent payable under a l ease.
In many instances a statute prescribes the contents of the contract.
The Moneylenders Act, 1927, dictates the terms of any loan caught by its provisions; the Carriage of Goods by Sea Act, 1924, contains six pages of rules to be incorporated in every contract for 'the carriage of goods by sea from any port in Great Britain or Northern 491 Ireland to any other port; the Hire Purchase Act 1938 inserts into hire purchase contracts a number of terms which the parties are forbidden to exclude; successive Landlord and Tenants Act from 1927 to 1954 contain provisions expressed to apply 'notwithstanding any agreement to the contrary.".
It would be incorrect to contend that because law imposes some restrictions on freedom to contract, there is no contract at all.
So long as mutual assent is not completely excluded in any dealing, in law it is a contract.
On the facts of this case for the reasons already mentioned, it is not possible to accept the contention of the ,learned counsel for the appellant that nothing was left to be decid ed by mutual assent.
On the other hand, we agree with the learned Advocate General of Madras and Mr. Setalvad who appeared for.
the State of West Bengal, the intervener, that the controller 's directions were confined to narrow limits and there were several matters, which the parties could decide by mutual assent.
We shall now proceed to examine the principal decisions relied ' upon by the learned counsel for the appellant.
In Kirkness vs John, Eudson & Co. Ltd.(1), the material facts were these: On January 1, 1948, railway wagons owned by John Hudson & Co., the tax payers '.
then under requisition by the Minister of Transport. were acquired, by the British Transport Commission under section 29 of the Transport Act, 1947.
Under section 30 of that Act, compensation became payable by the Commission to the tax payers.
The amount paid as compen sation was substantially higher than the written down value of the wagons for income tax purposes and as the tax payers had received allowances under r. 6 of the rules applicable to Cases I and 11 of Sch.
D to the Income Tax Act 1918, they were assessed under section 17 of the Income Tax Act 1945 to give effect to a balancing charge in respect of the excess of the original cost of the wagons over the written down value.
The Court of Appeal held that the transfer of ' wagons under section 29 of the Transport Act 1947 was not a sale at common law, since it did not involve a mutual assent and a price;, it was an acquisition authorised by a statute and not a compulsory purchase.
Therefore, the wagons were not machinery or plant which had been 'sold ' within the meaning of section 17(1) (a) of the Act of 1945 and no, balancing charge could be made under the sub section.
This, decision was affirmed by the House of Lords by a majority.
Speak in,, for the majority, Viscount Simonds observed: "My Lords, in my opinion the company 's wagons, were not sold, and it would be a grave misuse of language, to say that they were sold.
To say of a man who has had his property taken from him against his will and been awarded compensation in the settlement of which be has had no voice, to say of such a man that he has sold his ' property appears to me to be as far from the truth as to, (1) 492 say of a man who has been deprived of his property without compensation that he has given ' it away.
Alike in the ordinary use of language and in its legal concept a sale connotes the mutual assent of two parties.
So far as the ordinary use of language is concerned it is difficult to avoid being dogmatic, but for my part I can only echo what Singleton L.J. said in his admirably clear judgment: 'What would anyone accustomed to the use of the words ,sale ' or 'sold ' answer? It seems to me that everyone must say 'Hudsons did not sell '.
I am content to march in step with everyone and say 'Hudsons did not sell '.
Nor is a different result reached by an attempt to analyse the legal concept.
When Benjamin said in the passage quoted by Singleton and Birkett L. JJ.
from his well known book on Sale, 2nd ed., p. 1, that 'by the common law a sale of personal property was usually termed a 'bargain and sale of goods ', he was by the use of the word 'bargain ' perhaps unconsciously emphasizing that the consensual relation which the word 'bargain ' imports is a necessary element in the concept ', ".
From the facts set out above it is clear that the House of Lords was dealing with a compulsory acquisition and not sale.
Therefore that decision is of no assistance to the appellant.
In Messrs. New India Sugar Mills Ltd. vs Commissioner of Sales Tax, Bihar(1), this Court was called upon to consider whether ,certain transactions effected under the Sugar Control Order 1946 were sales.
By a majority this Court held that they were not sales.
