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PETITIONER: KARNATAKA PAWN BROKERS ASSN. & ORS. ETC.

       Vs.

RESPONDENT: STATE OF KARNATAKA & ORS. ETC.

DATE OF JUDGMENT:       29/10/1998

BENCH: S.P.BHARUCHA, K.VENKATASWAMI

ACT:

HEADNOTE:

JUDGMENT:  JUDGMENT K.Vankataswami, J. The common question that arises for consideration in all these appeals is whether a Pawn-broker is a  dealer  and carries  on  ’business’  within  the  meaning  of  the State General Sales Tax Act read with the  State  Pawnbrokers  Act and   Rules   when   he   causes  the  sales  of  unredeemed articles/goods, occasioned by  the  default  of  the  Pawner through (statutory) Auctioneer. The   above  question  has  to  be  considered  with reference to the provisions of the Tamil Nadu General  Sales Tax  Act  read with the Tamil Nadu Pawnbrokers Act and Rules as well as  the  Karnataka  Sales  Tax  Act  read  with  the Karnataka  Pawnbrokers  Act and Rules. We may point out that the relevant provisions of both the Sales Tax Acts  and  the Pawnbrokers  Act are substantially the same and for the sake of convenience the provisions mentioned hereinafter are  the provisions of the Karnataka Acts. Before  going  into  the submissions advanced at the bar, certain basic background facts need to be stated. Pawn-broker is a person who carries on the  business of taking goods and chattels in pawn for a loan.  On payment of  the  money  lent  with  interest  and  other  admissible incidental expenses the pawn-broker is liable to return  the articles pledged.      under   the   Act  and  Rules  framed thereunder, the pawn-broker has to take  out  a  licence  to carry on  the business of pawn-broker.  In addition to that, he has to maintain  various  account  books,  registers  and records as  prescribed under the Rules.  In the event of the pawner’s failure to redeem the pledged articles  within  the stipulated  time  and  the grace period statutorily allowed, the pawn-broker is at liberty to bring the  articles  pawned for  sale  at  a public auction conducted in accordance with the rules prescribed under the Act.   Such  sale  by  public auction must be conducted only throng an approved auctioneer and in  the  manner specified in the rules.  The pawn-broker is given liberty to did at such public auction. The relevant statutory provisions may now be noted. Before  the enactment of the Pawn-brokers Act by the States, the transactions of pledge/pawn were governed by the

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provisions of the Indian Contract Act.  Chapter  IX  of  the Contract  Act  deals  with the bailments of Pledges. Section 172 defines ’pledge’, ’pawner’ and ’pawnee’ as under :-            "The bailment of goods as security for payment of            a debt or performance  of  a  promise  is  called            "pledge".  The  bailor is in this case called the            "pawner". The bailee is called the "pawnee". Sections  173 to 176 deal with the various rights of the Pawnee.  Section 177 deals with the defaulting  pawner’s right to redeem. In addition to the provisions in  the  Contract  Act dealing with the pledge, it was felt necessary by the States to  bring  in a separate legislation concerning the business of Pawn-brokers  in  order  to  regulate  and  control  that business  of  Pawn-brokers. Accordingly, the Pawnbrokers Act came to be enacted. The Pawnbrokers Act provides details  of the  manner in which the business of a Pawn-broker should be carried on and how the rights and liabilities of the  Pawner and the Pawnee should be adjusted and settled. A  Pawn-broker  in  the  Karnataka  Pawnbrokers  Act (hereinafter called the ’Act’) is defined in Section 2(7) as follows:-            "Pawn-broker" means a person who carries  on  the            business of taking goods and chattels in pawn for            a loan;            Explanation  -  Every person who keeps a shop for            the purchase or sale of goods or chattels and who            purchases goods or chattels and pays or  advances            thereon  any  sum  of  money,  with  or  under an            agreement or understanding expressed  or  implied            that  the  goods  or  chattels  may be afterwards            re-purchased on any terms, is a pawnbroker within            the meaning of this clause." Section  3  compels  the  Pawn-broker  to  obtain  a licence.  Section 7 directs the Pawn-broker to give a ticket to the Pawner on taking a pledge in pawn.    Section  11  an important  section,  deals  with  the  redemption of pledge, which reads as follows:-            "11.   Redemption  of  pledge  - (1) Every pledge            shall be redeemable within one year from the  day            of pawning exclusive of that day; and there shall            be  added to that year of redemption fifteen days            of  grace  within  which  every  pledge  (if  not            redeemed  within  the period of redemption) shall            continue to be redeemable.            (2) A  pledge pawned for a sum not exceeding ten            rupees, if not  redeemed  within  the  period  of            redemption and days of grace, shall at the end of            the   days   of  grace  become  the  pawnbroker’s            absolute property.            (3) A pledge  pawned  for  a  sum  exceeding  ten            rupees  shall  further  continue to be redeemable            until it is disposed of as provided in this  Act,            although  the  period  of  redemption and days of            grace have expired.            Explanation -- Where  the  contract  between  the            parties  provides  a longer period for redemption            than one year,  the  provisions  of  sub-sections            (1),  (2)  and (3) shall be read and construed as            if references to  such  longer  period  had  been            substituted  for  the references to the period of            one year therein." Section 12 of the Act deals with the sale of  pledge and inspection of sale book, which reads as follwos:-            "Sale of  pledge  and    inspection of sale book.

