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PETITIONER: THE SEKSARIA COTTON MILLS LTD.

       Vs.

RESPONDENT: THE STATE OF BOMBAY.

DATE OF JUDGMENT: 30/03/1953

BENCH: BOSE, VIVIAN BENCH: BOSE, VIVIAN MAHAJAN, MEHR CHAND JAGANNADHADAS, B.

CITATION:  1953 AIR  278            1953 SCR  825

ACT: Essential   Supplies   Act   (XXIV   of   1946),   ss.    7, 9--Notification  requiring manufacturers to submit true  and accurate  information--"Delivery",meaning  of-Possession  of del  credere agent-Whether possession of seller-Delivery  to such agent, effect of--Penal statutes -Liberal construction.

HEADNOTE: A  Government Notification issued under the  Essential  Sup- plies Act, 1946, required every manufacturer to submit "true and accurate information relating to his undertakings" and a note  of  the printed form stated that  "by  ’delivered’  or ’delivery’  is mean physical delivery of cloth in bales  and pieces but not cloth which though paid for, is still in  the physical possession of the seller. The appellant Mills  were manufacturers  of cloth and D.K. & Co. were their  sole  del credere,  selling  agents  who  guaranteed  payment  to  the appellant  of the price of all sales made and, on the  other side,  guaranteed delivery to the purchasers with whom  they dealt  direct.  One D.M. informed the Mills as the agent  of an  up-country quota-holder that he bad been  authorised  by the latter to take delivery of 13 bales and on this  account paid Rs. 14,000 to D.K. & Co. D.K. & Co. wrote to the  Mills that  they bad received payment.  The Mills  dispatched  the goods  to D.M. but meanwhile the quota. holder  had  changed his  agent  and D.M. refused to take  delivery.   The  Mills credited the money which had been received from D.M. to D.K. JUDGMENT: godown  till  the question of delivery was  settled.   In  a return  submitted  under the Essential  Supplies  Act  1946, these 13 bales were shown &a "delivered" to D. K. & Co.  The appellants were prosecuted and convicted on the ground  that physical  delivery  was  not given to D.K.  &  Co.  and  the return, was not therefore true and accurate: Held,  that,  as the goods had left the Mill  premises,  the price had been paid and the property in them had passed  and as  they were in a godown under the control of D. K. &  Co., D.  K. & Co. were in the circumstances, the persons to  whom the  goods were actually delivered, and the  conviction  was illegal. A  del credere agent is an agent of the seller only up to  a

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point.  Beyond that he is either a principal or an agent  of the buyer. In a penal statute it is the duty of the Court to  interpret words of ambiguous meaning in a, broad and liberal sense, 107 826

& CRIMINAL APPELLATE JURISDICTION:  Criminal Appeal No. 61  of 1952. Appeal by special leave granted by the Supreme Court on  the 10th September, 1951, from the Judgment and Order dated  the 5th  March, 1951, of the High Court of Judicature at  Bombay (Chagla C.J. and Bhagwati J.) in Criminal Appeal No. 394  of 1950  arising out of the Judgment and Order dated  the  29th May, 1950, of the Court of the Presidency Magistrate, Second Court,  Mazagaon, Bombay, in Cases Nos. 630 /P and 635/P  of 1949. M.P. Amin (R.  J. Kolah, with him) for appellants Nos. 1,  2 and 4. As K. Muthuswami for -appellant No. 3. C.   K.  Daphtary,  Solicitor-General for  India  (Porus  A. Mehta, with him) for the respondent. 1953.  March 30.  The Judgment of the Court was delivered by BOSE, J.-The appellants have been convicted under sections 7 and  9 of the Essential Supplies Act (No.  XXIV of 1946)  on two counts.  The first appellant is a registered joint stock company, the Seksaria Mills Ltd.  It was fined Rs. 10,000 on each of the two counts, that is to say, a total fine of  Rs. 20,000, and this was upheld in appeal.  The second appellant is  the  Director  of the Mills.  He was  sentenced  to  two months’ rigorous imprisonment and to a fine of Rs.  2,00,000 on  each count.  In appeal the sentence of imprisonment  was set aside and the fine reduced to Rs. 10,000 on each  count. The third appellant is the General Manager of the Mills.  He was  sentenced to a fine of Rs. 2,000 on each  count.   This has been upheld.  The fourth appellant is the Sales  Manager of  the  Mills.  He was sentenced to four  months’  rigorous imprisonment and a fine of Rs. 1,00,000 on. each count.   In appeal the sentence of imprisonment was upheld but the  fine was  reduced to Rs. 10,000 on each count.   The  substantive sentences are to run concurrently. 827 A Government of India Notification dated 2nd February, 1946, required  every manufacturer to submit " true  and  accurate information  relating to his undertakings " to  the  Textile Commissioner  C.S.T. Section at Bombay.  In compliance  with this Order the first appellant submitted a return, signed by the  third appellant, on 10th March, 1947.  This  return  is Exhibit  A-1.   It showed that 13 bales of  cloth  (20  half bales and 3 full bales) were delivered to Messrs.  Dwarkadas Khetan  &  Company of Bombay during the month  of  February, 1947,  on behalf of the quotaholder Shree Kishan &  Company. Another return of the same date (Exhibit A-2), also relating to  the  month of February, 1947, showed that 6  bales  were delivered  to the same Dwarkadas Khetan & Company on  behalf of another quota-holder Beharilal Bajirathi. A note on the back of each printed form states.     By   ’delivered  ’or   delivery  ’  is  meant   physical delivery of cloth in bales or in pieces but not cloth  which though paid for is still in the I physical possession of the seller." The offence charged is that this information is not true and

