Arihant Udhyog vs State Of Rajasthan And Ors.

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 8277 OF 2017 (ARISING OUT OF SLP (C) NO. 31709 OF 2012)

M/S. ARIHANT UDHYOG .....APPELLANT(S)

VERSUS

STATE OF RAJASTHAN & ORS. .....RESPONDENT(S)

WITH

CIVIL APPEAL NO. 8278 OF 2017 (ARISING OUT OF SLP (C) NO. 29508 OF 2012)

CIVIL APPEAL NO. 8280 OF 2017 (ARISING OUT OF SLP (C) NO. 30353 OF 2012)

CIVIL APPEAL NO. 8282 OF 2017 (ARISING OUT OF SLP (C) NO. 31186 OF 2012)

CIVIL APPEAL NO. 8281 OF 2017 (ARISING OUT OF SLP (C) NO. 31217 OF 2012)

CIVIL APPEAL NO. 8283 OF 2017 (ARISING OUT OF SLP (C) NO. 31372 OF 2012)

CIVIL APPEAL NO. 8279 OF 2017 (ARISING OUT OF SLP (C) NO. 31712 OF 2012)

CIVIL APPEAL NO. 8284 OF 2017 Signature Not Verified (ARISING OUT OF SLP (C) NO. 34764 OF 2012) Digitally signed by PARVEEN KUMAR

CIVIL APPEAL NO. 8285 OF 2017 Date: 2017.06.09 17:21:39 IST Reason:

(ARISING OUT OF SLP (C) NO. 34770 OF 2012)

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 1 of 29 CIVIL APPEAL NO. 8286 OF 2017 (ARISING OUT OF SLP (C) NO. 36160 OF 2012)

CIVIL APPEAL NO. 8293 OF 2017 (ARISING OUT OF SLP (C) NO. 37780 OF 2012)

CIVIL APPEAL NO. 8287 OF 2017 (ARISING OUT OF SLP (C) NO. 38311 OF 2012)

CIVIL APPEAL NO. 8290 OF 2017 (ARISING OUT OF SLP (C) NO. 38312 OF 2012)

CIVIL APPEAL NO. 8294 OF 2017 (ARISING OUT OF SLP (C) NO. 38313 OF 2012)

CIVIL APPEAL NO. 8288 OF 2017 (ARISING OUT OF SLP (C) NO. 38314 OF 2012)

CIVIL APPEAL NO. 8292 OF 2017 (ARISING OUT OF SLP (C) NO. 38315 OF 2012)

CIVIL APPEAL NO. 8291 OF 2017 (ARISING OUT OF SLP (C) NO. 38316 OF 2012)

CIVIL APPEAL NO. 8295 OF 2017 (ARISING OUT OF SLP (C) NO. 38317 OF 2012)

CIVIL APPEAL NO. 8289 OF 2017 (ARISING OUT OF SLP (C) NO. 38318 OF 2012)

CIVIL APPEAL NO. 8296 OF 2017 (ARISING OUT OF SLP (C) NO. 38319 OF 2012)

CIVIL APPEAL NO. 8299 OF 2017 (ARISING OUT OF SLP (C) NO. 38533 OF 2012)

CIVIL APPEAL NO. 8300 OF 2017 (ARISING OUT OF SLP (C) NO. 38567 OF 2012)

CIVIL APPEAL NO. 8301 OF 2017 (ARISING OUT OF SLP (C) NO. 192 OF 2013)

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 2 of 29 CIVIL APPEAL NO. 8302 OF 2017 (ARISING OUT OF SLP (C) NO. 256 OF 2013)

CIVIL APPEAL NO. 8304 OF 2017 (ARISING OUT OF SLP (C) NO. 1133 OF 2013)

CIVIL APPEAL NO. 8297 OF 2017 (ARISING OUT OF SLP (C) NO. 1567 OF 2013)

CIVIL APPEAL NO. 8298 OF 2017 (ARISING OUT OF SLP (C) NO. 1570 OF 2013)

CIVIL APPEAL NO. 8303 OF 2017 (ARISING OUT OF SLP (C) NO. 9980 OF 2013)

CIVIL APPEAL NO. 8305 OF 2017 (ARISING OUT OF SLP (C) NO. 10341 OF 2013)

CIVIL APPEAL NO. 8306 OF 2017 (ARISING OUT OF SLP (C) NO. 10361 OF 2013)

CIVIL APPEAL NO. 8307 OF 2017 (ARISING OUT OF SLP (C) NO. 20464 OF 2014)

AND

CIVIL APPEAL NO. 8308 OF 2017 (ARISING OUT OF SLP (C) NO. 16245 OF 2015)

JUDGMENT

A.K. SIKRI, J.

