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TMI Blog1980 (4) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... ao, Advocates, with them) (in W.P. Nos. 4238-4239 of 1978), F.S. Nariman, Senior Advocate (K.P. Kumar, R. Vasudevan, C.N. Murthy, Ajay Mehta and T. Subba Rao, Advocates, with him) (in W.P. No. 8 of 1979) and Dr. Y.S. Chitale, Senior Advocate (K.P. Kumar, R. Vasudevan, C.N. Murthy, Ajay Mehta and T. Subba Rao, Advocates, with him) (in W.P. No. 1458 of 1979), for the petitioners. N. Nettar, V.J. Francis, K.J. Chandran, J.B. Dadachanji, K.J. John and Sri Narain, Advocates, for the respondents in W.P. No. 1458 of 1979. K.K. Venugopal, Additional Solicitor-General (N. Nettar, Advocate, with him), for respondent No. 1, S.T. Desai, Senior Advocate (A.V. Rangam, Advocate, with him), for respondent No. 2, V.J. Francis, Advocate, for respondent No. 3 and K.J. Chandran, J.B. Dadachanji, K.J. John and Sri Narain, Advocates, for respondent No. 4, in W.P. No. 8 of 1979. -------------------------------------------------- The judgment of the Court was delivered by TULZAPURKAR, J.-These writ petitions filed by the registered exporters of coffee under article 32 of the Constitution raise an important question of proper construction of section 5(3), a provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard. These sales include internal sales in India and outside India. We are concerned in these petitions with sales outside India. Under section 20 of the Act no coffee (barring certain exceptions specified in the proviso) can be exported from India otherwise than by the Board or otherwise than under an authorisation granted by the Board in the prescribed manner and in the prescribed cases, while under section 21 no coffee which has been exported from India shall be re-imported into India except under and in accordance with a permit granted by the Board. Section 47 provides that all contracts for the sale of coffee in so far as they are at variance with the provisions of this Act shall be void. It will thus appear clear that the Coffee Board exercises complete control-almost monopolistic- over the coffee trade in exercise of its statutory powers. Export of coffee outside India is particularly controlled under the Act and the Rules by the Coffee Board. As stated earlier coffee can be exported either by the Coffee Board directly to parties outside India or the Coffee Board authorises other exporters to effect such exports. For effecting exports through other exporters the Cof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 deals with weighment, delivery and payment of price and contains an overriding provision to the effect that the "property in the coffee sold shall not pass to the buyer until after he has paid the full price and the coffee sold to him is weighed and set apart for delivery to him". Clause 26 declares that it is an essential condition of the auction that the coffee sold thereat shall be exported to the destination stipulated in the catalogue of lots or to any other foreign country outside India as may be approved by the Chief Coffee Marketing Officer within three months or within such, extended period as shall not exceed one year from the notice of tender issued to the auction buyer (registered exporter) and that under no circumstances the coffee purchased at such auction shall be diverted to other destinations or sold or be disposed of or otherwise released in India. Clauses 30 and 31 provide for the consequences of default on the part of the buyer to export the coffee or to produce evidence thereof; he is liable to pay a penalty at the rates specified in clause 30 and what is more under clause 31 the Chief Coffee Marketing Officer is entitled to seize and take possession of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export." "6. (1) ................................................... Provided that a dealer shall not be liable to pay tax under this Act on any sale of goods which, in accordance with the provisions of sub-section (3) of section 5, is a sale in the course of export of those goods out of the territory of India. " The petitioners have strongly relied upon the Statement of Objects and Reasons appended to the relevant Bill in this behalf. In other words, according to the petitioners under sub-section (9) of section 5 even the "penultimate sale" is to be regarded as a sale "in the course of export" and will under the proviso to section 6(1) be entitled to claim exemption from the liability to tax under the Act provided such penultimate sale- (i) took Place after, and (ii) was for the Purpose of complying with, the agreement or order for or in relation to such export. