MIS ARIHANT UDHYOG  versus STATE OF RAJASTHAN & ORS.
[2017] 7 S.C.R. 157, Supreme Court of India, 2017
Outcome: Disposed off
Segment: Ratio
[2017) 7 S.C.R. 157 
MIS ARIHANT UDHYOG 
v. 
STATE OF RAJASTHAN & ORS. 
(Civil Appeal No. 8277 of 2017) 
JUNE 09, 2017 
11"· K. SIKRI AND ASHOK BHUSHAN, JJ.) 
Rajasthan Agricultural Produce Markets Act, 1961- ss.14, 
A 
B 
17 - Rajasthan Agriculture Produce Market Rules, 1963 - r.58 -
Agriculture Produce Market Fee - Payment of - Whether the 
C 
appellants who are purchasing the material which is admittedly 
'agriculture produce' and bringing the same to the market area are 
liable to pay the market fee on the said produce - Held: The answer 
would depend upon when and at what stage the title in the goods 
passes from seller to appellant-buyer.- If the entire transaction takes 
place outside the State and ownership in goods also passes outside D 
the State, then the market fee is not payable - Further, it will depend 
upon the applicability of s.4 r/w. s. I 9 of the Sale of Goods Act, 
1930...:. S.4 deals with the contract of sale whereas as per s.19, 
property passes from seller to buyer when it is intended to pass and 
such intention is to be gathered from the contract - In the instant 
E 
case, the terms and conditions of the contract indicate that 
responsibility of the seller ceases as soon as goods are delivered, 
which means the seller remained responsible till the delivery of goods 
- Such a responsibility can be only if the ownership remains of the 
seller - No document produced by the appellant demonstrated the 
intention that property in goods passed in their
favour before these 
goods were delivered - Therefore, sale was fructified only after the 
goods were brought to the market area and ownership in the goods 
passed from the seller to the appellants at the time when the goods 
were delivered in the market area - Thus, market fee payable by the 
appellants - Sale of Goods Act, 1930 - s.4 r/w. s.19 and ss. 20, 21. 
Rajasthan Agricultural Produce Markets Act, 1961 -
Agriculture Produce Market Fee~ Plea of appellant that agriculture 
produce bought by it was not meant for further sale but was further 
processed at its factory, therefore, the Market Committee had no 
right to impose any levy and realise the market fee - Held: It is to 
157 
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[2017] 7 S.C.R. 
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be first ascertained whether agricultural produce was bought and 
sold in the market area or not which is a question which needs to be 
determined in each case - In instant case, no document produced 
by the appellant demonstrated the intention that property in goods 
passed in their favour before these goods were delivered - Therefore, 
B 
sale was fnictified only after the goocJs were brought to the market 
area - Once the goods bought are agriculture produce on which 
market fee is leviable in terms of the Schedule attached to the Act, 
then the market fee is payable - If it is thereafter used as raw material 
for manufacturing purpose, that would be of no consequence. 
c 
Disposing of the appeals, the Court 
HELD: 
Whether the appellants herein who are purchasing the 
material which is admittedly 'agricultural produce' and bringing 
the same to the area known as 'market area' and covered by the 
D provisions of the Rajasthan Agricultural Produce Markets Act, 
1961 and Rajasthan Agricultural Produce Market Rules, 1963 
are liable to pay the market fee on the said produce? 
1. The applicability of Section 17 of the Rajasthan 
Agricultural Produce Markets Act, 1961 read with Rule 58 of 
E 
the Rajasthan Agricultural Produce Market Rules, 1963 would 
depend upon the question as to whether agricultural produce is 
bought and sold by the licensee in the market area'. The answer 
to the aforesaid issue would depend upon the
question as to when 
and at what stage the title in the goods passes. If the entire 
transaction takes place outside the State of Rajasthan and the 
F 
ownership in the goods also passes outside Rajasthan, then the 
market fee is not payable. The answer to the aforesaid question 
would depend upon the applicability of Section 4 read with Section 
19 of the Sale of Goods Act, 1930, which provisions are to be 
applied keeping in view the terms and conditions on which the 
G goods are sold. That is the exercise which is done by the High 
Court by looking into the terms on which the goods were sold to 
appellant. Insofar as appellant is concerned, this was the only 
invoice produced before the High Court and is also made 
Annexure in the present proceedings. 'On going through the same, 
there is no fault in the approach of the High Court. [Para 14][169-
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G-H; 170-A-B]
MIS ARIHANT UDHYOG v. STATE OF RAJASTHAN & ORS. 
159 
2. In the case of appellant, intention is to be gathered from 
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the terms and conditions of contract, which mentions that 
responsibility of the seller ceases as soon as goods are delivered, 
which means the seller remained responsible till the delivery of 
goods. Therefore, intention was to retain the title in the goods 
till its delivery inasmuch as till that ·time it is the seller who was 
B 
responsible for the goods. This condition would clearly spell out 
that if the goods are destroyed or lost in transit, i.e. before their 
delivery, responsibility will be that of the seller. Such a 
responsibility can be only if the ownership remains of the seller. 