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          (1) A pledge  pawned  for  a  sum  exceeding  ten            rupees shall, when disposed of by the pawnbroker,            be  disposed  of  by  sale  by  auction  and  not            otherwise, and the sale  shall  be  conducted  in            accordance with such rules as may be prescribed.            (2)  A pawnbroker may did for and purchase  at  a            sale    by   public   auction   conducted   under            sub-section (1), a pledge pawned with him; and on            such purchase he shall become the absolute  owner            of the pledge.            (3)   At  any  time  within three years after the            public auction, the holder of the pawn-ticket may            inspect the entry relaiting to the sale either in            the pawnbroker’s book or in such catalogue of the            auction as may be prescribed.            (4)  (a) Where on such  inspection  or  otherwise            the  pledge  appears  to  have been sold for more            than the amount of the loan and the interest  and            charges   due  at  the  time  of  the  sale,  the            pawnbroker  shall  pay  to  the  holder  of   the            pawn-ticket  on  demand  made  within three years            after  the  sale,  the  surplus  after  deducting            therefrom  the necessary costs and charges of the            sale.                 (b)  If on such demand it appears  that  the            sale  of the pledge has resulted in a surplus but            that within twelve months before  or  after  such            sale,  the  sale  of another pledge or pledges of            the same person has resulted in  a  deficit,  the            pawnbroker  may  set  off the deficit against the            surplus and shall  be  liable  to  pay  only  the            bllance if any after such set off." The next relevenant provision will be Rule 20 of the Karnataka Pawnbrokers Rules, which reads as under :-            "20.  Procedure  in  auction  of  pledges. -- The            procedure for sale by public auction  of  pledges            shall be as follows:-            (1)  The sale shall be conducted by an auctioneer            approved by the Licencing Authority or  from  the            Inspector of Money Lenders and the Pawn-Brokers.        (2) The auctioneer shall (i)causes  all  pledges to be exposed to public view; (ii)get a catelogue of the pledges to be sold in auction containing the following particulars printed:-            (a) the  name,  place  of  business  and  licence            number of the pawn-broker concerned;            (b)  date of loan;            (c)  number of the pledge in the pledge book;            (d)  full and detailed description of the article            (weight to be noted in case of jewels);            (e)  name and address of pawner; and            (f)  date, hour and place of sale; (iii)publish  the  printed catalogue by getting a copy  thereof  posted  at  the  place  of  business  of  the pawn-broker  and  by  distributing  copies  among  intending bidders; (iv)send at least a week before the  date  fixed for the sale:-            (a)  two  copies  of the printed catalogue to the            police  station  having  jurisdiction  over   the            premises  where  the  auction  is to be held, one            copy for being posted on the notice board of  the            police station and another copy for record at the            police station:]            [(aa) two copies of the printed catalogue to  the

