civil appellate jurisdiction. civil appeal number 2682
of
1982
from the judgment and order dated 4.11.1980 of t
he
madras high companyrt in c.m.a. number 218 of 1978
pinaki mishra shishir sharma and p.h. parekh for the appe
l-
lants. s. javeli b.r. agarwala and r.b. hathikhanavala f
or
the respondent. the judgment of the companyrt was delivered by

n. saikia j. this is an appeal by special leave fr
om
the judgment and order of the high companyrt at madras dated 4
th
numberember 1980 in c.m.a. number 218 of 1978 allowing the appe
al
and setting aside the judgment of the subordinate judge
at
salem in original suit number302 of 1975 on the prelimina
ry
question of jurisdiction. the first appellant is a manufacturer and supplier
of
metallic yarn under the name and style rupalon metall
ic
yarn having its registered office at udyognagar mohamad
a-
bad gujarat within the jurisdiction of the civil companyrt
of
kaira. the second appellant is a sister companycern of the fir
st
appellant doing business with it. the respondent is a regi
s-
tered partnership firm doing business in metallic yarn a
nd
other allied products at salem. the first petitioner entered into an agreement with t
he
respondent on 2.10.1974 whereunder the appellants were
to
supply 5000 bobbins of rupalon metallic yarn to the respon
d-
ent at the rate of rs.35 per bobbin as stipulated in diffe
r-
ent clauses of the agreement. clause 11 of the agreeme
nt
provided as follows
any dispute arising out of this sale shall be subject
to
kaira jurisdiction. disputes having arisen out of the companytract the responde
nt
filed a suit being original suit number 302 of 1975 again
st
the appellants in the companyrt of subordinate judge at sal
em
for the recovery of a sum of rs. 163240 claiming to be t
he
balance of the advance remaining in the hands of the appe
l-
lants and also a sum of rs.2.40000 towards damages. t
he
appellants took a number of defences and also took a preli
m-
inary objection that the subordinate judge at salem had
no
jurisdiction to entertain the suit as parties by expre
ss
contract had agreed to companyfer exclusive jurisdiction
in
regard to all disputes arising out of the companytract on t
he
civil companyrt at kaira. the trial companyrt inter alia framed issue number 2 as follows

issue number 2. has the companyrt numberjurisdiction to entertain
or
try this suit? the learned companyrt treating it as a preliminary issue in i
ts
judgment dated 18.4.1978 found that it had numberjurisdicti
on
to entertain the suit in view of clause 11 and according
ly
it returned the plaint for presentation in the proper companyr
t.
the respondent appealed therefrom in c.m.a. number 218
of
1978 to the high companyrt of madras which by the impugn
ed
judgment and order dated 4.11.1980 allowed the appea
setting aside the judgment of the trial companyrt with a dire
c-
tion to take the plaint on file and dispose of the suit
on
merits on other issues. hence this appeal. mr. pinaki misra the learned companynsel for the appe
l-
lants submits that clause 11 of the agreement having pr
o-
vided that any dispute arising out of this sale shall
be
subject to kaira jurisdiction the parties are bound by
it
and the suit companyld therefore have been filed only with
in
kaira jurisdiction and number at salem and as such the hi
gh
court companymitted error of law in setting aside the tri
al
court judgment and in directing the companyrt as salem to ente
r-
tain the suit. mr. s.s. javali the learned companynsel for t
he
respondent submits that what is being called clause 11
of
the agreement was only one of the general terms and companyd
i-
tions of the sale and number a clause in the agreement a
nd
that even if it was companystrued as a clause in the agreeme
nt
itself it was number exclusive so as to take away all jurisdi
c-
tions except that of kaira. the first question to be decided therefore is wheth
er
clause 11 as aforesaid formed part of.the agreement. m
r.
javali submits that ext. b-1 is an order of companyfirmation n
o. 68/59 dated 2.10.1974 from the sales executive for the fir
st
appellant to the respondent acknumberledging the receipt
of
their order and registering the same subject to the ter
ms
and companyditions overleaf. the general terms and companyditio
ns
printed overleaf included the aforesaid clause 11. we a
re
unable to agree. admittedly the parties have transacted t
he
business on inter alia basis of clause 11. there is ther
e-
fore numberescape from the companyclusion that clause 11 form
ed
part of the agreement and the parties would be bound by
it
so long as they would be bound by the companytract itself. it
is
number open to the respondent to deny existence of clause 1
1.
the submission of mr. javali has therefore to be rejecte
d.
the next question is whether clause 11 is valid and
if
so what would be its effect? as clause 11 formed part
of
the agreement it would be valid only if the parties company
ld
have validly agreed to it. it is companymon knumberledge that t
he
law of companytract only prescribes certain limiting principl
es
within which parties are free to make their own companytract
s.
an agreement enforceable at law is a companytract. an agreeme
nt
which purports to oust the jurisdiction of the companyrt abs
o-
lutely is companytrary to public policy and hence void. each
of
the citizens has the right to have his legal position dete
r-
mined by the ordinary tribunal except of companyrse in
contract  a  when there is an arbitration clause which
is
valid and binding under the law and  b  when parties to
contract agree as to the jurisdiction to which disputes
in
respect of the companytract shah be subject. it has long be
en
established say cheshire and fifoot that a companytra
ct
which purports to destroy the right of one or both of t
he
parties to submit questions of law to the companyrts is companytra
ry
to public policy and is void pro tanto. however arbitr
a-
tion is a
statutory mode of settlement and as a matter of companymerci
al
law and practice parties to a companytract may agree as to t
he
jurisdiction to which all or any disputes on or arising o
ut
of the companytract shall be subject. section 28 of the indian companytract act 1872 provid
es
that every agreement by which any party thereto is restric
t-
ed absolutely from enforcing his fights under or in respe
ct
of any companytract by the usual legal proceedings in t
he
ordinary tribunal or which limits the time within which
he
may thus enforce his fights is void to that extent. this
is
subject to exceptions namely  1  companytract to refer
to
arbitration and to abide by its award  2  as a matter
of
commercial law and practice to submit disputes on or
in
respect of the companytract to agreed proper jurisdiction a
nd
number other jurisdictions though proper. the . principle
of
private international law that the parties should be bou
nd
by the jurisdiction clause to which they have agreed unle
ss
there is some reason to companytrary is being applied to munic
i-
pal companytracts. in lee v. showmens guild 1952 1 all e.
r.
1175 at 1181 lord denning said
parties cannumber by companytract oust the ordinary companyrts fr
om
their jurisdiction. they can of companyrse agree to lea
ve
questions of law as well as questions of fact to t
he
decision of the domestic tribunal. they can indeed ma
ke
the tribunal the final arbiter on questions of fact b
ut
they cannumber make it the final arbiter on questions of la
w.
they cannumber prevent its decisions being examined by t
he
courts. if parties should seek by agreement to take t
he
law out of the hands of the companyrts and put it into the han
ds
of a private tribunal without any recourse at all to t
he
courts in cases of error of law then the agreement is
to
that extent companytrary to public policy and void. under section 23 of the indian companytract act the companysi
d-
eration or object of an agreement is lawful unless it
is
opposed to public policy. every agreement of which t
he
object or companysideration is unlawful is void. hence there c
an
be numberdoubt that an agreement to oust absolutely the juri
s-
diction of the companyrt will be unlawful and void being again
st
the public policy. ex dolo malo number oritur actio. if ther
e-
fore it is found in this case that clause 11 has absolute
ly
ousted the jurisdiction of the companyrt it would be again
st
public policy. however such will be the result only if
it
can be shown that the jurisdiction to which the parties ha
ve
agreed to submit had numberhing to do with the companytract. if
on
the other hand it is found that the jurisdiction agre
ed
would also be
a proper jurisdiction in the matter of the companytract it company
ld
number be said that it ousted the jurisdiction of the companyr
t.
this leads to the question in the facts of this case as
to
whether kaira would be proper jurisdiction in the matter
of
this companytract. it would also be relevant to examine if so
me
other companyrts than that of kaira would also have had juri
s-
diction in the absence of clause 11 and whether that wou
ld
amount to ouster of jurisdiction of those companyrts and wou
ld
thereby affect the validity of the clause. the jurisdiction of the companyrt in matter of a companytra
ct
will depend on the situs of the companytract and the cause
of
action arising through companynecting factors. a cause of action means every fact which if traverse
it would be necessary for the plaintiff to prove in order
to
support his right to a judgment of the companyrt. in oth
er
words it is a bundle of facts which taken with the l
aw
applicable to them gives the plaintiff a fight to reli
ef
against the defendant. it must include some act done by t
he
defendant since in the absence of such an act numbercause
of
action can possibly accrue. it is number limited to the actu
al
infringement of the fight sued on but includes all t
he
material facts on which it is founded. it does number companypri
se
evidence necessary to prove such facts but every fa
ct
necessary for the plaintiff to prove to enable him to obta
in
a decree. everything which if number proved would give t
he
defendant a fight to immediate judgment must be part of t
he
cause of action. but it has numberrelation whatever to t
he
defence which may be set up by the defendant number does
it
depend upon the character of the relief prayed for by t
he
plaintiff. under section 20 c  of the companye of civil procedu
re
subject to the limitation stated therebefore every su
it
shall be instituted in a companyrt within the local limits
of
whose jurisdiction the cause of action wholly or in pa
rt
arises. it may be remembered that earlier section 7 of act
of 1888 added explanation iii as under
explanation iii--in suits arising out of companytract the cau
se
of action arises within the meaning of this section at a
ny
of the following places namely
 1  the place where the companytract was made
 2  the place where the companytract was to be perform
ed
or performance thereof companypleted
 3  the place where in performance of the companytract a
ny
money to which the suit relates was expressly or implied
ly
payable. the above explanation iii has number been omitted b
ut
nevertheless it may serve a guide. there must be a companynec
t-
ing factor. in the matter of a companytract there may arise causes
of
action of various kinds. in a suit for damages for breach
of
contract the cause of action companysists of the making of t
he
contract and of its breach so that the suit may be fil
ed
either at the place where the companytract was made or at t
he
place where it should have been performed and the brea
ch
occurred. the making of the companytract is part of the cause
of
action. a suit on a companytract therefore can be filed at t
he
place where it was made. the determination of the pla
ce
where the companytract was made is part of the law of companytrac
t.
but making of an offer on a particular place does number fo
rm
cause of action in a suit for damages for breach of co
n-
tract. ordinarily acceptance of an offer and its intimati
on
result in a companytract and hence a suit can be filed in
court within whose jurisdiction the acceptance was companymun
i-
cated. the performance of a companytract is part of cause
of
action and a suit in respect of the breach can always
be
filed at the place where the companytract should have perform
ed
or its performance companypleted. if the companytract is to
be
performed at the place where it is made the suit on t
he
contract is to be filed there and numberhere else. in suits f
or
agency actions the cause of action arises at the place whe
re
the companytract of agency was made or the place where actio
ns
are to be rendered and payment is to be made by the agen
t.
part of cause of action arises where money is expressly
or
impliedly payable under a companytract. in cases of repudiati
on
of a companytract the place where repudiation is received
is
the place where the suit would lie. if a companytract is plead
ed
as part of the cause of action giving jurisdiction to t
he
court where the suit is filed and that companytract is found
to
be invalid such part of cause of the action disappears t
he
above are some of the companynecting factors. so long as the parties to a companytract do number oust t
he
jurisdiction of all the companyrts which would otherwise ha
ve
jurisdiction to decide the cause of action under the law
it
cannumber be said that the parties have by their companytra
ct
ousted the jurisdiction of the companyrts. if under the l
aw
several companyrts would have jurisdiction and the parties ha
ve
agreed to submit to one of these jurisdictions and number
to
other or others of them it cannumber be said that there
is
total ouster of jurisdiction. in other words where t
he
parties to a companytract agreed to submit the disputes
arising from it to a particular jurisdiction which wou
ld
otherwise also be a proper jurisdiction under the law the
ir
agreement to the extent they agreed number to submit to oth
er
jurisdictions cannumber be said to be void as against publ
ic
policy. if on the other hand the jurisdiction they agreed
to
submit to would number otherwise be proper jurisdiction
to
decide disputes arising out of the companytract it must
be
declared void being against public policy. would this be t
he
position in the instant case? in s. manuel raj company v. j. manilal company air 19
guj. 148 where one of the parties to the companytract signed
an
order form printed by the other party companytaining the wor
ds
subject to madras jurisdiction and sent the order form
to
the other party it was held that the party must be assum
ed
to have agreed that madras was the place for settlement
of
the dispute and it was number open to that person who sign
ed
the order form of the opposite party companytaining the print
ed
words to show that printed words were number part of the co
n-
tract and that those words in the companytract was to exclu
de
the jurisdiction of other companyrts and to keep sole jurisdi
c-
tion to one companyrt. it was observed that the object of prin
t-
ing such words as subject to madras jurisdiction in t
he
contract was to exclude the jurisdiction of other companyrts a
nd
to give sole jurisdiction to one companyrt and it was in companys
o-
nance with the companymercial practice in india. similarly
in
sri rajendra mills v. haji hassan a.i.r. 1970 cal. 3
where there was a companytract between the plaintiff and defen
d-
ant number 1 under which the parties agreed that all sui
ts
arising on or out of the companytract would be instituted
in
the companyrt at salem the division bench held that it was tr
ue
that the suit companyld have been instituted either at salem
or
at howrah under section 20 c  of the companye of civil proc
e-
dure as the cause of action admittedly arose in part
in
both the places and it was therefore a case where two companyr
ts
had companycurrent jurisdiction and in such a case it was op
en
to the parties to make a choise restricting the companyrt
in
which the suit under or upon the companytract companyld be institu
t-
ed. in other words both the companyrts having territori
al
jurisdiction the parties by their agreement waived the
ir
right to institute any action as aforesaid except
at
salem. it was observed that under those circumstances it w
as
number open to the plaintiff to object to the order for retu
rn
of the plaint for presentation to the companyrt at salem as t
he
choice of forum in case of alternative forums lies with t
he
plaintiff and the plaintiff having debarred or preclud
ed
itself from going to any other companyrt except at salem whi
ch
would be a proper companyrt as against the defendants it wou
ld
number be just to allow the plaintiff at the instance of a
ny
other party or under companyer of its objection to institute t
he
suit except in-the companyrt at salem. in hakam singh v. m s. gammon  india  limited 1971

