Supreme Court of India
AGRICULTURAL MARKET COMMITTEEversusSHALIMAR CHEMICAL WORKS LTD.
- Citation
- 1997 INSC 496
- Decided
- 7 May 1997
- Disposal
- Dismissed
- Bench
- K S PARIPOORNAN
Holding
The statutory presumption is confined to the movement of notified agricultural produce out of the notified market area; Rule 74(2) and Bye‑law 24(5) are ultra vires, and the sale of copra took place in Kerala, rendering the market fee invalid.
Summary
The Agricultural Market Committee, a statutory body under the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966, levied a market fee on Shalimar Chemical Works Ltd for its purchase of copra. The respondent challenged the fee, arguing that the sale occurred in Kerala, not within the notified market area, and that the presumption of sale based on weighing (Rule 74(2) and Bye‑law 24(5)) was beyond the Act. The Supreme Court examined the statutory presumption in Section 12(1) Explanation I, held that it is limited to the movement of notified produce out of the market area and cannot be expanded by rules or bye‑laws. Consequently, Rule 74(2) and Bye‑law 24(5) were declared ultra vires. Applying Sections 19 and 20 of the Sale of Goods Act, the Court found that title passed in Kerala, so the sale did not occur in the notified area. The market fee could not be levied and the appeal was dismissed.
Issues considered
- The scope of the statutory presumption under Section 12(1) Explanation I of the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966.
- Whether Rule 74(2) of the 1969 Rules and Bye‑law 24(5) of the Committee’s bye‑laws, which extend the presumption to weighing, are ultra vires.
- Where the contract of sale of copra was deemed to have been completed – Kerala or Hyderabad – under the Sale of Goods Act, 1930.
- Whether the delegation of legislative power to the Government and the Committee complied with constitutional limits on delegated legislation.
Legislation cited
- Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966s. 12(1) Explanation I, s. 2(i), s. 2(vi), s. 2(x), s. 2(xi), s. 2(xii), s. 2(xvi), s. 3, s. 33, s. 34(1), s. 4(1), s. 7(1)
- Sale of Goods Act, 1930s. 19, s. 20
Subjects
market feestatutory presumptiondelegated legislationultra viressale of goodsproperty passageagricultural producecontract of salerisk and insurancejurisdiction
Judgment
A AGRICULTURAL MARKET COMMITTEE
v.
SHALIMAR CHEMICAL WORKS LTD.
MAY 7, 1997
B (K.S. PARIPOORNAN ANDS. SAGHIR AHMAD, JJ.)
Andhra Pradesh (Agricultural Produce and Livestock) Markets Act,
1966: Sections 12(1) Expln. l, 2(i), (vi), (x), (xi), (xii), (xvi), 3, 4( 1), 7(1),
33 and 34(1 ).
c ..
Notified Agricultural Produce-Sale or purchase-Presumption of-The
Act limited the statutory presumption to only one factor, namely, "moving" a
notified agricultural produce from within the notified market area to a place
outside the market area-Whereas the Rules and Bye-laws provided further
that such presumption would also be raised if a notified alJlicultura/ produce
D was weighed, measured and counted-Held: Such additional presumption is
beyond the legislative polic.ir-flence, Rule 74(2) and Bye-law 24(5) are
beyond the scope of the Act and ultra vires the Act-Andhra Pradesh (Agricul-
tural Produce and Livestock) Markets Rules, 1966, Rule 74(2) and Bye-law
24(5).
E
Sale of Goods Act, 1930 : Sections 19 and 20.
Property in goods-1'Copra" supplied from State of Kera/a to Hyderabad
pursuant to order placed by purchaser--Dispatch of goods at the risk of
purchaser-Goods insured by purchaser-Goods weighed at Hyderabad only
-
F for purchaser's satisfaction----Held : While ascertaining the intention of the
parties regard should be had to temis of contract, conduct of parties and
circumstances of the case provided in S. 19(2)--lf conditions for applicability
of S. 20, namely, that contract of sale is an unconditional contract and is for
specific goods in a deliverable state, are satisfied, court has to determine
G whether any ''differenl intention appears" in the contract as provided in S.
19(3)-Property in goods passed and sale took place in State of Kera/a and
not at Hyderabad-Hence, levy of market fee on the purchase of "copra'~ an
agricultural produce, under A.P. (Agrirnltura/ Produce and Livestock)
Markets Act, 1966, invalid.
H Administrative Law :
164
AGRICULTURAL MARKET COMMilTEE v. SHAUMAR CHEMICAL 165
Legislative function/power-Delegation of-Held: legislature lays down A
policy and the principles for the guidance of the delegates-Delegate while
:
. making subsidiary rules or regulations cannot widen or constrict the scope of
- the Act or the policy.