Leave granted.

2) Singular question of law, which is common in all these appeals, Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 3 of 29 that arises for consideration is as to 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 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 the agricultural

produce is brought to the market area and sold there, market fee

is payable thereon. The question in these appeals is as to

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 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

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 4 of 29 claim that the market fee is payable by the appellants.

3) The appellants had challenged the action of respondent 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 of Rajasthan vide common judgment

dated May 14, 2012 accepting 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

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 5 of 29 Circulars require a mention at this stage, which read as follows:

“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 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, namely:-

(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:

“Provided 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 fees. – 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 2/- 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 Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 6 of 29 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 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 of agricultural 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.

(2) The cess levied as per sub-rule (1) shall not be levied more 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 provided in the bye-laws.

(4) Deleted1” 1 Sub-Rule (4) of Rule 58, before deletion, read as under:

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 7 of 29

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 if the product

was purchased outside the State of Rajasthan. However,

amendment to Rule was carried out by the State Government

“(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 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 on 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-laws:

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, and who do not make any declaration and do not obtain a certificate in Form-V as 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.”

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 8 of 29 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 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-rule (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 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 stipulated in Rule 58 of

the Rules. It is in this 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 delivery thereof is

taken there. In case the title in goods in question had passed on

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 9 of 29 to the buyers (appellants herein) outside the State of Rajasthan

and only delivery 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, if the 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 payable.

8) Insofar as Arihant Udhyog is concerned, it had filed the copy of an

invoice, through which the goods were delivered, as Annexure-I

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 conditions:

“1. 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 10 days.”

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 10 of 29

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, the High Court held that as

per the provisions of Sale of Goods Act, 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.

10) It was argued by Mr. Rishabh Sancheti, learned counsel

appearing for Arihant Udhyog, that the 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 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 levying the market

2 (2016) 3 SCC 601 Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 11 of 29 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:

“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 of Section 27(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 of Rajasthan and by processing it

in its premises by different scientific ways it prepares various

dals. 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 if the appellants were

‘trading’ in agricultural goods, which was factually not true.

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 12 of 29 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 of unconditional 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 the time at which the property in the goods shall be treated to 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 “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 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

3 (1997) 5 SCC 516 Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 13 of 29 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 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 of sale were ascertained goods. They were also in a deliverable state. On the order being placed by the respondent, the seller in the State of Kerala, 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 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

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 14 of 29 the agricultural produce (sugar/paddy) from outside the State of

Rajasthan which is brought to its factory in Rajasthan for

processing the same into mishri, patasa, makhana, burra, etc.

from sugar and rice from the 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 of Rajasthan which was transported to Rajasthan at the

appellant’s risk and cost, as per the provisions of the invoice.

The goods are 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 in some of the

cases the appellant has even obtained the insurance of goods in

its name. After the goods were entrusted to the carrier, the

sellers from outside the State of Rajasthan 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 leave the factory of the

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 15 of 29 seller. As such, as soon as the goods leave the factory of the

seller (outside the State of Rajasthan), 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 appellant and premium thereagainst

was also paid by the appellant.

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, 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 to him,

squarely covers the instant case, and the same is reproduced

below:

4 (2014) 3 SCC 732 Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 16 of 29 “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 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.”

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 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 of Rajasthan and the ownership in the

goods also passes outside Rajasthan, then the market 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,

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 17 of 29 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 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 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 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 goods is to be transferred.”

The very distinction between the sale and agreement to sell

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 18 of 29 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 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 when it pertains to sale of specific or ascertained goods.

To understand 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 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) Unless 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.”

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 19 of 29

16) Sub-section (3) of Section 19 is another significant provision

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.

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 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.}.

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 bound to do something to the goods for the purpose of putting

them into a deliverable state, the property does not pass until

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 20 of 29 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 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 of uncertain goods and appropriation,

with which we are not concerned here. Likewise, Section 24

deals with a situation where goods are sent on approval or ‘on

sale or return’ 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 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 specific goods.

21) In the case of Arihant Udhyog, intention is to be gathered from the

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 21 of 29 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 title

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 these goods were delivered.