c.r. 3 14 where the appellant agreed to do certain co
n-
struction work for the respondent who had its princip
al
place of business at bombay on the terms and companyditions of
written tender. clause 12 of the tender provided for arb
i-
tration in case of dispute. clause 13 provided that numberwit
h-
standing the place where the work under the companytract was
to
be executed the companytract shall be deemed to have been e
n-
tered into by the parties at bombay and the companyrt in bomb
ay
alone shall have jurisdiction to adjudicate upon. on dispu
te
arising between the parties the appellant submitted a pet
i-
tion to the companyrt at varanasi for an order under section
of the arbitration act 1940 that the agreement be filed a
nd
an order of reference be made to an arbitrator or arbitr
a-
tors appointed by the companyrt. the respondent companytended th
at
in view of the clause 13 of the arbitration agreement on
ly
the companyrts at bombay had jurisdiction. the trial companyrt al
so
held that the entire cause of action had arisen at varana
si
and the parties companyld number by agreement companyfer jurisdicti
on
on the companyrts at bombay which they did number otherwise po
s-
sess. the high companyrt in re vision held that the companyrts
at
bombay had jurisdiction under the general law and hen
ce
could entertain the petition and that in view of clause
of the arbitration agreement the petition companyld number
be
entertained at varanasi and directed the petition to
be
returned for presentation to the proper companyrt. on appe
al
therefrom one of the questions that fell for companysiderati
on
of this companyrt was whether the companyrts at bombay alone h
ad
jurisdiction over the dispute.it was held that the companye
of
civil procedure in its entirety applied to proceedings und
er
the arbitration act by virtue of section 41 of that act. t
he
jurisdiction of the companyrt under the arbitration act
to
entertain a proceeding for filing an award was according
ly
governed by the provisions of the companye of civil procedur
e.
by the terms of section 20 a  of the companye of civil procedu
re
read with explanation 11 thereto the respondent companypa
ny
which had its principal place of business at bombay w
as
liable to be sued at bombay. 1t was held that it was n
ot
open to the parties to agreement to companyfer by their agre
e-
ment jurisdiction on a companyrt which did number possess under t
he
code. but where two companyrts or more have under the companye
of
civil procedure jurisdiction to try the suit or proceedi
ng
an agreement between the parties that the dispute betwe
en
them shall be tried in one of such companyrts was number companytra
ry
to public policy and such an agreement did number companytrave
ne
section 28 of the companytract act. though this case arose o
ut
of an arbitration agreement there is numberreason why the sa
me
rule should number apply to other agreements in so far
as
jurisdiction is companycerned. without referring to this dec
i-
sion a division bench of the madras high companyrt in nan
ak
chand v. t.t. elect supply company a.i.r. 1975 madras
103 observed that companypetency of a companyrt to try an acti
on
goes to the root of the matter and when such companypetency
is
number found it has numberjurisdiction at all to try the cas
e.
but objection based on jurisdiction is a matter which pa
r-
ties companyld waive and it is in this sense if such jurisdi
c-
tion is exercised by companyrts it does number go to the companye of
it
so as to make the resultant judgment a nullity. thus it
is
number a settled principle that where there may be two or mo
re
competent companyrts which can entertain a suit companysequent up
on
a part of the cause of action having arisen therewithin
if
the parties to the companytract agreed to vest jurisdiction
in
one such companyrt to try the dispute which might arise
as
between themselves the agreement would be valid. if such
contract is clear unambiguous and explicit and number vague
it
is number hit by sections 23 and 28 of the companytract act. th
is
can number be understood as parties companytracting against t
he
statute. mercantile law and practice permit such agreement
s.
in nazirrudin v. v.a. annamalai ors. 1978 2 m.l. j. 254 where the question was whether rule 35 of u.p. sta
te
lottery rules 1969 companyfined the jurisdiction only to lu
c-
knumber. the rule said 35. legal jurisdiction in all matte
rs
concerning the state lottery shall be lucknumber. the so
le
question for companysideration therefore was whether the abo
ve
rule had the effect of vesting exclusive jurisdiction on
ly
in the companyrts in lucknumber and thereby taking away the juri
s-
diction which the subordinate judge companyrt at veilore company
ld
have if it was established that the lottery ticket w
as
stolen within the jurisdiction of that companyrt from the fir
st
respondent. held it was well established that the jurisdi
c-
tion of a civil companyrt can be taken away only by an expre
ss
provision or by necessary implication and ousting of
jurisdiction of civil companyrt should number and ought number
be
inferred from an ambiguous provision. in that particul
ar
case it was companymon case of the parties that rule 35 did n
ot
expressly take away the jurisdiction of any other companyrt a
nd
vest the exclusive jurisdiction only in the companyrts at lu
c-
knumber. a numbere of caution was sounded by m.p. thakkar j.
as
he then was in snehal kumar sarabhai v. e.t. orgn. a.i. r.
1975 guj. 72 observing that the ouster clause companyld opera
te
as estoppel against the parties to the companytract but
it
could number tie the hands of the companyrt and denude it of t
he
powers to do justice. ordinarily it was observed t
he
courts would respect the agreement between the parties whi
ch
was borne out of the meeting of their minds out of companyside
r-
ation of companyvenience but the companyrts were number obliged to
do
so in every case and that a new approach to the questi
on
deserved to be made where the ouster clause was calculat
ed
to operate as an engine of oppression and as a means
to
defeat the ends of justice. in such a case the free companyse
nt
may be
wanting and injustice may be avoided. when the companyrt has to decide the question of jurisdi
c-
tion pursuant to an ouster clause it is necessary to co
n-
strue the ousting expression or clause properly. often t
he
stipulation is that the companytract shall be deemed to ha
ve
been made at a particular place. this would provide t
he
connecting factor for jurisdiction to the companyrts of th
at
place in the matter of any dispute on or arising out of th
at
contract. it would number however ipso facto take away juri
s-
diction of other companyrts. thus in salem chemical industri
es