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          Licensing  Authority having jurisdiction over the            premises where the auction is  to  be  held,  one            copy  for being pasted on the notice board of his            office and another copy for record;            (b)  one copy of the  printed  catalogue  to  the            police  station  or  each  of the police stations            having  jurisdiction  over  the  place   of   the            business  of  the pawnbroker concerned for record            at such police station; and            (c)  in any case, shall notify each of the police            stations having jurisdiction over the  places  of            business  of  the  pawnbroker  concerned  and the            place or places of sale, and postponement of such            auction and all the subsequent dates of auction;] (v)send a copy of the printed catalogue  by  registered post to  the  pawner  at least  a week before the date fixed for sale. (3) The pledges of each pawnbroker in the catalog  shall  be separate  from the pledges of any other pawnbroker notifying the sale in a news paper approved by the Licensing Authority or the Inspectors  of  Money  Lenders  and  the  Pawnbrokers furnishing the following details also:                    (a) the panwbroker’s name  and  place  of                    business; and                    (b)  the months in which the pledges were                    pawned.            (4)Where  the  pawnbroker himself bids at the            sale, the auctioneer shall not take the bidding in            any from other than that in which  he  takes,  the            bidding  of  other  persons at the same scale, and            the auctioneer on knocking down any article  to  a            pawnbroker  shall  forthwith  declare  audibly the            name of the pawnbroker as purchaser.            (5)The  auctioneer  shall,  within   fourteen            days,  after the sale deliver to the pawnbroker an            authenticated copy of the catalogue, or of so much            thereof  as  relates  to  the  pledges   of   that            pawnbroker  indicating  also  the  charges for the            sale of each article.            (6)The pawnbroker shall preserve  every  such            catalogue  for  at  least  three  years  after the            auction." Section 2(f-2)  of the Karnataka Sales.  Tax Act, 1957 defines ’business’ as follows;             "Business" includes -             "(i)  any  trade,  commerce  or manufacture or any             adventure or  concern  in  the  nature  of  trade,             commerce  or  manufacture,  whether  or  not  such             trade, commerce, manufacture adventure or  concern             is carried on with a motive to make gain or profit             and  whether  or  not any profit accrues from such             trade,   commerce,   manufacture,   adventure   or             concern; and             (ii)   any  transaction  in  connection  with   or             incidental  or  ancillary  to such trade commerce,             manufacture, adventure or concern." Section 2(k) defines ’dealer’.  The relevant portion is as follows:            "2(k)  "Dealer"  means  any person who carries on            the  business  of  buying  selling  supplying  or            distributing goods directly or otherwise, whether            for   cash   or  for  deferred  payment,  or  for            commission,  remuneration   or   other   valuable            consideration, and includes - ............." The  definition  of ’sale’ is found in Section 2(t).

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The relevant portion is as follows:-            "2(t)  "Sale"  With all its grammatical variation            and cognate expressions means every  transfer  of            the  property  in  goods  [other than by way of a            mortgage, hypothecation, charge or pledge] by one            person to another  in  the  course  of  trade  or            business  for  cash  or  for  deferred payment or            other  valuable  consideration,  [and   includes,            .........  " A careful reading of the above extracted  provisions will  show  that  the  Pawner can redeem the pledged article within the period stipulated  or  within  the  grace  period provided  or  before  the sale of pawned article takes place through auctioneer.  However, once the article is brought of sale and sold, the Pawner would lose his right in the pawned article as the general property right in  the  said  article passes on to the purchaser. On  the basis of the general facts broadly stated as above, the contentions of the learned counsel were advanced. S/Shri K. Parasaran  and  D.A.Dave,  learned  senior counsel,   advanced  leading  arguments  on  behalf  of  the appellants. The contentions raised by  the  counsel  are  as follows :- The Pawn-brokers as money lenders lend money on  the pledge of  articles.  It is incorrect to state that they are engaged in the business of buyingand/or selling of goods. On the pledge of the articles, a  relationship  of  bailor  and bailee  comes  into  existence and as such the bailee has no right to sell the property contrary to the contract or other statutory provisions regulating their  relationship.  If  at all  there is a sale occasioned by the default of the Pawner in redeeming the article, the auctioneer must be treated  as the  seller  and  the liability to pay the sales tax will be only on the auctioneer. As the Pawn-broker himself is  given a  right  to  did  at the sale under the rules, he cannot be treated as the seller. Consequently, the Pawn-broker  cannot be considered as a dealer effecting a sale. According to the learned  senior  counsel,  on  a  harmonious  reading of the relevant provisions of the Sales Tax Act and the Pawnbrokers Act, the only conclusion possible is that the Pawn-broker is not a dealer effecting a sale of property and, therefore, he is not liable for sales tax on such sales. At the  most,  it is  contended  that  the  sale  of  pledged articles, in the circumstances, must be deemed to be incidental to  the  main business of pawn-broker not attracting the provisions of the State  General  Sales Tax Act. It is also contended that the fact that Pawnbrokers  Act  and  the  Rules  framed  therein enabled  the  Pawn-brokers to dispose of the pawned articles by way of sale through an auctioneer; it does not in any way amount to transferring the general property right  in  goods by  the  Pawn-broker resulting in passing on of the property to the purchaser, it would be contrary  to  the  concept  of sale  as  contained in the Sale of Goods Act as the law does not recognise such a transaction as a sale. Mr.  T.L.Vishwanatha Iyer,  learned  senior  counsel appearing  on  behalf  of  the  State  of Karnataka, and Mr. V.Krishnamurthi, learned counsel appearing on behalf of  the State  of  Tamil  Nadu, answering the contentions of learned counsel for the appellants, submitted that  factually  there is  a  sale  in  disposing  of  the pledged articles through public auction, cannot be disputed.  The right to bring  the articles  for  sale  through  public auction in the event of default on the part of the pawner to redeem, vests with  the ’Pawn-broker’  and the same is incidental to the business of pawn-broker and the same is incidental to  the  business  of

