03 December 1954
Supreme Court


Case number: Appeal (civil) 61 of 1953






DATE OF JUDGMENT: 03/12/1954


CITATION:  1955 AIR  182            1955 SCR  (1)1071

ACT: West  Bengal Jute Goods Future Ordinance, 1949, s. 2(1)  (b) (i)   -Actual   delivery  of   Possession-Whether   includes symbolical  as well as constructive delivery of  possession- Indian  Sale  of  Goods Act, 1930 (III of  1930),  s.  2(2)- Delivery-Meaning of.

HEADNOTE: Delivery  has  been defined in s. 2 (2) of  Indian  Sale  of Goods Act, 1930, as meaning voluntary transfer of Possession from one per- 1072 son to another and it includes not only actual delivery  but also symbolical or constructive delivery within the  meaning of the term. The  expression  "actual  delivery  of  possession"  in   s. 2(1)(b)(i)  of the West Bengal Jute Goods Future  Ordinance, 1949 means actual delivery as contrasted with mere  dealings in  differences within the intendment of the  Ordinance  and such actual delivery of possession included within its scope symbolical as well as constructive delivery of possession. The word "involving" in the expression "involving the actual delivery  of  possession thereof" in s.  2(1)(b)(i)  of  the Ordinance  means  in  the  context  resulting  in  and  this condition  would be satisfied if the chain contracts in  the present  case,  as entered into in the  market  resulted  in actual  delivery  of  possession of goods  in  the  ultimate analysis. The  Ordinance came within Head 27 of List 2 of the  Seventh Schedule  of the Government of India Act,  1935:-"Trade  and commerce  within  the  Province;  markets  and  fair;  money lending  and money lenders" and the  Provincial  Legislature was competent to legislate on that topic. Nippon Yussen Kaisha v. Ramjiban ([1938] L.R. 65 I.A.  263), referred to.




Appeal  from the Judgment and Decree dated the 16th  day  of May,  1952  of the High Court of Judicature at  Calcutta  in Appeal  from Original Decree No. 124 of 1951 arising out  of the decree dated the 25th day of May, 1951 of the High Court of  Calcutta in its Ordinary Original Civil Jurisdiction  in Suit No. 3614 of 1950. M.   C. Setalvad, Attorney-General for India, (P.  Mandaland S. P. Varma, with him), for the appellant. N.   C.  Chatterjee,  (A.  N. Sinha and P.  C.  Dutta,  with him), for the respondent. 1954.   December 3. The Judgment of the Court was  delivered by BHAGWATI J.-This appeal with certificate from the High Court of  Judicature at Calcutta arises out of the suit  filed  on the original side of the High Court by the appellant against the  respondent  to recover a sum of Rs.  1,25,962-2-0  with interest and costs, 1073 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 appellant’s 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- 1074 dent and decreed the appellant’s -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 appellant’s suit with costs. The relevant provisions of the West Bengal Jute Goods Future Ordinance, 1949 were as under:- Section  2.  In this Ordinance,- unless  there  is  anything repugnant in the subject or context:- (1)’Contract  relating  to  jute  goods  futures’  means   a contract relating to the sale or purchase of jute goods made on a forward basis- (a)providing for the payment or receipt, as the case may be, of margin in such manner and on such    dates   as  may   be specified in the contract, or (b) by or with any person not being a person who, (i)habitually deals in the sale or purchase of jute    goods involving the actual delivery of possession thereof, or (ii)possesses, or has control over, a godown and other means and equipments necessary for the storage and supply of  jute goods:.................................... 3.(1)  The Provincial Government may, from time to time,  if it  so thinks fit, by notification in the  Official  Gazette prohibit  the  making of contracts, relating to  jute  goods futures  and  may,  by  like  notification,  withdraw   such prohibition      .....................................                             1075 (2)When  the  making  of contracts relating  to  jute  goods futures is prohibited by a notification under sub-section (I),- (a)no person shall make any such contract or pay or  receive any  margin  except, in the case of any such  contract  made prior  to  the date of the notification, to  the  extent  to which the payment or receipt, as the case may be, of  margin is  allowable  on the basis of the last closing  rate  in  a notified market:.............. (c)notwithstanding  anything contained in any other law  for the time being in force,- (i)every  such contract made, and every claim in respect  of margin,  in contravention of the provisions of  clause  (a), shall  be  void  and  unenforceable,  and (ii)  every  such  contract  made  prior  to  the  date   of publication of the notification shall be varied and  settled on the basis of the last closing rate in a notified market. Explanation-In this sub-section,- (a)"last closing rate" means the rate fixed by the Directors of  a notified market to be the closing rate of such  market immediately  preceding  the  date  of  publication  of   the notification under sub-section (1) prohibiting the making of contracts relating to jute goods futures: and (b)"notified  market"  means  a jute  goods  futures  market recognised  by the Provincial Government by notification  in the Official Gazette. The  Ordinance came into force on. the 22nd September  1949. In  pursuance of the power conferred under section  3(1)  of the  Ordinance  the  Government  of  West  Bengal  issued  a notification,  being  notification No. 4665 Com.  dated  the 23rd  September  1949 prohibiting the  making  of  contracts relating  to  jute  goods futures on and from  the  date  of publication of the notification in the Official Gazette  and by  another  notification  No. 4666 Com. of  the  same  date