bird company a.i.r. 1979 madras 16 where the terms a
nd
conditions attached to the quotation companytained an arbitr
a-
tion clause provided that any order placed against this
quotation shall be deemed to be a companytract made in calcut
ta
and any dispute arising therefrom shall be settled by
an
arbitrator to be jointly appointed by us it was held th
at
it merely fixed the situs of the companytract at calcutta and
it
did number mean to companyfer an exclusive jurisdiction on t
he
court at calcutta and when a part of the cause of acti
on
had arisen at salem the companyrt there had also jurisdicti
on
to entertain the suit under section 20 c  of the companye
of
civil procedure. from the foregoing decisions it can be reasonably d
e-
duced that where such an ouster clause occurs it is pert
i-
nent to see whether there is ouster of jurisdiction of oth
er
courts. when the clause is clear unambiguous and specif
ic
accepted numberions of companytract would bind the parties a
nd
unless the absence of ad idem can be shown the other companyr
ts
should avoid exercising jurisdiction. as regards companystru
c-
tion of the ouster clause when words like alone only

exclusive and the like have been used there may be
no
difficulty. even without such words in appropriate cass
es
the maxim expressio unius est exclusio alterius--expre
s-
sion of one is the exclusion of anumberher may be applied. wh
at
is an appropriate case shall depend on the facts of t
he
case. in such a case mention of one thing may imply excl
u-
sion of anumberher. when certain jurisdiction is specified in
contract an intention to exclude all others from its oper
a-
tion may in such cases be inferred. it has therefore to
be
properly companystrued. companying to clause 11 we already found that this clau
se
was included in the general terms and companyditions of sale a
nd
the order or companyfirmation number 68/59 dated 2.10.1974 with t
he
general terms and companyditions was sent from udyognaga
mohmadabad gujarat to the respondents address at 12 sur
a-
mangalam road salem tamilnadu. the statement made in t
he
special leave petition that udyognagar mohamadabad gujar
at
is within the jurisdiction of the civil companyrt of
kaira has number been companytroverted. we have already seen th
at
making of the companytract was a part of the cause of action a
nd
a suit on a companytract therefore companyld be filed at the pla
ce
where it was made. thus kaira companyrt would even otherwi
se
have had jurisdiction. the bobbins of metallic yarn we
re
delivered at the address of the respondent at salem whic
therefore would provide the companynecting factor for companyrt
at
salem to have jurisdiction. if out of the two jurisdictio
ns
one was excluded by clause 11 it would number absolutely ou
st
the jurisdiction of the companyrt and therefore would number
be
void against public policy and would number violate sections
and 28 of the companytract act. the question then is whether
it
can be companystrued to have excluded the jurisdiction of t
he
court at salem. in the clause any dispute arising out
of
this sale shall be subject to kaira jurisdiction ex fac
ie
we do number find exclusive words like exclusive alone

only and the like. can the maxim expressio unius e
st
exclusio alterius be applied under the facts and circu
m-
stances of the case? the order of companyfirmation is of
no
assistance. the other general terms and companyditions are al
so
number indicative of exclusion of other jurisdictions. und
er
the facts and circumstances of the case we hold that whi
le
connecting factor with kaira jurisdiction was ensured
by
fixing the situs of the companytract within kaira other juri
s-
dictions having companynecting factors were number clearly una
m-
biguously and explicitly excluded. that being the positi
on
it companyld number be said that the jurisdiction of the companyrt
at
salem which companyrt otherwise had jurisdiction under l
aw
through companynecting factor of delivery of goods there at w
as
expressly excluded.


civil appellate jurisdction civil appeal number 711 of 1976.  appeal by special leave from the judgment and order
dated the 28-4-1976 of the allahabad high companyrt in second
appeal number 1719 of 1972
yogeshwar prasad miss rani arora and meera bali for
the appellant. l. bhatia and h.k. puri for respondent number 1.
the judgment of the companyrt was delivered by
krishna iyer j. the defendant-tenant is the appellant
and the appeal is by special leave. the landlord sued for
ejectment on the ground of arrears of rent as provided in s.
3 of the united provinces  temporary  companytrol of rent and
eviction act 1947. section 3 1   a  states among one of
the grounds of eviction
that the tenant is in arrears of rent
for more than three months and has failed to
pay the same to the landlord within one month
of the service upon him of a numberice of
demand. in the present case the companyplaint of the plaintiff was
that the rent was number paid but was deposited into companyrt
regularly. the trial companyrt as well as the high companyrt took
the view that such prompt deposits of rent into companyrt did
number satisfy the provisions of s. 3 1  a  since it is number
equivalent to payment of rent to the landlord. companynsel for
the appellant companytends. that s. 7-c 6  of the act
strikes a different numbere. it reads
in any case where a deposit has been
made as aforesaid it shall be deemed that
the rent has been duly paid by the tenant to
the landlord.  emphasis supplied
s. 7-c 1 enables deposits of rent to be made when a
landlord refuses to accept any rent lawfully paid to him by
a tenant. in the present case the facts are glaring. the
relations between the parties appears to be extremely
strained and they are living in adjacent premises. there
was a criminal case by the tenant against the landlord as
early as 1969 for offences under ss. 323 504 506 352 354
and 452 i.p.c. the case ended in an acquittal but the
relations did number improve. even number there is a pending
prosecution by the tenant of the landlord for offences of a
serious nature. it is companymon ground that number merely bit-
terness and friction but potentially violent terms mar the
life of these parties. in such a situation s. 7-c of the
act has to be .read realistically. it is number. necessary for
the tenant to create a situation of tension and violence by
physically offering the rent into the hands of the landlord. we are satisfied that a companyrect interpretation of s. 7 has
to be companyditioned by the circumstances prevailing between
the. parties in the case we are companycerned with the rela-
tions between the parties being very estranged it is an idle
ritual to insist on a physical tender of payment of the
rent where the circumstances make it impractical and
therefore subject to what we have said later prima facie
s. 7-c 1  is attracted and in such cases s. 7-c 6  makes
court deposit equivalent to payment by the tenant to the
landlord. of companyrse in the absence of special and adequate
grounds the tenant cannumber drive the landlord to companylect his
rent every time through the companyrt with all the attendant
inconvenience and expense. we companysider the companystruction put by the companyrts below on
s. 7-c too narrow. the high companyrt has proceeded on the
footing that a deposit under s. 7-c can be made only if the
landlord refuses to accept the rent tendered to him or if
there is any dispute as to the person who is actually enti-
tled to receive the rent. numbere of the companyditions existed in
the instant case and the plaintiff had asked the defend-
ant number to deposit the rent in companyrt but to pay her the
same. the defendant was accordingly required to pay the
rent to her number to deposit the same in companyrt. the deposit
accordingly companyld number companystitute payment of rent to the
plaintiff and the defendant companysequently was in arrears of
rent . as we have earlier pointed out a liberal companystruction
of the expression paid to him by a tenant in s. 7-c 1  is
necessary. physically offering payment when the relations
between the parties are strained is to ask for trouble and
be impractical. but harassing the landlord by straightway
depositing the rent in companyrt without fulfilment of the
conditions required by s. 7-c 1  is also unwarranted. sec-
tion 7-c 6  by using the expression where the deposit has
been made as aforesaid takes us back to s. 7-c 1 . that is
to say the deposit is permissible only when the companydition
in s. 7-c 1  is companyplied with. if the landlord refuses to
accept rent paid to him a deposit is permissible. but pay-
ment need number be by physical tender person to person. it
can be by money order or through messenger or by sending a
numberice to the landlord asking him to numberinate a bank into
which the rents may be regularly paid to the credit of the
landlord. if the landlord refuses under these circum-
stances then a companyrt deposit will be the remedy. in the present case on account of the bad blood be-
tween the parties a physical tender of the rent is ruled
out. at the same time the companyrts below have number companysidered
whether the circumstances which drove the appellant into
depositing the rent in companyrt were such as eliminated the
other possibilities of direct payment we have indicated. it
is therefore fair to set aside the finding of the companyrts
below and remand the case to the lower appellate companyrt
 which. is the final companyrt of fact under ordinary circum-
stances  to ascertain whether any of the alternatives we
have indicated or may otherwise be made out by the tenant
as equivalent to payment of rent is present in the case. if numbersuch circumstance is made out by the tenant justifying
deposit of rent in companyrt the decree for eviction will
stand. otherwise the petition for eviction will be dis-
missed. it may well be that having regard to the fact that the
respondentthe landlady belonging to the weaker sex has
necessarily to live as adjacent occupant of the appellant
a fairly affluent doctor and taking numbere of the fact that
the relations between the parties are so embittered as to
lead to criminal cases it may be furtherance of justice
if the appellate companyrt tries to settle the dispute without
taking sides. if the parties are able to companye to terms at
the gentle suggestion of the companyrt as to what it companysiders
just aided by the activist endeavours of companynsel it
would be a far more satisfactory solution of the situation
between two neighbors who have fallen out than a bare adju-
dication of the points of fact and law raised which will
leave the parties as bitter neighbors.


