Case: Consolidated Coffee Limited and Another Etc Vs. Coffee Board, Bangalore Etc

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 Cl. 31 of the Auction Conditions, for, if the title has already passed it cannot pass again, Counsel for the petitioners contended that in view of cl. 31 a reservation of the right of disposal over the goods in favour of the Coffee Board within the meaning of s. 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 to a buyer or to a carrier or bailee for transaction to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. In the instant case it is true that Cl. 26 declares that it is an essential condition of the auction that the coffee sold thereat shall be exported to stipulated destinations or to any other foreign country outside India as may be approved by the Chief Coffee Marketing officer within 3 months or within the extended period but such essential condition is applied to the coffee which has already become the property of the buyer under Cls. 19 and 20 of the Auction Conditions and all that Cl. 31 provides is that if default is made by Buyer in ex porting coffee within the prescribed time or extended time it shall be lawful for the Coffee Board without reference to the buyer to seize the unexported coffee and take possession thereof and deal with it as if it were the part and parcel of the Board s Coffee held by them in their Pool Stock. Far from amounting to a reservation of the right of disposal over the unexported coffee to the Coffee Board, Cl. 31 is in the nature of a defeasance clause in the sense that what is vested in the buyer under the earlier conditions, the same shall revert back to the Coffee Board if the buyer commits a default in fulfilling the essential condition. Such a reading of Cl. 31 would be consistent with a further provision which is to be found in the latter portion of that clause. The latter part of Cl. 31 provides that after the coffee is seized and it becomes part and parcel of Boards coffee held by it in its pool stock, the Board shall re-sell the same but after such re-sale the Chief Coffee Marketing officer shall pay to the defaulting buyer only the balance of the sale proceeds after deducting godown charges, insurance premium, selling commission payable to agents and all other expenses of sale together with the penalty due under Cl. 30. But under the proviso it is provided thus:"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." 47. In other words the proviso clearly suggests that the seized coffee becomes Coffee Boards property and is re-sold as such, otherwise the surplus should go to the buyer (Registered Exporter). The fact that 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 Cl. 31 upon seizure the property reverts back to the Coffee Board. In our view, Cl. 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 Cls. 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 s. 25(1) of the Sale of Goods Act. 48. It will be noticed that though on the question of the passing of the property 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 have reached our conclusion on the point purely on the basis of construction of the relevant Auction Conditions from which primarily the intention of the parties is to be gathered. It is only when a clear intention in that behalf is not deducible from the terms and conditions that other factors such as the course of dealings and the conduct of the parties assume relevance.Having regard to the above discussion it is clear to us that in the penultimate sales (sales of coffee effected to Registered Exporters at export auctions conducted by the Coffee Board) the property in the Coffee sold thereat passes to the buyer immediately upon payment of full price, weighment and setting apart of coffee for delivery to the buyer under Cls. 19 and 20 of the Auction Conditions and it would be at this stage i.e. just before t his stage is reached that the agreement with or order from a foreign buyer must be available or produced in order to attract s. 5(3) of the Central Sales Tax Act, 1956.49.