Legislative fu11ction/power-Delegatio11 of-Reasons for giving
.,
-.<
delegated power to the Government to make Rules stated. B
The appellant-Agricultural Market Committee is a statutory body
i created under the Andhra Pradesh (Agricultural Produce and Livestock)
Markets Act, 1966 while the respondent is a licenced trader dealing in
"copra" (dried coconut kernel) which it imported from various places in c
the State of Kerala for manufacturing coconut oil. The respondent placed
an order with a dealer in the State of Kerala in pursuance of which goods
were dispatched by lorry to Hyderabad where the respondent after making
payment to and receiving documents from the bank, obtained delivery of
goods, after weighment. It was one of the terms of the contract between the
parties that the seller would not be liable for any future loss of good and D
that the goods were being dispatched at the risk of the respondent. The
respondents had also obtained insurance of the goods and had paid the
policy premium.
d, The Assessing Authority who was also ihe Secretary of the Agricul- E
tural Market Committee levied the market fee on the respondent who
challenged it in appeals filed under Section 12E of the Andhra Pradesh
... (Agricultural Produce and Livestock) Act, 1966 but the appeals were
dismissed on the technical ground of non-comp,iance with Section 12E(2)
of the Act under which the whole amount of market fee had to be deposited
before filing the appeal. The High Court allowed the appeal filed by the F
respondent. On the basis of material placed on record, the High Court
came to the conclusion that the sale of "copra" took place in the State of
Kerala and not at Hyderabad. The High Court further held that the
provisions contained in Rule 74(2) of the Andhra Pradesh (Agricultural
Produce and Livestock) Market Rules, 1969 and Bye-law 24(5) of the G
Bye-laws Committee relating to the 'rule of presumption' were beyond the
scope of the Act and, consequently, were bad in law. Hence this appeal.
~
Dismissing the appeal, this Court
HELD : 1.1. Market fee can be levied under the Andhra Pradesh H
166 SUPREME COURT REPORTS (1997] SUPP. l S.C.R.
A (Agricultural Produce and Livestock) Markets Act, 1966 only on the sales
and purchase of notified agricultural produce within the notified area.
Explanation I to Section 12 of the Act creates a legal fiction and provides
that if any notified agricultural produce is taken out of a notified market
area, it shall be presumed to have been purchased or sold within such area.
B The presumption is a rebuttable presumption and can be shown to be not
correct. The policy in enacting this provision is only to cover such trans-
actions of sale and purchase for which direct evidence may not be avail-
able. The legal fiction was thus limited to the "moving" of the commodity
from within the market area to a place outside the market area. No other
factor can give rise to such presumption nor can any additional factor be
C considered to raise such presumption. The statutory presumption is thus
of a limited character. Since it relates to the levy of market fee and is fiscal
in nature, it has to be strictly construed in the sense that any circumstance,
situation, factor or condition which are not contemplated by the Act cannot
be taken into consideration to raise the presumption regarding sale or
D purchase of th" notified agricultural produce. [173-B-C; 173-H; 174-A-C]
1.2. The Government to whom the power to make Rules was given
under Section 33 and the Committee to whom power to make Bye-laws was
given under Section 34 widened the scope of "presumption" by providing
further that if a notified agricultural produce is weighed, measured or
E counted within the notified area, it shall be deemed to have been sold or
purchased in that area. The creation of legal fiction is thus beyond the legis-
lative policy. Such legal fiction could be created only by the Legislature and
not by a delegate in exercise of the rule making power. Hence, Rule 74(2) of
the Andhra Pradesh (Agricultural Produce and Livestock) Market Rules,
1969 and Bye-law 24(5) of the Bye-laws Committee are beyond the scope of
F the Act and, therefore, ultra vires. The reliance placed by the Assessing
Authority as also by the appellate and revisional authority on these
provisions was wholly misplaced and they are not justified in holding, merely
on the basis ofweighment of "copra" within the notified area committee that
the transaction of sale took place in that market area. [177-G-H; 178-A]
G 1.3. The power of delegation is a constituent element of the legislative
power as a whole under Article 245 of the Constitution and other relative
Articles and when the Legislatures enact laws to meet the challenge of the
complex soc!o-economic problems, they often find it convenient and neces-
sary to delegate subsidiary or ancillary power to delegates of their choice
H for carrying out the policy laid down by the Acts as part of the Administra-
AGRICULTURAL MARKET COMMITTEE v. SHALIMAR CHEMICAL 167
tive Law. The essential legislative function consists of the determination of A
the legislative policy and the Legislature cannot abdicate essential legisla-
tive function in favour of another. Power to make subsidiary legislation may
be entrusted by the Legislature to another body of its choice but the Legis-
lature should, before delegating, enunciate either expressly or by implica-
tion, the policy and the principles for the guidance of the delegates. These B
principles also apply to Taxing Statutes. The effect of these principles is
that the delegate who has been authorised to make subsidiary Rules and
Regulations has to work within the scope of its authority and cannot widen
or constrict the scope of the Act or the policy laid down thereunder. It
cannot, in the garb of making Rules, legislate on the field covered by the
Act and has to restrict itself to the mode of implementation of the policy C
and purpose of the Act. [176-A-B; H; 177-A-C]
Vasantlal Maganbhai Sanjahwala v. State of Bombay & Ors., [1961) 1
SCR 341; Municipal Corporation of Delhi v. Bir/a Cotton Spinning and
Weaving Mills, Delhi & Anr., AIR (1968)" SC 1232 and In Re : The Delhi
Laws Act, 1912, 1951 SCR 747 and Avinder Singh v. State of Punjab, [1979) D
1 sec 137' relied on.
Salmond : "Jurisprudence" 12th Edn. p. 116, referred to.
