Case: Jute And Gunny Brokers Ltd.And Another Vs. The Union Of India And Others.(And Connected Appeals)

In September, 1946, there was food shortage in the Country. In order to relieve this shortage, the Government of India entered into an agreement with the President of Argentine Institute for Promotion of Trade by which it undertook to freeze, requisition and take over and sell to the Argentine Institute and Ship to Argentine 30,000 tons of hessian and in return the Institute guaranteed to obtain licences for shipment from Argentine of maize and wheat offals already purchased by the Government of India in Argentine. This agreement was arrived at on September 27, 1946. In anticipation of this agreement, the Government of India on September 20, 1946, addressed letters to the managing agents of various jute mills in Bengal demanding from them information as to stocks of hessian of certain description held by the mills under their managing agencies and prohibiting them from selling, transferring, removing, consuming or otherwise disposing of any article enumerated in Sch. B to the communication. This demand was made under sub-rule (5) of R. 75A of the Defence of India Rules (hereinafter called the Rules). After the information had been gathered, the Government of India issued an order on September 30, 1946, to the same managing agents requisitioning the hessian specified in the schedule to the order and directing them and every other person in possession of the said property to deliver it to the Director of Supplies, Calcutta, and in the meantime not to dispose of the property in any manner without the permission of the Central Government. The schedule to the order in each case indicated the mill from which the requisition was made, the quantity, the description of the hessian and the name of the registered stock-holders. These requisition orders were served upon the managing agents of the mills under sub-rule (1) of R. 75A of the Rules on that very day. Thereafter on the same day, that is, September 30, 1946, the Government of India issued a notice under sub-rule (2) of R. 75A to the managing agents communicating that it had been decided to acquire the property under that sub-rule. The managing agents were further informed that by virtue of sub-rule (3) of R. 75A the said property would vest in the Central Government at the beginning of the day on which the notice was served upon them free from any mortgage, pledge, lien or other similar encumbrance. The notices of acquisition were accompanied by schedules similar to the schedules accompanying the requisition-orders. This notice of acquisition was also served on the same day on all the managing agents. Further on the same day the deputy Director of Supplies, Government of India, wrote to the Secretary, Indian Jute Mills Association, that shipping instructions would be issued in due course by the Director of Supplies, Calcutta, with respect to hessian requisitioned and acquired under the orders and notices already referred to. The Government then tried to take possession of the hessian requisitioned and acquired but the mills and the holders of delivery-orders resisted the Governments attempt on the ground that the orders of requisition and acquisition were invalid. The Government of India then filed the suit out of which the present appeals have arisen on December 11, 1946, for enforcing the orders of requisition and acquisition and also applied for a receiver to be appointed. This application was resisted and it became apparent that it would take some time before it could be disposed of. As ships which were to carry the hessian to Argentine were ready and shipment could not be delayed, the Government on January 7, 1947, promulgated an Ordinance, being Ordinance No. 1 of 1947, whereby notwithstanding the pendency of the suit the title and possession of the goods requisitioned and acquired were made to vest in the Government. The Government then took possession of the hessian and shipped the same to Argentine. The suit however did not became infructuous or unnecessary after this because S. 3 of the Ordinance provided that the suit should be proceeded with in regard to one question involved in it and decision thereon obtained. Under S. 3 it was provided that if in the suit it was finally decided that the said goods were of validly requisitioned or acquired by the Central Government on the 30th day of September, 1946, each of the several previous owners of the said goods would be entitled to receive as compensation from the Central Government the market price prevailing on the date of the institution of the aforesaid suit; but if no such decision was made in the suit the said goods would be deemed to have been validly requisitioned and acquired by the Central Government on the 30th September 1946, and the amount of compensation to be paid by the Central Government to the several previous owners of the said goods would be determined in accordance with the provisions of law in force on September 30, 1946, relating to the requisition and acquisition of movable property under the rules made under the Defence of India Act, 1939. It may be mentioned that the Defence