No other document was produced by appellant which could 
demonstrate the intention that property in goods passed in their 
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favour before these goods were delivered. Thus, insofar as 
judgment of the High Court in appellant's case is concerned, no 
fault can be found therein. However, it is to be first ascertained 
whether agricultural produce was bought and sold in the market 
area or not which is a question which needs to be determined in 
D 
each case after applying the principles of law. [Paras 21, 22 and 
28][172-D-G; 174-C] 
3. It was argued by appellant that the agricultural produce 
bought is not meant for further sale but is processed at the factory 
of the licensees and, therefore, the Market Committee had no 
right to impose any levy and realise the
market fee, which can be 
done only on the transactions of purchase and sale and not when 
the agricultural produce is bought for the purpose of manufacture 
or further processing. This plea of the appellant is of no 
consequence. In the impugned judgment the High Court has 
rightly repelled this argument by observing that once the goods 
bought are agricultural produce on which market fee is leviable 
in terms of Schedule attached to the Act, then the market fee is 
payable. If it is thereafter used as raw material for manufacturing 
purpose that would be of no consequence.[Paras 25, 27][173-D; 
174-A-B] 
Gujarat Ambuja Exports Limited & Anr. v. State of 
Uttarakhand & Ors. (2016) 3 SCC 601 : (2015] 
12 SCR 304; Agricultural Market Committee v. 
Shalimar Chemical Works Ltd. (1997) 5 SCC 516 : 
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r20 I 7J 7 s~c.R. 
A 
[1997) 1 Suppl. SCR 164; Agricultural Produce Market · 
Committee v. Biotor Industries Limited & Anr. (2014) 3 
SCC 732 : [2013) 16 SCR 939 - referred to. 
B 
Case Law Reference 
[2015) 12 SCR 304 
referred to 
Para 10 
[1997) 1 Suppl. SCR 164 
referred to 
Para.11 
[2013) 16 SCR 939 
referred to 
Para 13 
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 8277 
of 2017. 
C 
From the'Judgment and Order dated 14.05.2012 of the High Court 
ofRajasthan at Jodhpur in DBCWP No. 7715 of2010 
• 
WITH 
Civil Appeal Nos. 8293, 8279, 8278, 8280, 8282, 8281, 8283, 8285, · 
8286,8284,8300,8302,8299,8287,8297,8296,8295,8294,8288,8289, 
D 
8290, 8298, 8291, 8292, 8304, 8303, 8301, 8305, 8306, 8307 and 8308 of 
2017. 
H. L. Tiku, Sr. Adv., Rishabh Sancheti, Ms. Padma Priya, Dhruv 
Sharma, T. Mahipal, Pankaj T., Shubhankar Sengupta, Ms. Arti Singh, 
H. D. Thanvi, Ms. Jakhmala, Rishi Matoliya, Mukul Kumar, M .. P. 
Devanath, Aditya Bhattacharya, Victor Das, Ms. Apeksha Mehta, Anil 
E 
Dutt, Rameshwar Prasas Goyal, Ashwarya Sinha, Milind Kumar, M/s 
Equity Lex Associates, Ms. Pragati Neekhra, Ajay Choudhary, Pankaj 
Kumar Singh, Dr. VinodKumarTewari, K. L. Janjani, Ms. Ruchi Kohli, 
Anish Maheshwari, Ms. Farha Malik and Sanjeev Agarwal, Advs. for 
the appearing parties. 
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The Judgment of the Court was delivered by 
A. K. SIKRI, J. I. Leave. granted. 
2. Singular question oflaw; which is common in all these app\'.ills, 
that arises for
consideration is as to whether the appellants herein who 
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are purchasing the material which is admittedly 'agricultural produce' 
and bringing the same to the area known as 'market area' and covered 
by the provisions of the Rajasthan Agricultural Produce Markets Act, 
1961 (hereinafter referred to as the 'Act') and Rajasthan Agricultural 
Produce Market Rules, 1963 (for short, the 'Rules') are liable to pay the 
market fee on the said produce. Admittedly, the legal position is that if 
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the agricultural produce is brought to the market area and sold there,
M/S ARIHANT UDHYOG v. STATE OF RAJASTHAN & ORS. 161 
[A. K. SIKRI, J.) 
market fee is payable thereon. The question in these appeals is as to 
A 
whether the goods were bought and sold at the market place. The 
appellants maintain that the sale of the agricultural produce took place 
and was concluded outside the State of Rajasthan and before these 
goods were brought to the market area, they had already become the 
owner thereof by virtue of the sale outside the State and, hence, are not. 
liable to pay any market fee. On the other hand, the respondents, including 
B 
the Agricultural Produce Market Committee (respondent No.3), argue 
that the sale was fructified only after the goods were brought to .the 
market area and the ownership in the goods passed from the seller to 
the appellants herein at that time when the goods were delivered in the 
market area. On this reckoning, the respondents claim that the market 
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fee is payable by the appellants. 