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accurate.   The case for the prosecution is that  the  bales remained  in the physical possession of the first  appellant at  all material times and were not physically delivered  to Messrs.  Dwarkadas Khetan & Company. Before  us the learned Solicitor-General added that even  if there was physical delivery to Dwarkadas Khetan-that did not comply  with the requirements of the form because  the  form requires  information  regarding physical  delivery  to  the quota-holder  or his agent and as Dwarkadas Khetan  was  not the  agent of the quota-holder, the statement is  inaccurate and misleading. The  learned Presidency Magistrate who tried the  case,  and also  the  High Court on appeal, hold that  the  prosecution have established their case and so have convicted and upheld the convictions respectively. 828 The business procedure of the first appellant is  -explained by Dwarkadas Khetan.  His firm, Dwarkadas Khetan &  Company, are  the first appellant’s  sole selling agents.’  They  are del  credere  agents  and guarantee  payment  to  the  first appellant  of  all  sales  made  and,  on  the  other  side, guarantee  delivery  to the purchasers with whom  they  deal direct.   It is necessary at this stage to  understand  that because  -of  various  orders  and  rules  made  under   the Essential  Supplies Act the first appellant could only  sell to  specified  quota-holders and only up to  the  limits  of their  quotas.  The two quota-holders which concern  us  are Shree  Kishan & Company and Beharilal Bairathi.   The  first appellant’s selling procedure is this.  When goods are ready for sale, it sends Dwarkadas Khetan & Company in duplicate a " ready sale note ". These notes contain particulars  -about the bales and the persons to whom they are to be  delivered. Upon receipt of this Dwarkadas & Company contact the  quota- holders or their agents. The  next  step is for the quota-holder to pay  Dwarkadas  & Company the price of the goods specified in the " ready sale note".   Upon receipt of the money, one of the two notes  is handed over to the quota-holder or his agent and he is given a receipt for the money paid.  At the same time Dwarkadas  & Company send the first appellant an " advice slip "  telling it that the money has been received and asking it to prepare a delivery order.  The first appellant then debits Dwarkadas & Company with the price and not the purchaser.  For payment it looks to Dwarkadas & Company. Upon  receipt  of  this advice slip  the  first  appellant’s office  -prepares the delivery order and delivers the  goods to the party concerned.  The person receiving the goods then signs the delivery order in token of receipt and the  signed order  is sent to Dwarkadas & Company who, after making  the necessary  entries in their books, return the order  to  the Mills office. It  will  be  seen that the first appellant  has  no  direct dealing,  with the purchaser.  It acts through  Dwarkadas  & Company in every case. 829 It  will  now be necessary to trace the history of  the  two consignments  relating  to  the 13 bales  and  the  6  bales separately. We will deal with the 13 bales first. The quota-holder in respect of the 13 bales was Shree Kishan &  Company.  This firm was an up-country firm and so it  was necessary  for  it to appoint a local agent  in  Bombay  for making  payments  and receiving delivery.   There  was  some confusion about the agent so appointed; at first one  Dharsi Moolji  was  appointed  and then P.  C.  Vora.   The  letter informing  the first appellant that Dharsi Moolji  bad  been

