TMI Blog1991 (3) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... itors a compromise scheme was sanctioned by the Gujarat High Court by its order, dated 8th April, 1970. Under the said scheme the plant and machinery of unit No. 2 of the appellant-company were to be sold out and also some stock-intrade was to be sold out in order to enable the appellant to discharge its debts to the Union Bank of India and other creditors. Under the said scheme it was, inter alia, contemplated that the appellant-mill company will, with the prior consent in writing of the bank, sell the pledged stocks of 1076 bales of cloth and 75 bales of cotton and it shall also sell the remaining hypothecated and/or pledged stocks of raw materials and finished products as loose cotton, cotton yarn, etc., with the prior consent in writing of Union Bank of India. It was further stipulated that the sale proceeds will be deposited by the appellant-mill company with Union Bank of India. As regards plant and machineries of unit No. 2 of the mill company it was stipulated that the appellant mill company will with the prior consent in writing of Union Bank of India sell the plant and machineries of the unit No. 2 and shall deposit the sale proceeds thereof with the said bank. There was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that pursuant to the order passed by the High Court in proceedings under section 391 of the Companies Act, compromise scheme was sanctioned and the plant and machinery of unit No. 2 and the stock-in-trade which were pledged with Union Bank of India were to be sold out. However, he submits that the scheme itself stipulated certain conditions, i.e. (i) that the sales would not be made by the appellant without consent of Union Bank of India, (ii) the said sales shall be scrutinised and approved by the committee consisting of representatives of the appellant-mill company, the State Government, the bank and the Regional Provident Fund Commissioner, and (iii) that the sale proceeds of the sales shall be deposited with Union Bank of India. He submits that because of these stipulations in the compromise which was sanctioned by the High Court the transactions of sale of machinery and stock-in-trade cannot be said to be the transactions of sale inasmuch as there was element of compulsion or at least the absence of free will. His second submission is that the said transactions of sale cannot be considered to have been made in the course of business, and as such, no tax can be levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubt that it was the appellant who was to find out a willing purchaser at market price. The properties were not to be sold out at a predetermined price or at a fixed price, but in fact, the price was to be fixed by the appellant-mill company and such transaction of sale was subject to the consent of Union Bank of India. Therefore, the conduct of the appellantmill company in filing application for compromise scheme under section 391 of the Companies Act necessarily goes to establish that the appellant-mill company was a willing agent to dispose of its property to a willing buyer and it agreed to such terms and conditions which appear to have been incorporated with a view to safeguarding the interests of class of creditors. In fact, various stipulations referred to and relied upon by Mr. Raval do not impose any fetter on the power of appellant-mill company in selling its property nor did they impose any restriction on the power of the willing purchaser. In fact, the stipulations are to safeguard the interest of the creditors. Any of the stipulations in the compromise scheme cannot be said to compel the appellant-mill company to sell its property nor can it be said from said stipulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r an agreement to transfer it, from one party-the seller, to the other party-the buyer, in consideration of a money payment or a promise thereof by the buyer. All the elements of sale are present in the case before us. Submission, however, is that there is absence of consensuality inasmuch as sale is effected under the order of the court. Looking to the fact that the appellant-mill company approached the High Court for sanctioning compromise scheme on its own and after taking into consideration the various stipulations in the compromise scheme there is no manner of doubt that in the transactions in question all elements of sale were present, we are of the opinion that there was element of "free will " or "volition" on the part of the mill company from the beginning inasmuch as it applied for compromise scheme. Moreover, sanction of the court under section 391 to the scheme merely superadded seal of the court to the compromise scheme. The desire to sell its plant, machineries and stock-intrade was manifested by the conduct of applying to the court. Even thereafter, appellant-mill company did not lack the power to contract. It was to find out the willing purchaser. It was to fix the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the transaction under an agreement by which one party bound itself to supply the stated quantity of goods to the other at a price not higher than the notified price and the other party consented to accept the goods on the terms and conditions mentioned in the permit. In order to determine whether there was any agreement or consensuality between the parties regard must be had to their conduct at or about the time when the goods changed hands. From the conduct of the parties even in such transactions the court inferred free consent in the following words: "When the allottee presents his permit to the dealer, he signifies his willingness to obtain the commodity from the dealer on the terms stated in the permit. His conduct reflects his consent. And when, upon the presentation of the permit, the dealer acts upon it, he impliedly agrees to supply the commodity to the allottee on the terms by which he has voluntarily bound himself to trade in the commodity. His conduct too reflects his consent. Thus, though, both parties are bound to comply with the legal requirements governing the transaction, they agree as between themselves to enter into the transaction on statutory terms, one agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riction on the power of the appellant. As regards fixation of sale price also there was no restriction on the power of appellant. It, therefore, becomes clear that, in fact, the transactions of sale were the transactions where two parties met together and where the appellant-mill company was willing to sell and the purchasers were willing to purchase. The conduct of the appellant reflected its consent. We are of the opinion that from the conduct of the appellant it could not be said that the appellant was, in anyway, compelled to sell its property. We, in fact, find that even in a case where the supplier was to act under the terms and conditions of control order and where the consumers were to purchase only from the supplier under the control order, the Supreme Court found that the transactions effected to the allottees of cement cannot be said to be the sale under compulsion. In fact, in the case before us the element of compulsion is not to be found at any stage of transactions, and in fact, there is willingness on the part of appellant-mill company from the very first stage when it approached the court for sanctioning its compromise scheme under section 391 of the Companies Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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