3. The appellants had challenged the action ofrespondent No.3 in 
demanding the market fee payable under the Rules by filing writ petitions · 
in the High Court. Fifteen such writ petitions were decided by the High 
Court ofRajasthan vi de common judgment dated May 14, 2012 accepting 
D 
the stand taken by respondent No.3 and it dismissed the writ petitions as 
bereft of any merit. The writ petitions of other appellants were dismissed 
by various orders following the said judgment. In view thereof, it would 
be appropriate to
discuss the facts and the reasons given by the High 
Court for arriving at the said conclusion. 
4. Before the High Court, lead case was that of Arihant Udyog, 
which is the position herein as well. Arihant Udyog is a small-scale 
industry registered as such with the Government of Rajasthan. 
According to Arihant Udyog, since it is purchasing the agricultural 
produce from outside the State for industrial purpose, it is not liable to 
pay any market fee'. It is, however, a licensee under the Act, obtained 
· by it under Section 14 thereof. Likewise, all other appellants are also 
licensees. 
5. Some relevant provisions of the Act, Rules and. the 
Administrative Circulars require a mention at this stage, which read as 
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follows: 
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"Section 14 of the Act 
Power of market committee to issue Licence. -
(1) Where a 
market is established under the provisions of this Act, the market 
committee may issue and.renew Licence, in accordance with the H
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SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
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rules and bye-laws, to traders, brokers, weighmen, measurers, 
processors, surveyors, warehousemen or other persons to operate 
in the market on payment of the prescribed fees. 
(2) The market committee may also grant Licence, - (a) for direct 
purchase from the agriculturists for the following purposes, 
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namely:-
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. (i) to processor for processing; 
(ii) to exporters for export of agricultural produce; 
(iii) for trade of agricultural produce of particular specification; 
and 
(iv) for grading, packing and transacting in other way by value 
addition of agricultural produce: 
"irovided that no sale or purchase shall be permitted under this 
clause within the market proper except for the purposes specified 
in sub clause(i) and (iv)." 
Section 17 of the Act 
Power to collect market foes. - The market committee shall collect 
market fees from the Licences in the prescribed manner on 
agricultural produce bought or sold by them in the market area at 
such rate as may be specified by the State Government, by 
notification in the official gazette, subject to a maximum of Rs 21 
- per hundred rupees worth of agricultural produce. 
[Provided also that Mandi Fee leviable on the sale or purchase of 
Mustard Seed shall be Rs. 1/- on one hundred rupees.] 
[Provided also that Mandi Fee leviable on the sale or purchase of 
Oil Seeds shall be Rs. 1/- on one hundred rupees.] 
· 
Rule 58 of the Rules 
Market area Cess -
(
1) A market area committee shall collect cess on agricultural 
produce bought and sold in the market area at such rate as may 
be specified by the Government by way of notification: 
Provided that no cess shall be levied on any such notified 
agricultural produce on which cess has been levied in any market
MIS ARIHANT UDHYOG v. STATE OF RAJASTHAN & ORS. 
[A. K. SIKRI, J.] 
area if the seller or the purchaser of such notified produce files a 
declaration in Form XI, in the prescribed manner, that no notified 
agricultural produce, cess has already been levied in any other 
market area of the State. 
Explanation- (a) For the purpose of this rule a sale ofagricultural 
produce shall be deemed to have taken place in a [Market area] 
if it has been weighed or measured or surveyed by a licensed 
weighman, measurer or surveyor in the Market area for the 
purpose of sale, notwithstanding the fact the property in the 
agricultural produce has by reason of such sale, passed to a person 
in place outside the market area. 
(b) Further for the Purpose of this rule, all notified agricultural 
produce taken out or proposed to be taken out of the market area 
shall, unless the contrary is proved, be presumed to be bought and 
sold within such market area. 
163 
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(2) The cess levied as per sub-rule (1) shall not be levied more 
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than once on agricultural produce bought or sold in the market 
area. 
(3) The market area committee shall also levy and collect licence 
fee from traders, brokers, weighman, measurer, surveyors, 
warehousemen and other persons operating in the market area as 
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provided in the bye-laws. 