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appointed is not on record but we were told at the Bar  that it is not disputed that I the letter is dated 7th  February, 1947.   In  any  case,  Dharsi Moolji  wrote  to  the  first appellant  on 20th February, 1947, saying that he  had  been authorised  to take delivery of the January quota on  behalf of  Messrs.  Shree Kishan & Company and on 21  st  February, 1947, he paid Dwarkadas Khetan & Company a sum of Rs. 14,000 for this quota.  A receipt and an entry in Dwarkadas’  books evidence the payment. The  same day Dwarkadas Khetan wrote to the first  appellant telling  it  that his firm had received payment  in  advance from Shree Kishan & Company and that the 13 bales should  be sent  to  "our  godown  ", Whether the "  our  "  refers  to Dwarkadas’  godown  or to a godown  jointly  shared  between Dwarkadas and the first appellant is not clear.  The learned High Court Judges hold that the godown belonged to the first appellant,  but that, in our opinion, is not  very  material for reasons we shall give later. On  receipt  of  this " advice slip "  the  first  appellant prepared  what  it has called a " ready sale note "  on  the same. day, 21st February, 1947, authorising the purchaser to take delivery within a week.  Dharsi Moolji was named as the Commission   Agent.  (The  man  now  entered  is   Prataprai Chunilal,  that  is, P. C. Vora, but the original  name  was Dharsi  Moolji.  The change was made for reasons which  will presently appear). 830 In pursuance of all this, the first appellant dispatched the 13  bales  on 28th February, 1947, and sent them  to  Dharsi Moolji.  But in the meanwhile other events had taken  place. One  P.  C.  Vora  wrote to  the  first  appellant  on  17th February, 1947, and said that he had been authorised to take possession  of  these 13 bales.  What had  happened  in  the meanwhile was that the, quota-holder Shree Kishan &  Company had  changed its local agent.  Accordingly, when  the  goods reached  Dharsi  Moolji he refused to  take  delivery.   The selling  agent  Dwarkadas  thereupon  telephoned  the  first appellant.  He explained that he had actually, received  the money for the bales from Dharsi Moolji and had not  received anything from P. C. Vora and so could not deliver the  goods to the latter and equally could not accept money from P.  C. Vora until the matter had been straightened out with  Dharsi Moolji.   The  first appellant thereupon told  Dwarkadas  to keep  the goods in the Dady Seth godown.  On the  same  day, apparently  before  all this occurred, the  first  appellant credited  Dwarkadas  Khetan with the money he  had  received from  Dharsi  Moolji  on  account  of  the  13  bales,  less Dwarkadas’  commission.  In other words, this adjustment  in the accounts was the equivalent of payment for the 13  bales by Dwarkadas Khetan to the first appellant on account of the purchaser  Shree  Kisban & Company.  It will  be  remembered that  Dwarkadas  Khetan  & Company were  -the  sole  selling agents  and  they alone were responsible to  the  Mills  for orders’ which. were placed through them. The muddle between Dharsi Moolji and P. C. Vora was  cleared up  between 3rd March, 1947, and 14th March, 1947.   On  3rd March, 1947, Dwarkadas Khetan returned the Rs. 14,000  which Dharsi Moolji had paid and on 14th March, 1947, accepted the money  from P. C. Vora.  The alteration in the  "ready  sale note" of 21st February, 1947, was presumably made because of these  facts.  Four days later, Dwarkadas  Khetan  delivered the  goods  to P. C. Vora. (There was no need  to  make  any alterations in the first 831 appellant’s account books because Dwarkadas was  responsible