2.1. A contract of sale, like any other contract, is a consensual act E
inasmuch as parties are at liberty to settle, amongst themselves, any terms
they may cho\)se. Section J9 of the Sale of Goods Act, 1930 attempts to give
effect to the elementary principle of the Law of.Contract that the parties may
fix the time when the property in the goods shall be treated to have passed. It
may be the time of deliwry, or the time of payment of price or even the time
of the making of contrac.t. It all depends upon the intention of the parties. It F
is, therefore, the duty of the court to ascertain the intention of the parties
and in doing so, they have to be guided by the principles laid down in Section
19(2) which provides that for 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. Both Sections 19 and 20 apply to the sale G
of"specific" or "ascertained" goods. [181-C-E; G]
2.2. Section 20, which contains the first rule for ascertaining the
intention of the pai:ties, provides that where there is an unconditional
contract for the sale of "specific goods" in a deliverable state", the property
in the goods passes to the buyer when the contract is made. This indicates H
168 SUPREME COURT REPORTS (1997) SUPP. 1 S.C.R.
A that as soon as a contract is made in respect of specific goods, which arc
in a deliverable state, the title in the goods passes to the purchaser. The
passing of the title is not dependent upon the payment of price or the time
of delivery of the goods. If the time for payment of price or the time for
delivery of goods, or both, is postponed, it would not affect the passing of
the title in the goods so purchased. [181-G-H; 182-A)
B
2.3. In order that Section 20 is attracted, two conditions have to be
fulfilled : (i) the contract of sale is for specific goods which are in a
C
deliverable state; and (ii) the contract is an unconditional contract. If these
two conditions are satisfied, Section 20 becomes applicable immediately
and it is at this stage that it has to be seen whether there is anything either
c
in the terms of the contract or in the conduct of the parties or in the
circumstances of the case which indicates a contrary intention. This exer-
cise has to be done to give effect to the opening words, namely, "Unless a
1
different intention appears" occurring in Section 19(3). Intention of the -
parties was the decisive factor as to when the property in goods passes to
D the purchaser. If the contract is silent, intention has to be gathered from
the conduct and circumstances of the case. [182-B-D)
Consolidated Coffee Ltd. & Anr. v. Coffee Board, Bangalore, AIR
(1980) SC 1468, relied on.
E Hoe Kim Seing v. Maung Ba Chit, AIR (1935) PC 182, referred to.
3. In the instant case, the goods, which were the subject matter of
sale, were ascertained goods. They were also in a deliverable state. On the
order being placed by the respondent, the seller in the State of Kerala,
F loaded the goods on the lorry and dispatched the same to Hyderabad. It
is at this stage that the conduct of the parties becomes extremely relevant.
It was one of the terms of the contract between the parties that the seller
would not be liable for any future loss of goods and that the goods were
being dispatched at the risk of the respondent. The respondent had also
obtained insurance of the goods and had paid the policy premium. He,
G therefore, intended the goods to be treated as his own so that if there was
any loss of goods in transit, he could validly claim the insurance money.
The weighment of the goods at Hyderabad or the collection of documents
from the bank or payment of price through the bank at Hyderabad were
immaterial inasmuch as the property in the.goods had already passed at
H Kerala and it was not dependent upon the payment of prke or the delivery
AGRICULTURALMARKETCOMMnTEE v. SHALIMARCHEMICAL(S.SAGHIRAHMAD,J.( 169
of goods to the respondent. Therefore, the sale took place in the State of A
Kerala and not at Hyderabad. [182-F-H; 183-A; CJ
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3359 of
1997.
From the Judgment and Order dated 18.4.96 of the Andhra Pradesh B
High Court in C.M.A. No. 1217 of 1994.
K. Ram Kumar, Y.S. Rao, Asha Nair and C. Balasubramaniam for
the Appellant.
D.D. Thakur, L.N. Rao, V.V. Ramana and S. Udaya Kr. Sagar for c
the Respondent.
The Judgment of the Court was delivered by
S. SAGHIR AHMAD, J. Leave granted.
D
2. Agricultural Market Committee (for short, 'the Committee') which
is the appellant before us is a statutory body created under the Andhra
Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 ('the
Act') while the respondent is a licenced trader dealing in "Copra" (dried
coconut kernel) which it imports from various places in the State of Kerala E
for manufacturing coconut oil.
3. "Copra" is a notified agricultural produce and, therefore, the
Committee has a right to levy and realise the market fee on all transactions
of purchase and sale provided the transactions take place within the
notified area of the Committee. F
4. By orders dated 2.3.89 and 28.3.89, the Assessing Authority who
1s also the Secretary of the Committee levied the market fee on the
respondent who challenged those orders in appeals (No. 1 of 1989 and No.
2 of 1989). filed under Section 12E but the appeals were dismissed on the G
technical ground of non-compliance with Section 12E(2) under which the
whole amount of market fee had to be deposited before filing the appeal.
5. The respondent then approached the Andhra Pradesh High Court
in Writ Petition 12199 of 1991 which was allowed and the appeals were
directed to be entertained provided the respondent deposited half of the H
170 SUPREME COURT REPORTS [1997] SUPP. 1 S.C.R.
· A amount of market fee and furnished bank guarantee for the remaining half.
The appeals were consequently taken up for hearing but were dismissed
compelling the respondent to file a revision under Section 12F of the Act
which was dismissed by the Director of Marketing by order dated 8.11.93.