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ostensibly for the protection of the Coffee Board in the event of the sales tax authorities holding that even in such cases the benefit of section 5(3) would not be available. The petitioners contend that the words "the agreement" for or in relation to such export in section 5(3) do not necessarily refer to the agreement with a foreign buyer but would include any binding or enforceable agreement to export even with a local party to implement which the penultimate sale must have taken place and since here the penultimate sales (sales of coffee to registered exporters by the Coffee Board) take place on the express and essential condition that the said coffee shall be exported and the same shall not be diverted to any other destination or sold or disposed of or released in India (vide clause 26) and which condition is enforced on pain of imposition of penalty and seizure of the unexported coffee (vide clauses 30 and 31) these must be regarded as having been made for the purpose of complying with the agreement for or in relation to export, and secondly, these penultimate sales invariably take place (i.e., become complete) after the agreement to export is entered into inasmuch as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners bank guarantees to secure payment of sales tax which but for the enactment of sub-section (3) of section 5 might have been payable on each such sale. To obtain appropriate reliefs in this behalf in two of the three writ petitions, the petitioners therein have also impleaded the concerned States, namely, State of Karnataka, State of Tamil Nadu and the State of Kerala as party respondents to their petitions. The petitioners have sought appropriate orders or directions against these State Governments directing them to make refunds to the Coffee Board of the amounts collected by them from the Coffee Board as and by way of sales tax and further restraining them from collecting or threatening to collect from the Coffee Board any amount as and by way of sales tax on the transactions in question or subjecting such transactions to sales tax. The petitioners have also sought the consequential reliefs of directing the Coffee Board to pay over to the petitioners the refunds which it may receive from the State Governments pursuant to the court's order and further directing the Coffee Board to release the bank guarantees or contingency deposits obtained by it under the impugned circular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is an agreement with or an order from a foreign buyer is correct as also its conclusion that in the export auctions conducted by it property in the coffee sold thereat passes to the registered exporter (bidder) at the fall of hammer and, therefore, the conditions imposed by the circular on the registered exporters before they can claim exemption from the tax liability are justified. The States of Karnataka, Tamil Nadu and Kerala in their respective counter-affidavits have supported the stand taken by the Coffee Board on both the points. It may, however, be stated that all the three States are desirous of having an authoritative pronouncement from this Court on the question of proper construction of the words "the agreement or order for or in relation to such export" occurring in section 5(3) of the Central Sales Tax Act, 1956, but on the second point the counsel for States of Karnataka and Tamil Nadu have urged that since the question of passing of property does not depend merely upon proper construction of the auction conditions read in the context of the relevant provisions of the Sale of Goods Act but will need investigation into all the relevant facts and circumstances of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of section 5(3) would affect a large number of dealers in export trade, including the Coffee Board (which was concerned with export trade in coffee), the Board was interested in having an authoritative decision of this Court on the point, that such authoritative decision would also facilitate the issuance of a proper circular in regard to its future transactions and, therefore, he was not pressing the preliminary objection to the maintainability of the writ petitions against the Coffee Board. We would, therefore, deal with the remaining three questions one after the other. Dealing first with the question whether section 5(3) of the Act which has been introduced by the Amending Act (103 of 1976) is ultra vires article 286(2) of the Constitution, the precise contention of Mr. S.T. Desai, appearing for the State of Tamil Nadu, has been that the said provision merely enacts an artificial rule or fiction that a penultimate sale, which in fact is not in the course of the export of goods out of the territory of India, shall be "deemed to be in the course of such export" if it satisfies the conditions specified therein; it does not lay down or formulate any principle for determining whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. A deeming provision might be made to include what is obvious or what is uncertain or to impose for the purpose of a statute an artificial construction of a word or phrase that would not otherwise prevail, but in each case it would be a question as to with what object the legislature has made such a deeming provision. In St. Aubyn v. Attorney-General [1952] A.C. 15 at 53., Lord Radcliffe observed thus: "The word 'deemed' is used a great deal in modern legislation. Sometimes it is used to impose for the purposes of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible." After making these observations the learned Law Lord went on to hold that it was in the last of the three ways (indicated in the observations) that the deeming provision was made in section 58(2) of the Finance Act, 1940, which came for interpretation before the House of Lords. Similarly in Words and Phrases, Permanent Editio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. It is