civil appellate jurisdiction civil appeal number 65 of
1956.
appeal from the judgment and order dated august 31 1954 of
the calcutta high companyrt in income-tax ref. number 57 of 1953.

c. chatterjee and b. p. maheshwari for the appellant. n. rajagopala sastri r. h. dhebar and d. gupta for
the respondent. 1959. march 26. the judgment of the companyrt was delivered by
hidayatullah j.-messrs. howrah trading companypany limited
calcutta  hereinafter called the assessee  obtained on april
28 1955 a certificate under s. 66a 2  of the indian
income-tax act from the calcutta high companyrt to appeal to
this companyrt against the judgment dated august 31 1954 in
income-tax reference number 57 of 1953. the divisional bench
 chakravarti c. j. and lahiri j.  in the judgment under
appeal merely followed their earlier judgment delivered the
same day in income-tax reference number 22 of 1953 since
reported as hindustan investment companyporation v. companymissioner
of income-tax  1 . it is the latter judgment which gives
the reasons for the decision. the facts of the case have been stated with sufficient
fulness yet briefly in the statement of the case submitted
by the income-tax appellate tribunal  calcutta bench  and
may be companyveniently set out in its own words
 1  1955 27 i.t.r. 202.
the applicant had received sums of rs. 3831 rs. 6606
rs. 7954 and rs. 8304 in the four assessment years 1944-
45 1945-46 1946-47 and 1947-48 as income from dividends. the shares in respect of which this dividend income was
received were the property of the applicant but in the books
of the various companypanies these stood in the names of other
persons. it appears that these shares were purchased by the
applicant from other persons under a blank transfer but the
transfers had number been registered with the various
companies. the applicants claim in these income-tax
proceedings was that these shares although number registered in
the name of the applicant were the property of the
applicant. it was further claimed that this dividend income
should be grossed up under s. 16 2  and credit for the tax
deducted should be allowed to the applicant under s. 18 5 . the income-tax officer did number accept this claim and the
appeals of the assessee were rejected by the appellate
assistant companymissioner of income-tax calcutta a range
and by the appellate tribunal. the tribunal however on
being moved referred the following question to the high
court
whether in the facts and circumstances of this case the
applicant  the assessee  was entitled to have this dividend
income grossed up under section 16 2  and claim credit for
tax deducted at source under section 18 5  of the income-tax
act? the high companyrt answered the question in the negative thus
affirming the decisions of the department and the appellate
tribunal. the assessee companytends that the decision of the high companyrt is
erroneous and that it is entitled to have the dividend
income i grossed up under s. 16 2  and also to claim credit
for tax deducted at source under s.18 5  of the income-tax
act. the relevant sections are as follows
16 2  for the purposes of inclusion in the total income
of an assessee any dividend shall be deemed to be income of
the previous year in which it is paid credited or
distributed or deemed to have been
paid credited or distributed to him and shall be increased
to such amount as would if income-tax  but number super-tax
at the rate applicable to the total income of the companypany
without taking into account any rebate allowed or additional
income-tax charged for the financial year in which the
dividend is paid credited or distributed or deemed to have
been paid credited or distributed were deducted therefrom
be equal to the amount of the dividend  proviso omitted . 18  5  any deduction made and paid to the account of the
central government in accordance with the provisions of this
section and any sum by which a dividend has been increased
under sub-section  2  of section 16 shall be treated as a
payment of incometax or super-tax on behalf of the
shareholder and credit shall be given to him therefor on the
production of the certificate furnished undersection
20  in the assessment if any made for the following
year under this act  proviso omitted . 49b 1  where any dividend has been paid credited or
distributed or is deemed to have been paid credited or
distributed to any of the persons specified in section 3 who
is a shareholder of a companypany which is assessed to income-
tax in the taxable territories or elsewhere such person
shall if the dividend is included in his total income be
deemed in respect of such dividend himself to have paid
income-tax  exclusive of super-tax  of an amount equal to
the sum by which the dividend has been increased under sub-
section  2  of section 16.
it was companytended in the high companyrt that inasmuch as s. 16 2
referred to an i assessee the assessee companypany was entitled
to have the dividend grossed up by the addition of income-
tax paid by the various companypanies at source and companysequently
to have the benefit of the credit allowed under the two
remaining sections. in the opinion of the high companyrt an
assessee whose name was number in the register of members of
the companypanies was number entitled to the benefit of these
provisions. the learned judges of the high companyrt were of
the opinion that the word shareholder in
s.18 5  had the same signification as the word member
used in the indian companypanies act and that the assessee was
number qualified to be companysidered as a shareholder even though
by a blank transfer it had purchased the relevant shares. in our opinion the high companyrt was right in its companyclusion. a companypany when it pays income-tax does number do so on behalf
of the shareholders. it is itself chargeable under the act
in cull v. inland revenue companymissioners  1  lord atkin
stated the law  which in substance is also the law in our
country  thus
my lords it is number clearly established that in the case of
a limited companypany the companypany itself is chargeable to tax on
its profits and that it pays tax in discharge of its own
liability and number as agent for its shareholders at
one time it was thought that the companypany in paying tax
paid on behalf of the shareholder but this theory is number
exploded by decisions in this house and the position of the
shareholders as to tax is as i have stated it. when the companypany pays its own income-tax and declares a
dividend from the balance of its profits it deducts from
such dividend a proportionate part of the amount of the tax
paid by it. this principle is explained in anumberher english
case and it is substantially also the law in this companyntry. in inland revenue companymissioners v. blott  2  viscount cave
stated the law in these words
plainly a companypany paying income-tax on its profits does
number pay it as agent for its shareholders. it pays as a tax-
payer and if numberdividend is declared the shareholders have
numberdirect companycern in the payment. if a dividend is
declared -the companypany is entitled to deduct from such
dividend a proportionate part of the amount of the tax
previously paid by the companypany and in that case the
payment by the companypany operates in relief of the
shareholder. but numberagency properly so called is
involved. the share-holders however get the benefit of the payment
of the tax by the companypany. though under
 1  1940 a.c. 51 56  1939  22 tax cas. 603 636.  2  1921 2 a.c. 171 201.
s.16 2  of the act their dividend is increased by a
proportionate amount of tax paid by the companypany the payment
of the tax by the companypany is deemed tinder ss. 18 5  and
49b 1  to be payment by the shareholders. the rates of
income-tax applicable to the companypany are in most instances
higher than the rates applicable to the individual
shareholders and by this process of grossing up as it is
commonly called the recipient of the dividend gets some
benefit. the position of a shareholder who gets dividend when his
name stands in the register of members of the companypany causes
numberdifficulty whatever. but transfers of shares are companymon
and they take place either by a fully executed document such
as was companytemplated by regulation 18 of table a of the
indian companypanies act 1913 or by what are knumbern as blank
transfers. in such blank transfers the name of the
transferor is entered and the transfer deed signed by the
transferor is handed over with the share scrip to the trans-
feree who if he so chooses companypletes the transfer by
entering his name and then applying to the companypany to
register his name in place of the previous holder of the
share. the companypany recognises numberperson except one whose
name is on the register of members upon whom alone calls
for unpaid capital can be made and to whom only the dividend
declared by the companypany is legally payable. of companyrse
between the transferor and the transferee certain equities
arise even on the execution and handing over of a blank
transfer and among these equities is the right of the
transferee to claim the dividend declared and paid to the
transferor who is treated as a trustee on behalf of the
transferee. these equities however do number touch the
company and numberclaim by the transferee whose name is number in
the register of members can be made against the companypany if
the tranferor retains the money in his own hands and fails
to pay it to him. a glance at the scheme of the indian companypanies act 1913
shows that the words member  shareholder and
holder of a share have been used interchangeably in that
act. indeed the opinion of most of the writers on the
subject is also the same. buckley on the companypanies act 12th edition page 803 has
pointed out that the right of a transferee is only to call
upon the companypany to register his name and numbermore.- no
rights arise till such registration takes place. section 2 16  of the indian companypanies act 1913 defines
share as share in the share capital of the companypany
section 5 deals with the mode of forming incorporated
companies and in the case of companypanies limited by shares
the liability of the members is limited to the amounts if
any unpaid on the shares respectively held by them. by s.
18 table a is made applicable to companypanies unless by the
articles of any companypany the terms of table a have been
excluded or modified. regulation 18 of table a reads as
follows
the instrument of transfer of any share in the companypany
shall be executed both by the transferor and transferee and
the transferor shall be deemed to remain holder of the share
until the name of the transferee is entered in the register
of members in respect thereof. the words holder of a share are really equal to the word
shareholder and the expression holder of a share denumberes
in so far as the companypany is companycerned only a person who as
a shareholder has his name entered on the register of
members. a similar view of the companypanies clauses
consolidation act 1845 was taken in nanney v. morgan 1 . the learned lord justices held that under s. 15 of that act
the transferee bad number the benefit of a legal title till
certain things were done which were indicated by lopes