(4) Deleted1" 
1 Sub-Rule (4) of Rule 58, before deletion, read as under: 
"(4) No cess shall be levied on agricultural produce brought from outside the market 
into the
market for use therein by the industrial concerns situated in the market or for 
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export and in respect of which a declaration has been made and a certificate has been 
obtained in Form-V: 
Provided that if such agricultural produce brought into the market for export is not 
exported or removed therefrom before the expiry of twenty days from the date -0n 
which it was so brought, the market committee shall levy and collect cess on such 
agricultural produce from the person bringing the produce into the market at such rates 
as may be specified in the bye-Jaws: 
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Provided further that if the industrial concerns that brought the agricultural produce 
from outside the market. into the market for the purpose of use by them, an4 who do 
not make any declaration and do not obtain a certificate in Form-Vas prescribed above, 
shall be deemed to be responsible for the contravention of this rule, and shall, on 
conviction be punished under Sub-section (3) of Section 36 of the Act with a fine 
which may extend to Rupees two hundred." 
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[2017] 7 S.C.R. 
6. As per Section 14 of the Act, a trader is required to obtain a 
licence and is under lawful obligation to make good the market fee. 
Insofar as levy of market fee is concerned, power is given to the Market 
Committee in this behalf to prescribe the market fee on agricultural 
produce, bought and sold by the licensee in the market area. Rule 58 is 
the Rule under which this market fee is prescribed. Initially, when the 
Rules were framed in the year 1963, Rule 58 contained sub-rule (4) as 
well, which empowered the Market Committee to exempt payment of 
market fee in respect of certain market produce. Circular dated March 
07, 1992 was issued under sub-rule (4) of Rule 58 of the Rules whereby 
agricultural produce was exempted from market fee ifthe product was 
purchased outside the State of Rajasthan. However, amendment to 
Rule was carried out by the State Government vide Notification dated 
April 27, 2005 vide which sub-rule (4) of Rule 58 was deleted. Effect 
thereof was that Circular dated March 07, 1992 issued under sub-rule 
(4) of Rule 58 was rendered otiose. Consequently, in terms of Section 
D 
17 of the Act, all the agricultural produce, bought and sold in the market 
area, became liable for payment of market fee. Vires of Notification 
dated April 27, 2005, vide which sub-rnle (4) of Rule 58 was deleted, 
were challenged by certain traders by filing writ petitions in the High 
Court of Rajasthan. The High
Court, however, repelled that challenge 
E 
thereby holding that deletion of sub-rule (4) of Rule 58 of the Rules was 
a valid exercise of power. 
7. The instant matters were argued before the High Court having 
regard to the aforesaid statutory framework as per which market fee is 
payable.on agricultural produce bought and sold by the licensees in the. 
market area on the rates stipulafed in Rule 58 of the Rules. It is in this 
F 
context the question raised was as to whether the appellants had bought 
the agricultural produce within the market area. In all these cases the 
seller of the goods is situated outside the State of Rajasthan. Those 
goods, after purchase, are brought in the market area and deliv.ery thereof 
is taken there. In case the title in goods in question had passed on to the 
buyers (appellants herein) outside the State ofRajasthan and only delivery 
G 
was taken within the market area, market fee will not be payable as the 
ingredient of buying and selling the goods in the market area would not 
be established in such a contingency. On the contrary, ifthe title in the 
goods passed in favour of the licensees/ appellants while taking the 
delivery of the goods in the market area, market fee would become 
H 
payable.
• 
M/S ARIHANT UDHYOG v. STATE OF RAJASTHAN & ORS. 165 
[A. K. SIKRI, J.] 
8. Insofar as Arihant Udhyog is concerned, it had filed the copy A 
of an invoice, through which the goods were delivered, as AnAexure-1 to. 
the writ petition. As per this invoice, the seller is one Jawahar Exim Ltd. 
of Jalgaon in Maharashtra, which is admittedly outside the State of 
Rajasthan. As per this invoice 'Toor Whole' (an agricultural produce) 
was sold by the said seller to the appellant which was loaded in a truck. 
. Truck number is mentioned in the invoice, so also weight of the goods, 
rate at which the goods are sold and total amount of the invoice. This 
invoice is dated March 22, 2006. It contains the following three terms 
and conditfons: 
"I. Goods once sold & delivered will not be taken back. 
2. Responsibility of the seller ceases as soon as the goods are 
delivered. 
3. Interest@24% per annum is payable on all payments received 
after l 0 days." 
9. Condition No.2 prescribes that responsibility of the seller would 
cease as soon as goods· are delivered. It would mean that till the goods 
are delivered, the seller would remain responsible. Admittedly, the goods 
were to be delivered only at Jodhpur (i.e. within the market area), which 
is so stipulated in the invoice. On the basis of the aforesaid conditions, 
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the High Court held that as per the provisions of Sale of Goods Act, 
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1930 the ownership in the goods stood transferred to the appellant only 
on the delivery
of the goods, which delivery took place within the market· 
area at Jodhpur and, therefore, the transaction of buying and selling was 
completed at Jodhpur. On this analogy, the High Court came to the 
conclusion that the market fee is payable. 
