23 October 1964
Supreme Court


Case number: Appeal (civil) 1084-1088 of 1963






DATE OF JUDGMENT: 23/10/1964


ACT: Sales  Tax-Sales by auction at Fort Cochin in Madras  State- Delivery  after approval in  Travancore-Cochin-Sale  whether completed  on  fall  of hammer at auction  in  Madras  State Taxability  of sales under Travancore-Cochin  General  Sales Tax Act (Act 11 of 1125).

HEADNOTE: Teas produced by the appellants were classified and  stocked in  lots  in,  godowns at Willingdon  Island  which  at  the relevant  time was in the State of  Travancore-Cochin.   The sale of the said teas was however effected by public auction at  Fort Cochin in Madras State under the Rules of  the  Tea Trade  Association of Cochin.  Sales-tax was imposed on  the appellants  by  the State of Kerala  under  the  Travancore- Cochin  General  Sales  Tax  Act (Act 11  of  1125)  on  the authority of the judgment of the Kerala High Court in Deputy Commissioner of Agricultural Income-tax & Sales Tax v. A. V. Thomas & Co. Ltd. which was on similar facts.  According  to the  said decision the sales were completed at the  fall  of the  hammer  in Fort Cochin but, nevertheless by  virtue  of explanation 2 to s. 2(j) of the Travancore Act they remained ’inside’ sales for the purpose of taxation in Kerala  State. Because of this judgment being against them, the  appellants also  could  not  succeed before  the  Sales  Tax  Appellate Tribunal  or  before  the High Court.   They  were  however, granted special leave to appeal by the Supreme Court.    Before  the  connected appeals came up  for  hearing  the Supreme  Court had reversed the judgment of the Kerala  High Court  in  the  case  of A. V. Thomas  &  Co.  Ltd.  on  the authority  of which the appellants had been taxed.   Counsel for  the  State  of Kerala therefore sought  and  was  given permission  to defend the imposition of tax  on  alternative reasoning.  Relying upon ss. 17 and 18 of the Sale of  Goods Act he contended that the sale at the auction in Fort Cochin being a sale by sample was not completed at the fall of  the hammer  but remained at that stage only a conditional  sale. It  became a completed sale when the buyer  after  comparing the  bulk with the sample accepted the goods  in  Willingdon Island.   ’Me  property in the goods thus passed  in  Kerala State making the sale liable to tax in that State.  Rules of the  Tea  Trade Association of Cochin were  called  for  and examined by the Court.    HELD  : The title to the goods passed to the buyer  under s.  64(2) of the Sale of Goods Act as soon as the  sale  was completed by the auctioner announcing its completion by  the fall  of the hammer.  The initial auction cannot be  treated as  an  executory contract which had  become  a  conditional contract on the fall of the hammer.  The sale at the auction