thus clear to us that section 5(3) formulates a principle of general applicability in regard to all penultimate sales provided they satisfy the specified conditions mentioned therein and there is no question of the said provision creating a legal fiction as has been contended for by the counsel. The contention, therefore, that section 5(3) is beyond the power or authority of article 286(2) and, therefore, ultra vires, must be rejected. Turning next to the main issue regarding the proper construction to be placed on the words "the agreement or order for or in relation to such export" occurring in section 5(3) of the Act, the question is whether the agreement referred to therein means only the agreement with a foreign buyer or would include any binding or enforceable agreement to export even with a local party to implement which penultimate sale should have taken place. Section 5(3), quoted above in extenso, has obviously been enacted to extend the exemption from tax liability under the Act not to any kind of penultimate sale but only to such penultimate sale as satisfies the two conditions specified therein, namely, (a) that such penultimate sale must take place (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel contended that according to the decisions of this Court what is required to constitute a sale in the course of export is that the sale should be so inextricably bound with the ultimate export that the link between the two cannot be voluntarily interrupted without a breach of the contract. In other words, an inextricable bond or obligation must subsist between the sale on the one hand and the final export on the other and such obligation can arise by reason of statute, contract or mutual understanding between the parties arising from the nature of the transaction and in this behalf strong reliance was placed by the counsel for the petitioners on the following observations of Shah, J., in the case of Ben Gorm Nilgiri Plantations Company, Coonoor v. Sales Tax Officer, Special Circle, Ernakulam [1964] 15 S.T.C. 753 at 759 (S.C.); [1964] 7 S.C.R. 706 at 711 and 712.: "A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of the transaction. In this sense to constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement with or an order from a foreign buyer, at a later stage during the course of his submissions he did not stick to that stand but submitted that the construction sought to be placed on those words by the counsel for the petitioners would be proper as it would promote the export trade in coffee by making Indian coffee available at competitive rates in the international market, an objective sought to be achieved by enacting the new provision in section 5 of the Act. It is true that the language employed in section 5(3) is a little ambiguous or equivocal and there is no indication in express terms whether the "agreement" mentioned therein necessarily refers to the agreement with a foreign buyer or would include any binding or enforceable agreement to export with a local party and that is why the counsel on either side have heavily relied upon the Statement of Objects and Reasons appended to the relevant Bill to show what was the legal position under section 5(1) as interpreted by this Court in the Coffee Board's case [1970] 25 S.T.C. 528 (S.C.); [1970] 3 S.C.R. 147., and the Mohd. Serajuddin's case[1975] 36 S.T.C. 136 (S.C.); [1975] Supp. S.C.R. 169., before the propos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from a foreign buyer, the preceding word "agreement" in the phrase would take colour from the word "order" and would on the principle of noscitur a sociis mean an agreement with a foreign buyer. In Maxwell on the Interpretation of Statutes (at page 289, 12th Edn.), the rule of noscitur a sociis is explained thus: "Where two or more words, which are susceptible of analogous meaning, are coupled together, they are understood to be used in their cognate sense. They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general." Applying this rule of construction it becomes clear that "the agreement" occurring in the phrase must mean the agreement with a foreign buyer and not the agreement with a local party containing a covenant to export. Secondly, and more importantly, the user of the definite article "the" before the word "agreement" is, in our view, very significant. Parliament has not said "an agreement" or "any agreement" for or in relation to such export and in the context the expression "the agreement" would refer to that agreement which is implicit in the sale occasioning the export. Between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntegrated activities commencing from the agreement of, sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction". In the second case this Court held that a sale or purchase for the purpose of export, like production or manufacture for export, being merely an act preparatory to export could not be regarded as an act done "in the course of the export of the goods out of the territory of India" because etymologically the expression "in the course of export" denoted an integral relation between the sale and the export. Then came the Constitution (Sixth Amendment) Act, 1956, introducing a new clause being clause (2) in article 286 whereby Parliament was empowered by law to formulate