http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

PETITIONER: M/s.  BINANI COMMERCIAL CO., LTD.

       Vs.

RESPONDENT: RAMANLAL, MAGANLAL MEHTA

DATE OF JUDGMENT: 01/05/1961

BENCH:

ACT: Control  of  supply-Non-ferrous  metals-Statute   empowering Government  to  fix  maximum  quantity  that  may  be   sold Notification  fixing such maximum-Validity  of-Agreement  to sell  more  than maximum quantity fixed-If  void-Supply  and Prices  of  Goods  Act,  1950 (70 of  1950),  ss.  4  and  5 Government of India Notification dated September 2, 1950.

HEADNOTE: The  Supply and Prices of Goods Act, 1950,  made  provisions for  the  control  of prices,  supply  and  distribution  of certain  goods essential to the national  economy.   Section 4(1)(c)  empowers the Central Government to fix the  maximum quantity  of such goods which may be sold to any  person  in one transaction.  Sect ion 4(2)(a) provides that the maximum quantities  may be fixed for the same goods  differently  in different localities or for different classes of dealers  or producers.   Section  5(1)(c)  provides that  no  dealer  or producer shall sell or agree to sell or offer for sale goods exceeding  the  maximum  fixed  under  s.  4.  The   Central Government  issued  a notification prohibiting  dealers  and producers  from selling any non-ferrous metal exceeding  one ton  except  upon a declaration by the  purchaser  that  the quantity  did not exceed his requirements for three  months. The  appellant  entered  into an agreement to  sell  to  the respondent  300 tons of zinc.  The respondent did  not  take the  entire  quantity  and the appellant filed  a  suit  for damages for breach of contract.  The respondent resisted the suit  on  the  ground  that the agreement  was  void  as  it offended  s.  5(1)(c) of the Act.  The  appellant  contended that  the  notification  was invalid as  only  an  immutable arithmetical maximum could have been fixed for each non-fer- rous metal but the notification did not do so and also as it did  not fix the maximum by reference to difference  classes of  dealers and producers according to s. 4(2)(a).   It  was further  contended that the notification applied only  to  a sale  and  not  to  an agreement to sell  and  as  such  the agreement did not off end s. 52(1)(c). Held,  that  the notification was perfectly valid  and  that agreement  was  void as it offended s. 5(1)(c) of  the  Act. Section  4(1)(c) did not require the fixing of an  immutable arithmetical  maximum  as  a  large  number  of  goods  were intended to be covered by the Act which would be required by different   classes   of   persons  under   a   variety   of circumstances.   Section  4(2)(a)  was  merely  an  enabling provision  and  did  not oblige the Government  to  fix  the maximum  differently  for different classes of  dealers  and producers; s. 4(z)(a) was not a proviso to s. 4(1)(c).  Once the maximum was fixed, then by the combined operation of  s.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

4(1)(c)  and s. 5(1)(c) an agreement to sell or an offer  to sell  such  goods in excess of the maximum  was  immediately hit, 627

