Case: Collector Of Customs &amp; Ors Vs. Pednkar And Company (Private) Limited (In Liquidation) &amp;Anr

and also time for delivery were postponed."The Division Bench, on the other hand, after extensively dealing with all the facts and circumstances of the case including the terms of the contract, came to the conclusion that -"...... no property could pass before the goods were delivered at the Bombay godowns of the B.C. Cycle Company."17. The controversy has to be resolved by reference to Sections 18, 19 and 20 of the Sale of Goods Act, 1930.18. It is, in our opinion, not possible to hold that the property in goods passed at the time of agreement dated February 20, 1959. The contract to sell related not to the entire consignment of the goods which were being imported by the respondent but only to part of those goods, even though it may be a major part. Out of 208 dozen rock shafts which were imported, 200 dozen were to be sold by the respondent company to respondent No. 2. There was nothing to prevent the respondent company from selecting for itself any eight dozen rock shafts out of the whole consignment. The place of delivery of the goods was buyers godown in Bombay. The property in the goods could not pass in favour of respondent No. 2 until, after the arrival of the goods in Bombay, two hundred dozen rock shafts to be delivered to the buyer were separated. So far as industrial sewing machines were concerned, the property in them could also not pass to the buyer before the passing of the property in rock shafts as the contract between the respondent company and the buyer was one indivisible contract. The High Court, in our opinion, rightly held that the property in the goods did not pass to the buyer till the time of the delivery of the goods in Bombay. No specific goods in a deliverable state were attached to the contract when it was made.19. Mr. Sanghi submits that the fact that the Cycle Company was principally financing the whole transaction and stood guarantee to the Bankers in Delhi enabling the respondent to open a letter of credit for the importation of the goods clearly indicates that, notwithstanding the place of delivery in the contract, the parties intended that the imported goods were appropriated to the contract when the same was made. In many genuine commercial transactions guarantee can be arranged by a party importing or exporting goods under a valid licence. The mere fact of financial guarantee to a Banker for the purpose of opening a letter of credit without anything more, would not convert the guarantor to be the owner of the property the moment the contract was entered if the terms therein pointed to the contrary. We are unable to hold that the mere fact of the Cycle Company being the guarantor with regard to the financial arrangement, which the respondent made with the Bankers in Delhi, would lead to the inescapable conclusion that the property in the goods had passed to the Cycle Company at the time when the contract was made. The correspondence between the respondent and the Cycle Company, that between the parties and the Banker and the arrangements for clearing the goods through the Calcutta Clearing House relied upon by Mr. Sanghi, do not lead to a contrary conclusion.20. It is clear that the respondent had a valid import licence under the cover of which it imported the goods from japan and, as we have held above, the property in the goods had never passed during the importation as alleged by the Customs authorities.21. The entire controversy before the adjudicator was with reference to the importation of the goods by the Cycle Company which fact was sought to be established against the respondent from the legal position urged with regard to the passing of property to the Cycle Company at the time the contract had been made on February 20, 1959. Mr. Sanghi submits that if, on the facts and circumstances, conduct of the parties and the correspondence during the relevant period taken with the advance of finance and guarantee of the Cycle Company, the adjudicator came to the conclusion that the property had passed and the goods were liable to confiscation and the conclusion was prima facie reasonable, the High Court had no jurisdiction to interfere with the order under Article 226 of the Constitution. This would be true, says counsel, even if the High Court could on the same facts and circumstances take another view in the matter. We are unable to accede to the submission.22. We are dealing with an order of confiscation of certain goods imported under a licence granted to the respondent. It was never disputed that it was a valid licence. It was also not an Actual User licence. The respondent, therefore, could sell these imported goods to others. The whole matter, therefore, turned on the legal issue as to whether property had passed at the time the respondent had entered into the contract for the sale of the imported goods. Even the Customs Authority in its additional show cause notice made particular reference to Section 20 of the Sale of Goods Act and pointed out that -"the ownership in the goods under consideration appears to have passed on to M/s. Bombay and Calcutta Cycle Company right from the time the sale contract was concluded".When, therefore, on the terms of the contract along with other relevant facts and circumstances which had to be looked into by the adjudicator for application of Section 20 of the Sale of Goods Act, he committed a manifest error of law apparent on the face of the order, the High Courts jurisdiction to interfere under Article 226 of the Constitution is clearly attracted. The submission of Mr. Sanghi is, therefore, without any force.23. In the view we have taken regarding passing of property in the goods we need not deal with Mr. Sanghis submission with reference to the provisions of warranty under Section 12 of the Sale of Goods Act.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]We are, therefore, unable to agree with Mr. Sanghi that he can be permitted to raise this question of a "make-believe" transaction by the respondent.It is, in our opinion, not possible to hold that the property in goods passed at the time of agreement dated February 20, 1959. The contract to sell related not to the entire consignment of the goods which were being imported by the respondent but only to part of those goods, even though it may be a major part. Out of 208 dozen rock shafts which were imported, 200 dozen were to be sold by the respondent company to respondent No. 2. There was nothing to prevent the respondent company from selecting for itself any eight dozen rock shafts out of the whole consignment. The place of delivery of the goods was buyers godown in Bombay. The property in the goods could not pass in favour of respondent No. 2 until, after the arrival of the goods in Bombay, two hundred dozen rock shafts to be delivered to the buyer were separated. So far as industrial sewing machines were concerned, the property in them could also not pass to the buyer before the passing of the property in rock shafts as the contract between the respondent company and the buyer was one indivisible contract. The High Court, in our opinion, rightly held that the property in the goods did not pass to the buyer till the time of the delivery of the goods in Bombay. No specific goods in a deliverable state were attached to the contract when it was made.are unable to hold that the mere fact of the Cycle Company being the guarantor with regard to the financial arrangement, which the respondent made with the Bankers in Delhi, would lead to the inescapable conclusion that the property in the goods had passed to the Cycle Company at the time when the contract was made. The correspondence between the respondent and the Cycle Company, that between the parties and the Banker and the arrangements for clearing the goods through the Calcutta Clearing House relied upon by Mr. Sanghi, do not lead to a contrary conclusion.20. It is clear that the respondent had a valid import licence under the cover of which it imported the goods from japan and, as we have held above, the property in the goods had never passed during the importation as alleged by the Customsare unable to accede to the submission.22. We are dealing with an order of confiscation of certain goods imported under a licence granted to the respondent. It was never disputed that it was a valid licence. It was also not an Actual User licence. The respondent, therefore, could sell these imported goods to others. The whole matter, therefore, turned on the legal issue as to whether property had passed at the time the respondent had entered into the contract for the sale of the imported goods. Even the Customs Authority in its additional show cause notice made particular reference to Section 20 of the Sale of Goods Act and pointed out that -"the ownership in the goods under consideration appears to have passed on to M/s. Bombay and Calcutta Cycle Company right from the time the sale contract was concluded".When, therefore, on the terms of the contract along with other relevant facts and circumstances which had to be looked into by the adjudicator for application of Section 20 of the Sale of Goods Act, he committed a manifest error of law apparent on the face of the order, the High Courts jurisdiction to interfere under Article 226 of the Constitution is clearly attracted. The submission of Mr. Sanghi is, therefore, without any force.23. In the view we have taken regarding passing of property in the goods we need not deal with Mr. Sanghis submission with reference to the provisions of warranty under Section 12 of the Sale of Goods Act.