principles for determining when a sale or purchase took place in the course of export and pursuant to this power Parliament enacted section 5(1) in the Act which provides that "a sale or purchase of goods shall be deemed to take place in the course of the export of the goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into by the S.T.C. with the foreign buyers) that the former were to stand cancelled if the latter for any reason fell through and vice versa and further the penultimate sales were effected to implement the contracts with the foreign buyers and even then following the ratio of the Coffee Board's case [1970] 25 S.T.C. 528 (S.C.); [1970] 3 S.C.R. 147., this Court held that the penultimate sales (Mohd. Serajuddin's contracts with the S.T.C.) were not sales in the course of export. Negativing the contention that the contracts between Mohd. Serajuddin and the S.T.C. and the contracts between the S.T.C. and the foreign buyer formed integrated activities in the course of export, this Court took the view that the crucial words in section 5(1) showed that only if a sale occasioned the export, it would be in the course of export and that the two sets of contracts were separate and independent and Mohd. Serajuddin was under no contractual obligation to the foreign buyer either directly or indirectly and that his rights and obligations were only against the S.T.C. It will thus appear clear that even when the S.T.C. had with it foreign buyer's contracts and Mohd. Serajuddin's contracts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... territory of India shall also be deemed to be in the course of such export if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for, or in relation to, such export." (Emphasis supplied) Two things become clear from this statement: first, the Mohd. Serajuddin's decision [1975] 36 S.T.C. 136 (S.C.); [1975] Supp. S.C.R. 169., is specifically referred to as necessitating the amendment and secondly penultimate sales made by small and medium scale manufacturers to an export canalising agency or private export house to enable the latter to export those goods in compliance with existing contracts or orders are regarded as inextricably connected with the export of the goods and hence earmarked for conferral of the benefit of the exemption. But here again, "existing contract" with whom is not clarified. In other words, on this crucial point the statement is silent and does not throw light on whether the existing contract should be with a foreign buyer or will include any agreement with a local party containing a covenant to export. Therefore, the question will again depend upon proper construction and, as we have said above, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the trade practice obtaining in export trade, namely, that normally the export activity commences with securing or obtaining an export contract or a firm order from a foreign buyer as the first step towards the ultimate export (vide observations of this Court in State of Mysore v. Mysore Spg. and Mfg. Co. Ltd. [1958] 9 S.T.C. 188 at 190 (S.C.)., where obtaining a firm order from overseas buyer is described as the first out of nine steps enumerated in the entire procedure for export). As regards the other aspect it is clear to us that two public interests are involved; promotion of the exports of the country is one public interest while augmentation of the States' revenues through sales tax is the other and it is obvious that if the liberal construction, as suggested by the counsel for the petitioners, is accepted the former public interest will undoubtedly be served while the latter will greatly suffer and if the narrow construction is accepted the latter public interest will be served and the former will suffer. It is difficult to say that the Parliament intended to prefer one and sacrifice the other. In fact the granting of exemption to penultimate sales was obviously with a vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e part of both the buyer and the seller to export, that there must be obligation to export, and that there must be an actual export, and further that the obligation may arise by reason of statute, contract between the parties, or mutual understanding or agreement between them or even from the nature of the transaction which links the sale to export. In other words, even in the case of a single sale which ultimately resulted in the export it was held that the sale was not in the course of export because there was no obligation to export which afforded the inextricable link between the sale and the export. It is true that if the obligation to export affording the inextricable link between the sale and the export is necessary in the case of a single sale even though it results in export, then all the more such obligation will be necessary in the case of a penultimate sale if such penultimate sale is to constitute a sale "in the course of export" but even if the Ben Gorm Nilgiri Plantations Company's case [1964] 15 S.T.C. 753 (S.C.); [1964] 7 S.C.R. 706., is regarded as laying down a general proposition that what is required is an obligation which inextricably connects the sale with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse of a transfer of property in goods by one person to another and the argument has been that