of India Act, 1939, and the Rules made thereunder came to an end on September 30, 1946. The main question therefore which remained to be decided in the suit was whether the orders of requisition and acquisition were valid and binding on the respective defendants; and the suit was confined to obtaining a declaration to that effect. If a declaration was granted to the Government of India as prayed, the compensation would be determined as on September 30, 1946, in accordance with the provisions of law in force on that day relating to the requisition and acquisition of movable property under the rules made under the Defence of India Act, 1939. On the other hand, if no such declaration was granted, compensation would have to be arrived at in accordance with the market price of hessian prevailing on the date on which the suit was filed, i.e., December 11, 1946.2. The main questions which arose for determination in the trial court were four, namely-(1) Where the alleged orders of requisition dated September 30, 1946, mentioned in the plaint properly and/or validly and/or duly served? (2) Did such alleged orders effect any valid requisition of the goods mentioned in the Schedules to such orders? (3) Were the orders and notices of acquisition mentioned in the plaint properly made or given and/or duly served? (4) Is there any custom of trade practice or usage that upon delivery orders being made over to the buyers against payment the property in the goods represented by such delivery orders passed to such buyers?3. Sarkar, J. who tried the suit on the original side of the High Court held that the orders of requisition were properly and validly made. He further held that there was no service of the orders on the mills which were in possession of the hessian and which had to be served in order to effect a valid requisition. He therefore held that as there was no proper or due service of the orders there was no valid or binding requisition. Further on the question of acquisition he held that as the goods requisitioned and acquired were subject to pucca delivery orders and in view of the usage that pucca delivery order were only issued against payment, were passed from hand to hand by endorsement and were sold and dealt with in the market as absolutely representing the goods to which they relate and as the mills were estopped from challenging that the property in the goods had passed (see Anglo-India Jute Mills Co. v. Omademull, ILR 38 Cal 127 ) the Government which was claiming ownership through the mills was also subject to estoppel and as the holders of the delivery-orders being the owners of the property were not served on September 30, 1946, under R. 75-A(2) of the Rules, the property in the goods therefore did not pass on September 30, 1946. On this view the suit was dismissed.4. The Union of India then went in appeal. The appeal court reversed the view of Sarkar, J. on the question of requisition. It held that the requisition orders did affect and intended to affect individual mills and service on the managing agents of the mills was good service on the mills and therefore the orders of requisition were valid. On the question of acquisition the appeal court posed the question whether the notices of acquisition were served on the owners as required by R. 75-A (2). It did not agree with the view of Sarkar, J. that the government was claiming through the mills and were therefore estopped from challenging the title of the holders of delivery-orders. It also held that property in the goods could not pass by estoppel in the face of the provisions of the Sale of Goods Act, III of 1930. Accordingly it held that it was not necessary to serve the holders of the delivery-orders with notices of acquisition; but it further held that the mills which were the owners of the goods requisitioned were not served with the notices of acquisition, as in its opinion strict compliance with the provisions of the rules in O. XXIX of the Code of Civil Procedure were necessary in order that transfer of ownership contemplated under R. 75-A of the Rules may be effected. Further as there was failure to comply strictly with the provisions of O. XXIX of the Code of Civil Procedure and as in the view of the appeal court R. 119 (1-B) of the Rules did not apply to the case, there was no service of notices of acquisition on the owners as required by R. 75-A (2) of the Rules; therefore it held that the acquisition was not valid. In the result the appeal was partly allowed as to the effect of the requisition orders but the view of Sarkar, J. was upheld as to the effect of notices of acquisition.5. This has been followed by four appeals on certificates granted by the High Court. Appeals Nos. 314 to 316 are by the defendants in the suit challenging the view of the appeal court that the orders of requisition were valid and binding. The appellants in these appeals will hereinafter be referred to as the defendants. Appeal No. 778 is by the Union of India challenging the view of the appeal court that the notices of acquisition were not properly served and therefore there was no acquisition of property on September 30, 1946, as provided by R. 75-A (3).