was in respect of ascertained goods and it was concluded  in every  case on the fall of the hammer.  The High  Court  was therefore in error in upholding the imposition of sales  tax on the appellant by the State of Kerala. [814 E-G]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos.  1084-1088 of 1963. Sup./65-8 804 Appeals  by special leave from the judgment and order  dated November  1961, of the Kerala High Court in T.R.C. Nos.  39- 42, 31 to 34, 45 and 46, 35 to 38 and 47 respectively. M.   C.  Setalvad,  Rameshwar Nath, S. N. Andley and  P.  L. Vohra, for the appellants (in all the appeals).  P.  Govinda  Menon and V. A. Seyid Muhammad, for  the  res- pondent (in all the appeals). The Judgment of the Court was delivered by   Gajendragadkar C.J. This is a group of fifteen appeals  by special  leave  which raise a common question of  law.   The appellants  in  these  respective  appeals  are   Plantation Companies  which grow their own tea in Tea Estates and  sell their  products.   Under  the  relevant  provisions  of  the Travancore-Cochin   General  Sales  Tax  Act  11   of   1125 (hereinafter   called  ’the  Travancore   Act’),   Sales-tax Officers  had assessed the appellants to several amounts  of tax in respect of their turn-over for different years.   The appellants had urged before the Sales-tax Officers that  the transactions  in question were not liable to pay  sales-tax, but  their pleas were rejected and sales-tax was ordered  to be  imposed  in  respect  of  the  said  transactions.   The appellants  then challenged the correctness of these  orders by   preferring  appeals  before  the  Sales-Tax   Appellate Tribunal.  The Tribunal concurred with the view taken by the Sales-tax  Officers and confirmed the respective  orders  of assessment.   The  appellants then moved the High  Court  of Kerala  in its revisional jurisdiction under s. 15B  of  the Travancore  Act.  These revision applications also  failed-. and that has brought the appellants to this Court by special leave.    Though the periods and the amounts of turn-over for which sales-tax  has been levied against the different  appellants are  not the same, the principal point which  these  appeals raise  for our decision rests on facts which are  common  to all the cases, and so, it would be enough if we refer to the facts  in  respect  of  one  of  these  appeals.   We   will accordingly mention the relevant facts in regard to  appeals Nos.   1084-1088/1963   in  which  the  appellant   is   M/s Ouchterloney Valley Estates Ltd.  We may add that the  three other appellants in the present group are : The Kil Kotagiri Tea  &  Coffee Estate Co. Ltd., M/s.  Peria Karamali  Tea  & Produce  Co. Ltd.; and M/s.  Chembra Peak Estates Ltd.   The appellant M/s Ouchterloney Valley Estates Ltd. produces  tea in its own Tea Estates and sells its products.  It does  not itself  carry  on  the business of buying  and  selling  its products.   The  Managing Agents of the appellant  are  M/s. Peirce Leslie & Co. Ltd..  805 Coimbatore.  The quantities of tea produced by the appellant were  sold by public auction at Fort Cochin; the  purchasers paid the consideration at Fort Cochin and obtained from  the auctioneers delivery notes requesting the godown keepers  at Wellingdon Island to deliver the goods.  After the goods are



produced, they are sent to the godowns at Wellingdon  Island and the sale by public auction is held at Fort Cochin.  Fort Cochin  was  in the.  State of  Madras,  whereas  Wellingdon Island was in the State of Travancore at the relevant  time. The periods for which assessment has been levied against the appellant  are 1952-53, 1953-54, 1954-55, 1955-56 and  1956- 57. The  procedure followed for the public auctions in  question must  now be indicated.  This is how the procedure has  been summarised in the present proceedings:-               "Teas  produced in the concerned  Estates  are               graded,  weighed and packed in chests  in  the               estates  and are subsequently  forwarded  with               garden  invoices  to  the  godowns  of   their               Clearing   and  Forwarding   Agents,   Messrs.               Peirce Leslie & Co. Ltd., Cochin, at  Welling-               don Island to be stored there awaiting further               instructions.  Thereafter, the brokers in Fort               Cochin  check the weight of the  chests,  draw               samples of their contents and group the chests               in  lots.  They then publish printed  catalogs               giving  the  names of the Estate and  the  go-               downs,  the  numbers of the lots,  the  serial               numbers  and  total number of chests  in  each               lot,  the weight of each chest and  the  total               weight  of each lot and advertise the sale  of               such  chests  with export  rights,  by  public               auction. at Fort Cochin on particular date and               hour.   The sale is conducted, by samples,  at               Fort  Cochin, at the proclaimed date and  hour                             and  is  confirmed in the name of  the  highest               bidder.   The bid may be for an entire lot  or               for  a portion thereof, technically  known  as               ’brake’.  The buyer shall be entitled to  open               the chests bid by him and examine the contents               thereof  to  ascertain the  actual  state  and               condition   of   the   tea.    Difference   or               inferiority    in    quality,     description,               deterioration,  damage and defect  in  packing               will  entitle  the buyer to submit  claims  or               rejection,  or  allowance  or  damage.    Such               claims must be submitted, after inspection, no               doubt,  not later than 5 P.m. on the  3rd  day               before the prompt day (ninth day after date of               sale)  or  in the case of removal  before  the               prompt day, at least 24 hours before               806               such removal.  Payment shall be made in Cochin               on or before prompt day, in cash or by  cheque               or  draft  on a Cochin Bank.   If  the’  buyer               shall  fail  to pay for the tea  or  any  part               thereof on the due date for payment, the goods               may  be resold.  Any loss arising on such  re-               sale  shall be borne by the  buyer.   Delivery               shall  be taken before 5 P.m. on the  5th  day               after  prompt  day.   The  goods  will  be  at               sellers  risk to the extent of the sale  price               only, until 5 P.m. on the 5th day after prompt               day or until removal by the buyer, if  removed               earlier."   When  the assessment proceedings in question were  pending before the Sales-tax Officer, it was urged by the  appellant that  the impugned transactions which were included  in  the turnover of the appellant were not liable to tax on  several