The respondent then approached the High Court by another appeal under
B Section 12G which was allowed by judgment dated 18.4.96 and consequent-
ly the matter has come to this Court.
6. In order to levy market fee on the transaction of sale and purchase
by the respondent, the Assessing Authority had relied upon Rule 74(2) of
the Andhra Pradesh (Agricultural Produce and Livestock) Market Rules,
C 1969 (for short, 'Rules') and Explanation to Bye-law 24(5) of the Bye-laws
of the Committee which contained a statutory presumption that if a notified
agricultural produce was weighed or measured within the notified area of
the Committee, it shall be deemed to have been purchased or sold within
that area. The appellate as also the revisional authorities had also relied
D upon this provision and had held that since "Copra" which was imported
from the State of Kerala was, admittedly, weighed at Hyderabad, it shall
be deemed to had been sold to the respondent at Hyderabad and, conse-
quently, the respondent Was liable to pay market fee on all the transactions
of sale/purchase of "Copra" during the period in question.
E 7. The High Court held that the provisions contained in Rule 74(2)
and Bye-law 24(5) relating to the 'rule of presumption' were beyond the
scope of the Act and, consequently, were bad in law. It also held on the
basis of evidence and material on record that the transaction of sale/pur-
chase took place in the State of Kerala and not at Hyderabad and,
F therefore, the authorities under the Act were not justified in levying the
market fee on those transactions.
8. The findings recorded by the High Court have been challenged
before us on the ground that the goods were imported into the State of
Andhra Pradesh on the basis of Form-X prescribed under the Act and the
G delivery of commodity was taken by the respondent after weighment which
indicated that the transaction of sale took place at Hyderabad and not in
the State of Kerala from where the goods were imported. It was also
contended that after weighment, if the commodity was found to be defi-
cient in weight, a debit note is issued to the seller which also indicated that
H the property in the goods passed only at Hyderabad where weighment was
AGRICULTURAL MARKET COMMIITEE v. SHALIMAR CHEMICAL (S. SAGHJRAHMAD,J.] 171
made by the respondent after payment of price and collection of document A
through a Bank. The findings of the High Court that Rule 74(2) and
Bye-law 24(5) were beyond the scope of the Act was also assailed and it
was contended that these provisions were made only to give effect to the
policy already laid down by the Legislature in the principal Act.
9. We will first examine the validity of Rule 74(2) and Bye-law 24(5). B
10. Rule 74(2) reads as under :
"Rule 74(2)-Such fees shall be leviable as soon as the notified
agricultural produce, livestock and products -of livestock is pur- C
chased or sold by a licensee. The notified agricultural produce,
livestock or products of livestock shall be deemed to have been
purchased or sold after the notified commodity has been weighed
or measured or counted or when it is taken out of the notified
market area."
D
11. Bye-law 24(5) is as follows :
"The fees shall be leviable as soon as the notified agricultural
produce, livestock, or products of livestock is purchased or sold
by licencee. E
EXPLANATION: The notified agricultural produce or livestock
or products of livestock shall be deemed to have been purchased
or sold after the said notified commodity has been weighed,
measured or counted or when it is taken out of the notified market
area." F
12. We may also, at this stage, notice certain provisions of the Act.
"Agricultural produce" has been defined in Section 2(i) as
under:
G
"2(i) "Agricultural Produce" means anything produced from land
in the course of agriculture or horticulture and includes forest
produce or any produce of like nature either processed or un-
processed and declared by the Government by notification to be
agricultural produce for the purposes of this Act." H
172 SUPREME COURT REPORTS (1997) SUPP. 1 S.C.R.
A Section 2(vi) defines "market" as under :
"2(vi) 'market' means a market established under sub-section (3)
of Section 4 and includes market yard and any building therein."
"Markel Committee" has been defined in Section 2(vii) as
B under:
"2(vii) 'market committee' means a committee constituted or
reconstituted under the provisions of this Act."
"Notified agricultural produce" is defined in Section 2(x) as
c under:
"2(x) 'notified agricultural produce, livestock or products of live-
stock' means agricultural pr0duce, livestock or products of live-
stock specified in the notification under Section 3."
D "Notification area" is defined in Section 2(xi) as under :
"2(xi) 'notified area' means any area notified under Section 3."
"Notified market area" is defined in Section 2(xii) as under :
E "2(xii) 'notified market area' means any area declared to be a
market area by notification under Section 4."
"Trader" is defined in Section 2(xvi) as under :
"2(xvi) 'trader' means the person licensed under sub-section (1) of
F Section 7 and includes the person in whose management the
collection of fees is placed whether he is called a commission agent,
ginner, presser, warehouseman, importer exporter, stockist or by
whatever local name he is called."
13. Notified Area is constituted under Section 3 of the Act whereas
G
a Market Committee is constituted by the Government under Section 4(1).
Thus Market Committee is constituted for every notified area. The Notified
Market Area is established under Section 4(4) of the Act.
14. Section 7(1) provides that no person shall, within a notified area,
H set up, establish or use, or continue or allow to be continued, any place for
AG RI CULTURAL MARKET COMMITrEE v. SHALIMAR CHEMICAL [S. SAGHIR AHMAD, J.] 173
the purchase, sale, storage, weighment etc. of any notified agricultural A
produce or products of livestock or for the purchase or sale or livestock
except under and in accordance with the conditions of a licence granted
to him by the market committee.