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

Explanation:
1[ds]The aforesaid provision was examined by this Court in two leading cases, namely, Coffee Board Bangalore v. Joint Commercial Tax Officer, Madras &Anr. and Mohd. Serajuddin etc. v. State of Orissa and a certain interpretation had been accorded by this Court to the expression "in the course of export" and according to these decisions the last sale, immediately preceding the sale occasioning the export of goods out of India (hereinafter called the "penultimate sale"), however closely related to the final export, was held not to be the course of export but only for exp ort and hence liable to tax and according to the petitioners it was with a view to remove the difficulties caused by these and other similar decisions that the Parliament enacted the newsubs.(3) of s.5 and added a proviso to s.6(1) by the Amen ding Act (103 of 1976)It seems that since retrospective effect was given to the amendments introduced by Act 103 of 1976 the Coffee Board collected and the petitioners paid sales tax on these export auctions during the period of the retrospectivity and for few months more and thereafter the Coffee Board has, in terms of the said Circular, obtained from the petitioners ban k guarantees to secure payment of sales tax which but for the enactment ofsubs.(3) of s. 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 an d 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 ma y receive from the State Governments pursuant to the Courts order and further directing the Coffee Board to release the bank guarantees or contingency deposits obtained by it under the impugned CircularWe may, however, state that during the course of the hearing the learned Attorney General appearing on behalf of the Coffee Board fairly stated that since the question of proper construction of s. 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 t o the maintainability of the writ petitions against the Coffee Board. We would, therefore, deal with the remaining three questions one after the otherWe pointed out that prior to the Constitution (Sixth Amendment) Act 1956 this Court in its decisions while interpreting the expression "sale in the course of export" occurring in Art. 286 (1) (b) laid down two principles as to when a sale could be said to be a sale in the course of export and it held that two types of sales, viz. (a) sale which occasions the export and (b) sale which is effected by a transfer of documents of title to the goods after the goods have crossed customs frontiers of India, would be sales in the course of export. Section 5(1) which was enacted in Central Sales Tax Act 1956 pursuant to the power conferred on Parliament by Art. 286(2) which was introduced by the Constitution (Sixth Amendment) Act 1956 merely gave legislative recognition to the aforesaid two principles which had been formulated by this Court while interpreting Art. 286(2) (b) but while addingsubs.(3) to s. 5 of the Act Parliament had created a legal fiction to the effect that a penultimate sale satisfying certain specified conditions shall also be deemed to be a sale in the course of export when in truth and reality it is not.According to him, creation of such fiction is not formulation of any principle and as such the provision is beyond the power or authority conferred on Parliament by Art. 286(2)It is not possible to accept the aforesaid contention for the reasons we shall presently indicate. It is true that the word "deemed" has been used in s. 5(3) but the same word has been used not merely in s.5(1) but also in the other two sections 3 and 4 of Chapter II of the Central Sales Tax Act which has the heading "Formulations of Principles for determining when a sale or purchase of goods takes place in the course oft e trade or commerce or outside a State or in the course of export or import", the heading of Chapter II on the face of it suggests that what is done under ss. 3, 4 and 5 includingsubs(3) is formulation of principles. Secondly, the word "deemed" is used a great deal in modern legislation, different senses and it is not that a deeming provision is every time made for the purpose of creating a fiction. A deeming provision might be made to include what is obvious or what is uncertain o r 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 provisionLooked at from this angle it will be clear that. (3) of s. 5 formulates a principle inasmuch as it lays down a general guiding rule applicable to all penultimate sales that satisfy the two conditions specified therein and not any specific direction governing any particular or specific transaction of a penultimate sale. In other words the content of the provision shows that it lays down a principle. In fact, while addressing arguments on proper construction of the s. 5(3) counsel for the three States strenuously contended that the said provision should not be construed as being applicable only to the export auctions conducted by the Coffee Board and the terms and conditions governing them because it applies to variety of parties including the small manufacturers who seek a foreign market for their goods through private export houses or canalised agencies like State Trading Corporation. It is thus clear to us that s. 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 counsel. The contention, therefore, that s. 5(3) is beyond the power or authority of Art. 286(2) and, therefore, ultra vires, must be rejectedSection 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. e. become complete) after the agreement or order under which the goods are to be exported and (b) it must be for the purpose of complying with such agreement or order and it is only then that such penultimate sale is deemed to be a sale in the course of exportIt is true that the language employed in s.