The facts as found by the High Court and accepted by this Court ,are found at pp.
463 and 464 of the report.
They are as follows: "The admitted course of dealing between the parties was that the Government of various consuming States used to intimate to the Sugar Controller of India from time to time their requirement of sugar, and similarly the factory owners used to send to the Sugar Controller of India statements of stock of sugar held by them ' On a consideration of the requisitions received from the various State Governments and also the statements of stock received from the various factories, the Sugar Controller used to make allotments.
The allotment order was addressed by 'the Sugar Controller to the factory owner, direc ting him to supply sugar to the State Government in question in accordance with the despatch instructions received from the competent officer of the State Government.
A copy of the :allotment order was simultaneously sent to the State Government concerned, on receipt of which the competent authority of the State Government sent to the factory concerned detailed instructions about the destination to (1) (1963) Supp.
2 S.C.R. 459. 493 which the sugar was to be despatched as also the quantities of sugar to be despatched to each place.
In the case of the Madras Government it is admitted that it also laid down the procedure of payment, and the direction was that the draft should be sent to the State Bank and it should be drawn on Parry and Company or any other party which had been appointed as stockist importer on behalf of the Madras Government.
" On the basis of those facts, the Court came to the conclusion that there was no room for mutual assent in those transactions.
The facts of the present case are materially different from the facts of that case.
Hence the ratio of that decision does not apply to the facts of the present case.
Whether in a given case there was mutual assent or not is a matter to be decided on the facts of that case.
In Calcutta Electric Supply Corporation Ltd. vs Commissioner of Income Tax, West Bengal(1).
the facts were: The assessees were an electric supply company.
During the war the government requisitioned an electricity generating plant of the assessees under r. 83(1) of the Defence of India Rules.
The Government wanted to acquire that plant.
As the assessees were not willing to sell the plant, they required the government to re examine the position and to rescind the order depriving them of the plant, but the government refused to re consider that decision.
The amount which the assessees received as price or compensation for the plant exceeded the written down value of the plant by Rs. 3,27,840/ .
The taxing authorities treated the excess as assessees ' profits under section 10(2) (vii) of the Indian, Income Tax Act 1922 and assessed that amount to tax.
On a reference under section 66(1) of that Act, as to whether the amount in question can be considered as assessees ' profit, Harries, C. J. and Banerjee, J. held that the transaction by which the government acquired the plant could not be regarded as a sale within the meaning of section 10(2) (vii) and therefore the sum of Rs. 3,27,840/ was not taxable as profit under that provision.
The Court further observed that the ordinary meaning of the word 'sale ' is a transaction entered into voluntarily between two persons known as buyer and seller by which the buyer acquires the property of the seller for an agreed consideration known as 'price '.
The rule laid down in that decision is the same as that laid down by the House of Lords in Kirkness vs John Hudson & Co. Ltd.(2).
In this case also the Court was dealing with a compulsory acquisition and not sale.
In M/s. Cement Limited vs The State of Orissa(3), the Court was dealing with transactions effected under the Cement Control Order 1956.
Therein the assessee company.
a manufacturer of cement, was required to sell cement to the State Trading Corporation On payment of stipulated price.
3 of the Cement Control Order provided "Every producer shall sell (1)(a) the entire quantity of cement held in stock by him on the date of the commencement (1) , (2) (3) 12 S.T.C. 205.
494 of the order, and (b) the entire quantity of cement which may be produced by him during a period of two years from the date of commencement of this order to the Corporation and deliver the same to such person or persons as may be specified by the Corporation in this behalf from time to time, (2) notwithstanding any contract to the contrary, every producer shall dispose of cement lying in stock with him or produced by him, in accordance with the provisions of sub cl.
(1) and shall not dispose of any cement in contravention thereof".
6(1) was to the effect that the price at which a producer may sell cement shall be specified in the schedule.
The sales in this case were effected under the aforementioned clauses 3 and 6.
It is under those circumstances that the Court came to the conclusion that the transactions in question were not sales but were in the nature of compulsory transfer of title.
This case again is of no assistance to the appellant.