grounds.   The substantial contention against the  appellant was  that  the  transfers of tea which  were  sought  to  be assessed could be assessed by the respondent State of Kerala because  of a previous decision of the Kerala High Court  in Deputy Commissioner of Agricultural Income-tax and Sales-tax v. A. V. Thomas & Co, Ltd.(") In that case, the Kerala  High Court  had  proceeded to deal with the matter on  the  basis that the property in the goods sold passed at Fort Cochin on the  fall of the hammer at the auction and that  they  could not be said to be "outside" sale within the meaning of  Art. 286(1) (a) of the Constitution.  The High Court was inclined to take the view that the said constitutional provision  had no reference exclusively to the transfer of the property  in the goods according to the provisions of the Indian Sale  of Goods  Act,  1930 (No. 3 of 1930) (hereinafter  called  "the Act");  and so, explanation 2 to s. 2(j) of  the  Travancore Act was not violative of Art. 286(1) (a), and that if at the moment when the property passed, it being not relevant where the  property  passed,  the  goods  were  in  the  State  of Travancore-Cochin,  then it was not an "outside" sale  quoad Travancore-Cochin  and  could be subjected to sales  tax  by that  State.  Since this judgment of the Kerala  High  Court was  binding on the sales-tax authorities at the  time  when they  considered the dispute between the appellants and  the respondent State of Kerala in the present proceedings,  they have held that the transactions with which the appellant was concerned could be validly assessed by the respondent State. The  same view, in substance, has been accepted by the  High Court when it rejected the revision application filed by the appellant before it. (1)  I.L.R. [1960] Kerala 1395.  807   Meanwhile,  the decision of the Kerala High Court  in  the case  of  A. V. Thomas & Co.(1) was reversed by  this  Court when  the matter came before it in appeal in A. V. Thomas  & Co.  Ltd. v. Deputy Commissioner of Agricultural Income  Tax and Sales Tax, Trivendrum. (2) In that case, this Court  has held  that the explanation to Art. 286(1) creates a  fiction as between two States, one where the goods are delivered for consumption in that State, and the other where the title  in the  goods passed and the former is treated as the situs  of the taxable event to the exclusion of the latter.  In regard to sales of teas in lots by public auction, this Court  held that the property in teas passed to the buyer under S. 54 of the  Act  as soon as the offer was accepted on fall  of  the hammer at Fort Cochin in the State of Madras and, therefore, the only State which could have power to levy a tax on  such sale  would  be  the  State of Madras  and  so  far  as  the Travancore-Cochin  was  concerned,  the  sale  would  be  an outside  sale.   The same view has been  expressed  by  this Court  in  a  subsequent  decision  coming  from  Kerala  in Malayalam   Plantations   Ltd.,   Quilon   v.   The   Deputy Commissioner of Agricultural Income-tax and Sales-tax, South Zone,  Quilon.(3)  The result is that the  decision  of  the Kerala  High Court in the case of A. V. Thomas &  Co.(4)  on which the sales-tax authorities and the High Court of Kerala have  decided  the dispute between the  appellants  and  the respondent  State  in the present proceedings is  no  longer good law, and that would inevitably mean that the appellants must  succeed  on the ground that the sales  of  tea  having taken place in the same manner as the sales of tea which had come before this Court in the two decisions to which we have just  referred,  they  are "outside sales"  so  far  as  the respondent  State  is concerned and cannot  be  legitimately assessed  to tax under the relevant provisions of the  Sales