Court's reasoning:
The scheme of R. 75-A (1) which provides for requisitioning is that the Government has to form an opinion whether it is necessary or expedient to make a requisition for securing the defence of British India, public safety, the maintenance of public order or the efficient prosecution of the war or for maintaining supplies and services essential to the life of the community. After such opinion has been formed, the Government may by order in writing requisition any property, movable or immovable, and make such further orders as appear to it to the necessary or expedient in that connection. It has been faintly urged on behalf of the defendants that the orders of requisition were invalid as they did not comply with first condition indicated above, namely, the necessity or expediency of passing the order. It is enough to say that there is nothing in this contention. The order of September 30, 1946, states in so many words that "in the opinion of the Central Government it is expedient for maintaining supplies and services essential to the life of the community" to make a requisition. It has never been the case of the defendants that the orders of requisition were passed mala fide. In these circumstances, in the absence of mala fides, the opinion of the Government is final and the purpose indicated by it in the orders for making requisitions is one of the purposes for which an order of requisition can be made under R. 75-A.7. The main contention of the defendants in their appeals is that R. 75-A contemplates that the order of requisition must be brought to the knowledge of the person whose interests are being affected by it and that this was not done in this case, for neither the holders of delivery orders nor the mills were apprised of the orders of requisition on September 30. Therefore, it is urged that the orders of requisition were not valid and binding. Now sub-rule (1) of R. 75-A does not specifically provide for the manner in which an order of requisition is to be served, nor does it provide specifically on whom such an order should be served. So far as the person on whom an order of requisition should be served is concerned, we agree with the appeal court that service of such an order is necessary on the person who can place the goods in question at the disposal of the requisitioning authority and until that is done there cannot be any valid and effective requisition. This is also clear from the definition of the word "requisition" in R. 2 (11) of the Rules, for "requisition" means in relation to any property, to take possession of the property or to require the property to be placed at the disposal of the requisitioning authority. Therefore, a requisition of property can be effected either by taking possession of the property or by requiring the property to be placed at the disposal of the requisitioning authority. In the present case we are concerned with the second mode of requisition. In such a case it is necessary that the party which is required to place the goods in question at the disposal of the requisitioning authority should be informed of the order of requisition, so that it may place the property at the disposal of the requisitioning authority as required by the order. Three questions therefore immediately arise in this connection, namely, (i) who were the proper persons on whom orders of requisition should have been served, (ii) what is the manner in which the orders should have been served, and (iii) whether proper persons have been served in the proper manner in this case.8. So far as an order of requisition is concerned, we are of opinion that there is no question of any service of the order on the holders of delivery orders, for whatever may be their position as to the ownership of the goods (a matter with which we shall deal later when considering the matter of acquisition), they were admittedly not in possession of the goods on September 30. Further the goods were admittedly in the possession of the mills and therefore the proper persons to be served with the orders of requisition in this case were theis true that in the heading of the order, though the name of the managing agency corporation was mentioned, it was not specifically stated there that the order was being addressed to it as the managing agents for such and such mills. But when one reads the schedule attached to each order sent to the managing agents, it becomes immediately clear that the order was intended for the mills mentioned in the schedule and was being served on the managing agents of the mills. As an instance, we may refer to one requisition order addressed to Messrs. Thomas Duff and Co. Ltd. In the schedule it was clearly stated that the order was with respect to jute bales held by the jute mills under the managing agency of the addressee and the names of the jute mills with respect to which the order was passed and was being communicated to the managing agents were also mentioned, that is, Titaghur, Victoria, Samnaggur (South) and Samnaggur (North) Juteis true that under Rr. 1 and 3 the principal officer envisaged must be a human being, but that conclusion follows from the setting in which these words appear in these two rules. Rule 1 relates to the signature and verification of a pleading by the secretary, director or other principal officer of the corporation while R. 3 provides that a court may require the personal appearance of the secretary or of any director or other principal officer of the corporation. It is obvious therefore from the setting in which the words "other principal officer" appear in these two rules that he must