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for  the-price whatever happened between him and Dharsi  and also  because  in any event the. goods were  sold  to  Shree Kishan: the only query at that time was who was his agent to accept delivery for him). The  return  with which we are concerned was  made  on  10th March,  1947.   It  will be seen from  the  above  that  the position at that date was as follows: (1) the selling, agent bad  informed  the first appellant that he  had  effected  a sale, (2) the selling agent had paid the first appellant for the  goods,  (3)  specific  bales had  been  set  aside  and appropriated  to the sale and consequently the  property  in the  goods had passed, (4) the goods had actually  left  the Mills’  premises, and (5) they were in the Dady Seth  godown under the control of Dwarkadas Khetan. We say the goods were under the control of Dwarkadas Khetan for  three reasons: (1) as shown above, the property in  the goods  had passed and so the, first appellant no longer  had title to them, (2) Dwarkadas says that until be received the money  for  them from P. C. Vora he would  have  refused  to deliver  them, (3). being a del credere agent he would  have been  within  his rights (a) to refuse delivery  to  anybody till  he was paid and (b) to deliver them  despite  anything the  first appellant might say once he received  his  money; also because Dwarkadas’ Mehtaji says- "If  the goods are not, accepted by the merchants  or  their agents,  the  same are sent to us and we keep  them  in  the godown." Bearing  these  facts  in  mind, we  will  now  examine  the offending document.  It is a printed form.  The heading is- "  Manufacturer’s  Returns showing detail%  of  delivery  to quota-holders or other8 of civil cloth." Then there is a note as follows : "  IMPORTANT:-This  form should be completed  in  accordance with  the  instructions  printed  overleaf...  giving   full details relating to the previous month, 832 Under that is the following- "All stocks pledged/hypothecated by manufacturers with banks or others shall be included in this statement." The  only column in the printed form which could be  related to this is column 3 headed " Full name and address of person to  whom  delivered." On the back there  are  the  following instructions:- "II.  The word I others’ in the heading of the form includes artificers  who  are  privileged  to  purchase  cloth  under General Permission  No. TCS 42 / 1, dated 10th August, 1944, and  any person to whom deliveries are made under any  other General  or  Special  Permission or  Order  of  the  Textile Commissioner.   The name of artificers or any other  persons shall  be  ’mentioned in column 3 and against  their  names, number  and date of General or Special Permission  shall  be mentioned in column 2. III. By ’delivered’ or ’delivery’ismeantphysical delivery of cloth in bales or in pieces but not cloth which, though paid for, is still in the physical possession of the seller.  " The form was filled in as follows : In the column headed  11 Full  name  and  address  of  quota-holder  "  the  name  of ShreeKishan & Company is entered.  In the column headed Full name  and  address of person to whom delivered the  name  of Dwarkadas Khetan & Company is entered.  The question we,have to decide is whether these two entries are inaccurate. Dealing   first    with  the   learned   Solicitor-’General’s argument regarding the construction of the words used in the form,  we  are of opinion that it cannot  be  accepted.  The second clause of the portion marked "Important" towards  the

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head  of  the  form  states  that  all  stocks  pledged   or hypothecated with banks or others must also be included, and Instruction  No.  II on the back directs that the  names  of "any other person" must be entered in column 3 and that  the number and date of the General or Special Permission must be set out in column 2, Whether this means that goods 833 cannot  be  pledged without permission or  that  only  goods allotted to quota-holders can be pledged we do not know, but whatever it means, it is clear that the entry in column 3 is not intended to be confined to quota-holders or their agents but  means what it says, namely the person to whom  physical delivery of the goods has been made whoever he may be. The  only question therefore is whether there  was  physical delivery to Dwarkadas Khetan.  In one sense, there can be no doubt  about that.  The goods left the Mills’ premises,  the property  in them had passed and when Dharsi Moolji  refused to  receive them they were handed over to  Dwarkadas  Khetan and not taken back to the Mills.  Dwarkadas Khetan asked the Mills what he should do with them, and in the end he  placed them in the Dady Seth godown.  In any ordinary understanding of  the  term  it would be clear that  the  goods  had  been physically  delivered to Dwarkadas Khetan.  But the  learned High Court Judges do not appear to have concerned themselves with the question of actual physical possession because they say:- "It would not be true to say, and the record amply bears  it out, that this godown belonged to Dwarkadas Khetan.  Even if Dwarkadas  Khetan had control over the godown,  the  control was exercised on behalf of and as the agent of the Mills." Therefore, the test of the sort of possession which they had in  mind was not the control over the goods.  But  that  has always  been regarded as one of the tests of physical or  de facto  possession.   Lancelot  Hall  distinguishing  between possession   in  law  and  possession  in  fact  says   that "possession in the popular sense denotes a state of fact  of exclusive physical control".  See his treatise on Possessory Liens in English Law, page 2. See also Pollock and Wright in their  Essay  on  Possession in the Common  Law,  page  119. Drawing  the  same  distinction  they  say  that   "physical possession" may be generally described by stating that 108 834 "when a person is in such a relation to a thing that, so far as  regards  the thing, he can assume,  exercise  or  resume manual  control  of it at pleasure, and so  far  as  regards other  persons,  the thing is under the  protection  of  his personal  presence, or in or on a house or land occupied  by him,  or in some receptacle belonging to him and  under  his control." This  would  seem  exactly to meet  the  case  of  Dwarkadas Khetan. Possession  is an ambiguous term.  The law books divide  its concept  into two broad categories, (1) physical  possession or  possession in fact and (2) legal possession  which  need not  coincide with possession in fact.  The  offending  form with which we are concerned draws the same broad line.   But even on the factual side of the border niceties creep in and so the possession of a servant is called custody rather than possession.   But what of an agent ? If a man  lives  abroad over a period of years and leaves his house and furniture in charge of an agent who has the keys of the house and immedi- ate  access to and physical control over the  furniture,  it would be difficult to say that the agent was not in physical possession.  It is true the legal possession would  continue