Tax Act.    Mr.   Menon  for  the  respondent  State  has,   however, strenuously  contended that the question as to  whether  the present sales are outside sales so far as the respondent  is concerned, has never been properly tried, and he urges  that if  the essential incidents in regard to the  present  sales are  taken  into account, it would be found  that  the  said sales  are ’inside’ sales so far as the respondent State  is concerned.  It is common ground that if the sales are.  held to  be  inside  sales  so far as  the  respondent  State  is concerned, the view taken by the High Court would have to be confirmed and the appellants would have to pay the sales-tax as ordered by the (1) I.L.R. 11960] Kerala. 1395. (2) [1963] Supp. 2  S.C.R. 608. (3) A.I.R. 1965.  S.C. 161. 808 sales-tax  authorities.  On the other hand, if the sales  in question  are not inside sales as urged by Mr. Setalvad  for the  appellants,  the view taken by the High Court  must  be reversed and the appeals allowed.   It  appears  that in the two decisions of  this  Court  to which  we  have  just  referred, this  point  has  not  been considered.   In fact in the case of A. V. Thomas & Co.  (1) the conclusion of the Sales-tax Appellate Tribunal that  the property  in  the goods sold passed at Fort Cochin  in  full lots with the fall of the hammer was not disputed, and  that raised the question about the construction of Art. 286.   In the  latter  case  of  Malayalam  Plantations  Ltd.(1)  this question  was attempted to be raised before this Court,  but this Court did not allow the appellant to argue that  point, because  the finding of the sales-tax authorities  that  the title in the goods had passed at Fort Cochin on the fall  of the  hammer at the auction had not been disputed before  the High  Court.   Mr. Menon contends that in the  present  pro- ceedings,  the  respondent  State has  been  urging  at  all material stages that the sales in question are inside sales, and so, he should be permitted to argue that point.  We have accordingly heard Mr. Menon on this point and we propose  to decide it on the merits.   When  those  appeals were heard by us first  on  the  10th September,  1964, the procedure followed in  conducting  the sales  in  question was placed before us in the  form  of  a summary  which  we  have quoted at  the  beginning  of  this judgment.  We, however, thought that since we were  deciding the  question as to where the title in the goods passed,  it would  be more satisfactory to have before us all the  Rules of the Tea Trade Association of Cochin which prescribed  the procedure  for  these sales.  Accordingly,  the  matter  was adjourned  to enable the parties to produce the said  Rules. The  said Rules have since then been produced before us  and we  have heard both Mr. Setalvad and Mr. Menon fully on  the points  raised by Mr. Menon that the sales in  question  are inside sales so far as the respondent State is concerned. Mr.  Menon contends that in deciding this question we  ought to   bear  in  mind  the fact that the sales  are  sales  by sample to which s.  17 of the Act applies.  In the case of a contract of sale by sample, s. 17(2) provides three  implied conditions; they are : (a)    that the bulk shall correspond with the sample in quality; (1) [1963] Supp. 2 S.C.R. 608. (2) A.I.R. 1965 S.C. 161.  809 (b)  that  the buyer shall have a reasonable opportunity  of comparing  the bulk with the sample; and (c) that the  goods