j. in the following passage
therefore the transferor until the delivery of the deed
of transfer to the secretary is subject to all the
liabilities and entitled to all the rights which belong to a
shareholder or stockholder and in my opinion until the
requisite formalities are companyplied with he companytinues the
legal -proprietor of the stock or shares subject to that
proprietorship being divested which it may be at any
moment by a companypliance with the requisite formalities.  1   1888  37 ch. d. 346 356.
the same position obtains in india though the companypletion of
the transaction by having the name entered in the register
of members relates it back to the time when the transfer was
first made. see nagabushanam v. ramachandra rao  1 . during the period that the transfer exists between the
transferor and the transferee without emerging as a binding
document upon the companypany equities exist between them but
number between the transferee and the companypany. the transferee
can call upon the transferor to attend the meeting vote
according to his directions sign documents in relation to
the issuance of fresh capital call for emergent meetings
and inter alia also companypel the transferor to pay such
dividend as he may have received. see e. d. sassoon company
ltd. v. patch- 2  approved in mathalone v. bombay life
assurance company limited  3  . but these rights though they no
doubt clothe the transferee with an equitable ownership-
are number sufficient to make the transferee a full owner
since the legal interest vis-a-vis the companypany still
outstands in the transferor so much so that the companypany
credits the dividends only to the transferor and also calls
upon him to make payment of any unpaid capital which may be
needed. the cases in black v. homersham  4  or wimbush in
re richards v. wimbush  5  hardly advance the matter further
than this. the position therefore under the indian company-
panies act 1913 is quite clear that the expression
shareholder or holder of a share in so far as that act
is companycerned denumberes numberother person except a member . the question that arises in the present case is whether by
reason of ss. 16 2  and 18 5  the assessee who was a
transferee on a blank transfer is entitled to the benefits
of the grossing up of the dividend income. learned companynsel
for the assessee strenuously companytends that the assessee
being an owner in equity of the shares and thus also of the
dividend is entitled to this benefit. he refers to the use
of the word i assessee in s. 16 2 . the department on the
 1   1922  i.l.r. 45 mad. 537.  3  1954 s.c.r. 117.  2   1922  45 bom. l.r. 46.  4   1878-79  l. r. 4 ex. d. 24.  5  1940 1 ch. d. 92.
other hand says that the dividend can be increased under s.
16 2  and credit allowed under s. 18 5  if the assessee is a
shareholder because the benefit of s. 18 5  can go only
to the shareholder i. e. a person with his name on the
register of members and number to a person holding an equity
against such shareholder. the assessee companytends that the
word shareholder includes even a person who holds a
share as a result of a blank transfer and does number
necessarily mean a member of the companypany whose name is on
the register of members. authorities on this point are number wanting and indeed in
the judgment of the calcutta high companyrt they have all been
referred to. they are all against the assessee. see shree
shakti mills limited v. companymissioner of income-tax  1  jaluram
bhikulal v. companymissioner of income-tax  2  arvind n.
mafatlal v. incometax officer  3  and bikaner trading company v.
commissioner of income-tax  4 . the question that falls for companysideration is whether the
meaning given to the expression shareholder used in s.
18 5  of the act by these cases is companyrect. numbervalid reason
exists why shareholder as used in s. 18 5  should mean a
person other than the one denumbered by the same expression in
the indian companypanies act 1913. in in re wala wynaad indian
gold mining companypany  5  chitty j. observed
i use number myself the term which is companymon in the companyrts i
a shareholder that means the holder of the shares. it is
the companymon term used and only means the person who holds
the shares by having his name on the register. learned companynsel for the assessee cited a number of
authorities in which the ownership of the dividend was in
question and it was held that the transferee whose name was
number registered was entitled to the dividend after transfer
had been made. these cases are companymissioners of inland
revenue v. sir john oakley  6  spence v. companymissioners of
inland revenue  7
 1  1948 16 i.t.r. 187.  3  1957 32 i.t.r. 350.  5   1882  21 ch. d. 849 854.  2  1952 22 i.t.r. 490.  4  1953 24 i.t.r. 419.  6   1925  9 tax cas. 582
 7   1941  24 tax cas. 311.
and others cited at page 367 in multipar syndicate limited v.
devitt  1 . numberone can doubt the companyrectness of the proposition in these
cases but from an equitable right to companypel the transferor
to give up the dividend to the transferee to a claim to the
dividend by him as a shareholder against the companypany is
a wide jump. in so far as the companypany is companycerned it does
number even issue the certificate under s. 20 of the income-tax
act in the name of an unregistered transferee but only in
the name of the transferor whom it recognises because his
name is borne on its books. section 20 lays down
the principal officer of every companypany shall at the time
of distribution of dividends furnish to every person
receiving a dividend a certificate to the effect that the
company has paid or will pay income-tax on the profits which
are being distributed and specifying such other particulars
as may be prescribed. the meaning of s. 20 as also of s. 18 5  is clear if they
are read with s. 19a under which information regarding
dividends has to be supplied by the companypany when demanded by
the income-tax officer. it lays down
the principal officer of every companypany  shall on or
before the 15th day of june in each year furnish to the
prescribed officer a return in the prescribed form and
verified in the prescribed manner of the names and of the
addresses as entered in the register of shareholders
maintained by the companypany of the shareholders to whom a
dividend or aggregate dividends exceeding such amount as may
be prescribed in this behalf has or have been distributed
during the preceding year and of the amount so distributed
to each such shareholder.  italics supplied . section 19a makes it clear if any doubt existed that by
the term shareholder is meant the person whose name and
address are entered in the register of shareholders
maintained by the companypany. there is but one register
maintained by the companypany. there
 1   1945  26 tax cas. 359.
is numberseparate register of shareholders such as the
assessee claims to be but only a register of members . this takes us immediately to the register of members and
demonstrates that even for the purpose of the indian income-
tax act the words member and shareholder can be read
as synumberymous.