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pawn broker.   The concept of business includes the business of pawnbroker with incidental right to sell  the  unredeemed goods.   On  the facts of the case, the auctioneer cannot be treated as  the  seller  for  imposing  tax  on  him.    The appellants   have  admitted  that  the  sale  of  unredeemed articles is incidental to the business of  pawnbroker.    If that  be  so  the  liability  to  pay sale tax on such sales cannot be avoided in view of the  definitions  of  business, dealer and  sale in the Sales Tax Acts.  The learned counsel submitted that the reasonings given by the High  Courts  are well-founded  and  the  conclusions  thereon do not call for interference in these appeals. The case law cited by the learned  counsel  on  both the sides will be referred to at the appropriate place. All  the  contentions  now  raised  by  the  learned counsel for the  appellants  were  raised  before  the  High Courts of  Karnataka  and Madras, but without success.  Both the High Courts rejected similar contentions and found  that the  Pawnbrokers are liable to pay sales tax on the sales of articles  through  public  auction  on  account  of  default committed by the Pawner. The learned judges of  the  Division  Bench  of  the Karnataka  High  Court after referring to a judgment of this Court in Bank of Bihar Vs.  State  of  Bihar  [AIR  1971  SC 1210].   held  that  the  Pawnbroker  has a special property right in the pledge and that special property right is to be distinguished from the more right  of  detention  which  the holder of  a  lien  possesses.  The Division Bench also held that the  sale  of  unredeemed  goods  takes  place  at  the instance  of  the  Pawnbroker and such sale held through the approved  auctioneer  results  in  passing  on  the  general property right  in the goods to the purchaser.  According to the learned Judges the Pawnbroker squarely falls in the main definition of dealer under the Karnataka General  Sales  Tax Act.   To  come  to  the above conclusion the learned Judges invoked the aid of definition of pawnbroker in Section  2(7) of the  Pawn  Brokers Act.  After referring to a judgment of this Court in Lallan Prasad vs.  Rahmat Ali & Anr.   [(1967) 2  SCR  233], the learned Judges held that a Pawn-broker has an implied authority to sell and such activity of sale which is incidental/ancillary to the business of Pawn-broker falls within the definition of business under the karnataka  Sales Tax Act.   The learned Judges rejected the contention of the assesses that, if at all for the sale of pawned articles the auctioneer is liable for sales tax and not the  Pawn-broker. The  reason  for rejecting the above contention was that the auctioneer was not the agent of the Pawnbroker but appointed as auctioneer under the relevant rule.    According  to  the learned  Judges,  the  Pawnbroker  has  authority  under the statute to bring the pawned articles for sale and the pawner loses all  his  rights  in  the  article  sold  through  the auctioneer at the instance of the Pawn-broker. The learned Judges of  the  Division  Bench  of  the Madras  High  Court  also  took  the  view  as  that  of the Karnataka High Court and gave additional  reasons  as  well. After  referring to a full Bench judgment of the Madras High Court in Kandula Radhakrishna Rao & ors.  vs.  The  Province of  Madras  [3  STC  121],  the learned judges held that the pawner,  who  pledges  the   article   with   the   licensed Pawn-broker,  not  only  parts  with  the  possession of the pledged article in favour of the Pawn-broker, but by  virtue of  such  pledge  parts  with the rights he held to sell the pledged article in case of default of payment and  discharge of loan or redemption of the article pledged within the time stipulated  therefor by the contract or by the provisions of