22) Thus, insofar as judgment of the High Court in Arihant Udhyog is

concerned, 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 impugned

common judgment 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

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 22 of 29 between the licensees and their sellers and in view of the terms

and conditions contained in each of the case, the High Court was

supposed to decide as to whether in their cases also ownership in

goods transferred only in the market area within the State of

Rajasthan.

24) Insofar as the case of M/s. 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 judgment dated May 14, 2012 in Arihant Udhyog without

going into the invoices of M/s. 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 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 realise the market fee, which can be done

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 23 of 29 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.

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 and payment whereof was made at the mill site

within the market area. The Court 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 taken 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 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

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 24 of 29 also held that the item mentioned in Schedule to the Act was ‘oil

cake’ which is different and distinct from ‘de-oiled cake’.

27) This plea of the appellant, therefore, 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 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 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

judgment of the High Court, orders of the High Court in other

cases are set aside and writ petitions are remanded back to the

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 25 of 29 High Court to decide them in the light of the law stated by us in

this judgment.

29) The consequence is that the appeal of Arihant Udhyog is

dismissed and other appeals are allowed in the manner

mentioned above.

No costs.

.............................................J. (A.K. SIKRI)

.............................................J. (ASHOK BHUSHAN) NEW DELHI;

JUNE 09, 2017.

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 26 of 29 ITEM NO.3 COURT NO.4 SECTIONS XV SUPREME COURT OF INDIA RECORD OF PROCEEDINGS

Petition(s) for Special Leave to Appeal (Civil) No. 31709/2012

(From the judgment and order dated 14/05/2012 in DBCWP No.7715/2010 passed by the HIGH COURT OF RAJASTHAN AT JODHPUR )

ARIHANT UDHYOG Petitioner(s)

VERSUS

STATE OF RAJASTHAN AND OTHERS Respondent(s)

WITH SLP(C) NO. 37780/2012 SLP(C) NO. 31712/2012 SLP(C) NO. 29508/2012 SLP(C) NO. 30353/2012 SLP(C) NO. 31186/2012 SLP(C) NO. 31217/2012 SLP(C) NO. 31372/2012 SLP(C) NO. 34770/2012 SLP(C) NO. 36160/2012 SLP(C) NO. 34764/2012 SLP(C) NO. 38567/2012 SLP(C) NO. 256/2013 SLP(C) NO. 38533/2012 SLP(C) NO. 38311/2012 SLP(C) NO. 1567/2013 SLP(C) NO. 38319/2012 SLP(C) NO. 38317/2012 SLP(C) NO. 38313/2012 SLP(C) NO. 38314/2012 SLP(C) NO. 38318/2012 SLP(C) NO. 38312/2012 SLP(C) NO. 1570/2013 SLP(C) NO. 38316/2012 SLP(C) NO. 38315/2012 SLP(C) NO. 1133/2013

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 27 of 29 SLP(C) NO. 9980/2013 SLP(C) NO. 192/2013 SLP(C) NO. 10341/2013 SLP(C) NO. 10361/2013 SLP(C) NO. 20464/2014 SLP(C) NO. 16245/2015 [HEARD BY HON'BLE A.K. SIKRI AND HON'BLE ASHOK BHUSHAN, JJ.]

Date : 09/06/2017 These petitions were called on for judgment today.

For the Petitioner(s) Mr. Rishabh Sancheti, Adv.

Ms. Padam Priya, Adv.

Mr. Dhruv Sharma, Adv.

for Mr. T. Mahipal, AOR

Mr. Mukul Kumar, AOR

Ms. Arti Singh, AOR

Mr. Aditya Bhattacharya, Adv.

for Mr. M.P. Devanath, AOR

Mr. R.P. Goyal, AOR

Mr. Ashwarya Sinha, AOR

For the Respondent(s) Mr. Milind Kumar,AOR

Ms. Ruchi Kohli, AOR

M/s Equity Lex Associates, AOR

Dr. Vinod Kumar Tewari, AOR

Hon'ble Mr. Justice A.K. Sikri pronounced the judgment of

the Bench comprising His Lordship and Hon'ble Mr. Justice

Ashok Bhushan.

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 28 of 29 Leave granted.

For the reasons recorded in the Reportable judgment, which

is placed on the file, the appeal of Arihant Udhyog is dismissed

and 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 in this judgment. Other

appeals are allowed in the manner mentioned above. No costs.

(H.S. Parasher) (Parveen Kumar) Court Master AR-cum-PS

Civil Appeal arising out of SLP (C) No.31709 of 2012 and other connected matters Page 29 of 29