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 371 of 1957. Appeal  from the judgment and decree dated August 22,  1955, of the Bombay High Court in Appeal No. 49 of 1955. C.   B.  Agarwala, J. B. Dadachanji, Ravinder Narain and  O. C. Mathur, for the appellant.  Ajit H. Mehta and I. N. Shroff, for the respondent,. 1961.  May 1. The Judgment of the Court was delivered by GAJENDRAGADKAR,  J.-This appeal arises from a suit filed  by M/s.   Binani Commercial Co. Ltd., on the Original  Side  of the  Bombay  High  Court  against  the  respondent  Ramanlal Maganlal Mehta.  In its suit the appellant sought to recover from   the  respondent  a  sum  of  Rs.   93,053-3-0   which represented  the loss suffered by it in the  transaction  in question  or in the alternative damages for  Rs.  88,229-3-0 for   breach  of  the  contract  in  respect  of  the   said transaction. The  appellant  is  a  Limited Company  and  it  carries  on business   in  Bombay  as  metal  merchants,   bankers   and commission agents.  The respondent also carries on  business in Bombay under the name and style of M/s.  Balasinor Export and  Import  Co., and also as M/s.  Ramanlal and  Sons.   In January 1952 the appellant agreed to sell to the  respondent 300  tons  of Electrolytic Zinc at the rate of Rs.  171  per cwt. against delivery orders issued under the regulations of the  Metal  Traders  Association, Ltd.,  for  Posh  Sudi  15 delivery (January 12, 1952).  The respondent promised to pay for the said goods by January 21, 1952 and to take  delivery thereafter.   The respondent paid to. the appellant  several sums aggregating Rs. 1,56,000 as a deposit for the price  of the  said goods.  The appellant tendered the said  goods  to the  respondent  whereupon he arranged to take  delivery  of only  160 tons and made payments on account.  The  appellant then tendered the balance of 140 tons to the respondent  but the respondent failed and neglected to take delivery of  the said balance and to pay for it.  As a 628 result  of the respondent’s default in taking  delivery  the appellant  had to sell the balance in the falling market  at Rs.  81 per cwt., and that had resulted in the loss  to  the appellant.  That in brief is the nature of the claim made by the appellant against the respondent. This  claim  was  resisted  by  the  respondent  on  several grounds.   The principal ground urged by him,  however,  was that  the  transaction in suit for the sale of 300  tons  of Electrolytic Zinc was in contravention of the provisions  of Supply  and Prices of Goods Act, 1950 (70 of 1950)  and  cl. (b)  of  the  Government of  India  Notification  No.  1(4)- 32(17)50  issued  on September 2, 1950.   According  to  the respondent  the  said transaction was void and  illegal  and therefore the appellant’s claim was not maintainable in law. The  respondent also raised other contentions on the  merits without  prejudice  to his principal  contention  about  the illegality of the contract. The  suit was tried by Coyajee, J. on the Original  Side  of the Bombay High Court.  The principal defence raised by  the respondent  was tried as a preliminary issue by the  learned Judge.   On this preliminary issue, the learned  Judge  held

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

that the defence set out by the respondent was not good  and not  applicable to the facts and circumstances of the  case. His conclusion, therefore, was that the contract was  valid. The  learned  Judge,  after  delivering  this  interlocutory judgment,  proceeded  to try the issues on the  merits,  and having  found in favour of the appellant on the said  issues he directed that the matter be referred to the  Commissioner for taking accounts to ascertain the damages suffered by the appellant  in  the  light of the  directions  given  in  the Judgment. Against this decision the respondent preferred an appeal and the  Division Bench of the Appeal Court allowed his  appeal. Before  the  Court of Appeal only one point was  argued  and that  was  in regard to the validity of the  contract.   The Court  of Appeal has held, reversing the conclusion  of  the trial  Judge, that the defence raised by the respondent  was good and that the contract in question was invalid.  In the                             629 result  the Appeal Court has directed that  the  appellant’s suit  should  be dismissed with costs.  The  appellant  then applied  for and obtained a certificate from the  said  High Court  and it is with that certificate that it has  come  to this  Court by its present appeal; and the  main  contention raised  by Mr. Agarwala on behalf of the appellant  is  that the  view  taken  by the Division  Bench  in  upholding  the contention  of  the respondent against the validity  of  the contract  is erroneous in law.  It is, therefore,  necessary at  the  outset to refer to the material provisions  of  the Supply and Prices of Goods Act 70 of 1950 (hereafter  called the Act) and to examine very broadly its scheme and purpose. The  Act has been passed in pursuance of a resolution  under Art.  249 of the Constitution for the control of  prices  of certain  goods  and  the supply  and  distribution  thereof. Article 249 confers on Parliament the power to legislate  in regard to a matter in a State List but the said power can be exercised only in national interest and after the Council of State  passes  a resolution in that behalf supported  by  at least  two-third of the members voting.  There is  no  doubt that  the Act has been passed in national  interest  because national  interest undoubtedly required that the supply  and prices of certain types of goods should be controlled by the Central  Legislature.  The prices in regard to  those  goods which  are  essential for national economy are apt  to  vary from  place  to  place, and unless the supply  of  goods  is rationally  controlled the goods may be available in  plenty in one place and may not be available in adequate measure in another.   It  is  with  a  view  to  make  the’  supply  of controlled  goods  fairly  available in  the  country  at  a reasonable  price  that  the  Act  purports  to  impose  the necessary  restrictions to regulate the supply and  sale  of the  said  goods.   Section 2 of the Act  defines  goods  as meaning goods to which the Act applies.  Section 3 provides, inter  alia, that the Act applies to the goods specified  in the  Schedule  and  to such other  goods  that  the  Central Government may by a notified order specify in 80 630 that  behalf.   Section 4 deals with the fixing  of  maximum prices  and  maximum quantities which may be held  or  sold, while  s. 5 imposes restrictions on possession and  sale  by dealers  and  producers where maximum is fixed under  s.  4. Under s. 6 is imposed a general limitation of quantity which may be possessed at any one time, and the proviso to  sub-s. (1)  makes  it clear that it does not apply to  the  persons specified  in  cls. (a) and (b) of the proviso.  A  duty  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