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10. It was argued by Mr. Rishabh Sancheti, learned counsel 
appearing for Arihant Udhyog, thatthe appellant's case stands covered 
by a recent pronouncement of this Court in the case of Gujarat Ambuja 
Exports Limited & Anr. v: State of Uttarakhand & Ors. 2 wherein the 
court held that if the agricultural produce is brought into the market for 
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the purpose of manufacture or further processing, but not for the purpose 
of sale, then the market fee is not payable inasmuch as the State 
Legislature does not have competence to enact a provision for levyip.g 
2 (2016) 3 sec 601 
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[2017] 7 S.C.R. 
A 
the market fee on agricultural produce which is not brought for the purpose 
of sale. Paragraph 36 of the said judgment was quoted by the learned 
counsel in support of this submission, which reads as under: 
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"36. A perusal of the abovementioned judgments makes it clear 
that List I Entry 52 governs the process of manufacture and 
production. Therefore, in the instant case, the State Legislature 
did not have the competence to enact the impugned provisions 
which sought to levy market fee and development cess even on 
those agricultural produce which were not being brought into the 
market for the purpose of sale, but for the purpose of manufacture 
or further processing. Since the State Legislature was not 
competent to enact the impugned provision ofSection27(c)(iii) of 
the Act, the same is liable to be struck down as the same was 
enacted by the State Legislature without having the legislative 
competence to do so." 
11. It was also argued that the High Court noted the contention 
that the appellant is a small-scale industry and that it had purchased 
legumes from outside the State ofRajasthan and by processing it in its 
premises by different scientific ways it prepares various dais. Thus, the 
legumes which are purchased are not meant for further sale but for 
processing by the appellant in its factory. The learned counsel stressed 
that the appellant is purchasing produce from outside the State for
industrial purpose and the High Court, presumably, proceeded on the 
basis as ifthe appellants were 'trading' in agricultural goods, which was 
factually not true. Learned counsel also argued that even the provisions 
of Section 17 would not apply as they are applicable only when the 
agricultural produce is 'bought and sold' in the market area. He 
emphasised that both the conditions of buying as well as selling in the 
market area have to be satisfied, as is clear from the word 'and'. Learned 
counsel also relied upon the following observations from the judgment of 
this Court in Agricultural Market Committee v. Shalimar Chemical 
Works Ltd.3: 
"38. Section 20 indicates that in case ofunconditional contract of 
sale in respect of specified goods in a deliverable state, the property 
in the goods passes to the buyer at such time as the parties intend 
it to be transferred. Section 19(3) provides that Sections 20 to 24 
contain the rules for ascertaining the intention of the parties as to 
'(1997) s sec s16
MIS ARIHANT UDHYOG v. STATE OF RAJASTHAN & ORS. 167 
[A. K. STKRI, J.] 
the time at which the property in the goods shall be treated to 
A 
have passed to the buyer. Both Sections 19 and 20 apply to the 
sale of "specific" or "ascertained" goods. 
39. Section 20, which contains the first rule for ascertaining the 
intention of the parties, provides that where there is an 
unconditional contract for the sale of "specific goods" in a 
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"deliverable state", the property in the goods passes to the buyer 
when the contract is made. This indicates that as soon as a contract 
is made in respect of specific goods which are in a deliverable 
state, the title in the goods passes to the purchaser. The passing 
of the title is not dependent upon the payment of price or the time 
of delivery of the goods. If the time for payment of price .or the 
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time for delivery of goods, or both, is postponed, it would not affect 
the passing of the title in the goods so purchased. 
40. In order that Section 20 is attracted, two conditions have to 
be fulfilled: (i) the contract of sale is for specific goods which are 
in a deliverable state; and (ii) the contract is an unconditional 
D 
contract. If these two conditions are satisfied, Section 20 becomes 
applicable immediately and it is at this stage that it has to be seen 
whether there is anything either in the terms of the contract or in 
the conduct of the parties or in the circumstances of the case 
which indicates a contrary intention.
This exercise has to be done 
to give effect to the opening words, namely, "Unless a different 
intention appears" occurring in Section 19(3). In Hoe Kim 
Seing v. Maung Ba Chit [AIR 1935 PC 182 : 62 IA 242 : 39 CWN 
1217] it was held that intention of the parties was the decisive 
factor as to when the property in goods passes to the purchaser. 
If the contract is silent, intention has to be gathered from the 
conduct and circumstances of the case. 
xx 
xx 
xx 
42. In the instant case, the goods which were the subject-matter 
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of sale were ascertained goods. They were also in a deliverable 
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state. On the order being placed by the respondent, the seller in 
the State ofKerala, loaded the goods on the lorry and despatched 
the same to Hyderabad. It is at this stage that the conduct of the 
parties becomes extremely relevant. It was one of the terms of 
the contract between the parties that the seller would not be liable 
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SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
for any future loss of goods and that the goods were being 
despatched at the risk of the respondent. The respondent had 
also obtained insurance of the goods and had paid the policy 
premium. He, therefore, intended the goods to be treated as his 
own so that if there was any loss of goods in ·transit, he could 
validly claim the insurance money. The weighment of the goods 
at Hyderabad or the collection of documents from the bank or 
payment of price through the bank at Hyderabad were immaterial, 
inasmuch as the property in the goods had already passed at Kerala 
and it was not dependent upon the payment of price or the delivery 
of goods to the respondent." 