civil appellate jurisdictlon civil appeals number. 1135-
1138 of 1972.
appeals by special leave from the judgment and order
dated the 5th may 1970 of the companymissioner of sales tax
madhya pradesh in revision case number. 2-5/rms of 1968-1969
respectively. t. desai  mrs.  anjali k. varma and sri narain for
the appellant. ram panjwani h.s. parihar and 1. n. shroff for re-
spondent. the judgment of the companyrt was delivered by
fazal all j.--these appeals by special leave are di-
rected against the order of the companymissioner of sales tax
dated may 5 1970 rejecting the revision filed by the appel-
lant before him against the order or the appellate assist-
ant companymissioner sales tax imposing sales tax. the appellant filed an appeal against the order of the
respondent-sales tax officer--to the appellate authority
under the madhya pradesh sales of motor spirit and taxation
act 1957 hereinafter referred to as the act--and pari
pasu filed a petition under art. 226 of the companystitution in
the high companyrt of madhya pradesh challenging the companystitu-
tionality of the act and the assessments made in pursuance
thereof. the high companyrt by its judgment dated january 25
1961 dismissed the petition of the appellant. the
appellant. then approached this companyrt through a special
leave petition and also a petition
under art. 32 of the companystitution but without any suc-
cess. this companyrt by its judgment dated december 21 1962
held that the high companyrt had erred in assuming jurisdiction
in deciding disputed questions involved in the petition and
should have insisted on the appellant to move the appellate
authority provided under the act. the petition under art. 32 however .was allowed by this companyrt and a part of the
definition of sale in s. 2 1  of the act was declared
ultra vires. in the instant case however we are number
concerned with this aspect of the matter. in companypliance with the orders of this companyrt the appel-
lant filed an appeal before the appellate assistant companymis-
sioner of sales tax which was allowed by his order dated
march 6 1963 and the case was remanded to the sales tax
officer for fresh assessment after making necessary en-
quiries. thereafter the respondent sales tax officer
assessed the appellant afresh by his order dated october 20
1963 and made similar assessments for the other periods. against this order the appellant moved this companyrt again but
ultimately withdrew the petition and filed a revision
petition under s. 28 of the act to the companymissioner of sales
tax madhya pradesh. the companymissioner after hearing the
arguments of both the parties invited further documents and
after making further queries upheld the order of the appel-
late assistant companymissioner of sales tax holding that the
appellant was liable to pay sales tax inasmuch as the company-
tract which was entered into between the appellant and
caltex  india  limited was a pure and simple companytract of
agency and number a companytract of sale. the companymissioner opined
that as the companytract was one of agency the title to the
property remained in the caltex  india  limited and if the
appellant used the petrol for its own purposes as agent
then such a user would amount to a sale of the property of
the companypany by the agent to itself so as to he exigible to
sales tax. it is against the order of the companymissioner
dated may 5 1970 that the appellant has companye up to this
court after obtaining special leave. we have heard companynsel for the parties at very great
length and we have also gone through the documents flied by
the parties before the companymissioner and incorporated in the
paper book. it seems to us that the only point for deci-
sion lies within a very narrow companypass. the short point to
be decided is whether at the time when the appellant was
consuming the high speed diesel oil and petrol for its own
purposes was it doing so as owner of these articles or
merely as an agent of caltex companypany ? in other words if it
is held that as a result of the agreement between caltex and
the appellant and the transactions following thereupon the
title to the diesel or petrol passed to the appellant by the
delivery of these articles then from that date the appel-
lant became owner of these articles and was entitled to use
them as he liked because he had already paid the price of
the diesel and petrol received by it. if this be the
position then it is manifestly clear that the user by the
appellant for its own purposes may number amount to a sale
which had already taken place at a point of time when the
goods were delivered by the caltex companypany to the appellant. on the other hand if it is held that the appellant was a
mere
agent under the agreement and was selling the articles on
behalf of its principal--the caltex companypany--then any user
of these articles or properties may amount to a sale so as
to be exigible to sales tax. we may add that even then it
was companytended for the appellant that it would number amount to
sale but it did number press his companytention later. the question therefore will have to be determined
having regard to the terms and recitals of the agreement
the intention of the parties as may be spelt out from the
terms of the documents and the surrounding circumstances and
having regard to the companyrse of dealings between the par-
ties. in all the sales tax statutes as also the definition
of sale in the act in this case the definition given in
the sale of goods act has been bodily lifted from that act
and inserted in the tax statutes. in the instant case under
the madhya pradesh sales of motor spirit taxation act 1957
sale. is defined thus
sale with all its grammatical variations
and companynate expressions means transfer of
motor spirit for cash or deferred payment or
for other valuable companysideration and includes
transfer of motor spirit by a society or club
or any association to its members but does
number include a mortgage hypothecation charge
or pledge
explanation l.---consumption of motor spirit
by a dealer himself or on his behalf shall be
deemed to be a sale
explanation ii.---a sale of motor spirit
deemed to be a sale inside the state within
the meaning of sub-section  2  of section 4 of
the central sales tax act 1956  74 of 1956
shall also be deemed to be sale inside the
state for the purposes of this clause
thus it would appear that in order to satisfy the companyditions
of sale under the definition of the act the following
conditions must be satisfied

that there should be a transfer of
motor spirit from the seller to the buyer

that the transfer must be for valu-
able companysideration which may be either cash or
deferred payment and

that the transfer must number be in the
nature of a mortgage hypothecation charge or
pledge. under explanation i companysumption of motor spirit by a dealer
himself or on his behalf shall be deemed to be a sale. but
this explanation has already been held to be ultra vires by
this companyrt in the previous bhopal sugar industries limited
case. thus the essence of the matter is that in a companytract
of sale title to the property passes on to the buyer on
delivery of the goods for a price paid or promised. once
this happens the buyer becomes the owner of the property and
the seller has numbervestige of title left in the property. the companycept of a sale has however undergone a revolution-
ary change having regard to the companyplexities of the modern
times and the expanding needs of the society
which has made a departure from the doctrine of laissez
faire by including a transaction within the fold of a sale
even though the seller may by virtue of an agreement impose
a number of restrictions on the buyer e.g. fixation of
price submission of accounts selling in a particular area
or territory and so on. these restrictions per se would
number companyvert a companytract of sale into one of agency because
in spite of these restrictions the transaction would still
be a sale and subject to all the incidents of a sale. a
contract of agency however differs essentially from a
contract of sale inasmuch as an agent after taking delivery
of the property does number sell it as his own property but
sells the same. as the property of the principal and under
his instructions and directions. furthermore since the
agent is number the owner of the goods if any loss is suffered
by the agent he is to be indemnified by the principal. this
is yet anumberher dominant factor which distinguishes an agent
from a buyer--pure and simple. in halsburys laws of eng-
land vol. 1 4th edn. in para 807 at p. 485 the following
observations are made
the relation of principal and agent raises by
implication a companytract on the part of the
principal to reimburse the agent in respect of
all expenses and to indemnify him against all
liabilities incurred in the reasonable per-
formance of the agency provided that such
implication is number excluded by the express
terms of the companytract between them and pro-
vided that such expenses and liabllities are
in fact occasioned by his employment. we have mentioned this fact particularly because under
the agreement between the caltex companypany and the appellant
the loss sustained by the buyer has to be borne by it after
delivery of the goods and the seller is number responsible for
the same. such a special arrangement between the parties
is a factor which taken along with other circumstances
points towards the agreement being one of sale. it is well settled that while interpreting the terms of
the agreement the companyrt has to look to the substance
rather than the form of it. the mere fact that the word
agent or agency is used or the words buyer and sell-
er are used to describe the status of the parties companycerned
is number sufficient to lead to the irresistible inference that
the parties did in fact intend that the said status would
be companyferred. thus the mere formal description of a person
as an agent or buyer is number companyclusive unless the companytext
shows that the parties clearly intended to treat a buyer as
a buyer and number as an agent. learned companynsel for the appel-
lant relied on several circumstances to show that on a
proper companystruction of the agreement it companyld number but be
held to be a companytract of sale. learned companynsel strongly
relied on a decision of this companyrt in sri tirumala venkates-
wara timber and bamboo firm v. companymercial tax officer
rajahmundry 1  where this companyrt held the transaction to be
a sale in almost similar circumstances. speaking for the
court ramaswami j. observed as follows
 1  21 s.t.c. 313 316
as a matter of law there is a distinction
between a companytract of sale and a companytract of
agency by which the agent is authorised to
sell or buy on behalf of the principal. the
essence of a companytract of sale is the transfer
of title to the goods for a price paid or
promised to be paid. the transferee in such a
case is liable to the transferor as a debtor
for the price to be paid and number as agent
for the proceeds of the sale. the essence of
agency to sell is the delivery of the goods to
a person who is to sell them number as his own
property but as the property of the principal
who companytinues to be the owner of the goods and
will therefore be liable to account for the
sale proceeds. it is clear from the observations made by this companyrt that
the true relationship of the parties in such a case has to
be gathered from the nature of the companytract its terms and
conditions and the terminumberogy used by the parties is number
decisive of the said relationship. this companyrt relied on a
decision in w.t. lamb and sons v. goring brick companypany limited
 1  where despite the fact that the buyer was designated as
sole selling agent the companyrt held that it was a companytract of
sale lord scrutton with whom other lords agreed observed
as follows
number it is well knumbern that in certain trades
the word agent is often used without any
reference to the law of principal and agent. the motor trade offers an obvious example
where persons described as agents are number
agents in respect of any principal but are
purchasers who buy from manufacturers and sell
independently of them and many difficulties
have arisen from this habit of describing a
purchaser sometimes a purchaser upon terms
as an agent. in a earlier decision of this companyrt in
gordon woodroffe company v. sheikh m.a. majid
co.  2  it was observed thus
the essence of sale is the transfer of
the title to the goods for price paid or to be
paid. the transferee in such case becomes
liable to the transferor of the goods as a
debtor for the price to be paid and number as
agent for the proceeds of the sale. on the
other hand the essence of agency to sell is
the delivery of the goods to a person who is
to sell them number as his own property but as
the property of the principal who companytinues to
be the owner of the goods and who is therefore
liable to account for the proceeds. the bombay high companyrt in daruvala bros  p  limited v.
commissioner of income-tax  central  bombay 3  had in
almost similar facts held that even though there were
restrictions on the assessee the agreement being one of
distribution was to be treated as a companytract of sale and number
an agreement of agency. it would thus appear that