declare  possession  of excess stocks is imposed  by  s.  7, while  s. 8 imposes an obligation to sell goods  as  therein specified.  Failure to comply with the requirements  of  the said section is made an offence under the Act.  Under s.  13 power  is  conferred on the Central Government  to  regulate production  and  distribution of goods, and  s.  16  confers power  on the Central Government to authorise by general  or special order any officer not below the rank of an inspector of  police to effect search and seizure for the  purpose  of enforcing the provisions of this Act.  It is thus clear that the  sections  of  the Act have been so framed  as  to  give effect to the object of the Act to regulate and control  the supply  and  prices of goods which are  brought  within  the purview of the Act in the interest of national economy. In  the  present appeal we are directly concerned  with  the notification  issued  under  s. 4(1)(c).   It  is,  however, necessary to read s. 4. Section 4 provides thus:               "4.  (1) The Central Government may, by  noti-               fied order, fix in respect of any goods-               (a)   the  maximum price or rate which may  be               charged by a dealer or producer;               (b)   the  maximum quantity which may  at  any               one time be possessed by a dealer or producer;               (c)   the  maximum quantity which may  in  one               transaction be sold to any person.               (2)   Any such order may-               (a)   fix maximum prices or rates and  maximum               quantities  for the same description of  goods               differently  in  different localities  or  for               different classes of dealers or producers;                                    631               (b)   instead of specifying the maximum  price               or  rate to be charged, direct that  price  or               rate  shall be computed in such manner and  by               reference  to such matters as may be  provided               by the order."  Section  5  imposes restriction on possession and  sale  by dealers and producers in cases covered by s. 4 and  provides by  sub-s. (1)(c) that no dealer or producer ,,hall sell  or agree  to  sell or offer for sale to any person in  any  one transaction  a quantity of any goods exceeding  the  maximum fixed  under  cl.  (c) of sub-s. (1) of s. 4.  It  would  be recalled  that  the  respondent’s  contention  is  that  the contract  in  suit  is  void  because  it  contravenes   the provisions of s. 5(1)(c) in that it does not comply with the requirements  of the notification issued under  s.  4(1)(c). Thus,  for  deciding  the  narrow  controversy  between  the parties  it  would be necessary to determine the  scope  and effect of the provisions of s. 4(1)(c) and the  notification issued under it and the provisions of s. 5(1)(c). Let   us  now  read  the  notification.   The   notification provides:                "(b)  No such dealer or producer  shall  sell               any  non-ferrous  metals  exceeding  one   ton               unless  he  has  obtained  a  declaration   in               writing  from  the  buyer  that  the  quantity               proposed to be sold to him does not exceed his               requirements for consumption for three  months               or in case the buyer is a dealer his  require-               ments for normal trade for three months." What  does  the notification provide?  It provides  that  no dealer  shall  sell any nonferrous metals  exceeding  1  ton unless   the  other  requirement  of  the  notification   is satisfied.  In other words, the notification imposes in  the first  instance a general ban on sale of non-ferrous  metals