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 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 s. 5(1) as interpreted by this Court in the Coffee Boards case and Mohd. Serajuddins case (supra) before the proposed amendment and what was the lacuna or mischief that was sought to be remedied as also the object with which this provision came to be enacted. However, before applying the mischief rule initially enunciated in Heydons case for arriving at the true construction we propose to examine the new provision rather closely with a view to see whether by implication any indication one way or the other is available from the language thereof. The material words which prescribe the two conditions on satisfying which the penultimate sale is to be regarded as a sale in the course of export are: "If such last sale or purchase (mea ning the penultimate 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." It is true that Parliament has not said "the agreement or order for or in relation to such sale occasioning the export", but has used the phrase "the agreement or order for or in relation to such export." But in our view two aspects emerge very clearly on a close scrutiny of this phrase which by implication show that the "agreement" spoken of there refers to the agreement with a foreign buyer and not an agreement with a local party containing a covenant to exportIn the first place the concerned phrase speaks of two things in disjunctive: agreement or order. The word order which appears in a statute dealing with sales tax must be understood in a commercial sense, that is, in the sense in which traders and commercial men will understand it. In commercial sense an order means a firm request for supply of definite goods emanating from a buyer, an indent placed by a purchaser and, therefore, an order for or in relation to export would mean an indent from a foreign buyer. It is not possible to accept the contention urged by counsel for the petitioners that the word order in this phrase can mean or refer to an order, direction, mandate, command or authorisation to export that may be issued by a statutory body like the Coffee Board for two reasons; first, occurring in a sales tax statute the word must be given its commercial meaning and, secondly, while enacting the provision Parliament could not be said to have only statutory bodies like Coffee Board or S. T. C. in mind. If, therefore, an order for export in the concern ed phrase means an indent 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 p. 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 o ur 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 the two sales (the penultimate and the final) spoken of in the earlier part of then ordinarily it is the final sale that would be connected with the export, and, therefore, the expression "the agreement" for export must refer to that agreement which is implicit in the sale that occasions the export. The user of the definite article "the", therefore, clearly suggests that the agreement spoken of must be the agreement with a foreign buyer. As a matter of pur e construction it appears to us clear, therefore, that by necessary implication the expression "the agreement" occurring in the relevant phrase means or refers to the agreement with a foreign buyer and not an agreement or any agreement with a local party containing the covenant to exportTwo things become clear from this Statement; first, Mohd. Serajuddins decision (supra) 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 henced 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 the matter of construction the two aspects discussed earlier show that by necessary implication the agreement spoken of by s. 5(3) refers to the agreement with a foreign buyerIt is true that the benefit of the exemption was intended to be extended to small and medium scale manufacturers desirous of exporting their goods but the requirement of th e new provision is not that they must procure or have with them a foreign buyers contract but the requirement is that before they complete the sale of their goods to the canalising agency of the private export house there must be in existence a foreign buyers contract to implement which they should have sold their goods to such agency or export house. In the nature of things such manufacturers who have no expertise of export trade are not expected to have a foreign buyers contract with them and it would be sufficient compliance of the provision if the canalising agency or the export house has with it the foreign buyers contract. It would, therefore, be incorrect to say that the benefit of the exemption depends upon the fortuitous circumstance of a foreign buyers contract being available with such manufacturer when he sells his product to the agency or the export house. No hardship as is sought to be suggested is involved and we do not agree that by the construction which we are inclined to place on the expression the agreement occurring in s. 5(3) the small or medium scale manufacturers would be deprived of the benefit of the exemption. In fact, the construction which we are inclined to accept would be in consonance with 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. The Mysore Spg. and Mfg. Co. Ltd. where obtaining a firm order from overseas buyer is described 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 petitioner, 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 view to promote the exports but limiting the exemption to certain types of penultimate sales that satisfy the two specified conditions displays an anxiety not to diminish the States revenues beyond a certain limit. The section in any case gives no indication that one public interest is to be preferred to the other and therefore, in our view, the matter must again depend upon the proper construction of the language employed. On construction we are of the view that by implication the expression the agreement occurring in s. 5(3) refers to the agreement with a foreign buyerIn our view, the observations (quoted in extenso in the earlier part of the judgment) will have to be read in the context of the facts which obtained in that case. It has a case of only one sale which had resulted in the export and the question was whether transactions of sale of tea chests by the manufacturer at public auctions held at Port Cochin to the local agents of foreign buyers were exempt from levy of sales tax under Art. 286(1)(b) and though it was common ground that the purchases by the local agents of foreign buyers were with a view to