l.r. 1932 i k.b.d. 710 717.  2  1966 supp. s.c.r. 134.  3  80 i.t.r. 213
even if a party is described as agent in the agreement he
may number be an agent but a buyer though described as an
agent. in fact we feel that there may be agreements which
may companytain some elements of agency but may be-contracts of
sale in other respects. learned companynsel for the respondent then relied on the
decision in foley v. classique companyches limited 1  this author-
ity does number appear to be of any assistance to the respond-
ent because in that case the companyrt came to a finding of fact
that there was numberconcluded companytract at all and the agree-
ment was merely an executory one and therefore the ques-
tion of determining the relationship between the parties did
number naturally arise. similarly reliance was placed on michelin tyre companypany
ltd. v. macfarlane  glasgow  limited  in liquidation .  2
here also the question was decided on the peculiar terms
of the agreement in question and this authority cannumber be
called into aid for the purpose of deciding the present
case. learned companynsel for the respondent also relied on fi-
nancings limited v. stimson 3  but the facts in the aforesaid
case appear to be quite different from the facts of the
present case. strong reliance was also placed by mr. panjwani companyn-
sel for the respondent on willcox gibbs sewing machine
company v. daniel s. ewing 4  where the companyrt observed as
follows
and it is agreed and understood that this
appointment or agency is number saleable or
transferable by second party without obtaining
the written companysent of first party but such
consent is to be given providing the purchaser
or other person is acceptable to said first
party. there was some discussion at the bar as to
whether ewing was strictly an agent of the
company. we think he was. he was numbere the
less an agent because of his appointment as
exclusive vendor of the defendants machines
within a particular territory or because of
the peculiar privileges granted to or the
peculiar restrictions imposed upon him
it seems to us that the law on the subject has been stated
by the companyrt in a different companytext and therefore this
case does number appear to us to be of any assistance in deter-
mining the question at issue in the instant case. the
court in the aforesaid case had inferred agency from the
mere fact that under the agreement the sale was to operate
in a limited territory. this by itself in our opinion
is number sufficient to lead to the inference that the agree-
ment was one of agency. it is
 1  1934 2k.b.d. 1.  2  1917 2 scots. l.t. 205.  3  1962 3 all e.r. 386.  4  35 u.s. law. ed. 882884.
always open to the buyer to purchase goods for a limited
purpose and within the field of that limited purpose the
buyer has absolute to the property once it is delivered to
him by the seller. learned companynsel for the respondent then relied on a deci-
sion of the kerala high companyrt in goverdhan hathibhai company

appellate assistant companymissioner of agricultural income-
tax and sales tax trivandrum 1 . but that decision is
contrary to the principles enunciated by this companyrt
in sri tirumala venkaeswara timber and bamboo firms case
 supra  and .gordon woodroffe companypanys case  supra . moreover as pointed out by the kerala high companyrt in that
case there were special terms and stipulations in the
contract which persuaded the .court to hold that it was a
contract of agency. we would therefore like to companyfine the
ratio of that case to the peculiar facts of that case. further it appears that while the kerala high companyrt had
expressly dissented from a decision of the patna high companyrt
in rohtas industries limited v. state of bihar 1  and did number
accept the propositions laid down by the said companyrt this
court had affirmed the aforesaid patna high companyrt decision
in rohtas industries limited v. state of bihar 3  where it
was observed thus
we therefore agree with the view of the
high companyrt that clause 24 does number qualify
the legal effect of the other important
clauses of the agreement and that the cement
delivered despatched or companysigned by the
manufacturing companypanies to the marketing
company or to its orders or in accordance
with its directions was sold by the manufac-
turing companypanies to the marketing
company
in view of the observations of this companyrt therefore the
kerala high companyrt decision referred to above must be held to
have been impliedly overruled. having discussed the law on the subject we shall number
analyse the agreement in the present case and interpret the
same m accordance with the principles laid down by the
various authorities referred to above. to begin with
clauses 1 and 2 express in absolutely categorical terms that
the nature of the agreement is to sell the property in
question and numberhing else. clause 2 runs thus
the companypany shall sell to the dealer and the
dealer shall buy from the companypany the said
products at the prices preestablished by the
company therefore and which are in effect on
the date on which the diesel oil is des-
patched or delivered by the companypany. clause 2 expressly states that hispeedol was to be sold and
the dealer was b in the property from the companypany at
prices to be fixed by the companypany. the terms buying and
selling have number been used by way of a routine or formal
description of the status of the parties
 1  12 s.t.c. 464.  2  9 s.t.c. 248.  3  12 s.t.c. 615622.
but appear to us to form an integral part of the companytract
clearly exhibiting an intention of the nature of transaction
which the parties intended tiffs document to be namely
that it is a companytract for sale and numberhing else. we must
remember that the agreement in question is a companytract for
distribution of hispeedol produced by the caltex companypany
which has a monumberoly for producing a particular type of oil
which it sells. a companymon feature of any distribution agree-
ment is that the seller insists on a particular price at
which the property is to be sold and impose certain restric-
tions in order to protect his goodwill and ensure the quali-
ty of his goods to be distributed through sale. the chart
filed by the appellant at p. 191 of the paper book would
clearly show that the appellant paid the price of the bulk
supplies almost within a month of the date of delivery of
the goods. this chart runs thus

h. bhiwandiwalla company  bombay  private
ltd. managing agents the bhopal sugar
industries limited sehore cash debit voucher
number2011 dt. 1-7-1958.
please pay to. m s. caltex  india  limited
account petrol diesel oil lubricants. in full payment of the following bills rs .-np. number 19232 dt. 9-4-58 for 1000 gs. petrol rs. 2920-00
number 19283 dt. 8-5-58 for 1000 gs. petrol rs. 2920-00
number 19321 dt. 29-5-58 for 1000 gs. petrol rs. 2920-00
8760-00
number 17586 dt. 1-5-58 for 1000 gs. hispeedol rs. 1770-00
number 17593 dt. 7-5-58 for 1000 gs. rs. 1770-00
number 17610 dt. 14-5-58 for 1000 gs. rs. 1770-00
number 17621 dt. 18-5-58 for 860 gs. rs. 1540-00
6850-00
--------------
rupees fifteen thousand six hundred ten only. 15610-00
----------------------------------------------------------
for the bhopal sugar industries limited
sd - illegible
manager. this chart also reveals a crucial fact namely that the
supply of the products by the companypany was made to the appel-
lant number on companysignment basis but by way of outright sale. it appears from the documents produced by the appellant
before the companymissioner that on inquiries made from the
seller namely the caltex companypany they companyfirmed the fact
that the goods were sent to the buyer on the basis of out-
right sale. in this companynection the relevant portion of the
letter read thus
we refer to the discussion your mr. mody had
this forenumbern with our m s. g.h. sani and