recognised  certain  jute  goods  futures  markets  for  the purpose  of Para. (b) of the Explanation to section 3(2)  as notified markets.  These notifications were published in the 138 1076 Calcutta Gazette on the same day, the 23rd September 1949. The  relevant terms and conditions of the standard  form  of the   Indian  Jute  Mills  Association  contracts   may   be conveniently set out here:- (1)Buyers  to  give 7 Clear Working days’  notice  to  place goods alongside............................................ (3)Payment  to  be  made in cash in  exchange  for  Delivery Orders  on Sellers, or for Railway Receipts, or  for  Dock’s Receipts  or  for Mate’s Receipts (which Dock’s  Receipt  or Mate’s  Receipts  are to be handed by a  Ship’s  or  -Dock’s officers to the Sellers’ representatives). (4)The  Buyers  hereby  acknowledge, that so  long  as  such Railway  Receipts or Mate’s or Dock’s Receipts  (whether  in Sellers’  or  Buyers’ names) are in the  possession  of  the Sellers,  the  lien  of  the  sellers,  as  unpaid  vendors, subsists  both  on such Railway Receipts  Dock’s  or  Mate’s Receipts and the goods they represent until payment is  made in full. There  were other terms and conditions appertaining  to  the delivery  of goods under the contracts including  inspection by  the  buyers,  insurance, tender,  etc.   The  settlement contracts were also practically in the same form except that in  the  body  of the contracts it was  mentioned  that  the particular  contract represented settlement of  an  original contract  which  had been already entered into  between  the parties and that the buyers in the settlement contract would pay to the sellers the difference at the particular rate on due date. In respect of the goods deliverable under the contracts  the mills would, in the case of goods sent by them alongside the vessel in accordance with the shippers’ instructions in that behalf,  obtain the mate’s receipts in respect of  the  same and such mate’s receipts would be delivered by the mills  to their immediate buyers who in their turn would pass them  on to their respective buyers in the chain of contracts resting with  the ultimate shipper.  If the mills held the goods  in their godown they would issue 1077 delivery orders on the due date, which delivery orders would be  dealt  with in the same manner as  the  mate’s  receipts aforesaid.  Both these sets of documents would represent the goods  and would be passed on from seller to  buyer  against payment  of cash.  As a matter of fact on the  evidence  the learned  Trial  Judge held that in the Calcutta  jute  trade mills’  delivery orders are ordinarily issued by  the  mills against cash payment and pass from hand to hand by  endorse- ment  and  are  used  in the  ordinary  course  of  business authorising  the  endorsee to receive the goods  which  they represent  and  that they are dealt with in  the  market  as representing the goods. The  Appeal Court accepted this position and  further  found that in the instant case "the mills who held the goods  sold them to A, A to B, B to the defendant to the plaintiff to  C and  C  to the shipper.  This is what is known  as  a  chain contract.   It is admitted by the plaintiff, that the  mills give  the delivery order to A. A endorses it to B, B to  the defendant, defendant to the plaintiff and so on". The question that falls to be determined on these facts  and circumstances is whether the settlement contracts  mentioned above  could be called contracts between the  appellant  and