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the Act and the rules made thereunder.  The  learned  Judges further  held  that  the  sale  of the pawned article can be safely and legitimately be said to be occasioned or  brought about   by   the   action   of   the  Pawn-broker  only  and consequently, he alone has to  be  treated  in  law  as  the person  responsible  and also as the person who has sold the pledged articles.    The   intervention   of   an   approved auctioneer  is  only  to prevent abuse by the Pawn-broker of his right to auction the un-receemed pledged articles to the detriment of the pawner and to prevent exploitation  of  his innocence or  indigent  circumstances.   The position of the auctioneer was that of a more crier or  broker,  who  brings about sale.   Therefore, the auctioneer can be bo stretch of imagination be characterised as  a  seller  inasmuch  as  be cannot  be  said  to have any personal or propriety interest either in the pledged articles plays on role whatever in the actual sale of the articles, through it is  his  default  in redemption  of  the  pledged  articles  that  results in the auction sale of the pledged articles.  It was learned Judges that the Pawn-broker, whose action and decision brings about the sale and who alone  having  possession  hands  over  the pledged  articles  to the successful bidder subsequently, is to be considered as a seller under the Sales Tax law.    The learned  Judges  held  that  the  Pawn-broker  satisfies the definition of ’dealer’ as well as business under  the  Tamil Nadu General  Sales  Tax  Act.   which are substantially the same  as  that  of  the  corresponding  definitions  in  the Karnataka Sales Tax Act. Aggrieved  by  the  above  conclusions  the  present appeals by special leave are filed. The  learned  Judges  of  the  Division Bench of the Karnataka High Court as well as the learned  Judges  of  the Division  Bench  of  the  Madras  High  Court  have  written elaborately on the subject citing  numerous  authorities  of this   Corut  and  of  the  High  Courts  to  support  their conclusions. We are, with  respect  in  agreement  eith  the conclusions and the reasonings given for such conclusions in the  judgments under appeal. We do not therefore, propose to give elaborate reasonings, except to point out the principal reasonings to sustain the conclusions reached in  judgements under appeal. It  cannot  be  and  it  is  not  disputed  that the Pawn-broker has special property rights in the goods pledge, a right higher than a mere right of detention of goods but a right lesser than general property right in the goods.    To put  it  differently,  the  pawner at the time of pledge not only transfers to the pawnee the special right in the pledge but also  passes  on  his  right  to  transfer  the  general property  right  in  the  pledge  in the event of the pledge remained unredeemed resulting in the sale of the  pledge  by public auction through an approved auctioneer.  The position being  what  is stated above the natural consequence will be that it is the  pawnee  who  holds  not  only  the  absolute special  property  right  in the pledge but also conditional general property interest in the pledge, the condition being that he can pass on that general property only in the  event of   the  pledge  brought  to  sale  by  public  auction  in accordance with the Act and the Rules framed thereunder. In this connection, we can usefully quote a  passage from  Kandula  Radhakrishna  Rao  (supra),  which  has  been approved by this Court in Bagal Kot Cement Co.  vs.    State of Mysore [(1976) 1 SCC 336]. The Madras High Court in Kandula Radhakrishna  Rao’s case  (supra),  (a  Full  Bench  Judgment)  speaking through Rajamannar, C.J., an  eminent  Judge,  had  an  occasion  to

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consider  the  position  of  a broker and a commission agent under the Madras General Sales Tax Act, 1939 and  the  rules made  thereunder.  The  question  that was considered in the said judgment was as to whether  a  commission  agent  is  a dealer  or not under the Taxing Enactment. The learned Chief Justice observed as follows :-            "As   no   written   conveyance,   still  less  a            registered deed, is necessary  for  the  sale  of            goods,  unlike  in  the case of sale of immovable            property, the contract of sale is preformed  when            the goods  are actually delivered.  It is because            that there can be a sale by a person who  has  no            title to the goods that Section 27 enunciates the            rule  that  the buyer acquires no better title to            the goods than the seller had.  In the case of  a            commission   agent,   the   accepted   mercantile            practice  is  that  he  has   control   over   or            possession  of the goods and he has the authority            from the owner of the goods to pass the  property            in and  title  to  the  goods.    If  this is so,            undoubtedly when a commission agent  sells  goods            belonging to his principal with his authority and            consent  and  without disclosing to the buyer the            name of the owner, there is certainly a  transfer            of  property  in  the  goods  from the commission            agent to the buyer.  A business which consists in            such transactions can properly be described as  a            business of  selling  goods.   A similar position            would arise even in  the  case  of  a  commission            agent buying  for  an  undisclosed  principal.  A            Commission agent  doing  this  kind  of  business            would,  in  my opinion fall within the definition            of dealer in the Sales  Tax  Act.    Neither  the            definition  of dealer nor of sale contemplates as            a necessary condition, that the goods sold should            belong to the person selling or  buying.    There            can be a sale or purchase on behalf of another." We  have  already  pointed  out that this view of the Full Bench of the Madras Hihg Court had the approval of  this Court in Bagal Kot Cement Co. (supra). In   member,   Board  of  Revenue,  West  Bengal  vs. Controller of Stores, Eastern Railway, Calcutta [74  STC  5]. this  Court  had  an  occasion  to consider whether the Sourt Eastern  Railway  as  a  carrier  of  goods  when  sells  the unclaimed  goods  was  carrying  on an activity incidental or ancillary to its business as carrier of goods and  therefore, was  a  ’dealer’ for the purpose of the Bengal Finance (Sales Tax) Act, 1941 and liable to pay sales tax  on  the  sale  of unclaimed   goods.   While  answering  the  question  in  the affirmative the learned judges held as follows :-            "In  these  appeals  the  question is whether the            assessee - railway in each case is a "dealer" for            the  purpose  of  assessment  under  the   Bengal            Finance (Sales  Tax)  Act,  1941.  In the case of            the assessee, South Eastern  Railway,  what  were            sold were  unclaimed  goods.    The railway gas a            carrier of the goods  and  if  at  the  stage  of            delivery  goods  remained  unclaimed for a period            the railway was  entitled  to  dispose  them  of.            There  can  be  no  doubt that the activity of so            disposing of the  goods  was  adjunctive  to  the            principal  activity  of  the carriage of goods by            the railway.  It is  an  activity  which  may  be            regarded  as  necessarily incidental or ancillary            to its business as carrier  of  the  goods.    It