15. Section 12 of the Act provides for the levy of fees by the Notified
Market Committee. The relevant portion of this Section is reproduced B
below:
"12. Levy of fees by the market committee : (1) The market
committee shall levy fees on any. notified agricultural produce,
livestock or products of livestock purchased or sold in the notified C
market area (at such rate, not exceeding (two rupees) as may be
specified in the bye-laws) for every hundred rupees of the ag-
gregate amount for which the notified agricultural produce, live-
stock or products of livestock is purchased or sold, whether for
cash or deferred payment or other valuable consideration. D
Explanation I : For the purposes of this Section, all notified
agricultural produce, livestock or products or livestock taken out
of a notified market area shall, unless the contrary is provided, be
presumed to have been purchased or sold within such area.
E
Explanation II : ..................... .
(2) ····································
16. The market fee is liable to be paid by every trader operating in
the notified area. He is also under a statutory duty to submit returns F
relating to his turnover as required by Section 12A. The assessment is made
by the Market Committee under Section 12B. The assessment made by the
Market Committee is appealable before the Regional Joint Director of
Marketing under Sectfon 12E. A revision is provided by Section 12F against
the judgment of the Regional Joint Director to the Director of Marketing. G
The order of Director of Marketing is appealable before the High Court
under Section 12G.
17. A perusal of Explanation I appended to Section 12, extracted
above, would indicate that the statutory presumption regarding purchase
and sale is raised in respect of all notified agricultural produce, livestock H
..
174 SUPREME COURT REPORTS [1997] SUPP.1 S.C.R.
A or products of livestock if they are taken out of a notified market area. As
soon as a notified agricultural produce is moved out of a notified market
area, it is to be presumed that such notified agricultural produce was either
purchased or sold within the notified market area. Acting on this presump-
tion, the Committee can proceed to levy market fee on such transaction.
B What is important to notice in this provision is that the presumption is
confined to the movement of notified agricultural produce. No other factor
can give rise to such presumption nor can any additional factor be con-
sidered to raise such presumption. The statutory presumption is thus of a
limited character. Since it relates to the levy of market fee and is fiscal in
nature, it has to be strictly construed in the sense that any circumstance, ~
C situation, factor or condition which are not contemplated by the Act cannot
be taken into consideration to raise the presumption regarding sale or
purchase of the notified agricultural produce.
18. Section 33 of the Act gives power to the Government to make
D Rules. It is in exercise of this power that the Government made the Rules
~in 1969. Section 34 authorises a Market Committee to make Bye-laws.
Sub-section (1) of this Section provides as under :
"34. Bye-laws : (1) Subject to any rules made by the Government
under Section 33 and with the previous sanction of the Director
E of Marketing, a market committee may, in respect of the notified
area for which it was constituted, make bye-laws for the regulation
of the business·and the conditions of trading therein."
19. Bye-law 24(5) made by the Committee has already been quoted
F above. Rule 74(2) as also Bye-law 24(5) also contain the deeming
provisions concerning sale or purchase of a notified agricultural produce.
They provide that a notified agricultural produce shall be deemed to have
been purchased or sold after the Notified Commodity has been Weighed
or Measured or Counted or when it is taken out of the Notified Market
Area. Thus while the Act limited the presumption to only one factor,
G namely, moving the notified agricultural produce out of the notified market
area, the Rule and the Bye-law have additionally provided that such
presumption would also be raised if the commodity is weighed, measured
or counted. "Weighed" "Measured" or "Counted" are factors which are not
mentioned in Explanation I to Section 12 of the Act. The question which,
H therefore, arises is whether the scope of Explanation I to Section 12 can
,
AGRICULTIJRAL MARKET COMMITTEE v. SHALIMAR CHEMICAL {S. SAGHIRAHMAD, J.] 175
be widened by Rule 74(2) or the Explanation appended to Bye-law 24(5). A
20. The Act was made by the State Legislature while the Rules have
been made by the State Government and the Bye-laws have been made by
the Committee. Both constitute delegated legislation.
21. Delegated Legislation has been defined by Salmond as "that B
which proceeds from any authority other than the sovereign power and is
therefore dependent for its continued existence and validity on some
superior or supreme authority." (See Salmond, Jurisprudence, 12th Edn.
Page 116).
,,I• 22. Delegated Legislation is not a new phenomenon. Ever since the C
Statutes came to be made by Parliament, the Delegated Legislation also
came to be made by an authority to which the power was delegated by the
Parliament. It is no use going back into the pages of history or to look to
the Statute of Proclamations 1539, under which Henry VIII was given
extensive powers to legislate by proclamations, what is intended, to be D
emphasised is that there has always been, and continues to be, need for
delegated legislation. The eicigencies of the modern State, especially the
social and economic reforms, have given rise to the making of Delegated
Legislation on a large scale (by authorising the Gov::rnment, almost in
every Statute passed by Parliament or the State Legislature to make Rules) E
so much so that a reasonable fear could have arisen among the people that
they were being ruled by the Bureaucracy.