export the goods to their principals abroad and that the goods were in fact exported out of India this Court found nothing in the transactions from which a bond or obligation could be said to spring between the sale and the intended export linking them as part of the same transaction and though the seller (manufacturer) could be said to have knowledge that the tea sold to the local agents of foreign buyers was meant for the export and would be exported, the seller had no concern with the export, that the sale imposed or involved no obligation to export and there was possibility that the goods might be diverted f or internal consumption. It was in that context that Shah, J., observed in that case that there must be an intention on the 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 Ben Gorm Nilgiri Plantations Companys case (supra) is regarded as laying down a general proposition that w hat is required is an obligation which inextricably connects the sale with the export and that such obligation may, in the absence of legislative guidance, arise by reason of statute, contract, mutual understanding, or the nature of trans action which links the sale to export, still the question would be what type of obligation and arising from what circumstances would be necessary or enough in the case of a penultimate sale must depend upon the language of the statute concerned and , therefore, the question will again be what type of obligation and arising from what circumstances has been prescribed by the Parliament by enacting s.5 (3) and that would depend upon the proper construction of the phrase "the agreement or order for or in relation to such export" occurring therein and, as we have said above, since on proper construction the expression "the agreement or order" means the agreement with or an order from a foreign buyer it must be held that the Parliament intended to prescribe that the obligation to export arising only from such agreement or order that would afford the inextricable link so as to constitute the penultimate sale a sale in the course of exportIt is not possible to accept this contention for more than one reason. In the first place the definitions of sale and "agreement to sell in the Sale of Goods Act 1930 would not apply to the expression sale occurring in the Central Sales Tax Act, 1 956 wherein the expression sale has been defined in s. 2(g) for the purpose of that Act and under s. 2 (g) of the Central Sales Tax Act sale means "any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hirepurchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods." In other words, wherever the w ord sale occurs inthe Central Sales Tax Act, 1956 it is this definition given in s. 2(g) that will be applicable and therefore the word sale in s. 5(3) must mean transfer of the goods by one person to another for cash or for deferred payment or for any other valuable considerations; it cannot mean "agreement to sell"Moreover, there is nothing in the context of s. 5(3) to suggest that the word sale occurring therein should be understood differentlyThe contention urged by counsel must, therefore, be rejectedIt is true that) says that "the sale is complete" when the auctioneer announces its completion by the fall of hammer or in other customary manner, but, the next following provision which says: "and until such announcement is ma de any bidder may retract his bid" suggests that what is complete at the fall of the hammer or the announcement of closure in other customary manner is that the contract for sale is complete. It is well known that our Sale of Goods Act 1930 is based upon and is largely a reproduction of the English Sale of Goods Act 1893 and in principle as well as in most details the law of sale of goods in both the countries is now the same and, therefore, English authorities on interpretation of different sections, although not technically binding in India, would have great persuasive value. It will be pertinent to observe that our s. 64 is based upon s. 58 of the English Act, though it is somewhat differently arranged; but. (2) of s. 64 is particularly in identical terms as s. 58(2) of the English ActIt will thus appear clear that because the auction sale w as 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 s. 58(2) but the property had passed under s. 18(1). This case also shows that to an auction sale normally governed by s. 58 the implied rule pertaining to the passing of property contained in s. 18(1) applied; if so, it stands to reason that the auctioneer could incorporate an express term pertaining to t he passing of property, different from the implied rule, in his auction conditions and if he were to do so it will be operativeTwo things appear very clear from what we have stated above. At an auction sale all that happens at the fall of hammer or at the announcement of the 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 propertySection 64(2) of our Sale of Goods Act, being in pari materia with s. 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, the property in the goods would pass to the purchaser upon the acceptance of the bid but that would not be because of s. 64(2) but because of s. 20 and such would not be the case if the goods sold thereat arec or unascertained goods or the auction sale is conditional. In this context it will be useful to refer to a decision of this Court in A.V. Thomas &Co. Ltd. v. Deputy Commissioner of Agricultural Income Tax where this Court recognised a distinction between auction sales pertaining to specific or identifiable goods and auction sales in regard to unascertained goods and held that in regard to the former the property in the goods passed when the contract was accepted at the fall of hammer and not in the latter case. That was a case where the tea s were stored in the godowns in the Willingdon Island which was in the State of Travancore Cochin and samples of those teas were taken to Fort Cochin which at the relevant time was in the State of Madras. At Fort Cochin by the samples the teas we re sold by public auction in lots, some of the lots were purchased in their entirety and others in parts and after the consideration money was paid at Fort