the  respondent involving the actual delivery of  possession of  the goods.  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 jute  goods.   The only point at issue was whether the respondent was a  person who  habitually dealt in the sale or purchase of jute  goods involving the actual delivery of possession thereof and  the contention  which  was  vehemently urged on  behalf  of  the respondent  in  the Courts below was that  the  transactions were  purely speculative, that mere delivery  orders  passed between the parties, which delivery orders did not represent the  goods  and  the transfer thereof  did  not  involve  as between   the  intermediate  parties  actual   delivery   of possession of the goods but 1078 differences  in  rates  were only paid or  received  by  the parties. The appellant on the other hand contended that the  delivery orders  represented  the goods, that each  successive  buyer paid  to  his immediate seller the full price of  the  goods represented  by  the  delivery  order  in  cash  before  the relative delivery order was endorsed in his favour and  thus obtained not only the title to the goods but actual delivery of  possession thereof and that in any event when the  goods were  delivered alongside the vessel or actual delivery  was taken by the ultimate buyer there was the giving and  taking of actual delivery of possession of the goods all along  the chain at the same moment. The  Trial  Court accepted the contention of  the  appellant that  the  delivery orders are dealt with in the  market  as representing the goods and that they pass from hand to  hand by  endorsement  being  received by  the  successive  buyers against cash payment land are used in the ordinary course of business authorising the endorsee to receive the goods which they represent.  The learned Trial Judge further observed: "Now  visualize  the long chain of contracts  in  which  the defendant’s  contract is one of the connecting  links.   The defendant  buys from its immediate seller and sells  to  its immediate  buyer.   As seller it is liable to  give  and  as buyer  it  is  entitled  to take  delivery.   As  seller  it receives  and  as buyer it shipping  instructions.   Similar shipping instruction     is  given  by each  link  until  it reaches the mills.The  mills  deliver the goods  alongside the steamer.Such      delivery  is  in implement  of  the contract betweenthe  mills  and their  immediate  buyer. But eo instanti it is also in implement of each of the chain contracts  including the contract between the defendant  and its  immediate buyer and the contract between the  defendant and  its immediate seller.  Not only does the mill give  and its  immediate  buyer take actual delivery but  eo  instanti each   middleman   gives   and   takes   actual    delivery. Simultaneously  the  defendant  takes  actual  delivery   of possession  of the jute goods from its immediate seller  and gives actual delivery of possession 1079 of  jute goods to its immediate buyer.  Prima facie  at  the moment  of  the  delivery alongside  the  steamer  there  is appropriation  and the passing of the property in the  goods and  the giving and taking of actual delivery of  possession thereof all along the chain at the same moment". The  learned  Trial  Judge then referred  to  the  following observations  of  Lord  Wright in  Nippon  Yusen  Kaisha  v. Ramjiban(1)  in  regard to the standard form of  the  Indian



Jute Mills Association contract:- "This  is a form under which the entire export  business  in gunnies in Calcutta is conducted............ In the  present case the sale being free alongside, the property prima facie passes when the goods are appropriated by delivery alongside in implement of the contracts," and added:- "The  sale  and purchases of the defendant  where  there  is actual  shipment  and delivery of possession  of  the  goods alongside the vessel involves actual delivery of  possession of the jute goods.  The delivery of the goods alongside  the vessel  is  physical delivery of the goods  and  necessarily changes  the actual custody of the goods.  It is  said  that there  is  no actual physical delivery of the goods  by  the defendant  himself.  The Legislature, however, does not  say that  the  dealer must himself give actual delivery  of  the goods.   I  cannot read in the statute words which  are  not there and say that the dealer must himself give delivery  of the  goods  in order to come within the definition  in  sub- section  2  (1) (b) (i) of the Ordinance.   The  Legislature simply  insists that the sales and purchases of  the  dealer involve actual delivery of possession of the jute goods.   I do not see why the sales and purchases do not involve actual delivery if such actual delivery is given not by the  dealer but  by a third party in performance of and in  relation  to the  sales and purchases of the dealer.  Even the buyer  and the  seller of jute goods over the counter rarely takes  and gives manual delivery of the goods.  Very often such  manual delivery is given and taken not by the buyer and (1)  [1938] L. R. 65 1. A. 263. 1080 seller  but by their respective servants and agents.   I  do not  see why instead of the buyers’ and  sellers’  employees and  servants  giving  and  taking  delivery  of  the  goods somebody else on their behalf gives and takes delivery; such delivery is not actual delivery of possession of the goods". The  learned  Judges  of the Appeal Court  however  did  not accept  this view and misdirected themselves both in  regard to  the  facts and the position in law.  They took  it  that none  of the parties in the chain contracts paid the  actual price  of the goods except the shipper who took delivery  of the  goods  from the mills against  payment.   They  wrongly 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 the seller. The learned 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 as 1081 contrasted  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 mate’s 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 of 1082 possession  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 delivery thereof. It  is  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   the respondent. In view 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 that the 1083 Ordinance  came  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. The result therefore is that the appeal will be allowed, the decision of the Appeal Court will be reversed and the decree passed by the Trial Court in favour of the Appellant will be restored with costs throughout. Appeal allowed.