23. The reasons for giving delegated power to the Government to
make Rules are many, but the most prominent and dominant reasons are:
(i) The area for which powers are given to make delegated legislation F
may be technically complex, so much so, that it may not be possible and
may even be difficult to set out all the permutations in the Statute.
(ii) The Executive may require time to experiment and to find out
how the origina1.legislation was operating and thereafter to fill up an other G
details.
(iii) It gives an advantage to the Executive, in the sense that a
Government with an onerous legislative time schedule may feel tempted to
• pass skeleton legislation with the details being provided by the making of
Rules and Regulations. H
176 SUPREME COURT REPORTS [1997) SUPP. 1 S.C.R.
A 24. The power of delegation is a constituent element of the legislative
power as a whole under Article 245 of the Constitution and other relative
Articles and when the Legislatures enact laws to meet the challenge of the
complex socio-economic problems, they often find it convenient and neces-
sary to delegate subsidiary or ancillary powers to delegates of their choice
B for carrying out the policy laid down by the Acts as part of the Administra-
tive Law. The Legislature has to lay down the legislative policy and prin-
ciple to afford guidance for carrying out the said policy before it delegates
its subsidiary powers in that behalf (See: Vasantlal Maganbhai Sanjanwala
v. The State of Bombay and Others, [1961) 1SCR341. This Court in another
case, namely, Tht! Municipal Corporation of Delhi v. Bir/a Cotton, Spinning
C and Weaving Mills, Delhi and Another, AIR (1968) SC 1232 as also in an
earlier decision in In Re : The Delhi Laws Act, 1912, The Ajmer-Merwara
(Extension of Laws) Act, 1947, and The Part C States (Laws) Act, 1950,
[1951) SCR 747 has laid down the principle that the Legislature must retain
in its own hands the essential legislative functions and what can be
D delegated is the task of subordinate legislation necessary for implementing
the purposes and objects of the Act concerned.
25. In Avinder Singh v. State of Punjab, [1979) 1 SCC 137, Krishna
Iyer, J. laid down the following tests for valid delegation of legislative
power. These are:
E
"(1) the legislature cannot efface itself :
(2) it cannot delegate the plenary or the essential legislative func-
tion;
(3) even if there be delegation, Parliamentary control over
F
delegated legislation should be a living continuity as a constitution-
al necessity."
It was further observed as under :
"While what constitutes an essential feature cannot be delineated
G
in detail it certainly cannot include a change of policy. The legis-
lature is the master of legislative policy and if the delegate is free
to switch policy it may be usurpation of legislative power itself."
26. The principle which, therefore, emerges out is that the essential
H legislative function consists of the determination of the legislative policy
AGRICULTURAL MARKET COMMITTEE v. SHALIMAR CHEMICAL (S. SAGHIR AHMAD, J.( 177
and the Legislature cannot abdicate essential legislative function in favour A
of another. Power to make subsidiary legislation may be entrusted by the
Legislature to another body of its choice but the Legislature should, before
delegating, enunciate either expressly or by implication, the policy and the
principles for the guidance of the delegates. These principles also apply to
Taxing Statutes. The effect of these principles is that the delegate which B
has been authorised to make subsidiary Rules and Regulations has to work
within the scope of its authority and cannot widen or constrict the scope
of the Act or the policy laid down thereunder. It cannot, in the garb of
making Rules, legislate on the field covered by the Act and has to restrict
itself to the mode of implementation of the policy and purpose of the Act.
--..-... c
/ 27. Applying the above principles to the instant case, it will be seen
that the market fee can be levied under the Act only on the sales and
purchase of notified agricultural produce within the notified area. Explana-
tion I to Section 12 creates a legal fiction and provides that if any notified
agricultural produce is taken out of a notified market area, it shall be D
presumed to have been purchased or sold within such area. The presump-
tion is a rebuttablc presumption and can be shown to be not correct. The
policy in enacting this provision is only to cover such transactions of sale
and purchase for which direct evidence may not be available. Since a
notified agricultural produce can be sold only within the notified market
area, and, that too, by a trader having a licence issued to him by the E
Committee, it is obvious that if such commodity is moved out of the notified
area, it would mean either that it has been sold or purchased. Otherwise,
there would be no occasion to move such commodity out of the notified
market area. The legal fiction was thus limited to the "moving" of the
commodity from within the market area to a place outside the market area.
F
28. The Government to whom the power to make Rules was given
under Section 33 and the Committee to whom power to make Bye-laws
- was given under Section 34 widened the scope of "presumption" by provid-
ing further that if a notified agricultural produce is weighed, measured or
counted within the notified area, it shall be deemed to have been sold or G
purchased in that area. The creation of legal fiction is thus beyond the
legislative policy. Such legal fiction could be created only by the Legislature
and not by a delegate in exercise of the rule making power. We are,
therefore, in full agreement with the High Court that Rule 74(2) and
Bye-law 24(5) are beyond the scope of the Act and, therefore ultra vires.
The reliance placed by the Assessing Authority as also by the appellate H
178 SUPREME COURT REPORTS [1997] SUPP. 1 S.C.R.
A and revisional authority on these provisions was wholly misplaced and they
are not justified in holding, merely on the basis of weighment of "Copra"
within the notified area committee that the transaction of sale took place
in that market area.