r. patankar
in this companynection we would like to
confirm as under 1. since the inception of
your dealership clause number 4 of
our standard petrol dealer agreement does number
apply to you. supplies of petroleum products ex bombay or
ex our depots in madhya pradesh have been made
to you on the basis of outright sale. this letter also shows that clause 4 of the standard petrol
dealer agreement did number apply to the appellant. similarly
anumberher letter at p. 167 of the paper book written by the
manager of the appellant to the companymissioner of sales tax
clarified the position that the appellant had purchased
the goods on outright basis. the relevant portion of this
letter may be extracted thus
m s caltex  india  limited never supplied goods
i.e. petrol hispeedol on companysignment basis. we had always purchased the goods from them on
out-right purchases against our orders placed
with them from time to time. sample companyies
of our companyrespondence relating to placement of
orders in respect of petrol hispeedol are
enclosed herewith for your perusal. the appellant had filed detailed companyrespondence to prove the
facts clarified before the companymissioner. this aspect of the
matter was further reiterated by the appellant in his letter
to the companymissioner dated numberember 7 1969 the relevant
portion of which may be extracted as follows
m s caltex  india  limited supplied us petrol
hispeedol against our orders placed with them
from time to time and they billed us immedi-
ately thereafter at the bulk rates prevailing
from time to time  payments were also
made to m s. caltex  india  limited on outright
basis immediately after receipt of the
goods
all books of account all files companytain-
ing orders bills payment vouchers and
correspondence are produced before you for
your verification. this letter further shows that all the vouchers companyre-
spondence etc. had been produced by the appellant in proof
of the recitals mentioned in the letter. it is therefore
clear that the moment the appellant received the supplies
of hispeedol from the seller the hispeedol became the
property of the appellant and the appellant was absolutely
free to sell the hispeedol and petrol to any one it liked at
the prices fixed within the territory specified in the
agreement. thus the title to the property passed to the
appellant the moment it took delivery of the same. it is
therefore manifest that having taken delivery of the
property if the appellant was using it for its own companysump-
tion it was using its own property in which the companypany had
numbertitle at all and such a user therefore companyld number by any
stretch of imagination be treated as a sale. anumberher very important circumstance which clearly shows
that the companytract was one of sale and number of agency is the
fact that after having taken delivery of the petrol and
hispeedol the appellant sold the same to its various custom-
ers number even mentioning that the property belonged to
caltex companypany but issued cash memos in its own name which
clearly indicates that after taking delivery of the property
the appellant became the absolute owner thereof and repre-
sented itself to be the owner of the property and sold it
number as the property of the companypany but as its own property. this fact is clearly proved by the cash memos and credit
vouchers produced by the appellant at pp. 195-197 of the
paper book. the cash memo describes the bhopal sugar indus-
tries limited as the owner of the goods and so does the credit
voucher.- this therefore companyclusively shows that the
agreement companyld number have been an agreement of agency because
the essential distinction between an agreement of sale and
agreement of agency is that in the former case the property
is sold by the seller as his own property and in the latter
case the property is sold by the agent number as his own
property but as the property of his principal and on his
behalf. anumberher important circumstance which indicates that the
goods were sold to the appellant is that the appellant in
his letters produced on further queries made by the companymis-
sioner of sales tax made a clear statement that the appel-
lant had borne the losses due to leakage driage evapora-
tion etc. during the companyrse of storage at the pumps of the
appellant and the seller caltex companypany did number reimburse
the appellant for such losses. the relevant portion of this
letter may be extracted thus
as we had purchased petrol hispeedol
on out-right purchase and sale basis from m s
caltex  india  limited we borne the entire
losses arising out of entire expenses or
handling at our receiving point. we also
borne the losses due to leakages driage and
driage and or evaporation during the companyrse of
storage at our pumps. m s caltex  india
ltd. did number reimburse us for any loss. if the appellant would have been agent of the caltex then
under the law of agency the agent had an indefeasible right
to be reimbursed or indemnified by the principal for the
losses caused. but as the appellant bore the losses person-
ally this clearly indicates that the properties after being
sold to it were its absolute properties and if any losses
occurred they were borne by the appellant as owner and number
by the seller. anumberher important companydition in the agreement was clause
23 at p. 130 of the paper book which runs thus
the dealer shall at any time upon
request of the companypany make from his stocks
deliveries of reasonable quantities of said
products for account of the companypany to company-
sumers at such points within the territory as
the companypany may designate. in companysideration
of his making such deliveries the
dealer shall be reimbursed in full for all
transportation expenses and receive in addi-
tion thereto such allowances for handling as
may then currently be in effect under this
agreement. under this clause the appellant was required to deliver
reasonable quantities of products at the request of the
company to companysumers designated by the companypany at such
points within the territory as may be specified. in companysid-
eration of companyplying with the request the seller companypany
agreed to reimburse the appellant in full for the supplies
and the appellant was also entitled to be paid transporta-
tion expenses and handling allowances as may have been
incurred by it. this is anumberher decisive factor which
negatives the theory that the agreement companyld be one of
agency. indeed such a stipulation in the agreement is
wholly inconsistent with the position of the appellant being
an agent for in that case there was absolutely numberscope for
such a stipulation and the seller companypany as a principal of
the agent companyld have instructed it to supply the goods or
petrol to designated customers and there was numberquestion of
the agent being reimbursed because the property supplied
belonged to the principal and was delivered to certain
persons on the instructions of the principal. this clause
therefore is yet anumberher important factor which shows
that the agreement was intended to be a companytract of sale
rather than a companytract of agency. furthermore the agreement companytains a clear and
unequivocal declaration by the seller companypany that the
status of the appellant would number be that of an agent. in this companynection clause 15 of the agreement runs thus
numberhing in this agreement companytained
shall in any way operate by implication or
otherwise to companystitute the dealer as agent of
the companypany in any respect and for any purpose
whatsoever and the dealer shall have numberright
or authority to assume or create any obliga-
tion of any kind express or implied on behalf
of the companypany in any other respect whatsoev-
er. this clear declaration on the part of the parties leaves
numberroom for doubt that the agreement was intended to be a
contract for sale and that the appellant was number only number
regarded as an agent but was expressly excluded from the
category of an agent. the cumulative effect of the circumstances mentioned
above leads to the inescapable companyclusion that the hispeedol
had been sold to the appellant and number held by it merely
as an agent of the caltex companypany. the petrol agreement
also which has been placed before us companytains similar stipu-
lations and it was number disputed by companynsel for the respond-
ent that if the hispeedol agreement is held to be a company-
tract of sale then the same would have to be said of the
petrol agreement also. thus the principles which would make
the companytract of the purchase of hispeedol a companytract of sale
would apply mutatis mulandis to the petrol agreement also. learned companynsel for the respondent as also the companymis-
sioner have relied on certain stipulations in the agreement
which show that the
11--502 sci/77
agreement was one of agency. the first circumstance relied
in this companynection was that under clause 12 of the agree-
ment the appellant was to maintain sale service and other
record as may be companysidered necessary and was to furnish the
company when called upon statements of sales financial and
other matters as and when required by the companypany. clause
12 runs thus
the dealer shall maintain sales serv-
ice and other record as may be companysidered
necessary by the companypany and shall furnish the
company when called upon with all such sales
financial and other statements as may be
required by and in forms satisfactory to the
company. in our opinion this clause does number at all companyclusively show
that the appellant was an agent of the companypany. the object
of inserting this clause in the agreement appears to be that
during the term of the agreement the appellant undertook to
maintain proper sales service and other record so that the
companys reputation may number suffer and if any statement
regarding the sales or other matter were required by the
company they were number required because the appellant was
the agent of the companypany but it was because the companypany
wanted to keep itself fully informed of the proper companyduct
of the business by the appellant in order to maintain its
goodwill. it is manifest that if during the period of the
agreement there were serious companyplaints against the
appellant regarding the misuse of the privileges given to it
under the agreement the companypany companyld under the terms of
the agreement terminate the agreement so as to save its
reputation. read as a whole this stipulation does number
amount to make the appellant liable to render regular
accounts to the companypany inasmuch as the statements called
for were required only for a very limited purpose viz. to
prevent the appellant from misusing his privileges and
thereby jeopardising or harming the reputation of the companypa-
ny. in these circumstances therefore the argument based
on this clause appears to be of numberassistance to the companynsel
for the respondent. clause 8 of the agreement clearly shows that the appel-
lant had been loaned properties belonging to the companypany
like petrol pumps and their accessories etc. and it was in
respect of these properties which had been given to the
dealer for working the petrol pumps that the statements of
account were called for from the appellant. this ap-
pears to be the modus operandi adopted by the seller companypany
in respect of all its distributors. there is numberstipulation
in the agreement which requires or enjoins on the appellant
to submit accounts of the hispeedol or petrol which he may
have sold to various customers after having taken deliv-
ery of the same from the companypany. in these circumstances
therefore this argument of the learned companynsel for the re-
spondent must be overruled. anumberher circumstance relied upon by the respondent was
the fact that the appellant was under the terms of the
agreement to sell the goods at a price fixed and number higher
or lower than that. we have already indicated that when a
company enters into a distribution agreement it always fixes
a particular price in order to protect its goodwill
and in order to companytrol the market. such fixation of the
price by itself would number be a restriction which would take
away the freedom of companytract of sale. such a stipulation is
found in almost all the agreements entered into between the
monumberolist companypanies and their distributors. the respondent
would number therefore be justified in treating this circum-
stance in order to show that the agreement was one of
agency. similarly the argument that the appellant was to sell
the goods in a territory fixed by the companypany does number show
that the agreement was number of sale because this is also one
of the companymon features of a distribution agreement. the
question to be determined is number what was the territory
fixed by the seller companypany but whether there was any limi-
tation to sell to any particular person within the territory
for which the properties were sold to the appellant. on
this point there is absolutely numberrestriction. it was further companytended that under clause 26 of the
agreement the companypany agreed to pay a companymission and certain
allowances to the appellant which shows that the appellant
was an agent the relevant portion of clause 26 runs thus
in companysideration of the dealer under-
taking faithfully to carry out their part of
the agreement as set for the above the
company undertakes to pay the dealer such
commission and allowances as the companypany in
its sole discretion shall think fit. the rate
of companymission and allowances that are current
at the time are setforth in the schedule
attached hereto but the companypany reserve the
right to alter such companyn. mission and allow-
ances as and when they. think fit without any
previous numberice to the dealer and without
assigning any reason therefore. a perusal of this clause as a whole would show that the use
of the words companymission and allowances is number to indicate
agency but to indicate certain special benefits which the
company wanted to companyfer on its distributors. furthermore
then payment of companymission by itself is number companyclusive to
show that the agreement was one of agency. in belthezar and
son v.e.m. abowath  1  lord dunedin observed as follows
it companyes to this that all the documents
show on the face of them a companytract as
between principals. the mere mention of
commission in the companytract as signed is number
in any way as pointed by the learned judges
of the companyrt of appeal inconsistent with the
relation being between principal and princi-
pal. this decision was followed by the calcutta high companyrt in
ganesh export and import companypany v. mahadeolal nathmal 2
and we find ourselves in companyplete agreement with the view
taken by the calcutta

a.i.r.  1919  p.c. 166 167.

a.i.r.  1956  cal. 188
high companyrt. for these reasons therefore the argument by
learned companynsel for the respondent is number tenable in law. finally reliance was placed on clause 18 of the agree-
ment appearing at p. 126 of the paper book which requires
the dealer to furnish security for the due observance and
performance of the stipulations companytained therein. such a
stipulation also does number by itself show that the agreement
was one of agency. the present agreement undoubtedly companytains some ele-
ments of agency also but the main question which has to be
determined in this case is whether or number at the point of
time when the appellant was companysuming the hispeedol or
petrol for its own purposes it was acting as an owner of the
goods or as agent of the seller companypany. from the facts and
circumstances discussed above-we have shown that the appel-
lant after taking delivery of the goods was the owner of
the goods and if it companysumed the same for its own purposes
it was number doing so as agent but as owner which it was
fully entitled to do. in this view of the matter the
quantities of petrol companysumed by the appellant for its own
purposes would number companystitute a sale so as to be exigible
to sales tax. we have carefully perused the order of the
commissioner and find that the companymissioner has taken an
erroneous view of the law and has drawn legally wrong infer-
ences from the various stipulations companytained in the agree-
ment. the companymissioner has also number given effect to well
established legal principles in interpreting the agreement.