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

beyond 1 ton but this coiling is not absolute.  Sale  beyond 1 ton can be validly effected provided the dealer obtains  a declaration  in  writing from the buyer  that  the  quantity proposed  to be sold to him does not exceed his  requirement for  consumption for three months.  It also allows  latitude to  sell  more than 1 ton in the case of a buyer  who  is  a dealer.  The effect of the notification, therefore, is  that two kinds of ceilings are imposed and thereby two maxima are 632 fixed.   Upto  1  ton  sale  can  be  effected  without  any declaration;  beyond 1 ton sale can be effected either to  a consumer or to a dealer provided the consumer or the  dealer makes  a declaration that the quantity sold to him does  not exceed  his  requirements for three months.   It  is  common ground  that no declaration was given by the  respondent  to the appellant before the agreement to sell was made, and  so the  respondent contends that agreement to sell more than  1 ton of the non-ferrous metal in question is violative of the requirements of the notification and as such it  contravenes s.  4(1)(c)  read  with the  notification  and  attracts  s. 5(1)(c) of the Act. Mr.  Agarwala contends that this notification does  not  fix the   maximum   quantity  because  according  to   him   the requirement  of  the section can be satisfied by  fixing  an arithmetical  quantity  and that too in an  immutable  form. The  argument  is  that  the  failure  to  comply  with  the provisions  of  the  relevant sections of the  Act  is  made penal, and so it is necessary to fix one maximum quantity in respect of a specified non-ferrous metal, and since that has not been done by the notification it is invalid.  We are not impressed  by  this argument.  Having regard  to  the  large number  of goods intended to be covered by the Act  and  the variety of circumstances under which they would be  required by different classes of persons or dealers it would be enti- rely  unrealistic  to  suggest that  the  maximum  which  is required to be fixed by s. 4(1)(c) is the maximum determined in  arithmetical  term  and fixed immutably  in  all  cases. Besides,  s. 4(2)(a) itself indicates that different  maxima can  be prescribed by reference to different  localities  or different  classes of dealers or producers.  Therefore,  the argument  that  in  the  absence  of  the  fixation  of  any arithmetical   quantity   of  the  immutable   maximum   the notification is bad must be rejected. Then it is urged that the notification is invalid because it is  inconsistent  with the provisions of s.  4(2)  (a).   It would  be  noticed  that  s.  4(2)(a)  enables  the  Central Government  to  fix  maximum prices  or  rates  and  maximum quantities for the same description of goods 633 differently in different localities or for different classes of dealers or producers.  It is urged that the maximum to be fixed  under s. 4(1)(c) must therefore be the maximum  fixed by  reference to different classes of dealers or  producers, and  since the impugned notification does not purport to  do so it is inconsistent with s. 4(2)(a) and therefore invalid. This contention is clearly misconceived.  It is obvious that s. 4(2)(a) cannot be read as a proviso and cannot be pressed into  service  for the purpose of  controlling  s.  4(1)(c). Section 4(2)(a) is an enabling provision and it is  intended merely to serve the purpose of showing that  notwithstanding the provisions of s. 4(1)(c) which refers to persons it  may be  open to the Central Government to prescribe the  maximum either  in  the  way of prices or  rates  or  quantities  by reference  to different localities or different  classes  of dealers  or  producers.   Section  4(1)(c)  speaks  of   the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