shall   be   free   from   any   defect,   rendering    them unmerchantable,  which would not be apparent  on  reasonable examination  of the sample.  The argument is that a sale  by sample is, in substance, a sale of unascertained goods, with the  result that no property in the goods is transferred  to the  buyer unless and until the goods are ascertained.  That is  the  effect  of  s. 18 of  the  Act.   Sale  by  sample, according  to  Mr. Menon, is a conditional sale and  can  be described  even  as  an executory contract.   It  becomes  a concluded  contract as a result of which title in the  goods would  pass  to  the buyer only when  the  goods  have  been inspected  by the buyer and accepted by him.  Section  64(2) of  the Act provides that in the case of a sale by  auction, the  sale  is  complete when the  auctioneer  announces  its completion  by the fall of the hammer or in other  customary manner;  and it adds that until such announcement  is  made, any  bidder  may retract his bid.  Mr.  Menon  accepts  this principle,  but  contends that what is  completed  under  s. 64(2)  is  conditional  sale, and that  does  not  make  the contract a concluded contract.  The executory contract under s.  17  becomes a completed conditional  contract  under  s. 64(2). but title under such a contract would pass only after the condition of inspection and approval has been satisfied. Thus  presented, the argument is no doubt  attractive.   The sale  by public auction took place at Fort Cochin which  was in  the State of Madras at the relevant time, but the  goods had  been  stored in the godowns at  the  Wellingdon  Island within  the  territorial  limits  of  Travancore,  and   the inspection of the goods took place at these, godowns.  It is after  the goods are inspected by the buyer and accepted  by him that the contract is completed and title passes from the seller  to  the  buyer.   This  event  takes  place  in  the Wellingdon  Island,  and so, the transaction of sale  is  an inside  sale  for  the purpose of sales-tax  levied  by  the respondent State.    In support of this argument, Mr. Menon has referred us to the statement of Benjamin that "where the subject-matter  of the sale is not in existence, or not ascertained at the time of the contract, an engagement that it shall, when  existing or  ascertained,  possess certain qualities, is not  a  mere warranty,  but  a  condition, the performance  of  which  is precedent  to  any  obligation upon  the  vendee  under  the contract,  because the existence of those  qualities,  being part of the description of the thing sold, becomes essential to its identity; and the vendee cannot be obliged to receive and pay for a thing different from that for which he con- 810 tracted".  (1) Another passage from the same book  on  which Mr.  Menon  relies speaks of acceptance as a taking  of  the goods by the buyer with the intention of becoming owner  (p. 750).   The  argument is that the goods are required  to  be inspected  in  the case of a sale by sample and it  is  only when  inspection discloses no material defects in the  goods that  acceptance  follows,  and that makes  the  contract  a concluded  contract  by  which title passes  to  the  buyer. Similarly,  Mr.  Menon  relies  on  one  more  statement  of Benjamin which says, "The specific goods may, for  instance, be sold by description.  If the specific existing chattel is sold  by  description,  and does not  correspond  with  that description, the seller fails to comply, not with a warranty or  collateral  agreement, but with the contract  itself  by breach of a condition precedent" (p. 304).    In  support of his case, Mr. Menon has also relied  on  a decision  of  the  King’s  Bench  Division  in  McManus   v. Fortescue  & Anr. (2) In that case, the Court of Appeal  has



held that at a sale by auction subject to a reserve price on the article sold, where the fact that there is a reserve  is known, the offer of the auctioneer to sell, the bidding, and the  knocking down of the article to the highest bidder  are all  subject to the condition that the reserve price  should be reached, and the fact that the auctioneer knocks down the article  to  a  bidder who has bid a  less  price  than  the reserve  gives  the latter no right of  action  against  the auctioneer, either for breach of duty in refusing to sign  a memorandum  of  or otherwise complete the contract,  or  for breach  of  warranty  of authority to accept  the  bid.   In dealing with the point raised before the Court, -Collins, M. R.  observed that no authority had been cited to  show  that the  fall  of  the hammer could do  away  with  a  condition expressly  stipulated  for by the conditions of  sale.   The same  view  has been expressed by Fletcher Moulton  L.J.  by observing that the limitation of an auctioneer’s  authority, by  his  principal fixing a reserve price,  is  a  perfectly valid and effectual limitation.  That is why the fall of the hammer  would  not  affect  the  binding  character  of  the condition  as  to reserve price subject to which  alone  the contract  of sale could be concluded.  It would  be  noticed that  the whole of the argument thus presented by Mr.  Menon proceeds  on  the assumption that the contract  of  sale  by sample  in the present proceedings was a contract  of  goods which  were  in  a  sense  unascertained  and  it  would  be concluded  only  when  the buyer, inspected  the  goods  and accepted them. (1)  Judah Philip Benjamin’s "A Treatise on the Law of  Sale of  Personal  Property 8th Edn. by Finnomore and  James,  p. 907. (2) [1907] 2 K.B. 1.  811    The position in regard to the relevant provisions of  the Act  bearing on the question as to when title in  the  goods sold  passes, is not in doubt.  If the contract of  sale  is for  ascertained goods which are actually described  in  the list prepared before the sales are held and it appears  that all  material particulars about the goods are shown  in  the list, then the question as to when title passes would depend essentially  upon the intention of the parties expressed  in the  terms  of  the contract.  Section 19  (1)  of  the  Act provides  that  where there is a contract for  the  sale  of specific  or  ascertained  goods, the property  in  them  is transferred to the buyer at such time as the parties to  the contract  intend it to be transferred.  Section  19(2)  adds that  for the purpose of ascertaining the intention  of  the parties,  regard shall be had to the terms of  the  contract the  conduct  of the parties and the  circumstances  of  the case.  Under s. 19(3) it is provided that unless a different intention appears, the rules contained in sections 20 to  24 would  be  relevant to decide this question.  One  thing  is clear  in the present case viz., that the goods in  question were   not  unascertained  goods,  nor  were  they  not   in existence;  goods were clearly in existence, they  had  been graded, weighed and packed in numbered chests and a list was prepared  in  respect  of  the  contents  of  these   chests separately.   It is true that what the buyers are  shown  at the time of sale by public auction are samples and the rules authorise  the buyers to inspect the goods; but that is  not to  say  that the sale is a sale of  unascertained  or  non- existing goods.    Let  us,  therefore, consider the relevant  and  material terms and conditions of the rules under which the sales take place,  for it is these terms which will decide as  to  when



