TMI Blog1961 (7) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ., HIDAYATULLAH M. AND SHAH J.C. JJ. A.V. Viswanatha Sastri, Senior Advocate (M.B. Lal, Advocate, with him), for the appellant (in all the appeals). R.C. Prasad, Advocate, for the respondent (in all the appeals). -------------------------------------------------- The Judgment of the Court was delivered by SHAH, J.- Rohtas Industries Ltd., a public limited company registered under the Indian Companies Act having its registered office at Dalmia Nagar in the State of Bihar, is engaged in the manufacture, amongst other commodities, of cement, and is registered as a "dealer" under the Bihar Sales Tax Act, 1944. In proceedings for assessment of sales tax, the company denied its liability under the Act to pay tax in respect of cement supplied, delivered or consigned pursuant to orders issued by a company called the Cement Marketing Company Ltd., hereinafter called the Marketing Company, in the following six quarters ending September 30, 1945, June 30, 1946, September 30, 1946, December 31, 1946, March 31, 1947, and June 30, 1947, on the plea that there was no sale by the appellant company to the Marketing Company. The plea of the company was disallowed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able turnover. In these appeals filed with special leave, the question for determination is as to the true effect of the agreement dated June 4, 1942, to which the company and the Cement Marketing Company were parties. The parties to the agreement were five companies-The Associated Cement Companies Ltd., the Patiala Cement Company Ltd., the Rohtas Industries Ltd , (the company), the Dalmia Cement Company Ltd., and the Cement Marketing Company Ltd. (the Marketing Company). In the agreement, the Associated Cement Companies Ltd. and the Patiala Cement Company Ltd were collectively referred to as the Associated Group and the Dalmia Cement Company Ltd., and the Rohtas Industries Ltd., were collectively referred to as the Dalmia Group. These two groups were engaged in the manufacture of cement, but the Marketing Company was a trading corporation having no concern with the manufacture of cement. It is common ground that there was for some time unhealthy competition between different companies manufacturing cement, and with a view to avoiding competition and securing adequate return on investments, the Marketing Company was floated as a distributing company engaged in the sale of cement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o maintain any selling organization, and selling organizations in existence on the date of the commencement of the contract were taken over by the Marketing Company. Clause 14 which authorised the Marketing Company to appoint and to continue its agents and stockists on such terms and conditions as they thought fit and to supply such stockists with such quantity of cement as they might regularly require, raises a strong inference that the Marketing Company was constituted monopoly purchasers of the cement manufactured by the manufacturing companies during the subsistence of the agreement. Clause 5 of the agreement strengthens the view that the relation between the manufacturing companies and the Marketing Company was that of sellers and buyer. By that clause, the Marketing Company agreed, in respect of ordinary cement, to pay to the manufacturing companies at the rate of Rs. 24 per ton supplied at works, and for special cements, such amounts above the basic rate of Rs. 24 per ton as the directors of the Marketing Company in their discretion, having regard to the difference between the selling prices of such cement and the ordinary cement, deemed proper. The rate fixed by claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies had no control over the terms of the contracts of sale by the Marketing Company and that the price at which cement was sold by the Marketing Company could not be con- trolled by the manufacturing companies; that the manufacturing companies were entitled, for ordinary cement, to be paid at the rate of Rs. 24 per ton at works, or at such other rate as might be decided upon by the directors of the Marketing Company and in respect of special cements, at such additional rates as the directors of the Marketing Company might determine; that sale by the Marketing Company was not for and on behalf of the manufacturing companies but for itself and the manufacturing companies had no control over the sales nor had they any concern with the persons to whom cement was sold. In fine, the goods were supplied to the order of the Marketing Company which had the right, under the terms of the agreement, to sell on such terms as it thought fit and that the manufacturing companies had the right to receive only the price fixed by the Marketing Company. The relationship in such cases can be regarded only as that of a seller and buyer and not of principal and agent. Mr. Viswanatha Sastri appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the number of tons of cement supplied by them. But this covenant does not support the plea that there subsisted between the manufacturing companies and the Marketing Company the relation of principals and agent. Under the agreement, the price at which cement was to be sold by the Marketing Company depended solely in the discretion of the Marketing Company, and by clause 24, the manufacturing companies do not get the difference between the price at which an individual consignment is sold and the basic price fixed under clause 5. The right under clause 24 is to share in the overall profit in proportion to the number of tons of cement supplied by each company. There is therefore no relation between the share of the profits received under clause 24 and the profit or loss incurred in the individual transactions. There is no covenant, again, rendering the manufacturing companies liable in the event of the transactions of the Marketing Company resulting in loss. The Marketing Company enters into contracts on its own behalf and not on behalf of the manufacturing companies: it supplies goods as its own, and not as those of the manufacturing companies and it is not entitled to be indemnif ..... 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