29. Let us now consider the next question relating to the nature of
B transaction relating to sale/purchase of "Copra" by the respondent from
various dealers in the State of Kerala.
30. It is contended by the learned counsel for the appellant that if an
order was placed with a dealer at Kerala in pursuance of which goods were
C despatched by lorry to Hyderabad where the respondent, after making
payment to and receiving documents from the bank, obtained delivery of
goods, and that too, after weighment, the transaction cannot but be treated
as sale at Hyderabad and not in the State of Kerala.
31. During the pendency of the proceedings before the Appellate
D Authority, statement of Shri Somnath Bhattacharya, Director of the
respondent Company was recorded. He stated that the ''Copra" was
brought into the State of Andhra Pradesh from outside. It was unloaded
at the premises of the appellant where it was crushed and coconut oil was
extracted. He further stated as under :
E "After the material comes to Hyderabad, we will weigh the same
for the purpose of verification regarding the quantity despatched
by the Kerala dealers. We have a running account with the dealers
in Kerala State. The account of the dealers will be settled some
times monthly and sometimes within two or three months from the
F date of despatch... very rarely it is found on weighment at
Hyderabad that the quantity despatched by the dealer at Kerala
is less than the quantity mentioned in the concerned invoice and
in such cases, the Hyderabad unit will send a report to our Head
Office and the Head Office raises a debit note against the dealer
for the shortage of Copra."
G
32. The above statement has been considered by the High Court
which came to the conclusion that the weighment was done only for the
satisfaction of the buyer and was not a condition of contract. The High .
Court also took into consideration the contents of the invoice and Form-X
H and observed as under :
AGRICULTURAL MARKET COMMrITEE v. SHALIMAR CHEMICAL [S. SAGHIR AHMAD, J.] 179
"The appellate authority has referred to a copy of invoice No. 357 A
dated 16.5.1985 for arriving at the conclusion that the purchase
was effected by the appellant in Hyderabad. This invoice dated
15.5.1985 show that one Abdul Hameed despatched 200 bags of
'Copra' through lorry No. MSO 3971 from Allepey in Kerala to
Hyderabad and the demand draft for Rs. 1,39,000 was forwarded B
to bank. The note to the invoice says that the despatch of the goods
is made solely at the risk and responsibility of M/s. Shalimar
Chemical Works, the appellant herein, and that Abdul Hameed
takes "no responsibility or liability as to delayed ·despatches, losses
due to theft, pilferage, rain or damage, leakage, wear and tear etc. c
' Column 1 of the accompanying Form X mentions the name of the
person consigning the goods as Abdul Hameed. Clause 5 of Form
X is the following terms :
"If the consignor is transporting goods in pursuance of a sale
for purpose of delivery to the buyer, the name and address D
of the person to whom the goods are sold, his registration
certificate No. under the Andhra Pradesh General Sales Tax
Act, 1957. If he is a dealer furnish bill number and date
relating in the sale."
E
Against this column No. 5, it is mentioned that the appellant herein
is the person lo whom the goods are sold . .The consignor's name
__..
is mentioned in column No. 6 as Abdul Hameed of Alleppey.
Column No. 7 is in the following terms :
F
"7. If the consignor is transporting the goods from one of his
shops or godown to an agent for sale or from one of his shops
or godowns to another for the purpose of storage, the address
- a .
of the agent or of the shop or godown to which the transport
are made."
Against this column, it was written "For Sale". Because it was
G
written in Column No. 1 as "for sale", the appellate authority held
that this evidenced that the transport of 'Copra' was only to enable
the appellant to purchase the same and that the same was not sold
in Alleppey. H
180 SUPREME COURT REPORTS (1997) SUPP. 1 S.C.R.
A The view taken by the appellate authority is totally unsus-
tainable."
33. The High Court further observed as under :
"One significant aspect to be noticed in this case is that after the
B stocks were loaded into the trucks, the sellers in Kerala had
absolutely no liability with regard to any future losses. That is the
reason why the goods were insured and the insurance pn;mia were ·
paid by the appellant. Where goods have been delivered to a
common carrier to be sent to the person, by whom they have been
C ordered, the carrier becomes the agent of the vendee and such a
delivery amounts to delivery to the vendee section 23(2) of the Sale
of Goods Act. There was thus completed sale in Kerala State and
no purchase in the State of Andhra Pradesh."
D 34. On the basis of material placed on record, the High Court came
to the conclusion that the sale of "Copra" took place in the State of Kerala
and not at Hyderabad.
35. We may, at this stage, consider certain provisions of the Sale of
Goods Act, 1930, specially as the Andhra Pradesh (Agricultural Produce
E and Livestock) Markets Act, 1966 does not contain any definition of sale
or purchase. Sections 19 and 20 of the Sale of Goods Act are quoted
belows:
"19. Property passes when intended to pass-
F (1) Where there is a contract for the sale of specific or ascer-
tained goods the property in them is transferred to the buyer at
such time as the parties to the contract intend it to be transferred.
0
(2) For the purpose of ascertaining the intention of the parties
regard shall be had to the terms of the contract, the conduct of
G the parties and the circumstances of the case.
(3) Unless a different intention appears, the rules contained in
Sections 20 to 24 are rules for ascertaining the intention of the
parties as to the time at which the property in the goods is to pass
H to the buyer."