The appellant 's learned counsel also read to us the decisions in North Adjai Coal Company (P) Ltd. vs Commercial Tax Officer and others(1) and section K. Roy vs Additional Member, Board of Revenue, West Bengal(2).
On the facts of those cases, the Court came to the conclusion that the transactions in question were not sales.
For the reasons already stated, we are unable to accept the contention that the transactions with which we are concerned in these cases are not sales.
Out of the four elements mentioned earlier, three were admittedly established, namely, the parties were competent to contract, the property in the goods was transferred from the seller to the buyer, and price in money was paid.
The only controversy was whether there was mutual assent.
Our finding is that there was mutual assent in several respects.
Hence, we agree with the High Court that the transactions before us are sales.
That takes us to the next contention by the appellant i.e., that there was no material to conclude that the goods were delivered in the State of Madras for consumption.
There is no dispute that the goods in question were delivered in the State of Madras.
The dispute centres round the question whether it is proved that they were delivered for consumption in that State.
The learned counsel for the appellant conceded that actual consumption within the State need not be proved.
All that is required to be shown is that they were delivered for consumption in the State.
The only question is whether there was any material to support the conclusion of the Sales Tax Appellate Tribunal, the final fact finding authority, that the goods were delivered in the Madras State for consumption in that State.
The High Court rightly proceeded on the basis that "the burden is certainly upon the State to establish facts upon which a subject can be taxed under a financial enactment.
" But it accepted the finding of the Sales Tax Appellate Tribunal that from the facts and circumstances established it is a reasonable inference to draw (1) 17 S.T.C. 514.
(2) 18 S.T.C. 379.
495 that the goods were delivered for consumption in the Madras State.
This aspect was dealt with by the Tribunal in para 1 1 of its order dated April 17, 1959.
On that question this is what the Tribunal says: "It will be an onerous task to pursue the subsequent history of every inter State sale transactions to find out whether after successive change of hands the ' goods left the state; but it will be permissible in such cases to consider the broad pattern of the transaction, the surrounding circumstances and any other relevant date to draw a reasonable conclusion therefrom.
In the cases before us, it is admitted that the sales were in pursuance of a scheme of internal distribution under the control order applicable to the whole of India.
That there was necessity to draw up such a scheme, indicates that the goods were essential goods, that the supply was inadequate to meet the demand, and that unless there was control and restriction in distribution it was likely that the goods would pass into the black market, and would be sold at exorbitant rates.
It is permissible inference that controlled stockists, registered stockists and registered dealers, who are the principal buyers from the appellants and who could be expected to have been given quotas in the scheme of controlled distribution, would be people expected to meet the local demand for the consumption of the controlled goods.
It is also well known to people familiar with the operation of a controlled scheme and distribution of goods that quotas are given against proved demands, and that it is not part of the scheme of distribution to provide for goods sold in one State being exported to other states inside the Union territory because each State has got its own quota of goods and list of controlled stockists, registered stockists and so on.
Therefore we infer from the analysis given of the transactions by the appellants, that the sales to various groups of purchasers, registered stockists and controlled ' stockists and so on are all intended to meet the local demands for steel products and not for re export.
An analysis of the amount concerned in each of these transactions show that the quantity of steel involved would not be large in each individual case, a circumstance again point to the inference that the sales were intended to meet the requirements of the consumers in Madras State.
In the case of sales to local Government departments, it is obvious that sales were intended for internal consumption and not reexports".
Strangely enough, the High Court at the first instance thought that this finding was unsupported by evidence.
Consequently it remanded the case back to the Tribunal for a fresh finding on that aspect 496 after giving both the parties opportunity to adduce further evidence oral and documentary.
No fresh material was placed before the tribunal after the case was sent back to it.
But on the basis of the material already on record, the tribunal again came to the very conclusion that it had come earlier.
When the cases again came back to the High Court.
that finding was accepted as correct.
In our opinion, the High Court was not right in rejecting that finding at the first instance.
The finding of the tribunal is a reasonable finding .
The inferences drawn by it are reasonable inferences from the facts proved or admitted.
It is reasonable to assume that the supplies of iron and steel products were being made to stockists in a State for consumption in that State.
It may be, as found in this case, that a small portion of the supplies had gone out of the State.