12. Mr. H.L. Tiku, learned senior counsel appearing for M/s. 
Deepak Enterprises, also emphasised that the appellant was purchasing 
the agricultural produce (sugar/paddy) from outside the State ofRajasthan 
which is brought to its factory in Rajasthan for processing the same into 
mishri, patasa, makhana, burra, etc. from sugar and rice from the 
D 
paddy, which goods are not 'agricultural produce' as per Schedule-I of 
the Act. It was, thus, argued that the appellant was not dealing with sale 
and purchase of any agricultural produce in market area. His further 
submission was that purchase of agricultural produce was outside the 
State ofRajasthan which was transported to Rajasthan at the appellant's 
risk and cost, as per the provisions of the invoice.
The goods are 
E 
ascertained and in deliverable state. The invoices itself mention the 
terms and conditions that the goods are being sold at the risk of the 
appellants, in clear terms and i.n some of the cases the appellant has 
even obtained the insurance of goods in its name. A.ft er the goods were 
entrusted to the carrier, the sellers from outside the State ofRajasthan 
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had absolutely no liability with regard to any future losses. When goods 
have been delivered to a common carrier to be sent to the appellants, the 
carrier becomes the agent of the appellant and such a delivery amounts 
to delivery to the purchaser under Section 23(2) of the Sale of Goods 
Act, 1930. There was, thus, complete sale outside the market area the 
moment the goods le.ave the factory of the seller. As such, as soon as 
G · the goods leave the factory of the seller (outside the State ofRajasthan), 
the ownership in the goods passes on to the appellant, In such a situation, 
the place of delivery within the market area of agricultural produce is 
not a relevant factor. The appellant relied upon the terms and conditions 
of the invoices and also in some of the cases insurance is taken by the 
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MIS ARIHANT UDHYOG v. STATE OF RAJASTHAN & ORS. 169 
[A. K. SIKRI, J.] 
appellant and premium thereagainst was also paid by the appellant. 
A 
13. Learned counsel for the State, on the other hand, referred to 
the invoice produced by Arihant Udhyog and submitted that construing 
the terms thereof, the High Court has rightly held that the goods are 
bought and sold in Jodhpur in the market area. On that basis, he submitted 
that since there is a purchase and sale of goods in the market area, 
B 
conditions stipulated in Section 17 of the Act as well as Rule 58 of the 
Rules stand satisfied and the Market Committee was justified in 
demanding the market fee. He referred to the judgment in the case of 
Agricultural Produce Market Committee v. Biotor Industries 
Limited & Anr. 4 and particularly paragraph 21 thereof which, according c 
to him, squarely covers the instant case, and the same is reproduced 
below: 
"21. On the basis of the said material facts the learned Single 
Judge arrived at the conclusion that the respondent Company 
placed order for purchase of castor seeds from its suppliers from 
outside the market area but no payment was immediately made 
D 
for the same. On the demand of the respondent Company, the 
quantity of castor seeds so requisitioned by it was transported by 
the supplier which was received by it within the market area. It is 
an'undisputed fact that the consignment so received was weighed 
by the Company within the market area. Thereafter, on
finding 
out the exact weight of castor seeds received by it, the payment 
at the agreed rate was made by the Company to the supplier. 
Therefore, the learned Single Judge came to the conclusion on 
the basis of appreciation of the aforesaid facts and held that the 
sale was not effected till the consignment was received by the 
respondent Company and the same was weighed within the market 
area." 
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F 
14. From the aforesaid arguments it becomes clear that applicability 
of Section 17 of the Act read with Rule 58 of the Rules would depend 
upon the question as to whether agricultural produce is bought and sold 
by the licensee in the market area. It is also the common case of the 
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parties that the answer to the aforesaid issue would depend upon the 
question as to when and at what stage the title in the goods passes. If 
the entire transaction takes place outside the State ofRajasthan and the 
ownership in the goods also passes outside Rajasthan, then the market 
• c2014) 3 sec 732 
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fee is not payable. It is also the common case of the parties that answer 
to the aforesaid question would depend upon the applicability of Section 
4 read with Section 19 of the Sale of Goods Act, 1930, which provisions 
are to be applied keeping in view the terms and conditions on which the 
goods are sold. That is the exercise which is done by the High Court by 
B 
c 
looking into the terms on which the goods were sold by Jawahar Exim 
Ltd. to Arihant Udyog. Insofar as Arihant Udhyog is concerned, this 
was the only invoice produced before the High Court and is also made 
Annexure P-3 in the present proceedings. On going through the same, 
we do not find any fault in the approach of the High Court. 