be a human being, for signature and verification in one case and personal appearance in another can only be by a human being. But Rr. 1 and 3 do not define who a principal officer is. Therefore, even though in these two rules a principal officer must be a human being, it does not follow that in R. 2 also he must be a human being. Rule 2 relates to service and cl. (b) thereof clearly shows that the service to be effected need not necessarily be on a human being connected with the corporation, for under cl. (b) the service will be effective if the summons is left or sent by post addressed to the corporation at the registered office or if there is no registered office then at the place where the corporation carries on business.Therefore, for service to be effective it is not necessary that summons must be served on some human being connected with the corporation. Nor do we see anything in O. XXIX which would militate against our holding that the service on one corporation may be made by serving another corporation which may be the principal officer of the first corporation. Once it is clear in view of the definition of an "officer" in S. 2(11) of the Companies Act that a managing agent is an officer and when it is obvious considering the nature of the duties of a managing agent of the corporation that it must be held to be a principal officer, service on the managing agent of a corporation would be effective service for the purpose of O. XXIX, R. 2. We therefore agree with the appeal court that the orders of requisition in this cases having been undoubtedly served on the managing agents of the mills as such there has been proper service of the said orders on the mills as required by R. 119 of the Rules. Therefore as the service on the mills through the managing agents was good service within the meaning of R. 119 read with O. XXIX, R. 2, it is unnecessary to consider the further question whether it is good service within the meaning of R.e argument on behalf of the defendants is that the requisitioned goods did not belong to the mills and that the real owners were the holders of the pucca delivery orders, and as there was no service of notice on them, there could be no acquisition under R. 75-AThe contention on behalf of the Union of India is that property in the goods cannot pass in law to the holders of the pucca delivery orders till the goods are actually appropriated to the particular order; therefore, as in this case it is not in dispute that no goods were actually appropriated towards the pucca delivery orders concerned, the property in the goods did not pass to the holders thereof but was still in the mills. Reliance in this connection is placed on S. 13 of the Indian Sale of Goods Act. No. III of 1930. That section lays down that "where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained". In the present case, as we have already said it is not in dispute that the goods covered by the pucca delivery orders are not ascertained at the time such orders are issued and ascertainment takes place in the shape of appropriation when the goods are actually delivered in compliance therewith. Therefore, till appropriation takes place and goods are actually delivered, they are not ascertained. The contract therefore represented by the pucca delivery orders is a contract for the sale of unascertained goods and no property in the goods is transferred to the buyer in view of S. 18 of the Indian Sale of Goods Act till the goods are ascertained by appropriation, which in this case takes place at the time only of actual delivery. The appeal court in our opinion was therefore right in holding that the property in the goods included in the pucca delivery orders did not pass to the holders thereof in view of S. 18 of the Sale of Goods Act in spite of the decision in the case of Anglo-India Jute Mills Co., ILR 38 Cal 127 . What that case decided was that in a suit between a holder of a pucca delivery order-be he the first holder or a subsequent holder who has purchased the pucca delivery order in the market-and the mills, there will be an estopped and the mill will be estopped from denying that cash had been paid for the goods to which the delivery order related and that they held the goods for the holder of the pucca delivery order.That case therefore merely lays down the rule of estoppel as between the mill and the holder of the pucca delivery order and in a suit between them the mill will be estopped from denying the title of the holder of pucca delivery order; but that does not mean that in law the title passed to the holder of the pucca delivery order as soon as it was issued even though it is not disputed that there was no ascertainment of goods at that time and that the ascertainment only takes place when the goods are appropriated to the pucca delivery orders at the time of actualappeal court was, in our opinion, right in holding that the effect of the decision in the case of Anglo-India Jute Mills Co., ILR 38 Cal 127  was not that the property in the goods passed by estoppel and that that case only decided that as between the seller and the holder of the pucca delivery order, the seller will not be heard to say that there was no title in the holder of the delivery order. That case was not dealing with the question of title at all as was made clear by Jenkins, C. J. but was merely concerned with estoppel. In the present case the question whether the Government of India will be estopped is a matter which we shall consider later; but so far as the question of title is concerned, there can be no doubt in view of S. 18 of the Sale of Goods Act that title