But that is not a relevant circumstance.
What we have to see is whether the Supplies in question were made for consumption in the Madras State.
On that question the finding of the Tribunal is conclusive.
The contentions of the appellant that the findings of the tribunal about the quantum of the turnover were not based on any evidence, or that those findings were arrived at in violation of the principles of natural justice or that the decision of the High Court is perverse, are wholly untenable contentions.
At the time of the hearing no reasons were advanced in support of those contentions.
Hence those contentions do not merit any detailed examination.
In the result, these appeals fail and they are dismissed with costs hearing fee, one set.
Appeals dismissed.

dataset_name: IN-Abs

summary/full:
At the instance of the steel controller exercising powers under the Iron and Steel (Control of Production and Distribution) Order, 1941, the appellant supplied certain steel products to various persons in Madras State during the financial years 1953 54, 1954 55 and part of the financial year 1955 56.
The State of Madras assessed the turnover of the appellant relating to those transactions to sales tax under the Madras General Sales Tax Act, the law in force at that time.
The appellant contended before the authorities under the Sales Tax Act as well as the High Court that the transactions were not sales and therefore could not be taxed.
The further contention was that there was no material to show that the deliveries were for consumption within the State of Madras so as to become taxable within the State.
From the adverse decision of the High Court the appellant, by special leave, came to this Court.
In support of the contention that the transactions were not sales it was urged that they were effected under the directions of the Iron and Steel Controller given under cl.
10B of the Order and that being so there was no mutual assent between the parties to the transactions.
HELD:The authority of the controller to pass the orders in question came from cl. 5 of the order and not cl.
10B. The orders were in respect of goods not yet manufactured whereas under cl.
10B directions could be given only in respect of goods already in stock.
So far as cl. 5 is concerned admittedly it does not require the controller to regulate or control every facet of a transaction between a producer and the person to whom he supplies iron and steel products.
[488H: 489C H] In modern times the doctrine of laisser faire can have only a limited application.
That does not mean that there is no freedom of contract.
So long as mutual assent is not excluded in any dealing, in law it is a contract.
On the facts of the present case it was not possible to accept the contention that nothing was left to be decided ' by mutual assent.
On the other hand the controller 's directions were confined to narrow limits and there were several matters which the parties could decide by mutual consent.
[49OB; 491B C] Kirkness vs John Hudson & Co. Ltd. ; M/s. New India Sugar Mills Ltd. vs Commissioner of Sales tax, Bihar, [1963] Supp. 2 S.C.R. 459; Calcutta Electric Supply Corporation Ltd. vs Commissioner of Income tax.
West Bengal.
; M/s. Cement Ltd. vs State of Orissa, 12 S.T.C. 205; State of Madras vs Gannon Dunkerley, ; ; North Adjai Coal Company (P) Ltd. vs, Commercial Tax Officer & Ors.
17 S.T.C. 514 and section K. Roy vs Additional Member, Board of Revenue, West Bengal, 18 S.T.C. 379, refer red to.
(ii)From the facts and circumstances the Tribunal rightly found ' that the supplies were made to stockists in the State of Madras for 480 consumption in that State.
It may be that a small portion of the supplies had gone out of the State.
But that was not a relevant circumstance.
What had to be seen Was whether the supplies in question were made for consumption in the Madras State.
On that question the finding of the Tribunal was conclusive.
[496B C]


judgement:
Appeal No. 853 of 1966 Appeal by special leave from the order dated November 16, 1964 of the Punjab High Court, Circuit Bench at Delhi in Civil Revision No. 531 D of 1961.
M. C. Misra and M. V. Goswami.
for the appellant.
Harbans Singh, for the respondent The Judgment of the Court was delivered by Shah, J.
The appellant Miss Sanyal has since 1942 been a tenant of a house in Western Extension Area, Karol Bagh, New Delhi, a part of which is used for a Girls ' School and the rest 537 for residential purposes.
The respondent Gian Chand purchased the house from the owner by a sale deed dated September 19, 1956, and commenced an action in the Court of the Subordinate Judge 1st Class, Delhi, against the appellant for a decree in ejectment in respect of the house.