since the word "sale" in the aforesaid phrase means an agreement to sell such agreement to sell in the case of export auctions conducted by the Coffee Board takes place or becomes complete at the fall of the hammer when the bid of the highest bidder gets accepted and the regular contract containing the covenant to export is invariably entered into by the registered exporter with the Coffee Board at a later stage and, therefore, even the covenant to export to be found in the contract with the Coffee Board can never be regarded as having come into existence before the agreement to sell becomes complete and consequently the penultimate sale to the registered exporter would not qualify for 'the exemption. In support of the contention that the word "sale" means an agreement to sell the counsel relied upon section 4 of the Sale of Goods Act, 1930, wherein a contract of sale of goods is defined as contract wherein the seller either transfers or agrees to transfer the property in goods to the buyer for a price and also upon a decision of this Court in Balabhagas Hulaschand v. State of Orissa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med to be in the course of export and there is nothing therein to suggest that the word "sale" should have any such extended meaning; on the contrary, the context suggests that the word "sale" in the phrase "if such last sale or purchase takes place after" refers to a completed sale, i.e., a sale as defined in section 2(g) of the Act. The contention urged by the counsel must, therefore, be rejected. Dealing next with the three stages at which the property in the coffee sold at the export auctions conducted by the Coffee Board is said to pass to the highest bidder (registered exporter) three questions arise that need our close examination. Does it pass at the fall of the hammer when his bid is entered in the register of bids under his signature under section 64(2) of the Sale of Goods Act, 1930, as contended for by the counsel for the States of Karnataka, Tamil Nadu and Kerala? Does it pass after the coffee sold is weighed and set apart for delivery and price is paid therefor by the auction purchaser in view of clause 19 (particularly the overriding provision contained therein) and other clauses of the auction conditions (this being the alternative plea of the petitioners). or does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall pay to the defaulting buyer only the balance of the amount remaining over after deducting therefrom godown charges and insurance premia, and selling commission payable to the agents, and all other expenses of sale, together with the penalty due under clause 30: Provided, however, that if such balance is in excess of the sale price paid by the buyer, the payment shall be limited to the actual sale price: Provided further that such payment shall not affect or prejudice the right of the Board to levy the penalties under clause 32 hereunder." According to the counsel for the three States, section 64 is a special provision in the Sale of Goods Act which deals with auction sales and under sub-section (2) thereof the sale is complete no sooner the auctioneer makes an announcement in that behalf either by fall of the hammer or in other customary manner and, therefore, the property in the goods sold thereat passes at the fall of the hammer or immediately after the announcement of completion is made in any other customary manner and since in the instant case the Coffee Board conducts export auctions of coffee in lots which are specified in catalogues supplied to the auction purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the intention that the property should not pass would be given effect to in preference to a mere expression of intention in words." As regards clause 31, the counsel contended that it does not amount to any reservation of the right of disposal over the goods to the Coffee Board within the meaning of section 25 of the Sale of Goods Act. On the other hand, the counsel for the petitioners contended that section 64(2) of the Sale of Goods Act does not deal with the question of passing of the property at auction sale but merely deals with the completion of the contract of sale, that is to say, upon the fall of hammer or announcement of the close of sale in other customary manner the agreement to sell becomes complete; in other words, an executory contract comes into existence between a promisor and a promisee. Secondly, even if the said provision is regarded as one relating to the completion of sale in the sense of passing of property from one hand to the other such result will occur only if the auction sale is in respect of specific or ascertained and identifiable goods and unconditional; in other words, it is only in an unconditional sale by auction the property in the goods passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like a State Government or its sales tax authorities must apply their taxing measures by having regard to those terms and conditions. He. therefore, pointed out that if the court would be inclined to take the view that the property passes to the auction purchaser under clause 19 then the agreement with or order from a foreign buyer must be available or come into existence just before such passing of the property. However, he contended that clause 19 makes a