in these cases had not passed to the holders of the pucca delivery orders on September 30, 1946, for the goods were not ascertained till then, whatever may be the position of the holders of the pucca delivery orders in a suit between them and the mills to enforceare of opinion that the view of the appeal court is correct. The Government was not acquiring the property through the owners but under the power given to it by the statute, namely, the Defence of India Act and the Rules made thereunder. It did not acquire merely the rights of the owners of the property but the whole property. This is clear from R. 75-A (3) which lays down that "where a notice of acquisition is served on the owners of the property then at the beginning of the day on which the notice is so served, the property shall vest in Government free from any mortgage pledge, lien or other similar encumbrance". This shows clearly that what the Government is acquiring under the statute is a kind of paramount title and not any title derived from any owner, for title derived from the owner would not be (for example) free from mortgage, etc. Therefore when Government takes action to acquire the requisitioned property under sub-rule (2) of R. 75-A by serving a notice of its decision to do so, it is acquiring the whole property under the statute and is not making any claim to the property through the mills. Thus it is not merely the rights of the owners that the Government acquires; it acquires the whole property free from all kinds of encumbrances. What is thus acquired under the Defence of India Rules is no particular persons right but the totality of the rights in the property. It cannot therefore be said that the Government of India when it takes action under R. 75-A (2) is claiming through anybody; it acquires the totality of the rights in the property by virtue of the power vested in it by the statute, eliminating all subsisting private rights. There can, in such a case, be no estoppel against the Government of India qua the holders of the pucca delivery orders, for the Government of India is not stepping into the shoes of the mills but is acquiring title which is paramount in nature. Therefore, even though there may be an estoppel against the mills in view of the decision of the Anglo-India Jute Mills Co., ILR 38 Cal 127 , there can be no estoppel against the Government of India. Further as in law the property had not passed to the holders of the pucca delivery orders in the circumstances of this case, it was not necessary to serve them with notices under Rule 75-A (2), for in law the owners were the mills and it was sufficient if notices were served on them. We may incidentally make it clear that the decision in the case of Anglo-India Jute Mills Co., ILR 38 Cal 127  would still be good law in an appropriate case where the question of estoppel can rightly arise.16. In view of the foregoing discussion the conclusion at which we arrive is that on September 30, 1946, the mills were in law the owners of the property which had been requisitioned and with respect to which notices of acquisition were given on the same day. Therefore, the notice required under R. 75-A (2) had to be given only to thecontention of the learned Attorney-General on behalf of the Union of India is that a notice under R. 75-A (2) has also to be served in the manner provided in R. 119 and that, therefore, the provisions of R. 119 (1-B) would also apply to service of such a notice. On the other hand, it has been contended on behalf of the defendants that R. 119 refers to service of orders in writing and R. 75-A (2) does not speak of an order in writing as is the case in R. 75-A (1). We do not think it necessary for purposes of this case to decide whether a notice stating that the Government has decided to acquire the requisitioned property is an order in writing as contemplated under R. 119. Assuming that it is not so, it still remains to be seen how a notice of the kind envisaged in R. 75-A (2) has to be served on a corporation. The appeal court was of the view that as R. 75-A (2) did not provide for the manner of service and as in its opinion R. 119 did not apply, the service of a notice under R. 75-A (2) must be in a reasonable manner. Proceeding on the assumption that R. 119 does not apply, it seems to us that the view of the appeal court that a notice under R. 75-A (2) must be served in a reasonable manner isare of opinion that this view of the appeal court is not correct and that what was good service in the case of orders of requisition was also good service in the matter of notices of acquisition, for in substance the two services were effected exactly in the same manner on the principal officer of the mills, which in one case were in possession of the goods and in other were owners of the goods. We are therefore of opinion that service of the notices of acquisition in this case on the managing agents of the mills was effective service on the mills as owners for the purpose of R. 75-A (2). In consequence R. 75-A (3) would apply and the property in the goods passed to the Government of India on September 30, 1946. The appeal of the Union of India therefore is allowed and a declaration is granted that the goods were validly requisitioned and acquired and that the orders of requisition and notices of acquisition were valid and binding on the respective defendants, and the goods specified therein vested in the Government of India on September 30, 1946.18. As to costs, it appears that this litigation was due entirely to the defect in the form of address of the requisition orders and the notices of acquisition.