Numerous grounds were set up in the plaint in support of the claim for a decree in ejectment, but the ground that the respondent required the house bona fide for his own resi dence alone need be considered in this appeal.
The Trial Court dismissed the suit and the Senior Subordinate Judge, Delhi dismissed an appeal from that order holding that the house being let for purposes non residential as well as residential, a decree in ejectment could not be granted under section 13(1)(e) of the Delhi and Ajmer Rent Control Act, 1952.
The High Court of Punjab (Delhi Bench) in a revision petition filed by the respondent held that on the finding recorded by the First Appellate Court a decree in ejectment limited to that portion of the house which was used for residential ' purposes by the tenant could be granted, and remanded the case to the Rent Controller "for demarcating those portions which were being used for residence" and to pass a decree in ejectment from those specified portions of the house.
Against that order the tenant has appealed to this Court.
It is necessary in the first instance to read the material pro visions of the Delhi & Ajmer Rent Control Act, 1952.
The expression "premises" is defined in section 2(g) of the Act as "any building or part of a building which is, or is intended to be let separately for use as a residence or for commercial use or for any other purpose, and includes.
" Section 13 of the Act which grants protection to tenants against eviction provides insofar as it is material : "(1).
Notwithstanding anything to the contrary contained in any other law or any contract, no decree or order for the recovery of possession of any premises shall be passed by any Court in favour of the landlord against any tenant (including a tenant whose tenancy is terminated): Provided that nothing in this sub section shall apply to, any suit or other proceeding for such recovery of possession if the Court is satisfied (e)that the premises let for residential purposes are, required bona fide by the landlord who is the owner of such premises for occupation as a residence for himeslf or his family and that he has no other suitable accommodation; Explanation For the purposes of this clause, 'residential premises ' include any premises which having been let for use as a residence are, without the consent of the landlord used incidentally for commercial or other p urposes.
" 538 it is clear that section .13(1) imposes a ban upon the exercise of the power of the Court to decree ejectment from premises occupied by a tenant The ban is removed in certain specific cases, and, one such case is where the premises having been let for residential purposes the landlord requires the premises bona fide for occupation as a residence for himself or the members of his family and he has no other suitable accommodation.
It is plain that if the premises are not let for residential purposes, cl.
(e) has no application, nor on the express terms of the statute does the clause apply where the letting is for purposes residential and nonresidential.
In the present case the First Appellate Court held that the house was "let out for running a school and for residence".
The High Court held that where there is a composite letting, it is open to the Court to disintegrate the contract of tenancy, and if, the landlord proves his case of bona fide requirement for his own occupation to pass a decree in enjectment limited to that part which "is being used" by the tenant for residential purposes.
In so holding, in our judgment.
the High Court erred.
The jurisdiction 'of the Court may be exercised under section 13(1)(e) of the Act only when the, premises are let for residential purposes and not when the premises being let for composite purposes, are used in specific portions for purposes residential and non residential.
The contract of tenancy is a single and indivisible contract, and in the absence of any statutory provision to that effect it is not open to the Court to divide it into two contracts one of letting for residential purposes, and the other for non residential purposes, and to grant relief under section 13(1)(e) of the Act limited to the portion of the demised property which "is being used" for residential purposes.
The learned Judge purported to follow the decision of his (Court in Motilal and another vs Nanak Chand and others(1).
It was held in that case that in cases governed by the Delhi & Ajmer Rent Control Act.
1952 "if the premises are in well defined parts and have been let out for residential and commercial purposes together, the rule as to eviction regarding the portion that has been used for residence will govern the residential portion of the same and similarly the rules of eviction regarding the commercial premises will govern the commercial portion of the same as laid down in the Act".
In the view of the Court even if there be a single letting for purposes residential and non residential, if defined portions of the premises let are used for residential and commercial purposes "it must be held that the letting out was of the commercial part of the building separately for commercial purposes and of the residential part of the building for residential purposes".
We find no warrant for that view either in the Delhi & Ajmer Rent Control Act or in the general law of landlord and (1) 539 tenant Attention of, the learned Judge in that case was invited to a judgment of this Court in Dr. Gopal Das Verma vs section K. Bhardwaj and another(1), but the Court distinguished that judgment on the ground that "the facts of that case disclosed that they had no applicability to the facts of the case" in hand.