title  passes  to the buyer.  Condition No. 7 of  the  Rules provides  that subject to the reserved or upset  price,  the highest  bidder shall be the buyer, and it lays,  down  that until  the fall of the hammer or until the  registration  of the sale as provided in clause 5, any bidder may retract his bid.   Under condition No. 8, the auctioneer has to  declare the  name  of the highest bidder before the lot  is  knocked down.  Under condition 11, the buyer is entitled to open the chests purchased by him and examine the contents thereof  to ascertain  the actual state and condition of the tea.   Such examination  has to take place before the expiration of  the time  allowed  for  submission  of  claims  as  provided  in condition 12 or in the event of earlier removal of the  tea, before the date of actual removal.  This condition refers to the chests purchased by the buyer and contemplates that as a result  of the examination of the goods, the buyer can  make claims 812 within the time specified by condition 12.  Condition 12  is material.  and  so, it is necessary to read  it.   It  reads thus:-               "All  claims  on the ground of  difference  or               inferiority    in    quality,     description,               deterioration,  damage, defect in  packing  or               any other ground whatsoever must be  submitted               to  the  selling broker in writing  not  later               than  5  p.m. on the third day  before  Prompt               Day.  Prompt Day shall be the tenth day  after               date  of  sale.  In the case of  teas  removed               before Prompt Day, such claims must be submit-               ted  at least 24 hours before removal of  tea.               In  the  absence  of any  claim  submitted  in               strict accordance with this condition, the tea               shall  be  deemed to have  complied  with  the               contract  in  all respects and  to  have  been               accepted  by  the  buyer,  who  shall  not  be               entitled  to  reject the tea or to  claim  any               allowance or damages in respect thereof". Mr. Menon has placed considerable emphasis on the fact  that this  condition provides that the goods shall be  deemed  to have  been  accepted  by the buyer when he  failed  to  make inspection  within  the time allowed.  In other  words,  his argument is that this condition shows that acceptance can be deemed  to  have  taken  place  only  after  the   procedure prescribed  by  condition  12  has  not  been  followed  and therefore, it envisages acceptance only after inspection  in all  cases.   We do not think that much  importance  can  be attached  to  the expression "to have been accepted  by  the buyer"  on  which  Mr. Menon rests his  argument.   We  have already  seen that condition  has referred to the chests  as having  been  purchased  by the buyer;  and  that  would  be clearly   against  Mr.  Menon’s  case.   So,  it  would   be reasonable not to base our decision principally on the words used  by the conditions, such ’purchased’ or  ’   accepted’, but to take into account the substance of these conditions. It may be stated at this stage that after the public auction takes  place, claims have to be made by the buyer not  later than the third day before the Prompt Day, or 24 hours before removal  of  goods, whichever event  happens  earlier.   The Prompt Day is the 10th day on or before which payment has to be made by the buyer, and possession has to be taken by  him before  5  P.m.  on  the fifth  day  after  the  Prompt  Day (condition  No.  22).   The  goods continue  to  be  at  the sellers’  risk to the extent of the sale price only until  5 P.M. on the fifth day after the Prompt Day or until  removal