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to  reside in the owner but the actual  physical  possession would  surely  be  that of the agent.  And  so  with  a  del credere  agent,  because such a person is the agent  of  the seller  only  up  to a point.  Beyond that he  is  either  a principal  or an agent of the buyer.  This  distinction  was discussed by one of us in the Nagpur High Court in  Kalyanji Kuwarji  v.  Tirkaram  Sheolal(1) and was  accepted  by  the Madras  High  Court  in Kandula  -Radhakrishna  Rao  v.  The Province of Madras(2). But we need not go into all this.  Here is an Order which is to affect the business of hundreds of persons, many of  whom are small petty merchants and traders, the sort of meni  who would  not have lawyers constantly at their elbow; and  even if they did, the more learned their advisers were in the law the more puzzled (1) A.I.R. 1938 Nag. 254. (2) (1952)  M.L.J. 494. 835 they  would be as to what advice to give,for it is not  till one  is  learned in the law that subtleties of  thought  and bewilderment  arise  at the meaning of plain  English  words which  any ordinary man of average intelligence, not  versed in the law, would have no difficulty in understanding.  In a penal statute of this kind it is our duty to interpret words of  ambiguous meaning in a broad and liberal sense  so  that they  will  not become traps for honest, unlearned  (in  the law)  and  unwary men.  If there is honest  and  substantial compliance with an array of puzzling directions, that should be  enough  even if on some hypercritical view  of  the  law other  ingenious meanings can be devised.  In  our  opinion, Dwarkadas Khetan could, in the circumstances given above, be described, without any straining of language, as the  person to  whom the goods were actually delivered.  It follows  the conviction on this count cannot stand. We  would  like  to add that in any  event,  even  if  ultra technical  notions regarding the concept of possession  were to  be incorporated into the case, it would be wrong to  say that  there  had  been  anything  beyond  a  technical   and unintentional  breach of the law.  The facts are  truly  and accurately  given  according  to  the  popular  and  natural meaning  of the words used; nothing was hidden.   The  goods did  reach the quotaholder in the end, or rather his  proper agent, and we cannot see what anyone could stand to gain  in an  unauthorised  way over the very  natural  mistake  which occurred owing to what seems to have been a time-lag in  the consequences of a change of agency.  So, even if there was a technical breach of the law, it was not one which called for the  severe  strictures which are to be found in  the  trial court’s judgment and certainly not for the savage  sentences which  the  learned Magistrate imposed.  In the  High  Court also  we  feel  a nominal fine would have met  the  ends  of justice even on the view the learned Judges took of the law. The charge on the second count relating to the 6 bales is  a similar  one  and the facts follow the same  pattern.   They have been detailed in the High Court’s 836 judgment, so  it  is not necessary to do more  than  outline them here.  The quota-holder here is Beharilal  Bairathi. In this case also, Dharsi Moolji paid Dwarkadas Khetan for  the goods  and  the Mills sent the bales to Dharsi  Moolji  for- delivery  in the same truck as the 13 bales.  Dharsi  Moolji refused  to accept these bales also, so they were  deposited in  the  Dady  Seth godown along with  the  other  thirteen. Dwarkadas Khetan & Company has been entered as the person to whom  delivery  was made.  For the reasons given  above,  we

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hold that this was a true and accurate return. The appeal is allowed.  The conviction and sentence in  each of the four cases is set aside.  The fines, if paid, will be refunded. Appeal allowed. Agent for appellants Nos. 1, 2 & 4: Rajinder Narain. Agent for appellant No. 3: Ganpat Rai. Agent for the respondent: G. H. Rajadhyaksha.