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          seems  to  us  that  the  assessee, South Eastern            railway, was a "dealer" for the purposes  of  the            Bengal Finance (Sales Tax) Act.  1941." Applying the above principle to facts of these cases, we are clearly of the opinion that in the sales of unredeemed goods through public auction by an  approved  auctioneer  the pawnee,  who has control or possession over the goods and who was given statutory authority to pass the general property in and title to the goods, is the seller and as such,  satisfies the definition of ’dealer’ under the General Sales Tax Act of both the  States.  This conclusion is further strengthened by the definition of ’Pawn-broker’ (supra).  The explanation  to the  definition  of  ’Pawn-broker’  contemplates  that  every person who keeps the shop for the purchase or sale  of  goods or  chattels  and who purchases goods or chattels and pays or advances thereon any sum of money, with or under an agreement or understanding  expressed  or  milled  that  the  goods  or chattels  may  be  afterwards re-purchased on any terms, is a Pawnbroker within the meaning of main clause.  The activities of pawnbroker as detailed above will satisfy  the  definition of business  as  well.   We have also noticed that the pawner has no role at all in the sale of  goods  pledged  except  to redeem the  same before the sale is concluded.  Therefore, he cannot  be  treated  as  seller  in  the   context   of   the transaction. Likewise,  the  Auctionner  cannot  be  treated  as a seller liable to pay sales tax on the turnover as the role of the auctioneer in the facts of these cases  is  very  limited and  he  is  not under the control of the pawnbroker. Instead the auctioneer is under the control of authorities  concerned who  granted  approval  for  being  an  auctioneer.  In  thsi connection we can usefully city a Division Bench judgment  of the   Madras   High  Court  in  The  Deputy  Commissioner  of Commercial Taxes, Madras Division, Madras -7 vs. Sri Dayanand Corporation, Madras-1 [21 STC 346]. The issue for decision in that case was whether the auctioneer can be considered  an  a dealer  for  the purpose of levy of sales tax. The auctioneer in that case  was  also  an  approved  Auctioneer  under  the provisions  of  the Tamil Nadu Pawnbrokers Act. While holding that the auctioneer was not a dealer liable to  pay  tax  the learned judges observed as follows :-            "We  have  carefully gone through the formalities            which the above rules  have  laid  down  for  the            procedure  at the auction of pledged goods by the            auctioneer. But nowhere has it been  stated  that            the auctioneer should take over possession of the            goods from the pawnbroker and sell them. Even the            specific provision in rule 15(2) extracted above,            only  directs the auctioneer to cause all pledges            to be exposed to public view.  He  could  perform            this obligation by directing the pawnbroker to be            present at the time of the sale with the articles            proposed  to  be  sold  and  keep  them ready for            inspection. But this obligation will not make  it            necessary   for   the  pawnbroker  to  part  with            possession  of  the  goods  in  favour   of   the            auctioneer.            With a little reflection, one also realises  that            a careful pawnbroker would like to keep the goods            in  his own custody until they are sold and would            not  like  to  hand  over   possession   to   the            auctioneer  without  any  security for their safe            custody.  The provisions in the  pawnbrokers  Act            and  in  particular,  the obligation that auction            sales  of  unredeemed  goods  shall  be  effected