by the buyer if removed earlier (condition No. 23).  813 Condition  12  clearly shows that the buyer has a  right  to make   claims  either  on  the  ground  of   difference   or inferiority  in  quality disclosed on inspection,  or  as  a result   of  a  defect  in  packing  or  any  other   ground whatsoever.  After the time specified by this condition  has expired, the buyer cannot male a claim to reject the  goods, nor  can  he  ask for any allowance or  damages  in  respect thereof.               Condition 13 is also important.  It reads thus               "Each  chest  comprised  in  a  lot  shall  be               treated as the subject of a separate  contract               of sale; but this condition shall not  entitle               the  buyer to require the seller to give  part               delivery  of  less  than the  full  number  of               chests  sold;  and in the event of  the  buyer               claiming  to reject the lot purchased by  him,               the  Arbitrators or Umpire, if satisfied  that               the  lot  was  not a  good  tender,  shall  be               entitled to award rejection of the entire lot,               and  not only the particular chests  found  on               examination to be defective". It  would  be noticed that the first part  of  condition  13 corresponds to s. 64(1) of the Act.  It, however, adds  that though each chest shall be treated as the subject-matter  of a separate contract of sale, the buyer cannot claim delivery of  less than the full number of chests sold.  If the  buyer makes a claim for rejecting the contract, the Arbitrators or Umpire  may,  if  satisfied that the lot  was  not  a  good. tender, hold that the buyer is entitled to reject either the entire  lot  or in a proper case even  particular  specified chests  constituting the lot.  Like the word  "accepted"  in condition  12,  the word "tender" in  condition  13  cannot, however,  materially affect the nature of  the  transaction. Condition  13 makes it clear that in case the buyer finds  a substantial defect in the quality of the goods -sold to him, he  cannot reject the contract of his own; all he can do  is to  make a claim in that behalf before the  Arbitrator;  and this  condition  is consistent only with the view  that  the goods have already been purchased by the buyer and the claim which he is allowed to make is as a result of the breach  of the contract of sale.    Mr. Menon attempted to argue that condition 13 merely en- able  the buyer to move the Arbitrator.  According  to  him, the  buyer  can reject the contract of his own,  or  file  a claim  for damages in a civil court without having  recourse to arbitration.  In our opinion, condition 13 is not  merely an enabling condition; it is an obligatory condition and  it gives  the  buyer only one remedy, and that is to  move  the arbitrator for appropriate relief. 814               Condition  15  is  also  relevant.   It  reads               thus:-               "If the Buyer shall fail to pay for the tea or               any part thereof on the due date for  payment,               the goods may be resold. either by auction  or               private  sale,  at the option of  the  seller.               Any loss arising on such resale, together with               interest at 6 per cent per annum from the  due               date  and all charges incurred, shall be  paid               by  the  buyer to the seller,  and  the  buyer               shall not be entitled to any profit, which may               accrue from such -resale".    This  condition is consistent with the provisions  of  s.



64(2)  of  the  Act, and it cannot be said  to  support  Mr. Menon’s contention that the title in the goods does not pass to  the buyer until he has inspected them and indicated  his acceptance.   Condition 16 is a general condition as to arbitration  and it provides that any disputes or differences which may arise between  the  parties shall be referred  to  arbitration  as therein  indicated.  Reading conditions 13 and 16  together, there  can  be no doubt that all claims which the  buyer  is entitled  to make must be made to the arbitrators and it  is the  decision  of the arbitrators that  will  determine  the dispute between the buyer and the seller.   We  have  carefully considered all the rules  under  which sales  in question have been held by public auction, and  we are  satisfied that title to the goods passed to  the  buyer under s. 64(2) of the Act as soon as the sale was  completed by  the auctioneer announcing its completion by the fall  of the hammer.  The initial auction cannot. in our opinion,  be treated as an executory contract which became a  conditional contract  on  the fall of the hammer.  The  auction  was  an auction  sale  in respect of ascertained goods  and  it  was concluded in every case on the fall of the hammer.  On  that view of the matter, we must hold that the High Court was  in error  in  coming  to  the  conclusion  that  the  Sales-tax authorities were justified in imposing sales-tax against the appellants  in regard to the transactions which  have  given rise to the present appeals.    The result is, the appeals are allowed, the orders passed by the High Court in revision are set aside, and the levy of sales-tax imposed by the Sale,,-tax authorities against  the appellants  is held to be invalid.  There would be no  order as to Costs.        Appeals allowed. 815