fixation of maximum quantity which may in one transaction be sold  to  any person, and lest it be said that  the  maximum cannot  be  fixed  in reference to  classes  of  dealers  or producers  the Legislature has added the enabling  provision as  s.  4(2)(a).  Therefore to rely on s.  4(2)(a)  for  the purpose of construing s. 4(1)(c) appears to us to be  wholly unreasonable.  Now, if we look at s. 4(1)(c), as we must, it is  obvious  that the notification is  perfectly  consistent with  s.  4(1)(c) inasmuch as it prescribes the  maximum  by reference to consumers as well as dealers. There  is  one more argument which has  been  very  strongly pressed before us by Mr. Agarwala which still remains to  be considered.   He contends that though the  notification  may have  prescribed  a  maximum quantity under  s.  4(1)(c)  we cannot  ignore the fact that as the notification  is  worded contravention of the requirements of the notification  would not  attract  the provisions of s. 5(1)(c)  in  the  present case.   The argument is this.  The  notification  prescribes the  maximum  for  sale at any one time,  and  sale  in  the context  must mean actual sale.  The notification  therefore cannot refer to or cover cases of agreement to sell or offer to sell.  In the present case the appellant no doubt  agreed to sell to the respondent a quantity 634 contrary  to the condition prescribed by  the  notification; but, at the stage of the agreement to sell the  notification would not apply and so the agreement is perfectly valid.  If by  his  failure  to  give  the  necessary  declaration  the respondent has made the performance of the contract  illegal he  cannot take advantage of his own default and  stamp  the whole  of the transaction as illegal under s.  5(1)(c).   In our opinion this argument is based on a misconception of the effect  of the provisions of s. 4(1)(c) and s. 5(1)(c)  read together  and of the notification issued under  s.  4(1)(c). The  scheme of the two sections is plain.  Under s.  4(1)(c) the  Central Government by a notified order is  required  to fix the maximum quantity which may be sold to any one person in  one transaction, and that the impugned notification  has done.  Once the maximum is thus fixed by a notified order s. 5 immediately comes into operation, and it provides that  in regard to commodities the maximum quantity of which has been determined  by a notified order under s. 4(1)(c) there is  a prohibition  against agreement to sell, offer for  sale,  or sale  in  respect of the said commodities  contrary  to  the requirements  of the notification.  In other words,  once  a notified  order fixes the maximum in respect of the sale  of any  goods the agreement to sell the goods or the offer  for the  sale of such goods above the maximum specified  in  the notification  for the purposes of sale is  immediately  hit, not  by  virtue  of  the notification as  such  but  by  the combined  operation of the provisions of s. 4(1)(c) and  the notification  issued  under it and the provisions of  s.  5. Therefore,  in  our opinion, it is futile  to  suggest  that because  the notification refers only to sale and not to  an agreement  to  sell  s. 5(1)(c) would not  hit  the  present contract in suit. In this connection, weight to add that any argument based on the distinction between an agreement to sell and the  actual sale  as well as on the conduct of the respondent is  really not  open to the appellant at this stage.  The  judgment  of the  learned  trial  Judge as well as of  the  Appeal  Court clearly show that the appellant’s learned Cousel Mr. Mistree expressly conceded before both the Courts that if under  the relevant                             635

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

clause  of  the notification it is held that a  maximum  has been validly prescribed then the respondent’s defence  would be  valid and the appellant would have no case on the  point of  law.   In  fact the Appeal Court has  referred  to  this concession more than once in the course of its judgment  and it has made it perfectly clear that on the appellant’s  side it  was expressly stated before the Court that if the  point of law raise a  by the appellant about the invalidity of the notification  failed he would be out of Court.  That is  why we  think  that the point raised by Mr.  Agarwala  that  the agreement to sell was valid in this case is really not  open to him. It  is  true that in the trial Court the learned  Judge  has made certain observations that it appeared to be an  implied term  of  the  contract that the buyer would  be  ready  and willing  to give the declaration at the time of actual  sale and  it also appears that the learned Judge thought that  it was not open to the respondent to take up the defence  about the invalidity of the agreement to sell.  It is difficult to see  how  these  observations can  be  reconciled  with  the concession  made by the appellant’s counsel even before  the trial  Court;  but we have referred  to  these  observations because it is on these observations that Mr. Agarwala wanted to  build  up an argument that the respondent  is  precluded from disputing the validity of the agreement to sell and  so his  default  in giving a declaration should be  taken  into account  in dealing with the point of law urged by him.   In our  opinion,  apart  from  the fact that  in  view  of  the concession  made  by the appellant’s counsel  this  argument cannot  be  raised,  we  are  satisfied  that  there  is  no substance  in it.  As we have just indicated the  scheme  of ss. 4(1)(c) and 5 is clear and so any distinction between  a sale and an agreement to sell is obviously invalid.  That is why  we  have  no  doubt  that  Mr.  Mistree  was  perfectly justified in making the concession that he did. In  the result the appeal fails but there would be no  order as to costs. Appeal dismissed. 636