Now in Dr. Gopal Das Verma 's(1) case the premises in dispute were originally let for residential purposes, but later with the consent of the landlord a portion of the premises was used for non residential purposes.
It was held by this Court that "where premises are let for residential purposes and it is shown that they are used by the tenant incidentally for commercial, professional or other purposes with the consent of the landlord, the landlord is not entitled to eject the tenant even if he proves that he needs the premises bona fide for his personal use, because the premises have by their user ceased, to be premises let for residential pur poses alone".
It was, therefore, clearly ruled that if the premises originally let for residential purposes ceased, because of the con,sent of the landlord, to be premises let for residential purposes alone, the Court had no jurisdiction to decree ejectment on the grounds specified in section 13(1)(e) of the Act.
The rule evolved by the Punjab High Court in Motilal 's case(1) is inconsistent with the judgment of this Court in Dr. Gopal Das Verma 's(1) case.
If in respect of premises originally let for residential purposes a decree in ejectment cannot be passed on the grounds mentioned in section 13(1)(e), if subsequent to the letting, with the consent of the landlord the premises are used both for residential and nonresidential purposes, the bar against the jurisdiction of the Court would be more effective when the original letting was for purposes non residential as well as residential.
It may be recalled that the condition of the applicability of section 13(1)(e) of the Act is letting of the premises for residential purposes.
In this case the letting not being solely for residential purposes, in our judgment, the Court had no jurisdiction to pass the order appealed from.
We may note that a Division Bench of the Punjab High Court in Kunwar Behari vs Smt.
Vindhya Devi(1) has held in construing section 14(i)(3) of the Delhi Rent Control Act 59 of 1958, material part whereof is substantially in the same terms as section 13(1)(e) of the Delhi & Ajmer Rent Control Act, that "where the building let for residence is the entire premises it is not open to the Court to further sub divide the premises and order eviction with respect to a part thereof".
In our view that judgment of the Punjab High Court was right on the fundamental ground that in the absence of a specific provision incorporated in the statute the Court has no power to break up the unity 'of the contract of letting and attribute incidents and obligations to a part of the subject matter of the contract which are not applicable to the rest.
(1) ; (3) A.I.R. 1966 Punjab 481, (2) 540 In our view the order passed by the High Court of Punjab remanding the case for determination; of the residential portion of the house occupied by the appellant and for passing a decree in ejectment in respect of that part is without jurisdiction and must be set aside.
The appeal is allowed and the decree passed by the Senior Subordinate Judge is restored.
The appellant in this appeal did not appear before the High Court to assist the Court.
In the circumstances there will be no order as to costs of this appeal.

summary/full:
Under section 13(1)(e) of the Delhi and Ajmer Rent Control Act, 1952, the jurisdiction of the court to evict a tenant, may be exercised in favour of a landlord who wants the premises bona fide for his own residence, only when the premises are let out for residential purposes, and not, when the premises being let out for composite purposes, are used for residential and non residential purposes.
The owner of a house let it out to the appellant for her residence and for running a school.
The respondent purchased the house and filed a suit for eviction of the appellant.
The suit was dismissed, but the High Court, in revision, held that a decree in ejectment limited to that portion of the house which was used for residential purposes by the tenant could be granted, and remanded the case for demarcating that portion and passing a decree.
In appeal to this Court, HELD:The order of the High Court was without jurisdiction and should be set aside.
[540A] The contract of tenancy was a single and indivisible contract, and, in the absence of any statutory provision to that effect, it was not open to the Court to divide it into two contracts one of letting out for residential purposes and the other for non residential purposes and to grant relief under the section in respect of that portion of the property which was being used for residential purposes.
[538E] Dr. Gopal Das Verma vs section K. Bhardwaj & Anr.
[1962] 2 S.C.R. 678, followed.
Kunwar Behari vs Smt.
Vindhya Devi, A.I.R. 1966 Punj.
approved.
Motilal and Anr.
vs Nanak Chand & Anr. (1964) Punj.
L.R. 179, overruled.