Cochin delivery orders were given to the buyers addressed to the godown keepers at Willingdon Islands and actual delivery of tea was taken there. These teas were then sent out from willingdon Island in Travancore Cochin for consumption either in other parts of India or were exported out of India. The taxability of the sales of teas in the manner mentioned above under the Travancore Cochin General Sales Tax Act depended upon whether the sales could be held to have taken place at Willingdon Island. i.e., within the territory of Travancore Cochin State and were liable to sales tax under the Act or whether the sales were outside sales and, therefore, not subject to sales tax in the State of Travancore Cochin in view of Article 286(1) (a) read with the Explanation. This Court after referring to s. 64(2) and th e definition of specific goods in s. 2(14) of our Sale of Goods Act, took the view that on the fall of the hammer the offer would get accepted and if the goods were specific goods the title would pass to the buyer. The distinction that was made by the Sales Tax Appellate Tribunal between goods which were sold in "full lots" and those which were sold "in portions" and its view that in regard to the former title had passed as soon as the hammer fall and not in regard to the latter was ref erred to by this Court with approvalApproving the distinction this Court ultimately held that the sales of full lots being outside sales were not liable to the levy of sales tax. Thus s. 64(2) has nothing to do with the aspect of the passing of the property at an auction sale and it is by virtue of goods being specific and in a deliverable state that under s. 20 the property in such goods passes to the buyer at the completion of the contract at the fall of hammer at such saleOn the other question there is no difficulty in coming to the conclusion that s. 64 is subject to a contract to the contrary, especially in light of the above discussion. In the first place s. 64 occurs in Chapter VII which contains "Miscellaneous" provisions and s. 62 which occurs in the same Chapter clearly provides that where any right, duty or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement or by the course of dealing between the parties or by usage, if the usage is such as to bind both the parties to the contract. Ordinarily, the rights, duties and liabilities arising under a contract of sale by implication of law spoken of in s. 62 refer to the rights, duties and obligations referred to in Chapter III containing provisions which lay down rules as to transfer of property as between seller and buyer and transfer of title but there is no reason why s. 62 should not apply to rights, duties and obligations arising under s. 64 in regard to auction sales. In other words, s. 64 would be subject to s. 62. Moreover, there is intrinsic material in s. 64 itself which shows that the provisions thereof could be subject to a contract to the contrary. For instance,. (1) thereof provides that where goods are put up for sale in lots than each lot is prima facie deemed to be the subject of a separate contract for sale, which means terms between the parties may provide to the contrary or circumstances may indicate to the contrary. Again,. (5) provides that the sale may be notified to be subject to a reserved or up set price which means that the auctioneer may not fix a reserved price; further, it is well settled that if such a reserved price has been fixed than not withstanding the fact that the highest bid has been accepted by the auctioneer and that the sale relates to specific or identifiable goods no concluded contract comes into existence if the highest, bid so accepted falls short of the reserve pr ice and the property in the goods will not pass.. (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 s. 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 conditionsHaving 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 a re 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 Condition s 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 time the property in the coffee sold thereat passes to the auction purchaser (Registered Exporter) must depend upon the intention of the parties to be derived from the aforesaid terms and conditions. The contention that the property in coffee sold thereat passes to the buyer at t he fall of the hammer under s. 64(2) of our Sale of Goods Act has simply to be rejected, for, as we have indicated above, all that happens at the fall of the hammer is that a completed contract of sale comes into existence creating a relationship of promisor and promisee between the parties in an executory contractThe aforesaid clause suggests that the parties to the auction sale also understood s. 64(2) of the Sale of Goods Act in the manner in which we have interpreted it. On the question of the passing of the property the specific provision is to be found in Cl. 19 of the Auction Conditions. As stated earlier Cl. 19 principally deals with aspects of delivery, weighment and payment of price and towards the end it contains anoverriding provisionto the effect that notwithstanding anything contained in these conditions, 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. In other words, it is clear that parties intended that the passing of the property shall not take place till the full price is paid and the coffee sold is weighed and set apart for delivery. Now there is nothing in any of the other provisions o f these Auction Conditions which indicates that the property in coffee sold should pass either at the fall of the hammer or at any point of time prior to the payment of price and weighment and setting apart of coffee for delivery to the buyer. Therefore, the observations of Lord Chancellor Herschell in Mc Entire And Another v. Crossley Bros. Ltd. (supra) relied upon by counsel of three States cannot avail them. Further, it is true that theoverriding provisioncontained at the end of Cl. 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 Cl. 20(d) and (f) which show that positively the property in the coffee sold passes to the buyer at that point of time. Under Cl. 