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          according  to  certain  prescribed  rules through            according to  certain  prescribed  rules  through            approved  auctioneers  are  intended to safeguard            the pledgers of goods form the effect of  nominal            or  bogus  sales of their goods by pawnbrokers in            the event of non-redemption, Which will otherwise            have the effect of preventing poor  persons,  who            respect   to  the  pawnbrokers  for  loans,  from            getting a proper value of the pledged goods  when            they remain  unredeemed.  The intervention of the            auctioneer    is    therefore,    intended    for            safeguarding  the  interest  of  the  pledgers of            goods but at the same time, the rules are careful            to see that the interest of pawnbrokers  are  not            also  affected  and  they  do not require them to            part with the possession  of  the  goods  to  the            auctioneer before  the  sale.   In fact the rules            are silent about the  mode  of  delivery  of  the            goods.   They  have meticulously provided for the            manner in which the sales are to be published and            conducted.  The auctioneer will be  carrying  out            the  obligations  under  the  rules, even without            taking  possession  of  the  pledged  goods   and            delivering them to the highest bidder on the fall            of the  hammer.    The  pawnbroker can still be a            person who retains the possession of  the  goods,            and  he can deliver them to the successful bidder            at the auction by the auctioneer.    It  is  from            this  point  of view that we are impressed by the            circumstances mentioned by the  Tribunal  in  its            order including clause 5 of the conditions of the            auction  sale  which  allows  the  bidder to take            delivery of the goods from  the  pawnbroker,  and            the  bill of sale which makes mention of the fact            that the buyer will take delivery  of  the  goods            from  the  pawnbroker  on payment of the price to            the auctioneer.            It  is  no  doubt a fact that section 2(g) of            the Madras General  Sales  Tax  Act,  1959,  which            defines "dealer"includes   an   auctioneer.    The            "auctioneer" is however included therein  only  as            an instance of other types of dealers who are also            referred to  in the definition.  But the main part            of the definition at the beginning of section 2(g)            refers to a person who carries on the business  of            buying  selling,  supplying or distributing goods.            Before these requirements can apply to  a  dealer,            for   the   purpose  of  levy  of  sales  tax  the            transaction must amount to a sale  as  defined  in            section 2(n) of the Act.  That definition makes it            necessary  that  there  should  be  a  transfer of            property in the goods by one person to another  in            the  course  of  business  for  cash  or  deferred            payment or other valuable consideration.   In  the            present  case,  there  is a clear finding that the            auctioneer merely served the  purpose  of  brining            the  bidders and the pawnbrokers into contact with            each other and also arranged for the holding of  a            sale in an open and fair manner, giving the widest            publicity  to the sales so that the pledgers might            get the most advantageous prices at the open  sale            of their pledged articles.            But  it  is  the  pawnbroker  who  ultimately            delivers possession of the goods to the bidder. On            this finding of fact by the Tribunal it has to  be