AGRICUtTIJRAL MARKET COMMITTEE v. SHALIMAR CHEMICAL [S.SAGHIRAHMAD, J.] 181
"20. Specific goods in a deliverable state - where there is an A
un-conditional contract for the sale of specific goods in a
deliverable state, the property in the goods passes to the buyer
when the contract is made and it is immaterial whether the time
of payment of the price or the time of delivery of goods, or both,
is postponed."
B
->..
36. Wc may, before analysing the provisions of Sections 19 and 20,
observe that the Indian Sale of Goods Act is based largely upon the English
and American Acts. Under these Acts, namely, the English Sale of Goods
--- Act, the American Uniform Sales Act and the Indian Sale of Goods Act,
the relevant factor for determining where the sale takes place, is the
intention of parties. A contract of sale, like any other contract, is a
C
consensual act inasmuch as parties are at liberty to settle, amongst them-
selves, any terms they may choose.
37. Section 19 attempts to give effect to the elementary principle of
the Law of Contract that the parties may fix the time when the property in D
the goods shall be treated to have passed. It may be the time of delivery,
or the time of payment of price or even the time of the making of contract.
It all depends upon the intention of the parties. It is, therefore, the duty of
the Court to ascertain the intention of the parties and in doing so, they
have to be guided by the principles laid down in Section 19(2) which E
provides that for ascertaining the intention of the parties, regard shall be
had lo the terms of the contract, the conduct of the parties and the
circumstances of the case.
38. Section 19 indicates that in case of unconditional contract to sale
in respect of specified goods in a deliverable state, the property in the F
goods passes to the buyer at such time as the parties intend it to be
transferred . Section 19(3) provides that Section 20 to 24 contain the rules
for ascertaining the intention of the parties as to the time at which the
property in the goods shall be treated to have passed to the buyer. Both
Sections 19 and 20 apply to the sale of "specific" or "ascertained" goods. G
39. Section 20, which contains the first rule for ascertaining the
intention of the parties, provides that where there is an unconditional
contract for the sale of "specific goods" in a "deliverable state", the property
in the goods passes to the buyer when the contract is made. This indicates
that as soon as a contract is made in respect of specific goods which are H
182 SUPREME COURT REPORTS (1997] SUPP. 1 S.C.R.
A in a deliverable state, the title in the goods passes to the purchaser. The
passing of the title is not dependent upon the payment of price or the time.
of delivery of the goods. If the time for payment of price or the time for
delivery of goods, or both, is postponed, it would not affect the passing of
the title in the goods so purchased.
B 40. In order that Section 20 is attracted, two conditions have to be
fulfilled : (i) the contract of sale is for specific goods which are in a
deliverable state; and (ii) the contract is an unconditional contract. If these
two conditions are satisfied, section 20 becomes applicable immediately
and it is at this stage that it has to be seen whether there is anything either
C in the terms of the contract or in the conduct of the parties or in the
circumstances of the case which indicates a contrary intention. This exer-
cise has to be done to give effect to the opening words, namely, "Unless a
different intention appears" occuring the Section 19(3). In Hoe Kim Seing
v. Maung Ba Chit, AIR (1935) PC 182, it was held that intention of the
D parties was th1;: decisive factor as to when the property in goods passes to
the purchaser. If the contract is silent, intention has to be gathered from
the conduct and circumstances of the case.
41. This Court in Consolidated Coffee Ltd. & Anr. v. Coffee Board,
Bangalore, AIR (1980) SC 1468 = (1980] 3 SCC 358 has held that in an
E auction sale of chattels, property passes to the purchaser on the acceptance
of his bid. This occurs not because of Section 64(2) but because of the rule
contained in Section 20.
42. In the instant case, the goods which were the subject matter of
F sale were ascertained goods. They were also in a deliverable state. On the
order being placed by the respondent, the seller in the State of Kerala,
loaded the goods on the lorry and despatched the same to Hyderabad. It
is at this stage that the conduct of the parties becomes extremely relevant.
It was one of the terms of the contract between the parties that the seller
would not be liable for any future loss of goods and that the goods were
G being despatched at the risk of the respondent. The respondent had also
obtained insurance of the goods and had paid the policy premium. He,
therefore, intended the goods to be treated as his own so that if there was
any loss of goods in transit, he could validly claim the insurance money.
The weighment of the goods at Hyderabad or the collection of documents
H from the bank or payment of price through the bank at Hyderabad were
AGRICULTURALMARKETCOMMfITEE v. SHAL!MARCHEMICAL[5.SAGHIRAHMAD,J.] 183
immaterial inasmuch as the property in the goods had already passed at A
Kerala and it was not dependent upon the payment of price or the delivery
of goods to the respondent.
43. We are in full agreement with the view expressed by the High
Court and are also of the opinion that having regard to the evidence on
record which indicated that on the order placed by respondent, the stocks B
were loaded into the trucks for despatch to Hyderabad with the clear
stipulation that the despatch was at the risk of the purchaser and that the
seller had no liability with regard to any future losses and that the stock
was insured and the insurance premium was paid by the respondent, the
sale took place in the State of Kerala and not at Hyderabad. C
44. In view of the above, the appeal has no merit and is dismissed.
There will be no order as to costs.
v.s.s. Appeal dismissed.
...::_:
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