Case: Duni Chand Rataria Vs. Bhuwalka Brothers Ltd

The appellant entered into three contracts, two dated the 8th August 1949 and the third dated the 17th August 1949 with the respondent agreeing to purchase 1, 80, 000 bags of B twills at the price of Rs. 134/4/- per 100 bags, 1, 80, 000 bags at the rate of Rs. 135/4/- per 100 bags and 90, 000 bags at the rate of Rs. 138/- per 100 bags respectively for October, November and December 1949 deliveries in equal monthly instalments on terms and conditions contained in the relative contract forms of the Indian Jute Mills Association. In September 1949 the respondent expressed its inability to deliver the goods under the said contracts and requested the appellant to settle the same by selling back the goods under the said contracts to the respondent at the price of Rs. 161-8-0 per 100 bags. Three settlement contracts were accordingly entered into between the parties on the 28th September 1949 whereby the appellant agreed to sell the goods under the original contracts to the respondent at the rate of Rs. 161- 8-0 per 100 bags on the terms and conditions contained in the relative contract forms of the Indian Jute Mills Association. The appellant duly submitted to the respondent his bills for the amounts due at the foot of the said contracts aggregating to Rs. 1, 15, 650 which the respondent accepted but failed and neglected to pay in spite of repeated demands of the appellant. The appellant therefore filed the suit for recovery of the said sum with interest and costs. The respondent filed its written statement contesting the appellants claim on the main around that the three settlement contracts above-mentioned were illegal and prohibited by the West Bengal Jute Goods Future Ordinance, 1949. The respondent contended that it never dealt in the sale and/or purchase of jute goods involving actual delivery of possession thereof, nor did it possess or have control over any godown and other means or equipments necessary for the storage and supply of jute goods and that therefore the said settlement contracts were void and not binding upon it and that the appellant was not entitled to any relief as prayed. The Trial Court negatived the contention of the respon-dent and decreed the appellants -claim. The learned Judges of the Appeal Court however came to the conclusion that the said settlement contracts were contracts relating to the purchase of jute goods made on a forward basis by the respondent not being a person who habitually dealt in the sale or purchase of jute goods involving the actual delivery of possession thereof and were therefore void and unenforceable. The only right which the appellant had against the respondent was to have the said original contracts settled on the basis of the last closing rate in a notified market which was Rs. 146/14/- per 100 bags. No such claim was however made by the appellant. A further contention which was raised by the respondent, viz. that the Ordinance was ultra vires was negatived by the Court. But in view of its finding on the main issue the Appeal Court dismissed the appellants suit with costs.

Court's reasoning:
It was common ground that the contracts did not provide for the payment or receipt of margin. It was also common ground that the respondent did not possess or have control over a godown and other means and equipments necessary for the storage and supply of jutewrongly assumed that A endorsed the delivery order over to B and took the difference, B in his turn endorsed the delivery order to the defendant and took the difference and so on and concluded that nobody was concerned to pay the actual price or take delivery of the goods except the shipper who took the goods and paid the price to the mills. This assumption was absolutely unwarranted, the evidence on record being that each of the successive buyers paid to his immediate seller the full price of the goods represented by the delivery order in cash against the endorsement of the relative delivery order in his favour by thelearned Judges of the Appeal Court also laid unwarranted emphasis on the words "actual delivery of possession" and contrasted actual delivery with symbolical or constructive delivery and held that only actual delivery of possession meaning thereby physical or manual delivery was within the intendment of the Ordinance. Delivery has been defined in section 2(2) of the Indian Sale of Goods Act as meaning voluntary transfer of possession from one person to another and if nothing more was said delivery would not only include actual delivery but also symbolic or constructive delivery within the meaning of the term. The use of the word "actual" in section 2 (1) (b) (i) of the Ordinance was considered by the Appeal Court as indicative of the intention of the Government to include within the scope of the exemption only cases of actual delivery of possession ascontrasted with symbolical or constructive delivery. This construction in our opinion is too narrow.. Even if regard be had to the mischief which was sought to be averted by the promulgation of the Ordinance, the Government intended to prevent persons who dealt in differences only and never intended to take delivery under any circumstances, from entering into the market. Provided a person habitually dealt in the sale or purchase of jute goods involving delivery of the goods, he-was not to be included in the ban. This could be the only intendment of the Ordinance, because otherwise having regard to the ordinary course of business in jute goods would become absolutely impossible. The manufacturer of jute goods does not come normally into direct contact with the shipper. It is only through a chain of contracting parties that the shipper obtains the goods from the manufacturer and if only actual delivery of possession as contrasted with symbolical or constructive delivery were contemplated it would be impossible to carry on the business. If the narrow construction which was put by the Appeal Court on the expression "actual delivery of possession" was accepted it would involve each one of the intermediate parties actually taking physical or manual delivery of the goods from their sellers and again in their turn giving physical or manual delivery of the goods which they had thus obtained to their immediate buyers. Such an eventuality could never have been contemplated by the Government and the only reasonable interpretation of the expression "actual delivery of possession" can be that actual delivery as contrasted with mere dealings in differences was within the intendment of the Ordinance and such actual delivery of possession included within its scope symbolical as well as constructive delivery of possession. Once this conclusion is reached it is easy to visualise the course of events. The mates receipts or the delivery orders as the case may be, represented the goods. The sellers banded over these documents to the buyers against cash payment, and the buyers obtained these documents in token of delivery ofpossession of the goods. They in turn passed these documents from hand to hand until they rested with the ultimate buyer who took physical or manual delivery of possession of those goods. The constructive delivery of possession which was obtained by the intermediate parties was thus translated into a physical or manual delivery of possession in the ultimate analysis eliminating the unnecessary process of each of the intermediate parties taking and in his turn giving actual delivery of possession of the goods in the narrow sense of physical or manual deliveryis necessary to remember in this connection that the words used in section 2(1) (b) (i) are "involving the actual delivery of possession thereof". The word "involving" in the context means resulting in and this condition would be satisfied if the chain contracts as entered into in the market resulted in actual delivery of possession of goods in the ultimate analysis. The Appeal Court was therefore clearly in error when it put a narrow construction on the expression "actual delivery of possession" and held that the transactions were purely speculative and the parties in no event. contemplated actual delivery of possession of the goods. The learned Trial Judge was in our opinion correct in his appreciation of the whole position on facts as well as in law and in negativing the contention of theview of this conclusion it is unnecessary to consider the argument which was submitted before us based upon the definition of "documents of title" in section 2(4) and the provisions of section 30, proviso to section 36(3) and the proviso to section 53(1) of the Indian Sale of Goods Act that all the documents of title enumerated in section 2(4) were assimilated to a bill of lading and a mere transfer of the documents of title in favour of a buyer was tantamount to a transfer of possession of the goods represented thereby.The contention that the Ordinance was ultra vires was not seriously pressed before us. We may however add that the Appeal Court rightly held thatcame within Head 27 of List 2 of the Seventh Schedule of the Government of India Act:--"Trade and commerce within the Province; markets and fair; money lending and money lenders", and that the Provincial Legislature was competent to legislate on that topic.