negative provision, namely, that the property shall not pass until after the coffee sold is weighed, set apart for delivery and price is paid therefor which would mean it passes not till then but some time later and, therefore, strong reliance was placed by the counsel on clause 31 which empowers the Coffee Board to seize the unexported coffee and deal with it as if it were part and parcel of the Board's coffee held by it in its pool stock if default is committed by the buyer to export the coffee within the prescribed time or such extension thereof as may be granted and such provision constitutes a reservation of the right of disposal to the Coffee Board within the meaning of section 25 of the Sale of Goods Act. He, therefore, u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t page 380, para 742 runs thus: "742. Bidding. The method of bidding and the amount of the bids are usually regulated by the conditions of sale (1). Until the property is actually knocked down there is no complete contract of sale. A bid is a mere offer, and can be retracted by the bidder at any time before the auctioneer announces the completion of the sale by the fall of the hammer, or in other customary manner (2)." (Emphasis supplied) At foot-note (2), section 58(2) of the Sale of Goods Act, 1893, is the provision indicated in support of the aforesaid statement of law and it is further stated: "In an unconditional sale the property in the goods passes on the fall of the hammer": the Sale of Goods Act, 1893, section 18, rule 1 (Dennant v. Skinner and Collom(1)). This would show that under section 58(2) of the English Sale of Goods Act, 1893, normally in an auction sale at the fall of the hammer a completion of the contract of sale takes place and until such time the bidder may retract his bid but if the auction sale happens to be an unconditional sale in respect of specific and ascertained goods, the title to the property passes simultaneously at the fall of the hammer not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hammer the property of this car passed to King.............." As regards the undertaking obtained from King the court observed: "Since the property had already passed a document subsequently executed by the bidder acknowledging that the ownership of the vehicle would not pass to him till the cheque was encashed could not have any effect on what had already taken place." It will thus appear clear that because the auction sale was unconditional and it related to specific goods that it was held that the property in the car had passed to King at the completion of the contract which occurred at the fall of the hammer under section 58(2) but the property had passed under section 18(1). This case also shows that to an auction sale normally governed by section 58 the implied rule pertaining to the passing of property contained in section 18(1) applied; if so, it stands to reason that the auctioneer could incorporate an express term pertaining to the passing of property, different from the implied rule, in his auction conditions and if he were to do so it win be operative. In American jurisprudence 2d, Vol. 7, it is clarified that sale by auction may be conditional or unconditional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he closure of the sale in other customary manner is that a contract of sale comes into existence and parties get into the relationship of a promisor and a promisee in an executory contract. Secondly, auction sales could be conditional or unconditional and if it is latter then by virtue of the goods being specific and in a deliverable state the property in the goods knocked down passes at the fall of hammer by reason of the concerned provision relating to the passing of the property. Section 64(2) of our Sale of Goods Act, being in pari materia with section 58(2) of the English Sale of Goods Act, 1893, will have to be interpreted in the same manner and we are, therefore, of the view that it does not deal with the question of passing of the property at auction sale but merely deals with completion of the contract of sale which takes place at the fall of the hammer or at the announcement of the close of the sale in other customary manner by the auctioneer. It would also be correct to say that if the auction sale of chattels is unconditional and is in respect of specific ascertained goods and nothing remains to be done to the goods for putting them in a condition ready for delivery, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose which were sold "in portions" and its view that in regard to the former title had passed as soon as the hammer fell and not in regard to the latter was referred to by this Court with approval. At page 612 (page 367 of 14 S.T.C.), this Court observed thus: "In the present case as soon as the hammer fell the title in the goods passed to the buyer as the goods were specific goods, i.e., goods which were auctioned in full lots and this event took place at Fort Cochin which was in the State of Madras. But in the case of unascertained goods the title in the goods does not pass to the buyer unless and until the goods are ascertained. It was for this reason that a distinction was drawn by the Sales Tax Appellate Tribunal between goods which were sold in full lots and those which were sold in portions. In regard to