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 Cl. 20. On the buyers 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 season but at the risk and cost of the buyer. Clause 20(d) provides: "During the interval the coffee so remains with the Board or the Pool Agent, it shall be held at the risk and on account of the Buyer" and Cl. 20(e) provides: "Gain or loss in weight of Coffee, as the case may be, during the period when the coffee (sold, weighed and paid for) remains in the godown of the Pool Agent as above, shall be to the benefit of detriment of the Buyer himself and he shall be at liberty to export the quantity gained in weight." The aforesaid provisions contained in Cl. 20 clearly go to show that after price i s fully paid and the coffee sold is weighed and set apart for delivery to the buyer the same lies with the Coffee Board at the risk of the buyer and if during the interval if there be any gain or loss in weight the same will be credited and debited to his account. This provision clearly indicates in positive terms that the property in coffee sold at the export auction passes to the buyer not before payment of full price, weighment and setting apart thereof for delivery to the buyer but immediately after such payment, weighment and setting apart for delivery. We might refer to another clause, namely, Cl. 23 which contains another specialoverriding provisionproviding fory of the Coffee Board in case damage to the coffee sold or to the warehouse wherein the coffee was stored occurs by fire, flood, strike, riot, civil commotion, etc. etc. and it is provided that notwithstanding anything contained in the Auction Conditions in regard to the payment of prices , insurance/warehouse charges, delivery or other conditions and notwithstanding the provisions of the Sale of Goods Act in regard to passing of property, the Board or its Agents shall not be liable to deliver the coffee in specie, in the event of loss or damage caused to the coffee sold by any of the aforesaid causes. But this clause has no bearing on the question of passing of the property. Having regard to Cls. 19 and 20 of the Auction Conditions, therefore, it is clear to us that in these penultimate sales (i.e. sales of coffee at the export auctions conducted by the Coffee Board) the property in coffee sold there at passes to the buyer upon payment of price, weighment and setting apart of the coffee sold for delivery to the buyerIf once it is held that the property in coffee sold at such export auctions passes under Cls. 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 Cl. 31 of the Auction Conditions, for, if the title has already passed it cannot pass againIt 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 arey 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 to a buyer or to a carrier or bailee for transaction to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. In the instant case it is true that Cl. 26 declares that it is an essential condition of the auction that the coffee sold thereat shall be exported to stipulated destinations or to any other foreign country outside India as may be approved by the Chief Coffee Marketing officer within 3 months or within the extended period but such essential condition is applied to the coffee which has already become the property of the buyer under Cls. 19 and 20 of the Auction Conditions and all that Cl. 31 provides is that if default is made by Buyer in ex porting coffee within the prescribed time or extended time it shall be lawful for the Coffee Board without reference to the buyer to seize the unexported coffee and take possession thereof and deal with it as if it were the part and parcel of the Board s Coffee held by them in their Pool Stock. Far from amounting to a reservation of the right of disposal over the unexported coffee to the Coffee Board, Cl. 31 is in the nature of a defeasance clause in the sense that what is vested in the buyer under the earlier conditions, the same shall revert back to the Coffee Board if the buyer commits a default in fulfilling the essential condition. Such a reading of Cl. 31 would be consistent with a further provision which is to be found in the latter portion of that clause. The latter part of Cl. 31 provides that after the coffee is seized and it becomes part and parcel of Boards coffee held by it in its pool stock, the Board shalll the same but after suche the Chief Coffee Marketing officer shall pay to the defaulting buyer only the balance of the sale proceeds after deducting godown charges, insurance premium, selling commission payable to agents and all other expenses of sale together with the penalty due under Cl. 30In other words the proviso clearly suggests that the seized coffee becomes Coffee Boards property and isd as such, otherwise the surplus should go to the buyer (Registered Exporter). The fact that 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 Cl. 31 upon seizure the property reverts back to the Coffee Board. In our view, Cl. 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 Cls. 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 s. 25(1) of the Sale of Goods ActIt will be noticed that though on the question of the passing of the property 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 have reached our conclusion on the point purely on the basis of construction of the relevant Auction Conditions from which primarily the intention of the parties is to be gathered. It is only when a clear intention in that behalf is not deducible from the terms and conditions that other factors such as the course of dealings and the conduct of the parties assume relevance.Having regard to the above discussion it is clear to us that in the penultimate sales (sales of coffee effected to Registered Exporters at export auctions conducted by the Coffee Board) the property in the Coffee sold thereat passes to the buyer immediately upon payment of full price, weighment and setting apart of coffee for delivery to the buyer under Cls. 19 and 20 of the Auction Conditions and it would be at this stage i.e. just before t his stage is reached that the agreement with or order from a foreign buyer must be available or produced in order to attract s. 5(3) ofthe Central Sales Tax Act, 1956.