15. Section 4 of the Sale of Goods Act deals with the contract of 
sale and defines 'sale' as well as 'agreement to sell'. It reads as under: 
"4. Sale and agreement to sell 
(1) A contract of sale of goods is a contract whereby the seller 
transfers or agrees to transfer the property in goods to the buyer 
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for a price. There may be a contract of sale between one part-
owner and another. 
• 
(2) A contract of sale may be absolute or conditional. 
(3) Where under a contract of sale the property in the goods is 
transferred from the seller to the buyer, the contract is called a 
E 
sale, but where the transfer of the property in the goods is to take 
place at a future time or subject to some condition thereafter to 
be
fulfilled, the contract is called an agreement to sell. 
(4)An agreement to sell becomes a sale when the time elapses or 
the conditions are fulfilled subject to which the property in the 
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goods is to be transferred." 
The very distinction between the sale and agreement to sell 
enumerated in the aforesaid provision points out that a sale takes place 
when the property in goods is transferred from the seller to the buyer. If 
transfer of property in the case is to take place at a future time or subject 
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to conditions that are stipulated in the contract of sale of goods, then the 
contract is merely an agreement to sell. Section 19 is contained in 
Chapter-III of the Sale of Goods Act, title whereof is "Effects of the 
Contract (Transfer of Property as between Seller and Buyer)". As per 
this provision, property passes from seller to buyer when it is intended to 
.pass and such an intention is to be gathered from contract for the sale 
H
M/S ARIHANT UDHYOG v. STATE OF RAJASTHAN & ORS. 171 
[A. K. SIKRI, J.] 
when. it pertains to sale of specific or ascertained goods. To understand 
A 
fully. the implication of this provision, we reproduce hereunder the 
provisions of Section 19: 
"19. Property passes when intended to pass 
(1) Where there is a contract for the sale of specific or ascertained 
goods the property in them is transferred to the buyer at such 
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time as the parties to the contract intend it to be transferred. 
(2) For the purpose of ascertaining the intention of the parties 
regard shall be had to the terms of the contract, the conduct of 
the parties and the circumstances of the case. 
(3) ~nless a different intention appears, the rules contained in 
sections 20 to 24 are rules for ascertaining the intention of the 
parties as to the time at which the property in the goods is to pass 
to the buyer." 
c 
· 16. Sub-section (3) of Section 19 is another significant provision 
D 
which mentions that rules contained in Sections 20 to 24 are the rules for 
ascertaining the intention of the parties, unless a different intention 
appears in the contract for the sale of specific or ascertained goods. It 
means, if such an intention as to when the parties to the contract intend 
the property in. goods to be transferred cannot be gathered from the 
contract, rules contained in Sections 20 to 24 would be applied. 
E 
17. Section 20 deals with a situation where specific goods are in a 
deliverable state. In
that case property in goods passes to the buyer 
when the contract is made, even when time of payment of the price or 
the time of delivery of the goods or both is postponed. In order that 
· Section 20 is attracted, two conditions have to be fulfilled: (i) the contract 
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of sale is for specific goods which are in a deliverable state; and (ii) the 
.. contract is an unconditional contract. If these two conditions are satisfied, 
Section 20 becomes applicable {See-Shalimar Chemical Works Ltd.}. 
1; .. 
. ... 18. However, Section 21 is exception to Section 20 which states 
that where there is a contract for sale of specific goods and the seller is 
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bound to do something to the goods for the purpose of putting them into 
a deliverable state, the property does not pass until such a thing is done 
and the buyer has notice thereof. Likewise, Section 22 carves out another 
exception and mentions that even when the specific goods are in a 
deliverable state but the seller is bound to weigh, measure, test or do 
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some' other act or thing with reference to the goods for the purpose of 
ascertaining the price, the property does not pass until such Act or thing 
is done and the buyer has notice thereof. -
19. Section 23 deals with sale ofuncertain goods and appropriation, 
with which we are not concerned here. Likewise, Section 24 deals with 
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a situation where goods are sent on approval or 'on sale or retiun' basis, 
which is also not relevant for our purposes. 
20. A conjoint reading of the aforesaid provisions makes it clear 
that title in goods is transferred from the seller to buyer only on the sale 
of goods. As to when such a sale fructifies and the property passes is to 
c be ascertained from the intention of the parties having regard to the 
terms of the contract. If no such intention can be gathered from the 
terms of the contract, the property in goods passes where the goods are 
in a deliverable state and there is unconditional contract for sale of 
D 
E 
F 
_ specific goods. 