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          concluded  that the respondent discharged only the            duty of a crier or a broker who brought he parties            together, but he was not a dealer who  transferred            the property in the goods to the highest bidder." We  are  in agreement with the above observations and the  conclusions  reached  thereon.  This  answers   in   the negative, the contention advanced on behalf of the appellants that   if  at  all  in  the  transactions  in  question,  the Auctioneer must be held liable for payment of tax. Now coming to the contention  that  inasmuch  as  the pawn-broker  is given liberty to bid and purchase at the sale of unfedeemed goods he cannot be deemed as a  seller  as  one cannot sell  the  goods  to  himself.    This  contention  is mis-conceived as the Pawnbroker in such circumstance plays  a dual  role  one  as  a pawnbroker and the other as individual self.  As a matter of fact, a similar question  arose  before the Madras High  Court  in  L.S.   Chandramouli & Co.  vs The State of Madras [18 STC 325].  In that case, the question for consideration was whether a local  agent  of  a  non-resident principal,  who carried on business of his own also transfers the goods of non-resident principal to his own  business  can be  considered  as  a  transaction of sale chargeable to tax. The learned judges overruling a similar contention held  that the  concerned  agent  of  a non-resident principal - and the other as  proprietor  of  his  own  business,  two  different indentations  altogether, while transferring the goods of the non-resident principal to himself, he not only acted as agent of his non-resident principal but also  as  a  purchaser  and there  is  nothing  in  law  which militates against the said conclusions and consequent tax liability on such person.   We have  no  hesitation  to reject the contention of the learned counsel for the appellants that  the  Pawn-broker  cannot  be treated  as  a seller of goods in the facts and circumstances of these case and, therefore, not a ’dealer’ under the  Sales Tax Act. It is now well settled that any  activity  incidental or  ancillary  to the main business will also come within the definition  of  ’business’  under  the  Sales  Tax  Act   and therefore,  the contention that the sale of unredeemed goods, being incidental to  the  business  of  Pawn-broker  was  not liable to sales tax, cannot be accepted. Let  us now consider the decisions cited on behalf of the learned counsel for the appellants. Mr. K. Parasaran,  learned  senior  counsel  for  the appellants,  cited a Single Bench judgment of the Madras High Court  in  Provincial  Government  of  Madras  vs.   Mudukuru Munirathnam  Chetti  &  Anr. [4 STC 296]. This judgment apart from the fact that it was rendered under the  Madras  General Sales  Tax  Act,  1939,  is not directly on the point and the context in which the  judgment  was  rendered,  was  entirely different.  That judgment considered a transaction treated by both the parties as loan and entrustment of goods for sale to others to discharge the loan. It was  held  that  transaction cannot  be  treated  as a sale at the hands of the person who advanced the money for the purpose of levy of sales tax.  The nature  and  character of the transaction in the case on hand are totally different.  Therefore,  the  case  cited  has  no application to the facts of this case. Likewise, the  decisions  cited by Mr.  Dave, learned senior counsel  for  the  appellants,  namely.    The  Deputy Commissioner of Commercial Taxes, madurai Division Madurai Vs A.R.S.  Thirumeninatha  Nadar.   Firm Tuticorin [21 STC 233], Lallan Prasad vs.  Rahmat Ali & Anr.  [(1973) 1 SCC  46]  are all  under  different circumstances and with reference to the facts of those cases which have  no  direct  bearing  to  the

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issues raised in these cases. In  The  Deputy  Commissioner  of  Commercial  Taxes, Madurai  Division  Madurai (supra), the Division Bench of the Madras High Court, on the facts of the case,  held  that  the bank  in  selling the goods pawned to it did not act as agent of the assessee and the sales were on behalf of the  pledger. The  learned  Judges  further held that the pawn or pledge by itself did not make the pawnee or pledgee the  owner  of  the goods on the peculiar facts of that case.         In   Lallan   Prasad’s   case   (supra),  this  Court considered a question whether the appellant in that case  was entitled  to a decree in view of his denial of the pledge and his failure to offer to redeliver  the  goods.  In  answering that  question, this Court, after referring to Section 176 of the Indian Contract Act, held that so long, however,  as  the sale does not take place the pawner is entitled to redeem the goods  on payment of the debt. Therefore, the right to sue on the debt assumes that he is in a position  to  redeliver  the goods on payment of the debt, and if by denying the pledge or otherwise, he has put himself in a position whereby he is not able to redeliver the goods, he cannot obtain a decree. In Balkrishna Gupta & Ors.  (supra), again a judgment of this Court had considered a question that arose under  the Companies  Act,  1956  and  the  effect  and  consequence  of appointment of a Receiver in respect of certain shares  of  a company. In M/s  Chowringhee  Sales  Bureau (P) Ltd.  (supra). this Court, on the peculiar facts of that  case,  found  that there was a close and direct connection between an auctioneer and the  transaction  of  auction  sale in that case.  On the basis of the peculiar facts, this Court also found  that  the auctioneer had collected sales tax on the auction sale of the goods but had not passed on the same to the Revenue.  In such circumstances, this Court held that the auctioneer was liable to pay sales tax under the West Bengal Act. None  of  the  cases cited by the learned counsel for the appellants has any bearing to the facts of the  cases  on hand.   On  the  other  hand,  the  decisions  cited  in  the judgments under appeal and cited in this judgment in  support of the conclusions are directly on point. We  have already stated that we are in agreement with the  conclusions  reached  by  the  learned  judges  in   the judgments  under  appeal  and  we  have  dealt  with only the principal reasons  sufficient  for  approving  the  judgments under appeal. In  the  light  of the discussions made above and for the reasons given above we are of the view that the  judgment  under  appeal  lay  down the correct law and do not call for any  interference.  Accordingly  the  appeals  fail  and  are dismissed. However, there will be no order as to costs.