the former it was held that the title passed as soon as the hammer fell but not so in regard to the latter and therefore the sale of 'full lots' was held to have taken place outside the State of Travancore-Cochin and of portions of lots inside that State." Approving the distinction this Court ultimately held that the sales of "full lots" being outside sales were not liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reserved price and the property in the goods will not pass. Sub-sections (3) and (4), if carefully scrutinised, also indicate that there could be a contract to the contrary. Moreover, once it is accepted that auction sales to which section 64 applies could be unconditional or conditional and that the auctioneer can prescribe his own terms and conditions on the basis of which the property is exposed to sale by auction it must be held that the acceptance of any bid as well as the passing of the property in the goods sold thereat would be governed by those terms and conditions. Having clarified the legal position as above we shall now deal with the export auctions of coffee conducted by the Coffee Board in the instant case. Such auction sales are admittedly conducted by the Coffee Board on terms and conditions prescribed by it called "auction conditions". Further, there is no suggestion in the case that a statutory body like the Coffee Board while prescribing the auction conditions has acted not in good faith or that the said terms and conditions do not truly govern the rights and obligations of the parties thereto. It will, therefore, be clear that the question at what point of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them. Further, it is true that the overriding provision contained at the end of clause 19 is negative in character, that is to say, the parties are agreed that the property shall not pass to the buyer until after the payment of the price, weighment and setting apart of the coffee for delivery to the buyer. But, does it positively follow that upon payment of price and weighment and setting apart the coffee sold for delivery to the buyer, the property passes to the buyer. On this aspect, in our view, there are two provisions contained in clause 20(d) and (f) which show that positively the property in the coffee sold passes to the buyer at that point of time. Under clause 19 after the payment of full price the buyer has to apply for and take delivery within a certain time but in case he fails to take delivery what shall happen to the coffee sold is provided for in clause 20. On the buyer's failure to take delivery, the coffee is first stored by the pool agent in the pool warehouse pending its exportation by the buyer by the 15th May and if it is not exported by that date the curer or depot manager removes it from the West Coast to inland centres for safe storage during the monsoon se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the coffee sold at such export auctions passes under clauses 19 and 20 of the auction conditions immediately upon payment of price, weighment and setting apart of the coffee for delivery to the buyer, it will be difficult to accept the petitioners' contention that passing of the property in such coffee is further postponed till actual shipment by reason of clause 31 of the auction conditions, for, if the title has already passed it cannot pass again. The counsel for the petitioners contended that in view of clause 31 a reservation of the right of disposal over the goods in favour of the Coffee Board within the meaning of section 25 of the Sale of Goods Act is made. It is difficult to accept this contention. Section 25(1) which deals with the reservation of the right of disposal provides that where there is a contract for sale of specific goods or where goods are subsequently appropriated to the contract, the seller may by terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled and, if he does so, the legal consequence mentioned in the section flows, namely, that in such case notwithstanding the delivery of goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment to the defaulting buyer is limited to the actual sale price paid by him and that the surplus if any reverts to the Coffee Board clearly shows that under clause 31 upon seizure the property reverts back to the Coffee Board. In our view, clause 31 properly read amounts to a defeasance clause and nothing more, especially when it is clear that property in the coffee sold at auction passes to the buyer under clauses 19 and 20 immediately upon payment of price, weighment and setting apart of the coffee for delivery to the buyer. Once the property has passed there would be no question of reserving any right of disposal over the same to the Coffee Board within the meaning of section 25(1) of the Sale of Goods Act. It will be noticed that though on the question of the passing of the property the factual material, in the form of affidavit of the Chief Coffee Marketing Officer (on the point whether the lots exposed at the auctions are specific and ascertained goods or not) and several documents executed by the registered exporters in favour of their bankers to obtain packing and other credit facilities, was placed before us, we have not gone into the factual aspects at all and we ..... 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