Case: Union of India Vs. Upper Doab Sugar Mills Limited

2. The material facts of the case have been detailed in the judgment of the High Court and the statement of cases filed by the parties and it is not necessary to repeat the same. Shorn of the necessary details it appears that thes filed a suit against the appellant for recovery of Rs. 68, 067 in the court of Additional Civil Judge, Muzaffarnagar being the price of 100 tons of sugar supplied to the appellant under a contract which embodied in the various communications and correspondence between the parties regarding the manner and the terms on which the quantity of sugar was to be supplied to the appellant. It appears that in pursuance of an agreement as culled out from the correspondence thes supplied 100 tons of sugar on August 6, 7 and 8, 1947 to Kanpur, Bahawalnagar and Sammasatta according to the instructions issued by then Railway which was the purchaser of the goods. The sugar was to be delivered to the Station Master, Shamli who was directed to put them into wagons after proper weighment. It is the admitted case of the parties that goods loaded in the wagons were looted in the course of transmission between Buchhoo and Allal. The case was that having supplied the goods as desired to the purchasers, the property passed to them on delivery of the goods at Shamli and hence thes were entitled to the recovery of the amount mentioned above3. The suit was resisted by thet firstly on the ground that as the goods were consigned by the plaintiffs to self and Railway receipts were to be issued through the Central Bank in the name of some of the railway employees, the title to the goods was retained by the plaintiffs and the goods did not pass to the appellant. It was further averred that in view of the provisions of Article 8(1)(a) of the Indian Independence (Rights, Property and Liabilities) Order, 1947 (hereinafter to be referred to as the Order), the liability to pay the cost of the goods fell on the Government of Pakistan because the places where the goods were to be supplied were part of Pakistan on August 15, 19474. The trial Court held that as thet had undertaken to compensate the plaintiffs for the shortage in the transit of goods, it could not escape its liability to pay the amount sought to be recovered on the ground that the goods were looted en route. The trial Court further explained that Article 8(1)(a) of the Order had no application to the facts of the present case. The trial Court accordingly decreed the suit of the plaintiffs5. The defendant then filed an appeal before the High Court which also affirmed the decree of the trial Court and held that according to the contract spelt out from the correspondence of the parties particularly Exs. 27 and 28, goods passed to the purchaser the moment the plaintiffs made the delivery to the Station Master, Shamli and the goods were put in the transmission. The High Court, however, did not consider the scope and ambit of Article 8(1) (a) of the Order6. The appellant has now filed an appeal to this Court after obtaining a certificate from the High Court as indicated above.

Court's reasoning:
We are of the opinion that as this appeal must succeed on a short point, viz., the applicability of Article 8(1)(a) of the Order, it is not necessary to decide the question as to whether or not the goods in question passed to the defendant, in the facts and circumstances of this case, which does not appear to be free from difficulty. We, therefore, propose to decide this appeal on the basis of the application of Article 8(1)(a) of the Order7. From a careful perusal of the two clauses (a) and (b) of Article 8(1) of the Order it appears that the intention of the statute was to apportion all the liability of the Dominions of India and Pakistan after their creation under the Independence Act. Article 8 appears to import a legal fiction by which any contract which is made by any of the two governments will incur the rights and liabilities which may accrue to them as on the date mentioned in the Article, viz., August 15, 1947. In the instant case, it is not disputed that all the three places, namely, Kanpur, Bahawalnagar and Sammasatta, were parts of Pakistan on August 15, 1947 and therefore as the goods in the present case were meant for those places, it would be the liability of Pakistan to pay the price of the goods11. Thus, it would appear from the decisions referred to above that the main test to apply as to on which of the two Dominions the liability for payment of the goods under contract would lie was to enquire and determine to whom the property or the goods were to be supplied. In the instant case, it is not disputed that the goods in question, viz., 100 tons of sugar, was to be supplied to all the places which formed part of Pakistan on August 15, 1947. In these circumstances, therefore, we are satisfied that the present case is fully covered by the decision of this Court as referred to above and it is therefore manifest that the appellant, the Union of India, would not be liable for making any payment to thes even if the goods were delivered at Shamli which was in India. The dominant factor to be considered was not the places where the goods were delivered but the destination to which the goods were to be sent. Mr. Mridul tried his best to repel this argument and to distinguish the cases of the Supreme Court but was unable to satisfy us as to the existence of any ground which could take out the facts of the present case from the ambit of Article 8(1)(a) of the Order. The Trial Court had no doubt referred to Article 8(1)(a) but it misconstrued the decision of the Bombay High Court approved by the Supreme Court as also the provisions of Article 8(1)(a).