21. In the case of Arihant Udhyog, intention is to be gathered 
from the terms and conditions, which have already been noted above. It 
mentions that responsibility of the seller ceases as soon as goods are 
delivered, which means the seller remained responsible till the delivery 
of goods. Therefore, intention was to retain the tit!e in the goods till its 
delivery inasmuch as till that time it is the seller who was responsible for 
the goods. This
condition would clearly spell out that if the goods are 
destroyed or lost in transit, i.e. before their delivery, responsibility will be 
that of the seller. Such a responsibility can be only if the ownership 
remains of the seller. No other document was produced by Arihant 
Udhoyg which could demonstrate the intention that property in goods 
passed in their favour before th~se goods were delivered. 
- 22. Thus, insof~r as judgment of the High Court in Arihant Uqhyog 
is conct:rned, no fault can be found therein. The appeal filed by Arihant 
Udhyog is, accordingly, dismissed. 
23. Having said so, we find that the High Court has passed 
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impugned commoµjudgment deciding as many as fifteen writ petitions. 
Other writ petitions are also dismissed taking into consideration the terms 
and conditions of the contract of sale between Arihant Udhyog and its 
seller. This is clearly a wrong approach. In each case the High Court 
was supposed to go into the contract for sale between the licensees and 
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their sellers and in view of the terms and conditions contained in each o.f
MIS ARIHANT UDHYOG v. STATE OF RAJASTHAN & ORS. 173 
[A. K. SIKRI, J.] 
the case, the High Court was supposed to decide as to whether in their A 
cases also ownership in goods transferred only in the market area within 
the State of Rajasthan. 
24. Insofar as the case of Mis: Deepak Enterprises is concerned, 
the same is decided by the High Court by separate judgment dated July 
27, 2012. However, the High Court has simply followed the earlier 
B 
judgment dated May 14, 2012 fa Arihant Udhyog without going into the 
invoices of Mis. Deepak Enterprises. Therefore, the appeal has to be 
allowed and the impugned judgment will have to be set aside on this 
ground itself by remitting the case back to the High Court to decide the 
same on the basis of the terms and conditions contained in the invoice 
which would decide what was the intendment between the appellant 
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and the seller who sold the goods. Ordered accordingly. 
25. One more aspect, however, needs to be dealt with by us. It 
was argued before us that the agricultural produce bought is not meant 
for. further sale but is processed at the factory of the licensees and, 
therefore, the Market Committee had no right to impose any levy and D 
realise the market fee, which can be done only on the transactions of 
purchase and sale and not when the agricultural produce is bought for 
the purpose of manufacture or further processing. In support of this, 
judgment of this Court in Biotor Industries Limited & Anr. was pressed
into service. 
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26. We have gone through the said judgment and find that no such 
principle, as sought to be advanced by the appellants, is laid down therein. 
That was a case where the respondent had purchased castor seeds 
from suppliers outside the market area but weighment arid payment 
whereof was made at the mill site within the market .area. The Court 
F 
concluded that the respondent company had become owner of the goods 
only once the exact weight of the castor seeds was ascertained and 
purchase voucher was obtained and, therefore, the sale had take11 place 
. within the market area and the respondent was liable to pay market fee 
thereon. To that extent, the aforesaid judgment is against the appellants. 
However, there was one more issue involved in the said case. The 
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respondent industry was using the castor seeds for manufacturing of oil 
therefrom. In this manufacturing, de-oiled seed cake·emerged as a bye-
product. The Market Committee wanted to levy market fee on this bye-
.product also, which was held to be impermissible. The Court also held 
that the item mentioned in Schedule to the Act was 'oil cake' which is 
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different and distinct from 'de-oiled cake'. 
27. This plea of the appellant, therefore, is ofno consequence. ln 
the impugned judgment the High Court has rightly repelled this argument 
by observing that once the goods bought are agricultural produce on 
which market fee is leviable in terms of Schedule attached to the Act, 
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then the market fee is payable. If it is used as raw material for 
manufacturing purpose thereafter would be of no consequence. 
28. However, as mentioned above, it is to be first ascertained 
whether agricultural produce was bought and sold in the market area or 
not is the question which needs to be determined in each case after 
c applying the principles of law as enumerated above. The High Court 
would be required to ascertain this on the basis of terms and conditions 
of sale in each case and that would determine the fate of each of the 
writ petitions filed by the appellants. This exercise is not done and after 
dealing with the case of Arihant Udhyog, other writ petitions are also 
dismissed. Thus, except Arihant Udhyog, where we have upheld the 
D 
judgment of the High Court, orders of the High Court in other cases are 
set aside and writ petitions are remanded back to the High Court to 
decide them in the light of the law stated by us in this judgment. 
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29. The consequence is that the appeal of Arihant Udhyog is 
dismissed and other appeals are allowed in the manner mentioned above. 
No
costs. 
Ankit Gyan 
Appeals disposed of.